Financing

Third-party delivery has become a huge sales driver at Papa Johns

The pizza chain, which outperformed its largest competitors last quarter, now gets 15% of its sales from companies like DoorDash and Uber Eats.
Papa Johns delivery
Sales of Papa Johns through DoorDash are up 150% over the past three years. | Photo: Shutterstock.

Apparently, consumers are perfectly willing to pay a premium to order pizza delivery on an aggregator’s mobile app.

Papa Johns, which has offered its pizzas through third-party delivery apps since 2019, has seen sales surge through that channel even as its competitors jumped into the market. The channel now amounts to 15% of company sales, rivaling or bettering that of many other chains that don’t already have their own delivery channels.

“It turns out pizza is a great product for home delivery,” CEO Rob Lynch told investors on Thursday.

Aggregators helped push the chain’s same-store sales up 3% in the third quarter, beyond those of either of its publicly traded competitors Pizza Hut (flat) and Domino’s (-0.6%). Papa Johns also said that its same-store sales came thanks to higher transactions, rather than price.

Executives said that it focused on finding ways to offset inflation without resorting to higher menu prices, which helped drive those transactions—as did menu innovation, such as Garlic Epic Stuffed Crust Pizza.

“In the current inflationary environment, we have watched as many restaurant brands have increased menu prices,” Lynch said. “We have found other ways to drive restaurant profitability and have executed a thoughtful approach to managing price and promotions.”

He added that the company has a better value proposition, noting that a family of four can get a couple of pizzas and a two-liter beverage for $22, while tickets at fast-food chains can run $40 or more on average. “This was a key driver of our transaction growth in the quarter and we expect it to continue as many QSRs continue to take more price,” Lynch said.

But demand through aggregators may be the most surprising, given the premium customers pay to order their pizzas that way—particularly given how readily available Papa Johns and other pizza chains are available through mobile apps and websites.

Papa Johns started using the aggregators in part to provide some delivery help when it could not find enough drivers back in 2019. But it has evolved into a key part of the company’s business, providing the chain access to customers on those platforms and helping with delivery during times of need.

Lynch noted that the company has competed with “thousands of hometown pizza shops” on those platforms since it joined those aggregators.

Pizza Hut and Little Caesars have joined the marketplaces in the past three years, and that still hasn’t affected the chain’s sales. Lynch said sales of Papa Johns on DoorDash has grown more than 150% over those three years.

He added that there is plenty of room for expansion in the marketplace. “There continues to be a lot of room for category expansion, indicating that competitive entries do not necessarily lead to significant volume loss for brands that have been thriving in this space for years,” Lynch said.

That could be key, given that Domino’s is about to enter the market. Yet Lynch also said that the aggregator market is different from the typical pizza delivery market.

Typically, pizza is purely value, with offers and deals driving a lot of demand. But aggregator customers clearly do not care about value—otherwise why buy through those apps? Papa Johns has focused much of its attention on innovation, rather than discounts.

“The largest competitor has been running 50% off discounts for the last couple of years,” Lynch said. “And they have gotten even more aggressive. But I think as evidenced by the quarter’s top-line results, that’s not necessarily the strategy that is delivering growth right now in this category.”

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