Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the Papa John's Second Quarter 2023 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Frole. call like speaker to now Stacy today would hand over the your I

begin. may You

Stacy Frole

Good morning, second our by to be ir.papajohns.com morning, investor_relations@papajohns.com. A and under welcome at of Investor obtained we call. earnings copy Releases Relations issued Relations This on conference the our department our website release News contacting XXXX the quarter Investor release. our earnings can second at quarter or tab

Thanawala, our the as President Ravi On and this and Chris and Rob morning our Financial served Chief our Lynch, new Collins, call are Principal Accounting previously Officer; Officer. Financial CEO, who Interim

we this to call Before the remind during forward-looking include comments statement within made federal need I will the meaning you begin, of that laws. securities

risks to uncertainties actual and cause statements. these involve differ from could results that statements These materially may

conjunction should release, earnings our the in statement considered Forward-looking be the SEC cautionary statements included our with risk in filings. factors and in

to non-GAAP the refer for our release discussed please call. measures addition, today's financial In earnings of reconciliation required on

let follow one back for question queue for in the thank and more asking only you Lastly, getting in up. advance me

Rob?

Rob Lynch

Thank you, for and everyone, us. Stacy. morning, joining Good thanks

leaning in the consumer want we welcome his to Before a forward well as team. as into brands finance experience to moment We expertise. I take vast and Ravi operations look global to get to started, with international his

period want Thank team. and and high partner also Chris. and up this of importantly, leadership financial teams team makes thank performing for Most I a you, strategic collaboration being him addition passion building for transition. thought our our his great to Chris during leading fostering a stepping to Collins

data innovation new create control solid with how operating how channels. optimize demonstrated teams management we continues to experience have be control behaviors, customer and and that know to how cannot base this As inflation challenging and morning, and you release execute our to or margins, our our introduce drive our read to spending operations we customer and better expand execution increase revenue can but and We customer menu we a drive sales our we are we our utilize to insights that what all pleased environment. in a frequency a better earnings strategies we

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comp beyond quarter X% growth improvement and of As above second costs. moderating margin our achieve owned in the company year-over-year sales and restaurants the benefits food

the scores level John's operations Index The over and teams ranked receiving in the Satisfaction year fast is external as solid the further our is recognition recognition that and pizza the food continue that will we improvements in efforts making experience as a top five for into all We're paying American our into Customer have evidence franchisees foundation that category number one remarkable. implemented today also future. past and these operational in the of This building dividends that are for Papa well guest discipline the are is restaurants. recently

domestic enough our solid the during not than by However, restaurants franchisees to comps, anticipated was quarter. offset performance lower the the our company-owned experience

an find teams our business ever-changing ways environment. to franchisees to Our been partnering have in drive consumer with improvements

to opportunities strategies, including deploying three and our revenue for We principles, modifications best their leveraging franchisees, marketing of areas have core identified optimizations. management operating

and sequential of adjustments to work the franchisees and positive make saw they improvement appropriate delivered quarter June. throughout end comps by the Our the

us franchise over comp both half sales our the the we'll into term. owned company XXXX these positive giving and restaurants, back in of importantly, third positive More accelerated confidence in and trends produce have the quarter longer

into of key deeper margins. John's innovation. improving bit drivers key I'll in a with our America strategy of Lay. Doritos, component a level with trends point, winning the menu Pepsi of North A and Papa menu Papadia, offering innovation start Now our let's restaurant value. and is sales with some pipeline. great In May, price partnership And we proprietary a dive new $X.XX launched Frito it Ranch, Cool our is menu

This launch our amount additional of traffic channels. significant generated to a digital and buzz

saw start the sessions double-digit In at fact, we the growth promotion. digital of in

year. improving successful transactions remained this experienced while franchisees our prior consistent with weekly launch, ticket Following the

that national Several by $XX.XX Papadia, promoting weeks barbell brought our at we after point. national an our positive the to overall style Cool to our our to by pizza also strategy higher see to approach to month. extra This promotions we the New the contributed York past Ranch, introducing this life quarter price sales and sales layered popular began of attractive Doritos, franchisee comparable large end

innovation, expanded platforms, Continuing pizza most popular Stuffed with of our our menu we recently one Crust.

another John's with new Crust we of three example of on known Stuffed ingredients, crust, of nationwide how crust, garlic, this pizza. is ingredients the limited equity Epic brand our the inside which different best and for are is Our the with side ways, dipping one better signature Garlic launched Epic Garlic time the is leveraging of garlic Papa our Crust in week better Pizza, sauce. top on Stuffed layered which

keep this introduction the taking of Epic Stuffed Crust of offering end going. notch momentum at up to month this the also spicy the with a We're Garlic

