The pizza business, looking for customers, takes on burger chains

Papa Johns is bringing back its Cheesy Burger Pizza, after Pizza Hut created its Cheeseburger Melt, as major fast-food chains face challenges with their value reputation.
Papa Johns
Papa Johns' Cheesy Burger Pizza will be broadly available on Monday. | Photo courtesy of Papa Johns

An industry sector losing customers is hoping to take advantage of another sector losing customers.

The pizza business, which has watched sales slow markedly over the past two years amid driver shortages and demand shifts to third-party delivery, appears to be gunning for the burger business.

This week, Papa Johns brought back its Cheesy Burger Pizza. It's also available as a Cheesy Burger Papadia and new Cheesy Burger Papa Bites. The line returns to the chain’s menu next Monday, though customers on the company’s Papa Rewards loyalty app got their first taste this week.

This comes on the heels of Pizza Hut “joining” the burger wars with a Cheeseburger Melt, a burger version of its successful line of Melts sandwiches.

(Check out the 10 largest pizza chains.)

The push represents at least a theoretical opportunity for the pizza business to recapture the value customer at a time when much of the quick-service sector is losing traffic.

The pizza business thrived during the pandemic when consumers were stuck at home. Demand for delivered pizza soared in 2020 and 2021 when people had fewer dining options due to COVID. But that demand slowed markedly, particularly among the largest chains.

Sales at fast-food pizza chains grew 6% in 2020 and 7% in 2021 before slowing to less than 2% in 2022 and 3% last year.

The slowdown is even more dramatic at the five largest pizza chains, Domino’s, Pizza Hut, Little Caesars, Papa Johns and Marco's: Sales growth slowed from more than 9% in 2020 to just more than 1% in 2022.

They recovered moderately to 3% last year, but of those top five chains, only Marco’s (7.6% growth) came close to equaling the 8% menu price inflation last year. And nearly all of that came from 7.2% unit growth.

“The last, call it 2022 and 2023, were not Domino’s years at least as far as I’m concerned, with our performance,” Domino’s CEO Russell Weiner told analysts at an investor conference last month, according to a transcript on the financial services site AlphaSense.

Indeed, the chain’s same-store sales increased almost interrupted for a decade through the pandemic. But between the third quarter of 2021 and the fourth quarter last year, its same-store sales barely broke even on average.

And last year, Domino’s lost its spot as the ninth largest U.S. restaurant chain to the surging Chipotle Mexican Grill.

Both Papa Johns and Pizza Hut have lost momentum. The Yum-owned Pizza Hut is changing its U.S. management team after its sales turned south in the first quarter. So is Papa Johns, whose CEO Rob Lynch moved on to Shake Shack.

Papa Johns’ sales have turned south despite a major marketing push.

Pizza chains have lost a lot of delivery business to third-party delivery apps like DoorDash and Uber Eats, which have given customers more options when they want convenience-oriented food.

But the sector could regain some of those customers in an economy like this, which can help explain why pizza chains are targeting burger concepts.

(Check out RB’s special report on the restaurant value war.)

Fast-food chains have been under fire from consumers frustrated by higher prices. While those chains slowed their price hikes last month, it is still far more expensive to feed a family at a burger chain than it was four years ago.

Pizza is one of the best deals in the restaurant industry, because a single large pizza can feed up to four people, assuming the two kids in the family aren’t hungry teenagers. Food costs are traditionally lower for pizza chains, which enables them to compete over price.

Convincing customers about this value could be a key move for such chains, not just in contrast to fast-food burger chains but in contrast to third-party delivery, where the total price for delivery can be twice what it costs to pick that meal up yourself.

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