Papa Johns (PZZA) , which is famous for its “Better Ingredients. Better Pizza. Papa Johns” slogan, is on a mission to revamp its business after it recently faced a slump in sales.
In Papa Johns fourth-quarter earnings report for 2024, the pizza chain’s comparable sales in the U.S. declined by roughly 4% year over year during the quarter.
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Operating income, which is the company’s profit after expenses, decreased by a whopping 30% compared to the same period in 2023.
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Amid these recent declines, Papa Johns said in the report that it predicts that its U.S. sales for 2025 will either remain flat or increase by 2%.
During an earnings call on Feb. 27, Papa Johns CEO Todd Penegor said that the company is noticing its customers becoming more cautious about their spending, despite recent deals and discounts.
“The environment is very much value focused at the moment and customers are much more deliberate on managing their overall ticket,” said Penegor. “And we do expect the pizza category to be flattish to slightly down.”
Papa Johns is noticing a trend of customers picking up pizza instead of having it delivered.
Image source: Papa Johns.
Papa Johns customers are avoiding a major service
Papa Johns also noted that an increasing number of customers are opting to pick up their orders from stores instead of having them delivered. During the fourth quarter, the company saw carry-outs increase by low single digits compared to the same quarter in 2023.
During the call, Penegor said that carryout “is growing the fastest on an order basis.”
“Organic or first-party delivery is where we are seeing the traffic loss,” said Penegor.
Papa Johns’ struggle with delivery comes after one of its main competitors, Domino’s Pizza, also revealed during an earnings call on Feb. 24 that it also faced a decrease in deliveries and a spike in carryout orders during the fourth quarter.
“Delivery is a tougher value right now in this value-conscious world,” said Domino’s Pizza CEO Russell Weiner during the call. “And so, the choice isn’t going to another restaurant. Most of the time, it’s eating at home.”
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The increased popularity of carryout during a time when tipping-culture in the fast-food industry is rubbing some consumers the wrong way amid inflated prices.
According to a recent survey from LendingTree, 78% of consumers view fast-food as a luxury since it’s gradually become more expensive. Also, 43% of Americans who were asked to tip on fast-food refused to do so, while 62% said that they’re eating less fast-food due to rising prices.
Papa Johns unveils plan to win back frugal customers
As Papa Johns struggles with shrinking sales, Penegor said that the company will be focusing more on value. It plans to do this by rolling out more “competitive offers” to customers, and will be “reinvigorating” core menu items.
“This testing will help us better understand how we can redefine value and price, personalize customer experiences, execute with operational excellence, and provide for more productive franchisee engagement and a more flexible food cost structure,” said Penegor.
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The company will also continue to enhance its Papa Rewards loyalty program, which provides members with exclusive deals and discounts, as it recently saw a spike in membership over the past two months.
Consumers should also expect to see more Papa Johns locations popping up in their neighborhoods. After closing 31 restaurants last year in the U.S., the pizza chain is now expecting to open between 85 to 115 new locations this year.
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