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driving times comp are continuous only improvement owned restaurant not sales, and company also reducing These in make also efforts order we're product accuracy delivering but increasing Our are restaurants while margins. allocation. labor quality,

on team at driving Finally, product every channel. customer right our revenue by time offering right right the the right sales focused incremental in the the at price, management remains

and the between quarter, of that During a restaurants franchisees. company performance our remained our the gap of second

year, our franchisees prices an this in faster past to period. restaurants at than margins a highly their effort company-owned inflationary our the during have increasing preserve been Over rate

opportunities improvement experienced their higher transactions each surgical result, pricing quarter. a decline they company-owned performing relative optimize a past to and along customer ongoing teams As and enhance utilizing business system-wide. promotional in with transactions been have models. We've with cross-functional in this delivering sequential rating approach their larger to business our reviews is operations, This identifying to restaurants franchisee, satisfaction

have leveraging system. to date, progress more with we through our we are taking and close our place insights opportunities and the strategies of channels, our than additional XX% data the consumer the We made the by at see disposal pleased gap across optimize to transactions to our with digital pricing

today that in to One and national experience, I the the channel to highlight is holistically partner give leading history, like To we offerings. would our channel. area this aggregators, and pizza were of model more expertise, strong capabilities deep growth giving its significant chain with first aggregator you some us

these comparable quarter has is while Today, Maintaining we on strong a in quarter. marketplaces growth in price, an delivery consistently consumer organic what environment business. remain still proposition to garnering delivered margins our after competitive value increasingly competitive

the channel a as feel embraces growth. system aggregator as the key our We model of entire about good leading continue transaction the driver in opportunity to

additional bring marketplaces presented these offerings, continue excited as to a capture forward more even the Papa new about to Going attracting demand. broader we're on customers, John's opportunity to

franchisees believe do comps by half half We America not our but expect of the XXXX, the offset experienced to back to the first deliver it softness the in in positive be of enough year. North will already

not a basis we're result, ability we up longer On to remain expectations our normalized North X% that guidance. changing and long-term comp As annually, between America to term, X%. X% more confident in XXXX to fiscal grow adjusting America a comp and sales North flat our are

were X% international declines our international last UK, in which the from comps largest year, primarily market. reflects In our down business

improved our specifically channels, the best we are marketing aggregator in the in innovation, UK in market, developed quarter including investments, relative second with improvements. the we menu operational However, the domestic within as performance and implement practices pleased

Excluding This development Middle Asia by international unit announced positive, translating our accelerated have into second sales the were in markets. both of for markets. also agreements we and the within significant long-term UK, is our as quarter comp strength development, Eastern driven strength these

portfolio UK the In the a with restaurant company-owned in of XX restaurants. June, we established acquisition

with recently our those UK XX growth recently leadership also excited We July, meeting the and in our locations restaurants. about XXX and restaurants total ownership acquired additional long-term bringing to team locations field, the market. of after the and potential these holistic visited I'm the in these in I UK

through sales global take It'll our our our long-term We to continue but to final for revenue franchisees international support me to IT to sustainable the loyalty infrastructure. are capabilities strategic organization management like make and investments today development. across up investments brings time, like I'd discuss e-commerce, in topic some unit and improved success, which setting

were John's in domestically and footprint At I net we joined and priorities time, XXXX. internationally. When highlighted restaurants expand to our domestic due of our new pandemic, one negative opened only to growth the XXXX, I XXXX, was first five unit experiencing in strategic profitably in the XXXX Papa system-wide we and

drove to time, restaurant growth. profitability. largest Since accelerate in some company company we the in in and some XXXX between are XXXX, units. and AUVs significantly have agreements unscheduled development that the record unit continued we highest tracking improved and of open Signed XXX net of openings to system-wide net in This new our level history remain we history a new XXXX, and as year unit and to XXX new

and units a system-wide implied net new this goal growth a XXXX, beginning total new introduced is increase midpoint, X% XXXX X% new At XXXX and for the unit of net This XXXX between development between of to fiscal At XXXX XXXX. we through the X% years global in multi-year XXXX. units.

