It’s apparently tough to be a non-Domino’s pizza chain right now.
Papa Johns on Thursday said its same-store sales declined 3% in the third quarter, which the company blamed on the tough consumer environment and a heavy promotional environment in the fast-food business.
The company in reaction has started a review of its cost structure to cut expenses. That review has already identified at least $25 million in savings over the next two years, CEO Todd Penegor told analysts on the company’s earnings call Thursday. The cost cuts are not in marketing and are in “non-customer-facing” tasks.
Those cost cuts follow the company’s previously announced efforts to reduce $50 million in supply chain costs.
In addition, Papa Johns said that it is accelerating its refranchising strategy over the next two years. The company operates 545 of the system’s more than 3,500 locations in North America. It plans to get its ownership percentage to the “mid-single-digit” percentage, suggesting the company plans to sell nearly 400 locations to “growth-minded” operators.
Company executives also said they expect that restaurant closures this year will be at “the higher end” of its historical average of between 1.5% and 2% of its unit count. The closures will mostly be among non-traditional locations and those in small markets with unit volumes of about $500,000.
“Ultimately, we are positioning Papa Johns to compete better in 2026 and beyond, and we are aligning our system around a more comprehensive value proposition to address near-term consumer pressure,” Penegor told analysts on Thursday.
Papa Johns’ sales challenges come during a difficult period for the fast-food business and an increasingly competitive environment for the pizza business. Earlier this week, Yum Brands announced plans to sell Pizza Hut after that chain reported a 6% decline in same-store sales, its eighth straight decrease.
Both Pizza Hut and Papa Johns appear to be losing sales to rival Domino’s, which reported a 5.2% increase last quarter. But each of the chains face growing competition from third-party aggregators like DoorDash and Uber Eats, which are making a broad array of restaurants available for delivery.
Even amid that, Papa Johns’ sales through those channels rose in the low teens last quarter. The company said it is taking steps to improve its own delivery service.
Papa Johns said that its sales were weakest among low-ticket orders made over the web. The company said it is taking steps to improve the quality and offerings of its side items to make them more compelling.
The company also addressed recent reports that the private-equity firm Apollo was making a bid to buy the chain. Reuters this week reported that the firm withdrew a $2.1 billion bid to buy the chain.
Penegor told analysts that the company is focused on building shareholder value. “We are open-minded about the paths to do that,” he said, suggesting it would consider a sale. But he then added, “At this time, the opportunity for the company to drive the greatest value creation is through the execution of our transformation strategy.”
Papa Johns stock was down more than 5% in early-morning trading Thursday.
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