Papa Johns’ prices are driving some customers away
Papa John’s is facing a decline in discretionary spending as consumers reduce discretionary spending.
In North American locations open at least a year, sales fell 1% in the quarter ending on June 25, dragged down by high prices at franchise locations.
Papa Johns’ (PZZA) CEO Rob Lynch said some of the pricing had gotten ahead of what consumers were willing to spend during an analyst call on Thursday. In terms of sales at locations open at least a year, April was the worst month for Papa Johns (PZZA) since he joined the company. In 2019, Lynch joined Papa John’s (PZZA).
Lynch said franchise operators have been raising prices faster than company-owned restaurants to preserve profit margins as inflation has risen. Since June of last year, inflation has been cooling, but it reached a 40-year high. Due to this, they have experienced a larger decline in transactions this quarter than our company-owned restaurants.
About 2,900 of Papa John’s 3,400 North American restaurants are franchised, according to the company. It is generally up to franchise operators to set menu prices, though certain promotions may be capped by the company.
Sales at company-owned restaurants opened for at least a year grew in the quarter, but not enough to offset declines at franchised restaurants. In the second quarter, the chain’s total sales declined 2%.
Since their own costs have increased, companies have been increasing prices to protect or promote their margins. Many shoppers remained resilient despite high prices for a while, they said.
Papa John’s isn’t the only company pushing back.
There has been an increase of about 11% in the prices of products made by Kraft Heinz (KHC), which include Lunchables, Capri Sun, Philadelphia cream cheese, Oscar Mayer, Kraft Mac and Cheese, Velveeta and other brands.
Cold cuts, cream cheese, and kids’ single-serve beverages lost share to lower-priced competitors in the second quarter, Kraft Heinz CEO Miguel Patricio said this week.
At the company’s second-quarter earnings conference, Patricio said,above the market.” Kraft “is taking a disciplined and surgical approach to protecting our profit dollars in certain categories,” Patricio said, adding that losing share “was a headwind we anticipated.”