the financing and the have targets unforeseen delays we not these in put extended in globe, we place, costs an to war circumstances, material due Ukraine, limited around rate America interest but and construction Since including within to many higher increases. inflation North permitting experienced

ability next Despite to our these recent over of grow. This long-term years. pipeline announcement was XX confident new various the restaurants global continued as in challenges, our expectations remain we most continue our supported meet to our in by to India XXX

we see we're our that are there lower capitalize We still we in significant today persist near-term to all are world, also around and white but growth the that investments making therefore space strategies slightly us that will initial headwinds recognize enable rate the of our to some executing be target. continue we may on the know than

between net of at imply very a As our healthy to X% growth unit to result, from X% would units X,XXX guidance to and XXXX of mentioned resetting compared to of which This range long-term X,XXX to X,XXX of level. to the an X% rate our remains the global that net white we continue new X,XXX of with new X% XXXX we're annual a units forward, a I will advantage range earlier. net new range space going a of unit rapid development new guidance original we Ongoing, take see. pace

over our to Ravi, the for to Papa remains ingredients, I as model innovative turn call and I driven better want positioning. demand our strength business the by better Before pizza high brand of reiterate pipeline our John's

driven XXXX difficult once the seen pressures half sales, year and of have be Although challenges comparisons. a will in by near-term the year some again record first we system of macro

heading these of half over Despite are challenges, the the long-term. confident XXXX second and into we

and unit better the strategy domestically well back coupled growth offerings Our our strong our plan, positions for both future. to product and internationally, with us

execute extremely our an team have is strategy and to the bright. in future on place We strong

to like I'd turn Now, Ravi. over to the call

Ravi Thanawala

have Thank to excited you, good everyone. opportunity morning today. the I'm talk and you with to Rob,

here internationally. is brand the differentiated conversation space of I'm what of only be been Papa weeks, with robust I've white John's from have. store new and couple Company pleased able is validated say saw I with pipeline and a a domestically While outside for menu to innovation being both for amount that to I significant every a growth

each more unique in with space our order QSR experience team we partner activate to within data their a position marketing digital amount XX% insights to they adjust transactions allowing excited vast to of John's. with time are to incentivize have consumer and the we changing than quickly the the Papa consumer behavior channels, to identify of through the from occurring I'm trends, and us optimize our

enable scale model creates our I'm up a how experiencing career so a to support realized many franchisee through in also I with to and firsthand great my and how can grew franchise quickly for markets. work localize to professional attracting I've with also products family a company excited experienced in brand the partners franchisees. great opportunities people. new

They and their this want the thank of discipline to and partnership. timely financial period supporting transition. accurate finance during financials, all and to business amazing for stakeholders support value I job business done collaborative our and delivering an to and Chris have team leadership analysis,

for how the to setting of also up it recognize is next your Stacy of know looking with forward community. to all the me important I to to hearing few financial in is you process firsthand. in schedule the thoughts those a get I'm you meet of meetings and weeks. in many

I'd Now, the today's to over turn like call. Chris financial the of cover Chris? call to to portion

Chris Collins

the good to It interim serving working at with closely pleasure great role everyone. role, steps morning as a Thank look you, CFO forward in was John's. Ravi, I the Papa he Ravi into and and

international prior $X.XX unit in contributed to sales. X% year. the were billion, quarter, the constant the from higher For sales restaurant second currency primarily up Net in markets growth global system-wide system-wide

down comp in a were restaurants. in restaurants X% offset of North decrease X%, a X% our increase result America company-owned sales franchisee by

our the year-over-year saw transactions. quarter company franchisee while was owned For ticket domestic by transaction lower restaurants offset ticket growth and growth

of franchisees prioritizing short-term, variety growth including relative the timing over transactions. prior A and in have factors to national margin impacted the of year promotions transaction the

saw As month for third we into positive company-owned positive resulting both Rob restaurants America the month maintained that of and highlighted North the June, franchisee comps in during after quarter. and improvement growth transaction month the quarter,

in we formally our Asia consumer comps market, in Middle-East XX international as purchase in largely In quarter, other UK. quarter second especially pressures. down the the the of spending X% restaurants the second markets, completed International in these continued and inflation to strengthen were offset pressure the UK franchised

effective adjusted are the date operating second international the neutral this quarter Xnd, until is quarter in These for revenues reflected June period This for with nominal transaction restaurants after begin expenses. operating Therefore, royalty as Xnd. income an restaurants include our revenues in these June on restaurants results in international owned the EPS. company and consolidated restaurants results and impact to second

$X second second Total million down from quarter the for revenues quarter million $XXX were last year. the

of sales Revenues growth and partially decrease Excluding prior our company-owned restaurants, is were largely at to down this lower the by due commodity America total year-over-year lower to a at segment the versus $XX franchise the revenues our sales in segment. revenues down purchase year. million restaurants. offset saw UK related for were The prices restaurants volumes North our commissary comparable we

operating year. for million decline $XX operating the income second the was to adjusted basis compared year. XX million a versus Turning profits, Adjusted were quarter with for $XX same point last last X.X%, period margins

to led company-owned margins domestic through which I'll moment. efficiencies, higher at higher back to Our our restaurant and better a comp in labor level strategic initiative sales restaurants discuss

