Papa John’s Analysis

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The Company’s Introduction and History

Papa John’s International, Inc. (PZZA) is one of the largest pizza companies in the world. Papa John’s is known for making high-quality pizzas and having an excellent customer service. The company was established by John Schnatter in October of 1984. The very first Papa John’s restaurant was opened in 1985 in Jeffersonville, Indiana. A year later, in 1986, the first franchised restaurant opened but was later sold to Roger and Scott Roelofs in Fern Creek, Kentucky. Papa John’s operates in a fiercely competitive industry of pizza restaurants, but despite this, it continues to see the revenue growth (Yahoo Finance b). Thus, Papa John’s operates throughout North America and in 35 countries.

Papa John’s Market Segmentation and Target Market

The primary target market of Papa John’s is people who are looking for a family-oriented environment and enjoy traditional pizza. The secondary target market includes people who want a takeaway delivery service for pizza.

The geographical segmentation of Papa John’s pizza is worldwide because of the constantly opening new restaurants. Thus, at the end of 2012, there were 4,600 Papa John’s restaurants operating throughout North America, Latin America, Asia, Europe, Middle East and India (Cariaga).

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Papa John’s demographic segment is young and the middle-aged population, aged approximately from 18 to 44 years old and 75% of this age group being pizza restaurant customers. The annual income of these customers ranges from $75,000 to $99,900 (Barret). The younger part of the target audience consists primarily of full-time students who live an active social life and have no time for cooking. Freshmen’s spending habits also indicate a high percentage of funds spent on non-essential items. The middle-aged target audience, the so-called Generation Y, tends to eat in fast food and pizza restaurants due to the lack of time and the unwillingness to cook at home. These customers most likely have the children and the household. They always buy something for children and often order pizza delivery to eat at home with their families or friends.

The Marketing Mix

  1. Product. Papa John’s offers original or thin crust top quality pizzas, which is always made of fresh dough, which is made from their own flour mixture, 100% mozzarella cheese, parmesan-Romano and cheddar, real fresh pizza sauce made from ripe tomatoes and mixed with their own blend of spices. The served toppings include a large selection of high-quality meat that contains no fillers and only fresh vegetables; they never freeze the toppings. Also, the visitors are offered a wide range of snacks, such as a variety of chicken wings, chicken poppers and breadsticks (Yahoo Finance b). Moreover, there are three dessert options, including Red Kettle biscuits, which comprise a donation to the Salvation Army.
  2. Price. Papa John’s has focused on a product quality and an excellent customer service to differentiate itself from competitors. The ingredients on the menu are always fresh, never frozen and subjected to domestic production. Papa John’s offers even some gluten free options for pizza. These elements have significantly affected the pricing policy of the company; thereby, the product price is sometimes higher than that of the nearest competitors. Prices vary from $8 for a small pizza to $19 for an extra-large pizza, prices for bread begin from $5 per 8 pieces, and the customers will have to pay $37.49 for 50 Pc. Spicy Buffalo Wings.
  3. Place. Place refers to the places of storage, to the supply chains and the company’s distribution channels. Papa John’s Pizza sells its products all around the world. The products are sold both in stores and through delivery within the store’s delivery area. Papa John’s supply chain includes the efficient logistics to deliver the quality and fresh products to its stores and franchises. Papa John’s has ten regional Quality Control Centers, which distribute the products and different consumables within its network of stores. This allows the company to control the quality and consistency of their products, while keeping the costs low (Nathan).
  4. Promotion. Papa John’s promotional company includes a combination of advertising strategies, using television, radio, print (magazines, newspapers, brochures and billboards), social media and mobile marketing. In this regard, Papa John’s has developed an e-commerce loyalty program “Papa Rewards” to gain the customer loyalty and increase the frequency of using its online ordering platform (Nathan). Adding to this, Papa John’s has been the official pizza sponsor of the NFL and the Super Bowl for the past four years. Papa John’s is a marketing partner of Peyton Manning, quarterback of the Denver Broncos and the most famous NFL player (Nathan).

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Strategic Analysis

For the strategic company analysis the analytical SWOT method has been used.

