COMPANY PROFILE

Papa John's
International, Inc.

REFERENCE CODE: 0CF6FA79-7DAD-48ED-BFE4-C6C38AFDA5C9

PUBLICATION DATE: 12 Jun 2015
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Papa John's International, Inc.

TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

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Papa John's International, Inc.

Company Overview

COMPANY OVERVIEW
Papa John's International (Papa John's or 'the company') is an operator of restaurants and pizza
delivery services in the US and 36 other countries. It is headquartered in Louisville, Kentucky and
employed about 21,700 people as of December 28, 2014.
The company recorded revenues of $1,598.1 million during the financial year ended December 2014
(FY2014), an increase of 11.1% over FY2013. The operating profit of the company was $117.6
million in FY2014, an increase of 10.4% over FY2013. The net profit of the company was $73.3
million in FY2014, an increase of 5.4% over FY2013.

KEY FACTS
Head Office

Papa John's International, Inc.

2002 Papa Johns Boulevard
Louisville
Kentucky 40299 2367
USA

Phone

1 502 261 7272

Fax
Web Address

http://www.papajohns.com

Revenue / turnover 1,598.1

(USD Mn)
Financial Year End

December

Employees

21,700

NASDAQ Ticker

PZZA

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Papa John's International, Inc.

SWOT Analysis

SWOT ANALYSIS
Papa John's International (Papa John's or 'the company') is a leading operator of restaurants and
pizza delivery services. The company's wide network of food chains enhances its market penetration
opportunities. However, intense competition could affect the company's profit margins.
Strengths

Weaknesses

Wide network of food chains enabling to

reach broad customer base
Marketing and advertising capabilities
providing greater visibility
Leveraging information technology
capabilities for increasing operating
efficiency

Lack of scale compared to peers

Opportunities

Threats

Acquisition of Pizza Corners stores in South

India
Expansion of restaurants could improve
market position
Growth trends in the US restaurants
industry

Intense competition from many

well-established food service companies
Increasing labor costs in the US
Stringent laws and regulations

Strengths

Wide network of food chains enabling to reach broad customer base

Papa John's has a strong and wide spread chain of restaurants. As of December 28, 2014, the
company operated 4,663 Papa John's restaurants, consisting of 735 company-owned and 3,928
franchised restaurants operating domestically in all 50 states and in 36 countries.
The company's domestic quality control (QC) centers comprised of 10 full-service regional production
and distribution centers, supply pizza dough, food products, paper products, smallwares and cleaning
supplies. In addition, Papa John's owns full-service international QC Centers in the UK, Mexico City,
Mexico and Beijing, China. Other international full-service QC Centers are licensed to franchisees
or non-franchisee third parties.
The company sets quality standards for all products used in its restaurants and designate approved
outside suppliers of food and paper products that meet its quality standards. In order to ensure

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product quality and consistency, all domestic Papa John's restaurants purchases tomato sauce and
dough from its QC Centers. Further, national purchasing agreements with most of the company's
suppliers result in volume discounts to the company, allowing it to sell products to its restaurants at
lower prices. Within the company's domestic QC centers system, products are distributed to
restaurants by refrigerated trucks leased and operated by it or transported by a dedicated logistics
company.
A wide network of food chains of Papa John's in the US enhances its market penetration opportunities
by reaching a broader customer base. Further, a robust supply chain management by the company
in its own restaurants and franchise-operated restaurants allows the company to derive economies
of scale in operation, which in turn enables the company to increase its bargaining power with
suppliers and improve its operating efficiency and margins.
Marketing and advertising capabilities providing greater visibility
The company utilizes marketing, advertising and sponsorships to drive sales and generate restaurant
traffic. Papa John's marketing strategy consists of both national and local components. Its domestic
national strategy includes national advertising through television, print, direct mail, digital, mobile
marketing and social media channels. Papa John's has also increased its online and digital marketing
activities over the past few years in response to increasing consumer use of online and mobile web
technology.
The company's local restaurant-level marketing programs target consumers within the delivery area
of each restaurant through the use of local TV, radio, print materials, targeted direct mail, store-to-door
flyers, digital display advertising, email marketing, text messages and local social media.The company
is also involved in a variety of community oriented activities within schools, sports venues and other
organizations supported with its advertising vehicles. In international markets, the company targets
customers living or working within a small radius of a Papa John's restaurant, and the marketing
efforts use a combination of advertising strategies, including television, radio, digital, and print
materials such as flyers, newspaper inserts and in-store marketing materials.
Additionally, the company's proprietary digital ordering platform allows customers to order online.
Its e-commerce platforms include enhanced mobile web ordering for its customers. It also has the
Papa Rewards program, which is an e-commerce customer loyalty program designed to increase
loyalty and frequency of consumer use of the company's e-commerce ordering platform. Most
recently, in April 2015, the company introduced PayShare, a digital solution that lets customers
immediately split their pizza bill.
Strong and innovative marketing efforts provides better visibility to the company that leads to enhanced
sales volumes and provides a competitive advantage to the company.
Leveraging information technology capabilities for increasing operating efficiency
Papa John's uses information technology (IT) to run its daily operations. For instance, it utilizes its
proprietary FOCUS System, a next-generation point-of-sale system (POS), in all of its domestic

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Papa John's restaurants. According to the company, this technology facilitates fast and accurate
order-taking and pricing. It also allows the restaurant manager to better monitor and control food
and labor costs, including facilitation of managing food inventory and placing orders from the domestic
QC centers. The system allows the company to obtain restaurant operating information, providing
it with timely access to sales and customer information. As of December 28, 2014, the company had
installed FOCUS in almost 75% of its domestic restaurants, including all company-owned restaurants
and almost 1,600 franchised restaurants. The FOCUS system is also integrated with the companys
digital ordering solutions in all domestic traditional Papa Johns restaurants, enabling Papa Johns
to offer nationwide digital ordering to its customers.
Thus, the usage of IT tools helps the company in enhancing its operating efficiencies.