compared and of were improvements conference when due the with first higher year. return by expense franchisee quarter for April in These offset expense anticipated since to second the G&A XXXX time the variable our last compensation higher

continued investments related depreciation was our to addition, in technology expense support. In restaurants higher amortization there and and

between we million million For in expense $XX and amortization be and purposes, anticipate to $XX depreciation XXXX. modeling

to supporting costs excellent our performance while continue a teams do culture strategic growth high maintaining managing our disciplined Our initiatives. approach taking job and an to

let's our So a deeper segments. take operating dive into

to improvement restaurants. during supporting to our guidelines. costs continued In in labor basis our labor reflecting basket reduced poultry. improved Labor we overtime efforts year with modeling have costs meaningful increased company-owned especially points restaurant cheese domestic the our improved XXX year basis than prior and beginning second our throughput a from in segment These XX continued scheduling to peaks, relief are and adherence prior experience points our quarter, our margin food compared improvements as and more spend,

XXX represented margin basis, of with in than ago. year-over-year more basis combined XX points in basis segment. company-owned insurance a labor costs an domestic our improvement resulting anticipated health commodities point margins in compared level improvements restaurant than these restaurant a Higher increase claims offset On approximate and largely year

more we restaurant to company improvement we expect As the year, of the look second see our domestic in half margins. towards owned

to our costs in our on continue team to food moderate strategic initiatives. continues As execute

and the commissary remain lower fixed driven mentioned cost plus commodity by In margin operating our our revenues earlier. Adjusted year-over-year, pricing consistent X% volumes declined North segment, by with lower America margins quarter second model. I

was operating prior income adjusted For in operating the segment our the year. compared second with down international quarter

the market own earlier, international we mentioned where market, our it and the is is UK As only largest the commissary.

our Given come that our commissary markets international UK streams revenue and sales, have we from impact pronounced our the on challenges royalties facing more a are profits.

continued development diversification international UK in market into other Partially our is markets. our offsetting and declines

As quarter, within a new when net of with markets year international X% in an we growth have of the compared end unit increase seen our the ago. second

in cash flow flow months net six by XX increased expenditures increase million new first of by invest provided as cash the to million innovation. working on ago. restaurants to the reflecting XX a from we sheet, capital, offset up and favorable year of million partially XX Free Moving was the changes for a in cash activities $X technology continue balance million and development year, domestic operating in to capital

We liquidity, in our down our sheet X.X million and and end of basis. declared X.X borrowings annualized on pleased share, Based quarter available per I'm XXX to ratio ample or that XXXX of a times the revolving our and ended third $X.XX with credit positive on strong our an say first $X.XX from board increase to gross quarter. under at outlook, a dividend which the balance a common has in the XX% approximately times leverage totaled quarter cash facility

organic growth to We'll share approach a value Our disciplined combination balanced investments, repurchases. through our our and of creating cash flows, capital structure dividends, provides us cash and with for flexibility. substantial to take managing operating a continue shareholders

our to outlook. Now

we do comp half X%. expect to year the new range better comps positive to guidance adjusting driven America to for previously are to plus initiatives of continuous improvements strategic and the announced, innovations, North capabilities. Rob management in We our execution our see a of of menu back revenue by XXXX flat As second our

Furthermore, reiterating annually North longer X% over expectations growing we and comps are our X% America the of term. between our

anticipate are and will UK For remain our structure perform to each within but our into comps as international persist to international the year, quarter will and improve corporate other continue full organizational restaurants we under new continue as pressure UK challenges markets grow. integrated the

these level we North tailwinds the We positive making infrastructure UK, XXXX. comps initiatives, creation expect based comp up as acquisition as including achieved be the corporate the to prior the XXXX of better from benefit back to America the to adjusted of operating our comparable XXrd and our expenses in several in back to are in of back the margins slightly tailwinds, to investments recent and week we support up a Offsetting are office the higher some ramps restaurants and year. including versus performance G&A operational benefit

we longer they're the benefit for is these that pressure once but emphasize margin as that typically we our third term to stores. there sales. due our quarter our purposes, want be fully modeling integrated integrate I will recently near-term of some to expect acquired And remember restaurants into UK margin structure, quarter from corporate seasonality lowest

with end XX% and million terms to expenditures our expense and and range. All million, non-operating our capital remain XX% net tax the to our line $XX between non-operating guidance. previous $XX million of interest in expense expect $XX expense in of Finally, items remain between are to higher our rate remain to $XX we million, items,

look shareholder to focused at on As deliver Papa forward, we driving growth and we remain value. profitability John's

menu customers, execute our capital enhancements, driving We We help growth, our confident and our us numerous our our to franchisees, to of and shareholders. position achieve strategic in value unit digital operational capitalize our strength to initiatives improvements, strategy, for and in objectives, our productivity long-term place ability on allocation. remain including innovation, have

