Labor shortage has Papa John’s relying more on third-party delivery

Labor shortage has Papa John’s relying more on third-party delivery

LOUISVILLE, KY. — Premium-priced pizzas and third-party deliveries, including DoorDash, give Papa John’s International, Inc. an edge amid an industrywide labor shortage, said Robert M. Lynch, president and chief executive officer.

“Though these delivery-as-a-service transactions are slightly lower margin versus using our own drivers, they are incremental, profitable orders that otherwise may have gone unfulfilled,” he said in a May 5 earnings call to discuss first-quarter results.

The chain continues to roll out higher priced pizzas, such as the Epic Pepperoni-Stuffed Crust Pizza at $14.

“Our premium positioning is a different model than the folks who are talking about staffing such a challenge,” Mr. Lynch said. “I mean their staffing challenges are exacerbated because their model is low price, more transactions. We’re premium priced. We don’t need quite as many transactions, and therefore, we’re less impacted by the staffing challenges that we’re all seeing.”

Staffing still was an issue in the quarter ended March 27, as were escalating input costs. Net income for Louisville-based Papa John’s was $10.5 million, or 29¢ per share on the common stock, which was down from $33.9 million, or 83¢ per share, in the previous year’s first quarter. Revenues increased 6% to $542.7 million from $511.7 million. Comparable-store sales were up 1.9% in North America and 0.8% internationally.

“In January of this year, omicron exacerbated labor shortages across the economy, and our restaurants were at their lowest staffing levels since the beginning of the pandemic,” Mr. Lynch said.  “Then in February, as omicron declined and staffing levels began to recover to end-of-year levels, the conflict in Ukraine shocked the global system, triggering an acceleration in commodities and fuel inflation. By March, businesses across the industry and globe, including Papa John’s, faced yet another new normal. Despite these challenges, and as we’ve done since before the pandemic, Papa John’s continued to consistently grow and outperform last quarter against the challenging backdrop.”

Papa John’s International now expects net restaurant growth of 280 to 320 units in 2022, up from a previous estimate of 260 to 300 units. Inflation will have an effect throughout the year.

“Our current outlook for the food basket is for costs to be modestly higher in Q2, reflecting the full impact of March’s acceleration of inflation, and rise 12% to 14% for the full year,” said Ann B. Gugino, chief financial officer. “Based on this outlook, we expect adjusted operating margins in Q2 to decline sequentially in line with higher anticipated food costs for the quarter and recover sequentially in the second half of the year. For the full year, we currently expect operating margins in line with Q1.”