Three years ago, when it was in the midst of its post-John Schnatter purgatory, Papa John’s made a strategic decision that at the time raised more than a few eyebrows by working with third-party delivery companies.
It raised eyebrows because Papa John’s, after all, had its own fleet of delivery drivers and didn’t seem to need to deploy contractors to provide the job. Yet in many respects it was necessary. Papa John’s needed sales any way it could get them. Its sales problems also translated into more difficulty finding drivers. The third-party services could help on both fronts.
The benefit of that decision came into a clearer focus on Thursday when the chain reported third quarter same-store sales of 6.9%, for a two-year number in North America of 32%.
Rival Domino’s, which has opted against third-party delivery, saw its same-store sales decline 1.9% in the third quarter.
The numbers aren’t necessarily apples to apples. Domino’s has twice as many locations and unit volumes that are about 30% higher than Papa John’s. Also, Domino’s quarter ended in mid-September so the chain didn’t get the benefit of the apparent increase in entertainment-related orders during the month.
Yet Domino’s sales declined in part because labor challenges shortened hours and shrunk service.
Papa John’s said that it’s been able to tap into third-party delivery when it’s needed extra drivers.
“It definitely helps supplement our organic labor,” CEO Rob Lynch said in an interview. “Being able to partner with aggregators and leveraging their labor pool has been a big help to the restaurants.”
Papa John’s uses third-party delivery in two ways. First, it is on the providers’ marketplaces, where customers order through DoorDash or Uber Eats and they do the deliveries. Second, the company will use the services to provide “white label” delivery when times get busy.
The marketplaces have helped bring new customers to the chain, Lynch said. That’s been an important element in Papa John’s comeback. He told analysts on Thursday that the chain is getting sales from new customers, rather than existing customers ordering more often.
“Aggregators are growing even faster than we are,” Lynch said. He noted that the relationship is symbiotic, as Papa John’s brings customers to the platform. “We can supply them with a lot of trips and incremental routes for their drivers,” he said.
It’s the white label element that gets interesting. During peak periods, Papa John’s can tap into the aggregators to pick up with the orders.
So it’s not as if the chain doesn’t have problems with labor. It does. But Lynch says the company can call on third-party delivery drivers to pick up orders. “We’re able to take orders through organic channels and call on drivers to come pick up those orders,” he said.
Both the marketplace and the white label service are “working well.”
It’s not certain how much of an impact Papa John’s is getting from its use of third-party services.
And there remains some long-term concerns about the use of such aggregators when you already have a delivery fleet. Companies that use them lose some control over the customer relationship and don’t get access to the customer data that has proven valuable to a lot of restaurants, notably Domino’s.
But at least for now, Papa John’s appears to have made the right bet when it began using third-party services.