Nearly 60% of Papa John's US delivery sales now come through digital channels

Papa John's announced its second quarter earnings this week, which included a 6 percent jump in comp sales in its North American system and an 8.6-percent increase for international. Revenues increased 9.1 percent year over year. 

On today's earnings call, CEO/Founder John Schnatter called this "another tremendous quarter."

Momentum came from a new marketing focus and its digital capabilities, which helped Papa John's increase market share in the pizza space, Schnatter said. Just like last quarter, he reiterated that the chain is "on the verge" of being the first national pizza concept to achieve a digital sales mix over 50 percent. In Q2, Papa John's domestic digital sales were "well over" 45 percent.

"Additionally, during the quarter, nearly 60 percent of all delivery domestic sales came through our digital channels," Schnatter said.

New POS

The company continued to rollout its new POS system, called "Focus," during the quarter. About 840 restaurants now have the system in place and that is expected to rise to between 1,300 and 1,600 by the end of Q3. Executives said they expect it to have a positive impact on store-level operations and the overall customer experience.

"The difference between the new system and the old system – I can actually do Focus. The training is a lot quicker and new members adapt to it quickly. It's a disruption but the feedback is extremely positive," Schnatter said.

The company has had the current POS system in place for about 18 years, so the rollout includes all-new hardware upgrades. Order entry is the first key, COO Steve Ritchie said, to improve speed and accuracy.

Focus also includes a graphical driver dispatch system, which uses GPS technology to improve speed of service at the door. It also features suggested routing "and other things that are industry-specific and put us at a competitive advantage," Ritchie said.

The POS includes a labor management system to drive efficiencies, and a biometrics feature to help with loss prevention and accuracy. The material benefits from the new system are expected to show up in 2015.

New marketing focus

Q2 also marked the first quarter in which Papa John's worked with its new agency Grey to put a new creative in motion that focused on the brand's new Greek pizza. Schnatter said the new focus has generated a positive perception from both the system and consumers and has helped drive performance.

"Coming off a very strong 2013, some wondered about a change in advertising direction. Sometimes you have to have courage and foresight to take something that's really good and make it really, really better. We've accomplished just that. The new creative has elevated the brand and taken it to new level," Schnatter said during the earnings call.

Ritchie added that the company has and will continue to employ a "comprehensive approach that strikes a balance between national and local … value and premium."

"That's how we will continue to win in future, by avoiding highs and lows and delivering steady sales growth," he said.

International business, including China

During Q2, Papa John's opened 47 net global units. COO Steve Ritchie said the pipeline remains robust, with about 1,200 units scheduled to open globally over next six years.

International comp sales were up 8.6 percent, with strong performances from the UK, Russia, the Middle East and Latin America.

On the heels of a supply chain crisis in China that has affected American brands such as KFC, Pizza Hut and McDonald's, Papa John's executives said there is still an opportunity for improvement in this market. The company is now partnering with a Beijing-based football club to increase its sales and awareness in that market.

"We're getting through (the supply chain news) OK. It's something you don't want to have happen. The good news is we don't have a lot of exposure in China yet. We need to figure China out a little better and do a better job," Schnatter said.

The supplier in the middle of the news is OSI. It was a contingency supplier for Papa John's, so the company was able to remove its product from restaurants within 24 hours and rely on its primary supplier to fill the small void, Ritchie said.

Papa John's has about 210 stores in China. Most (about 150) are franchised.