Weaknesses

Lack of scale compared to peers

Papa John's lacks favorable scale of operations in comparison to its competitors. Many of its
competitors, such as Restaurant Brands International, Domino's Pizza and Yum! Brands are larger
in size in terms of revenues and operations. Restaurant Brands International currently operates over
19,000 restaurants in nearly 100 countries and US territories; Domino's Pizza operates through a
network of more than 11,700 stores in over 75 international markets; and Yum! Brands operates
more than 41,000 restaurants in over 125 countries and territories. Papa John's, in contrast, operates
around 4,700 company-owned and franchised restaurants in the US and other 36 countries.
The company's comparatively small scale of operations may turn out to be a disadvantage in the
fiercely competitive market. Lack of scale also reduces the bargaining power of the company.

Opportunities

Acquisition of Pizza Corners stores in South India

According to the company, the quick service restaurant segment in India is a $2.5 billion industry,
accounting for 43% of the overall food services business in the country and growing at a rate of
approximately 25%. To increase its share in this segment, in November 2014, Papa John's acquired
Pizza Corner stores in South India. By 2015, the company would convert the existing Pizza Corner
stores to Papa John's branded restaurants. Pizza Corner, a part of the Global Franchise Architects
(GFA) brands, is the third largest pizza chain in Southern India.
Papa John's operates 15 restaurants across India through its Master Franchisee for the region, Om
Pizza and Eats. Through this merger, Papa John's would significantly expand its presence by a
minimum of 40 stores by 2015. Hence, this consolidation provides Papa Johns with an opportunity
to increase its market share in the Indian pizza segment.

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Expansion of restaurants could improve market position

Papa John's has expanded its restaurants by opening new restaurants in different locations in the
recent years The company opened 388 restaurants in FY2014, consisting of 14 company-owned
(12 in North America and 2 in Beijing and North China), and 374 franchised restaurants (132 in North
America and 242 international). During 2015, Papa John's expects net unit growth of approximately
220 to 250 units, approximately 75% of which will open in international markets. International
franchised unit expansion includes an emphasis on markets in the Americas, the UK and Asia.
Further, as of March 2015, the companys development pipeline included approximately 1,200
restaurants (200 units in North America and 1,000 units internationally), the majority of which are
scheduled to open over the next six years.
Expansion of Papa John's restaurants in the new markets would provide an opportunity for the
company to capture the niche market demand and thereby increase its revenues through its product
offerings.
Growth trends in the US restaurants industry
The restaurants industry in the US is forecast to have a strong growth. According to a report by
MarketLine in April 2015, the US restaurants industry had total revenues of $683.4 billion in 2014,
representing a compounded annual growth rate (CAGR) of 4.1% between 2010 and 2014. In 2019,
the US restaurants industry is forecast to have a value of $842.1 billion, an increase of 23.2% since
2014.
As Papa John's operates and franchises pizza delivery and carryout restaurants in the US, it is likely
to benefit from the growing US restaurants industry.

Threats

Intense competition from many well-established food service companies

The quick service restaurant pizza industry in the US (QSR Pizza) is mature and highly competitive
with respect to price, service, location, food quality and variety. There are well-established competitors
with substantially greater financial and other resources than Papa John's. The category is largely
fragmented and competitors include international, national and regional chains, as well as a large
number of local independent pizza operators. Some of the company's competitors have been in
existence for substantially longer periods than Papa John's and can have higher levels of restaurant
penetration and stronger, more developed brand awareness in markets where the company competes.
With respect to the sale of franchises, the company competes with many franchisors of restaurants
and other business concepts.
Such an intense competition faced by Papa John's could force it to reduce prices, which could strain
its profit margins.

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Increasing labor costs in the US

The tight labor markets, increased overtime, government mandated increases in minimum wages
and a higher proportion of full-time employees are resulting in an increase in labor costs. The federal
minimum wage rate in the US, which remained at $5.15 per hour since 1998, increased to $5.85
per hour in 2008. It further increased to $6.55 per hour in 2009 and to $7.25 per hour in 2010.
Moreover, many states and municipalities in the country have a minimum wage rate even higher
than $7.25 per hour due to higher cost of living. The minimum wage rate has increased in the states
of Arizona (from $7.8 in 2013 to $7.9 in 2014), Colorado (from $7.78 in 2013 to $8 in 2014), Florida
(from $7.79 in 2013 to $7.93 in 2014), and Ohio (from $7.85 in 2013 to $7.95 in 2014), Oregon (from
$8.95 in 2013 to $9.1 in 2014).
As Papa John's primarily operates in the US, increased labor costs in the country may affect the
company's operating margin.
Stringent laws and regulations
Operations of Papa John's are subject to various federal, state and local laws. Each of its restaurants
is subject to licensing and regulation by state and local departments relating to health, safety,
sanitation, building and fire agencies in the state or municipality in which the restaurant is located.
Operations of the company are also subject to Federal Trade Commission regulation and various
state laws regulating the offer and sale of franchises. Further national, state and local government
initiatives, such as mandatory health insurance coverage, living wage or other proposed increases
in minimum wage rates and nutritional guidelines or disclosure requirements, could adversely affect
Papa John's as well as the restaurant industry.

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