  1. Strengths. As it was mentioned earlier, Papa John’s pizza makes its foods exclusively from fresh ingredients that do not contain any additives or fillers. Papa John’s offers an excellent customer service and has a reputation as the number one restaurant in customer satisfaction, according to the American Customer Satisfaction Index for the past thirteen years (Yahoo Finance b). The company has a strong employee training and development program to ensure consistency in all its franchise. Another advantage is a strong marketing program, on which Papa John’s spent $63 million, or 4% of total revenues in 2014 (Nathan). The store design allows the staff to work more efficiently. Through to an open floor plan, they can see the clients from any point of the store, and, therefore, the staff are able to respond more quickly to all of the possible challenges. Finally, an efficient supply chain gives the company an advantage by delivering the fresh ingredients to its stores and ensures consistency of their quality.
  2. Weaknesses. Papa John’s is still considered a newcomer to the market for pizza, though ranked third in the world in its field and had not saturated all the markets. At the same time, the competition may not be able to continue growing due to a huge number of already existing restaurants (Cariaga). Papa John’s offers only a few menu items, as compared with the competitors. Offering only pizza and appetizers, Papa John’s may lose their customers, which may want a more diverse menu. As a result, customers of the competitors have coupons more often than Papa John’s clients do.
  3. Opportunities. Papa John’s weaknesses can also be its opportunities in the menu area. They could expand the vegetarian menus and add to it more healthy food options, like salads, Fresh sandwiches, chicken tenders, fresh juices and milkshakes for kids (Kelso).
  4. Threats. Papa John’s competitors offer many different menu items, while Papa John’s only offers a choice of pizzas, snacks, and beverages. In 1998, Papa John’s was charged with false advertising on Pizza Hut, but the suit was rejected by the Federal Court of Appeal judges due to technical reasons (Kelso).
STRENGTHS

· High-quality ingredients

· Excellent customer service

· Strong employee training program

· Strong marketing support

· Efficient restaurant design

· Effective logistics

WEAKNESSES

· Locations

· Limited menu choices

· The switching costs

OPPORTUNITIES

· New markets

· New menu items

THREATS

· Competitors menu

· Competition’s brand recognition

Competitive Analysis

Papa John’s major competitors are the top two pizza franchises chains Holdings, Inc., Pizza Hut and Domino’s Pizza, as well as local independent pizza operators, like Papa Murphy’s, Little Caesar Pizza, Godfather’s Pizza, California Pizza Kitchen, Donato. Domino’s Pizza and Pizza Hut have existed for a longer period of time than Papa John’s and have more restaurants and stronger brand recognition.

Direct Competitor Comparison as of 2015 (Yahoo Finance).

PZZA Pizza Hut Domino’s Pizza Little Caesar
Market Cap: 2.26B N/A 5.97B N/A
Employees: 22,350 300,000 11,900 6,000
Revenue (ttm): 1.64B 15.95B 2.22B 206.40M

Papa John’s differentiates itself with the high-quality fresh ingredients for a better pizza. Papa John’s slogan is “Better ingredients. Better pizza” (Yahoo Finance b). Papa John’s also pays a lot of attention to customer service that distinguishes it favorably from its competitors. In 2014, Papa John’s in order to attract new clients has increased the proportion of the total costs to the social media channels, in addition to the TV. These efforts have led to an increase in digital sales up to 45%. Due to this, the company has exceeded the mark of $5 billion (Kelso).

How It Works


In addition to digital marketing, a new unique POS system FOCUS has developed for Papa John’s to support the store level productivity and profitability. This system is equipped with touch-screen technology, which controls the order speed and accuracy (Kelso).

Marketing Metrics

The two most important factors affecting the income in the restaurant business are sales growth and unit growth. Thereby, to calculate for Papa John’s sales and unit growth were selected as a metric. These metrics are important for any business, as it is the indicator of the general business growth. Papa John’s continues to generate strong sales in North America in a very competitive environment. The average annual sales for the domestic restaurants were $1.12 million for 2015, as compared with $1.06 million in 2014 and $988,000 in 2013. The average sales in emerging markets are lower than in the markets in which Papa John’s has established a significant position (Yahoo Finance).

The company notes the continuing growth in both North America and the franchise restaurants. The comparable same-store sales for North America franchised sales increased 3.1% in 2013, 6.2% in 2014 and 3.6% in 2015. At the same time, the comparable same-store sales for International franchised sales increased 7.5% in 2013, 2014 and 7.5% and 7.3% in 2015 (Yahoo Finance).

Papa John’s Unit Growth. By the end of 2014, the number of Papa John’s restaurants in North America exceeded by 70% of the total industry volume. The chart shows Papa John’s is focusing on strengthening its international business and opening new stores outside of North America (Nathan).

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Conclusion

When John Schnatter founded Papa John’s Pizza, he could not even imagine that he would be able to create such a successful corporation in the modern world today. Schnatter hoped that he could do a pizza better than his competitors. He offered the customers the most delicious and high-quality pizza ever made with only the freshest ingredients. Along with the superb customer service, the company ranks third in the world in terms of sales and number one of the customer’s reviews. “Better ingredients, better pizza” is more than just a marketing slogan put forward by John Schnatter, it is a branding obligation to the customers. Papa John’s is one of the best examples of a successful marketing plan available. The company managed to grow in a high competitive environment even in times of the economic crisis and a long recession. Papa John’s did it without sacrificing quality or profitability.