Rob And final I'll to turn Rob? with that, the for comments. over call some

Rob Lynch

Thank you, Chris.

right the for we year, quarter on half improving As path Despite supports continue that solid strong. that challenging I challenging and the the our of forward remain the the first trends to second and throughout mentioned third at environment. the call, start the a we are beginning the a products operate demand to start of consumer to

our of the to diversity, believe and against of a our. in leaders inclusivity operations our culture internationally. our success building a winning, expanding that foundation domestically and of our business profitability the footprint and improving and and platforms, execution The of operations continue pizza will unit has are technology who establishing been our superiority commercial through be franchisees, solid level our They building infrastructure enables

have about of confidence We're the sustainability our in progress. excited opportunities available us and the to

we'd any At up the may like for have. open this questions point, to call you

Operator

our will Brian come Instructions] [Operator Oppenheimer. of first from And Bittner question

open. is line Your

Brian Bittner

update time but accelerate back comps relates you of the do surprised to it specifically June secondly can drivers, improvement of insights, to call May I to sales, the direction to second is year. you same driving on lot us what kind you Thanks. the thought you you'd in specifically lot in the just talk more in you early right what's based bending As little related a relative the And I where know trend your to quarter back the be? bit about a Rob, believe the at there, and store sales a talked this different on you Is July? gave things throughout sequentially in think about what the you expected

Rob Lynch

the for question Thanks Brian.

that month spend. of front, had about April had pricing we've comp in John's that out front A yes, was I've gotten the really of the company macro lot terms was some talking issues and of worst of since kind consumer we where some So, of discovered performance. the in and that where to specific at spent issues, out was been time of Papa willing

that sure a so, from where And understood the where headed we dug we our side on franchisees. were consumer standpoint. that's with really of they kind management revenue Making in

also tax not of a in discretionary I but April the to was refund. due decrease In the that, lot, impacted it's addition in a the customer of power to think lot talked spending about the

focused of was met bring. the the recently investors more bullishness in to about on innovation as of with analysts kind Crust, that a and lot had I on then May, we So, lot really I were so we had that. about But Papadia a quarter well. Stuffed us excitement Doritos, of knew when that my and I hit Garlic

Also, we the of consistent improvement top-line on restaurants, we doing were of regardless just some sequential in were sales And the work company month April. over in challenges the margin that seeing of our the quarter that's continued sales both improvement quarter. has we QX in and because actually that And did color we've as see margin and in throughout momentum accelerated. given some why the well, QX the

So, brought that our restaurants. that outpace making, the we restaurants franchisees our improvements growth transaction top-line lot and of our franchisees. that of comp in both believe growth results do company a bottom-line innovation driving focused growth. in working that we've are And the laser can we're We company is continue are operational to terms and on for with we

And taking even confidence increasing more our customers. not we're because that gives us it's more bringing about pricing just revenues, winning by or

what the of that's in of demand us products, this lot our moving gives half and is a forward. there of a for back so And and lot confidence year

Brian Bittner

and franchise talk bifurcation Can to this traffic stores? I you Company you it's value again, owned the that issues price led franchise variance being that one the a Company. equation? that stores system stores and and traffic the And question, to franchise have they is and stores, franchise how driver to important what stores sales the restore specifically of did I specifically in relative how there's perform meaningful this identify are issue of help obviously about on you doing correct variance follow-up and just big and to kind price you're the company franchise a because seeing but the was owned, And for know from in perspective that pricing between the very that

Rob Lynch

that's I past, I most a is model industry. what pull In model QSR an deal management QSRs. board planned in where as at so menu is what goes This we it this price into on. of on in segment and about Yes, look relatively relative mean, think more you is revenue menu that talked the there's and of when to the we've the This complex drive-through you it's a a board, pizza QSR, traditional pay. the is with shopping ahead you e-commerce that here the

come discount of customers are essentially standpoint standpoint. as the typically slash they XX% discounts new storefront, And on industry, offered in the as there's from both our a channels, over a as transaction. segment each is being which at well digital into looking average this what So applied is special product to

So to has from How prices it's going we're we're as management as going places menu hey, prices our revenue menu simple take not up, to standpoint, our our a that take with but national down. menu just that all specials the an interact of with work to is at local both the that we're and together. we running offer, the algorithm kind promotions level saying,

have It's the on how we're in menu their offer and the your digital and going franchisees, down your execute aggregators, channels. to saying, price. take discounts up they they in show our pricing with they through e-deals in you prices not hey, how the it's work we as just their So on that on regular

carry even making as specials shifts, out, lay carry offering of volume out little play, bit from a you in is into there. delivery the have All some that sure

we are to all So, between how with and just can those it's they management. revenue build their come working relationship them really them not can long-term maximize facets different successful the in tell of they margin, how

Operator

next our Long will of Stephens. Joshua for And our from moment one next come And question question.

