Papa Johns plans to grow internationally, by closing some restaurants.
The Atlanta-based pizza chain is reconfiguring its international growth model to set it up for more long-term success. But this year, that means the company may need to close some underperforming restaurants in certain key markets to get to a better foundation.
“For a long time, this brand focused on just opening restaurants,” CEO Rob Lynch said at the ICR Conference on Tuesday. “We want to make sure that the restaurants that are open are operating at a high level, making money for their franchisees, making money from selling franchisees so we can continue to grow and prosper.”
Papa Johns operates just more than 2,500 locations internationally and has opened about 200 units outside the U.S. the past three years. But Lynch believes the brand can grow better and faster internationally than it has been.
The company announced substantial changes to its international development model this week as part of a broad set of marketing, development and franchising changes that are designed to encourage more overall growth.
It is establishing hubs that operate different regions around the world, led by general managers that work with franchisees in those markets. They will feature teams in the markets, in Asia, Europe, the Middle East and Africa, and Latin America. Those teams will feature operators, marketers and technology teams, Lynch said.
But that also requires some “right-sizing” of markets. The most notable such change will be in the U.K., a market that Papa Johns recently acquired in a “non-cash transaction.”
The U.K. is Papa Johns’ biggest and most important international market, but it has struggled in recent years amid inflation and economic challenges. Weakness in that market has pulled down sales for the company’s entire international business.
Papa Johns doesn’t intend to operate any restaurants, Lynch said. It plans to operate as a master franchise. “We love that,” he said.
But the plan this year is to close unprofitable stores, and get down to a base of profitable stores. “We have the ability to stabilize that market, get in and really understand what that market needs,” Lynch said. “We have restaurants there that we know are profitable.”
He suggested other markets could require some closures, too, as they get down to a set of profitable locations. “Our intention in 2024 is to right-size the U.K. market, and optimize the markets across the globe,” Lynch said.
The hope, Lynch said, is to set the brand up for more long-term international growth. And he said the company has plenty of opportunities.
“We’re bringing on new partners going into parts of the globe we have not yet penetrated,” he said. “And frankly we’re not talking about small countries. We’re not in Australia, we’re not in Japan, we’re not in Brazil. These are big, highly populated, affluent countries that we have yet to go in and establish partnerships and build out.”
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