Papa John’s International is replacing its chief marketing officer, as the Louisville, Ky.-based pizza delivery chain looks for a way out of its worst sales slump in well over a decade.
Speaking on the company’s first quarter earnings call on Tuesday, CEO Steve Ritchie said that CMO Brandon Rhoten is leaving the company at the end of the month. The departure follows a first quarter in which Papa John’s same-store sales declined by 5.3%—the second-straight decline after more than 14 years of consistent same-store sales increases.
“As we continue our journey to revitalize the brand, we are making the change in the chief marketing officer role,” Ritchie said. He said Rhoten helped the company “understand our challenges” and develop a strategic plan.
Yet Ritchie believes the company needs to make changes more quickly, saying that it would find a new marketing leader “that has the necessary skills to execute our strategy with urgency and agility.”
“Given my conversations over these past 100 days, and as a franchise owner myself, I know that this company has a lot of upside ahead,” Ritchie said. “But we need to be faster in improving how we communicate and connect with consumers to improve results.”
Ritchie said he will lead the marketing department while the company searches for Rhoten’s replacement. “I am committed to ensuring that we have a team who can deliver on the promises we make,” he said.
Papa John’s finds itself in a difficult position. The company’s sales started to slow down last year, which frustrated its founder and former CEO John Schnatter—who blamed lower NFL television ratings for weakening sales.
He then blasted the NFL for not effectively dealing with protests by some players during the national anthem, effectively blaming those protests for the weak ratings. The comments put the chain at the center of one of the most divisive controversies in the country.
Schnatter, whose picture adorns the Papa John’s logo and has appeared in the chain’s ads for years, stepped down as CEO in December. In February, the chain ended its relationship with the NFL, which rival Pizza Hut gladly picked up.
Papa John’s same-store sales declined 3.9% in the fourth quarter last year and then 5.3% in the first three months of this year. Meanwhile, rival Domino’s same-store sales rose 8.3% in the first quarter, while Pizza Hut’s same-store sales rose 4%.
Ritchie said that the company is “looking at ourselves in the mirror and knowing what our challenges are.”
Company executives indicated that the sales challenges are in part due to a value perception. But he also said that the chain has a “temporary issue … on the brand reputational side.”
With the sales challenges, Papa John’s increased its royalty waivers for franchisees, especially in certain markets.
“When you’ve got a couple of quarters of sales declines, we’ve got to keep our franchisees healthy,” Ritchie said. “We know the success and sustainability of our overall brand is really going to be tied to the success of our franchisees, so we have increased some of those waivers.”
The chain is also looking to expand its menu beyond simply pizza. That could include sandwiches, but it could also include other items.
“We’re going to look at new products,” Ritchie said. “We have to look at diversification and variety within our menu, in addition to many other things.”
He said that the availability of third-party delivery means Papa John’s has competitors outside the pizza industry. “We do not want to have the veto vote go against Papa John’s,” Ritchie said. “We’ve got to make sure we have the appropriate offerings for our customers.”
To fix its value perception, the company plans to test certain offers to see what works to bring customers back. For instance, Papa John’s recently started offering a $12.99 Papa’s Meal Deal, with a one-topping pizza, side and 2-liter drink.
Papa John’s also wants to use technology to generate more sales. As it is, more than 60% of the chain’s orders come through digital channels, numbers similar to the more-ballyhooed Domino’s.
The company is starting tests of an expansion to its Papa Rewards loyalty program. And the chain is working to improve unit economics, with Chief Digital Officer Mike Nettles working on in-restaurant technology and Chief Ingredient Officer Sean Muldoon working to remove costs from the operation.
The company is using savings from tax reform to “invest more in our teams” while using stock grants to provide employees with a long-term incentive to drive improvement.
“Many of the investments we are making and their associated benefits will not come until the latter part of the year,” Ritchie said, noting that same-store sales and profit margins should “improve over time.”
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