Your line open. is

Joshua Long

we think as much then points that comments outlined? about in of think Diddy that you some management is back a seems the terms as of and how mean, improvement you the Rob, or runway And just, shared. think model, when and date, opportunities, Following comparisons date, XQ outlined some of then just revenue lot being those I initiatives to that we these these driven we three look that, up When like of by in there's of the you've year. thinking Dewey, also improvement on particularly in about about terms focus last to the of about you versus

process terms seemed or normalizing in of what the term environment ending the these, past a of up you initiatives maybe meaningful the you of of of of just what is what kind after that of little in much level? top-line to can context and/or out just be offer how move at some execution store terms So, the kind April longer bit rolling profitability,

Rob Lynch

level, tell executing What promotion now are at management right high operation I is restaurants an from a standpoint, advertising from an our would you an that company and revenue standpoint. standpoint, extremely from

high runway take restaurants of our the are So, that company the a advantage performing degree ability gives confidence you to our me way highlight. of in

model the and I the mean, the on stores. on hasn't focused making both white side, making sure technology that and really that restaurants running unlocking economic both have product we're that investment continued we're as internationally, as making changed. are well we innovation, side that space that will we sure The still model warrant are our new domestically in and sure helping, driving

from probably that obviously faced we're So, in you situation we But and have Company the regards of kind of are, of all stronger, side, period the in, kind run given a seeing do entering I lapping which were rate, in are pandemic that probably a kind normalized of and is feel into, we comparables. where we of there the inflation artificial some demand with. pandemic the was quarter to broke where kind the QX like lot

strong date. We're entering I've run operating and normalized is restaurants our model seen to about in rate, an a as of more this as much into

set there. is strongly our all to business as highlighted, as same the goal the And food forward. make that the moving same sure, up I deliver to our are are franchisees So selling with mean, we're fundamentals model. Brian

franchise tweak executed at our it's the to some across We just scale of capabilities and how system. have being

do that. to know us gives where confidence ability are We're the and the so We the focused what gaps have challenges forward. that's it. moving and we much on So

Operator

moment One next our for question.

Our come question will of next from Senatore of America. Bank Sara

Your line is open.

Sara Senatore

and if offline Would the to issues extent in can I stores, is, hiring than that's customers was And perception. if to any to bringing the your aggregator that view now? general two with a at how perhaps times interested comments who channel piece service was wondering early as curious is, you. I people articulated talk all maybe was then One about you I versus question used was productivity behind value, I that related think point the less the faster like in-house value of now, opposed were about you seeking are the question. I aggregator wrong a offline? think you you that are and differences sounds part delivery are to that. contemplate online out the about and hear the perhaps about there been your dynamics delivery there's talked company as importance the are component that competitive door mark you

Rob Lynch

Thanks we of digitally. Sara. When that digital go and goes online that XX% center business everything in phone across offline, centralized mean, competition our into is our is comes talk essentially. online, come versus about we do XX% a the call now calls I channels and into then

So we online. that do is everything

the online. difference our and organic Now is our between aggregator online

question. driving you're the And think that's so I where

aggregators seen, value be have have And seeking. historically I less less you price sensitivity think and

more I and become think population. the larger kind general have behaviors be seeing to macro, the a of as scaled and you're similar aggregators population, their the affinities their more as to the aggregators

channel. deal it's what through to program, that a them through have and But I create go to able really hard be for a offer one tell we onto Rewards loyalty organic offer that, someone I been repeat mean, is organic Papa we we and going to than channels aggregators and get focused our better customers a value, dichotomy the of are the will our can our offer where you program primarily better

you volume incremental through website our organic is apps. or Papa mobile what see the buying customers aggregator best the people is are that lot So John's because are typically of a

the the So, sensitivity consumer at I different channels know is significantly across price don't that point. this

was think early you I it in. early on as adopters had coming

I value offer think consistent and more offer, streamlined organic always always our has aspire to they better with going that but are we bit to a than been [indiscernible], in channels. more can a

drivers. usage operations approved service staffing, and That there are goal different would In and pretty our of our still regards markets being our organic that said, to of yes, require question, Drive. your our improved be DoorDash all to a heavy transactions with second situations different in

to franchisees and our accessibility West where particularly of think of has out on labor labor you cost the we are the heavily we our we lower own on up been Coast leverage challenged, where the you find and leaning have to If rates. been been markets staff see where markets DoorDash able productively have the able the really about, there Drive more labor,

we leveraged moving larger So, would demand to a think I is drivers a I that be leverage able optimally our for labor don't to on organic see but a going DoorDash forward. away, great long time, Drive ever we've extent it, asset

