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Papa John's CEO: We want to conquer lunch

Brian Sozzi
Editor-at-Large

Don’t expect iced coffee and breakfast sandwiches at Papa John’s under new CEO Rob Lynch just yet. But some form of sandwich for lunch — never a big time of the day for Papa John’s — from the pizza chain may be in the cards in its effort to boost sales and profits.

“The number one thing our franchisees are asking for is to get our customers back and drive revenue, and we have a plan to do that. Our plan is to differentiate ourselves from our competition by offering better food,” Lynch, who took over as CEO in August after a successful stint reinventing Arby’s, tells Yahoo Finance. “That has a lot to do with the product pipeline we are building with the core pizza menu and coming out with new ideas, things that we have never even looked at before that could help us penetrate new day-parts and drive business into parts of the day where our restaurants have a lot of capacity.”

Lynch continued, “Pizza is a dinner business, and I think there is an opportunity for us to leverage our innovation to create business in times of the day where our restaurants are under-utilized. I think we are going to conquer lunch first and then we will start thinking about breakfast. We think there is an opportunity for us to meet a broader array of customers for lunch.”

Papa John’s has no plans to launch breakfast anytime soon, a company spokesperson says.

Papa John's President & CEO Rob Lynch poses for photos at the Nasdaq MarketSite in New York, before ringing bell Tuesday, Oct. 1, 2019. (AP Photo/Richard Drew)

To Lynch’s point on missed sales opportunities, Papa John’s menu has long been pizza dominated. The company currently sells only a few variations of buffalo wings and one type of chicken nugget. Sides are resigned to garlic knots and breadsticks.

Rival Domino’s Pizza offers nine different takes on buffalo wings and nuggets, seven different sandwiches and five simple pasta dishes.

Even without unveiling those new lunch foods, Lynch has scored an early win.

Papa John’s North America same-store sales rose 1% in the third quarter, a marked reversal from the 5.7% drop in the second quarter. Analysts had expected a 0.6% drop. Lynch says better traffic trends to its restaurants helped. Adjusted operating profits for North America company owned restaurants improved to $7.4 million from a slight loss a year ago. For North America franchised restaurants, operating profits increased to $20.4 million from $9.3 million a year earlier.

Third quarter international same-store sales rose 1.6% — the segment’s profits fell to $4.1 million from $4.5 million a year ago. The result was in line with analyst forecasts.

Papa John’s stock spiked 6.7% on the news.

C-suite shakeup

Lynch has also wasted no time building out his management team ahead of 2020.

After serving as chief financial officer since April 2018, the company said Joe Smith will be stepping down in 2020. No replacement was named. In addition, Mike Nettles, chief operation and growth officer, and Karlin Linhardt, chief marketing officer, will also be departing the company to “pursue other opportunities,” according to a statement.

Beginning November 18, Max Wetzel will join Papa John’s as the chief commercial and marketing officer. Wetzel was previously PPG Industries vice president of consumer brands and chief transformation officer.

Lynch tells Yahoo Finance the C-suite shakeup is designed to get better ideas for the brand onto the table.

Papa John’s reiterated its 2019 earnings guidance of $1 to $1.20 a share at the time. The tweak to the full-year outlook came via North America same-store sales — Papa John’s sees same-store sales falling 1.5% to 3.5% versus a prior outlook for a decline of 1% to 4%.

Yahoo Finance’s Heidi Chung contributed to this story.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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