Consumers armed with stimulus checks and stuck at home helped make April one of the best months in Papa John's history.
The company’s same-store sales rose 27% during the month, the company said Wednesday. The Louisville, Ky.-based chain’s average unit volumes and systemwide sales were higher that month than they’d ever been before.
Consumers ordered the chain’s Papadias sandwiches in addition to pizzas, and made orders through third-party delivery services as well as through the company’s loyalty program, which now boasts 16 million members.
The month, which followed a strong start to 2020, has helped the chain completely recover from a sales slide dating back more than two years.
The company said Wednesday that it will end assistance to franchisees after existing commitments expire in the third quarter. That assistance was put in place in 2018 in the aftermath of steep sales declines following the departure of founder John Schnatter—sales declines that led to some surprising closures among franchisee-owned units.
“Our franchisees are incredibly happy right now,” CEO Rob Lynch said on the company’s first quarter earnings call Wednesday morning. “The health of their restaurants is the best it’s been in the last three years.”
In fact, the company is rapidly shifting toward a strategy to encourage them to expand, he said. “We are actively working now to build plans and incentive structures and other agreements with them to accelerate development,” Lynch said.
The results are helping the chain generate interest from new operators, too. “There’s a lot of excitement around the brand right now,” Lynch said. “We’re having a lot of conversations with people interested in being part of the Papa John’s family.”
Same-store sales in North America in the first quarter ended March 29 rose 5.3%, the company said. They were up in the 7% range through February, before professional sports leagues began postponing their seasons and states began telling employees to work from home—that period likely cost the company 200 basis points.
April, however, brought about a “wave of growth in North America,” Lynch said. “Delivery and carryout became essential services.”
He said on the earnings call that roughly 10% of the 27% increase in same-store sales for the month could be attributed to COVID-19. Indeed, numerous restaurant chains have seen spikes in sales of late as they’ve adjusted to the pandemic shutdown and stockpiles of groceries that consumers bought in March ran out.
Some of the April spike can be attributed to weakness a year ago as the chain relaunched its loyalty program—the figure was down 5.7% in the second quarter of 2019, for instance.
A lot of the growth is coming from the chain’s new sandwich product, Papadias, introduced earlier this year. It has generated lunch business for the chain and incremental sales. “People are adding Papadias on top of pizzas,” Lynch said. “We’re getting a lot of check growth on that.”
Third-party delivery also appears to be helping. About 4% of sales are coming through delivery aggregators. The providers are bringing in new customers that are both incremental and profitable to the company.
“We’ve seen more than 1 million new customers come into the brand in April,” Lynch said. “We’re winning back customers.”
The company isn’t losing them as states begin reopening their dining rooms, either—at least not yet. Lynch said trends haven’t changed in the early days in those states.
In fact, he believes April’s trends could continue for some time. “We believe the tail on this thing is going to maybe be a little bit longer even when states and communities open back up,” Lynch said. “It’s conducive to large-demand delivery business.”