Sara Senatore

just I much just there your it of like versus about anymore how to your sounds aggregators guess like online sort I isolation on proprietary are advantages you people see competition do sounds aggregator, literally talk an to on screen, competition, And that they versus who distinction the and isn't point, the kind but there online, prevail ordering same same can when it versus you offline looking of maybe works directly at between, your as in the elsewhere? to comparing point,

Rob Lynch

behavior you tell obviously shopping aggregating they're site, even the of shopping one mean, that I mean like they're similar, would by on I still all into channels, is Yes, pretty aggregator sites. the multiple organic definition them but obviously

little John's, stacked Caesar's, as just your side is all by to as sitting Papa Domino's on up apps Hutt, and to their it's inside DoorDash phone have So, and four them on Pizza easy go there it platform. side, see

those channels. dynamic shopping of both competitive in that exists think that I So,

Operator

our for next moment One question.

Our Chris come of next will Stifel. O'Cull question from

line Your open. is

Chris O'Cull

hadn't that the you've changed transaction of said past know from I period. incremental from in growth average the the frequency customers, pandemic Rob, much that over period much that capturing and came

you're on of whether made, making any existing curious customers? that frequency with company progress just some in I'm operational the So, average among increasing particularly stores you've your changes

Rob Lynch

that Yes, and loyalty as more So will the therefore goal, is improve right? more I absolutely levels, frequency. we long-term service mean, we to create continue

is were which a service huge external is SCI fundamentally, validation by one businesses die business in as as one this I of all we're restaurant we things earlier, the the this back in to proud the live better work industry, all and operations. that mean, and called we're with we doing. of that that believe recognized are I just number really of out So,

focused year, great mean, safe, keeping has incessantly during deliver innovation last challenges was on were that's pandemic the about. it product talked If is doing year stores was matter your is. that all how experience, make that you half. to been that people how And or can't marketing customer fancy the everyone a it staffing scrambling about and I doesn't what everyone the really for and fancy and keeping, a your try just we the sure open, keeping we've

we driving pandemic We've discipline staffing things. as had We up lost discipline. have that the and and Now, operations, come out we kind some that that's now we we got of behaviors re-instituted and want. clean great improves some leadership of had the to

And is frequency. significantly so, yes, to I mean, increase our long-term goal

talk but as be to we're more in improve. we're it's a throes out data, untapped frequency that, opportunity kind make a for with we not business, our of share progress about that transpiring. think able of forward, our that's early so We huge we'll the to as evolves or we sharing will there, and moving operations how continue still you, huge more how Today, necessarily

Operator

next One our moment for question.

from comes Eric next Our KeyBanc. of Gonzalez question

Eric. line is Your open,

Eric Gonzalez

talked faster margins above of seem food questions margin like stores would moderating the to due the rate about health about it outlook the in you sounded at claims. costs. second Company a some The beyond the benefits prepared and quarter, improvement you much insurance remarks, In the it cost than and expanded

this a comment few the in but I'm the margins, relative fact Company second Thanks. prices flat could still half. your that in hear take Also on assume bit we And expectations expectations, didn't for operating if to uh, So those to back and remarks, you year? relative cheese in should those that the weeks. spiked margin this expectations account have the I you to quarter, last the wondering prepared the

Rob Lynch

our Right, mean, sure. talking we've in sequential in I XXXX. about improvement been restaurant margins

we our, year we that. shared in did the expect that think that see to first I call of

even have think as happening improvements we next we've quarters seen and look I restaurants. we that the towards more company in couple the our in confidence

in three really the weeks the It our that the you improvement last weren't kind have, company and couple and cheese some last We're been margins expecting. prices a excited health claims. saw claims of through over that some cheese were With significant prices seen we self-insured of we through. months, that has flow that we has had insurance we of of these we have company some about mitigated

should, expect so few to cheese should to continued higher we and restaurant rate in little And through and seeing so, run come a weeks, sequential improvement our on in restaurants, prices in despite back we maintain that's improvement not productivity and bit last continue would something can see we if operating margins. that efficiency our that we continue the

Eric Gonzalez

way Is the about full still flat right margin think year-over-year the the to year?

Rob Lynch

towards tracking Yes, I'd say that still we're that.

Operator

our One come Jefferies. will for next next moment question. our of Slagle question And from Alexander

Your line is open.

