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Jimmy John’s and Papa John’s have different responses to the delivery threat

The chains show the restaurant industry’s uncertain answer to third-party aggregators, says RB’s The Bottom Line.
Photograph: Shutterstock

the bottom line

Is Papa John’s making a deal with the devil?

Or is Jimmy John’s turning down potential customers?

The questions center on the chains’ very different responses to the growing threat from third-party delivery. One is trying to beat them. The other is joining them.

Papa John’s is partnering with DoorDash for delivery at 1,400 locations.

Jimmy John’s, on the other hand, is defiantly pushing back against delivery players, vowing to “never” use third parties and now advertising why its five-minute delivery zones are a good idea.

Their different strategies demonstrate the restaurant industry’s uncertain response to the emergence of third-party providers.

That’s not just true for companies that might use delivery—which have ranged from the dive-in-head-first response for chains such as McDonald’s and Chipotle Mexican Grill to the not-gonna-do-it defiance of Darden and Texas Roadhouse.

Chains that have blazed the delivery trail, however, face an existential threat to their competitive advantage. It’s difficult to envision a future of expanding delivery that doesn’t eat into those chains’ businesses.

Such companies are facing a choice: defy the trend and hope their quality and efficiency wins in the long run, or use the providers to their own advantage.

For much of the past year, Papa John’s has been quietly employing the latter strategy. The Louisville, Ky.-based pizza chain, faced with weak same-store sales last year, reached a deal with DoorDash to begin supplementing delivery at many of its locations.

Papa John’s is the smallest of the four big pizza chains, with 3,200 locations. Using delivery extends the potential pool of customers for each of those units. And it gets the company in front of third-party delivery customers.

“Papa John’s is a mature delivery player with tremendous reach,” CEO Steve Ritchie said in August. “But there are still many customers in outlying rural areas, even some suburban developments, who live outside our delivery zones.”

There are risks here. First: Papa John’s is effectively ceding at least some of its relationship with customers to a third-party player that may not have its best interests in mind. Plus, third-party delivery is expensive and Papa John’s operators aren’t exactly flush with profits right now. And the risk with any use of third parties is that customers blame the chain, and not the provider, if there are problems.

For a chain that bases much of its marketing on quality, using third parties with longer delivery times could hurt.

Jimmy John’s is taking the opposite strategy. It has vowed to “never” use third parties and this week started broadcasting ads that explain why its short delivery radius of just five minutes improves quality.

“What we’ve built and the way we’ve built it give us a significant competitive advantage,” Jimmy John’s Chief Marketing Officer John Shea told me last month.

There’s a real threat for the Champaign, Ill.-based chain, which has had delivery since 1983: Its primary sandwich competitors have all jumped on board the delivery bandwagon.

By vowing to “never” use third parties and deploying such a short radius, Jimmy John’s is cutting off a certain number of customers from getting its sandwiches delivered at a time when consumers are clearly using the service. And it is not getting access to customers who like ordering from those third-party apps.

But, unlike Papa John’s, it can control the experience and the relationship. And it can deliver more efficiently, anyway.

The uncertain industry response to delivery reflects the general uncertainty around the growth in third-party providers. On one hand, the service is growing quickly and a certain segment of consumers really like it.

On the other, it’s yet another potential profit problem, and delivery providers’ own profit challenges make the future of the service and its importance to the restaurant industry vague at best.

As such, it appears to be an equal risk for existing delivery-centric players to either beat the third-party players or join them.

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