Alexander Slagle

openings to just there get brands, just a can in were for be Wanted investors 'XX guidance expect reiterated, difficult seems realize as or quarter hat second it the your it you just of the and would below the that ramp some to the seems development pace and and helpful on what but number development's franchise quarter first on become the confidence gain environments on like this typical, to we'd their like touch external path hang more more to backdrop. not the color certainly given here typical

there'd perspective helpful? any So be

Rob Lynch

Yes, but really domestic mean, development And contributing it's on has our global Globally, seeing I domestically. difficult strong of our I become am focused development more development. to global significantly increasing not being benefit is disproportionately as difficult. one are that we development,

signed the lot gives us up significant that that a we of number to a for. have confidence in deliver have pipeline ability our We

units of seen accelerate going to Obviously in the with have front half, the to we're number in back we've the half.

see that able pulled through. Our a going team has that be to of they're to lot confidence

So, that's that why we're reiterated guide.

still white challenges, of macro drive, our in us lot to think space white space. despite fill there's for particularly of a lot the a markets that up international I and

our a ability So the between of to year. confidence lot get we and in XXX for have XXX

Operator

Strelzik One moment our question. of next will from Markets. Capital next question for our BMO And come Andrew

open. is line Your

Andrew Strelzik

particularly more about value. you've the the thinking the to how it's customer approach tends dynamics, but of Do you about. you you anything some to how talk metrics? lean your have or value more you're but management deflation, focus, the curious an around communicated guess in improvements value more with, The I the do that? revenue about value or in I'm with seen on the of brand area balancing about overtly any aggressive think know be talked an see change And scores you I kind discussion perception opportunity as margin around is not

Rob Lynch

I are Yes compelling indicative restaurants deliver sequential our think, in in way. Company particularly Sure. improvement ability a our of our to comps, value in the

do we topping great off lot come for like I and is selling one an great of a point for a our you're discounts, pizza mean, extra when large A that's a out XX% don't Papadia although, value. $X.XX price value. So, $XX.XX,

on pairings, which, value. our we a is channels $X.XX papa every day great promote digital at Our

last been system we environment. the the is getting ability periods right really competitive So, be is and a every amount and very delivering and value growth oriented are I think experiencing to XXX% committed is to transaction indicative our has our better value that three period of for of now essentially

Operator

next for One will our Mullan of Piper be our question. question coming Sandler. Brian And from next moment

Your line open. is

Unidentified Analyst

your thoughts to what need on health about Ashley internally? guess And them I for wanted franchisee TLC ask the to the on if stores. UK does you to is I UK? I you get want on plan the recently your look acquired for stores. levels wondering expand these Do in separately, This Brian. of a initial remaining they could lot the was like

Rob Lynch

an need operating mean, to remodeled. mean, when we're from great. They to we I but have say of would don't be say yes a invest planning I on having capital. I Sure. not all you TLC, standpoint, ton

that We've finance, those behind types a of bit great had support bought. obviously HR, footprint to a a infrastructure and of that out have operating we that the stores goes some operations build things. field We with the

then improvements costs we UK restaurants, franchisees, above those with those But we the now what the investment of quarter sure and a rest that model make beyond that, market that So base to optimize asset in are and that across had we put to of the are own that of to base. the into the almost we're doing XXX franchisee the purchase to and and the fully optimizations the we've just scale assets. leveraging U.S. similar those understand how

be And Not going partnering do the that the that with are principles. some that franchisees win restaurants consolidation. on We're are that in some best to ones helping are to we will franchisees but to the our multiple believe going to part, with those operators already adopt franchisees market them moving consolidate forward.

there be that yes, So there. happen may some over changes

to building grow franchisee in can us those those that for of to our choose and may the we restaurants is think going assets. we're partners who that model the franchisee intention we scale become is come those for pretty profitable. I and But more pretty, some rapidly with to long-term, may operate And and we find

we're there up dependent optionality situation what a over We of lot to upon the system success. for long-term setting have we sure make that is right

Operator

now like for the remarks. to to would I back conference turn closing Rob

Rob Lynch

you. Thank

franchisees. thank continued So, would of our And sincerely and your to also I thank for Papa support morning to your members this I'd you like time team like and John's.

XX it's times. challenges resiliency of some we've been that a all they've with mentioned, and during the months As unbelievable we challenging macro agility unique these faced, and shown

through the persevere a both as our both forward. worked today, these So, of half how on and year have to lot this I'm call they've of back And of restaurants company, employees, confidence proud and incredibly the moving and in for we franchisees our highlighted together challenges.

and all the your thank you time best. for much So, very

Operator

you participating. This Thank conference call. for today's concludes

now disconnect. may You

Papa John's International (PZZA) 3 Aug 232023 Q2 Earnings call transcript