Sizing up the International Reach of Papa John’s Pizza
In 1998, Papa John’s decided to venture outside the US by opening outlets in Mexico and Puerto Rico. In 1999, it acquired the UK’s Perfect Pizza Holdings.
Dec. 10 2015, Published 12:55 p.m. ET
Papa John’s background
After completing his business degree from Ball State University, John H. Schnatter took over the management of Mick’s Lounge, a bar co-owned by his father, which was in debt. After reorganizing the bar into a profit-making asset, Schnatter sold his father’s stake to a business partner, Bob Ehringer, with an agreement to supplement the revenues by selling pizza from the bar’s closet.
Revenues from Schnatter’s pizza sales gradually increased, and within two years, he was able to surpass the comparable revenue of national pizza chains. This increased revenue made Schnatter think about expansion, for which he choose franchising model.
Papa John’s early expansion
After incorporating the company in 1986, the company sold its first franchise the same year. Having doubled its revenues every year since 1986, Papa John’s International (PZZA) reached total revenues of $50 million in 1992. To finance expansion and pay off debts, the company decided to go public in 1993. With the help of raised money, the company began to expand rapidly within the US by increasing the restaurant count to 500 in 1994 to 1,000 in 1996. By 1998, Papa John’s had 1,500 restaurants.
Subsequent international expansion
In 1998, Papa John’s decided to venture outside of the US by opening outlets in Mexico and Puerto Rico. In 1999, the company acquired the UK pizza chain Perfect Pizza Holdings, which owned 205 restaurants, and converted them into Papa John’s restaurants. In 2003, Papa John’s entered China and South Korea. One year later, the company opened its stores in Russia, Trinidad, Peru, Bahrain, and Oman.
By the end of 2014, the company was operating 1,323 international restaurants, with a total of 4,663 across 36 countries, with China, the United Kingdom, Russia, South Korea, and Mexico being prominent markets.
Industry competitors and ETF exposure
When compared with other big players such as Domino’s Pizza (DPZ), Pizza Hut, which is a subsidiary of YUM! Brands (YUM), and McDonald’s (MCD), Papa John’s (PZZA) has a long way to go in terms of its number of international restaurants as well as in terms of the countries that it covers. Papa John’s International (PZZA) makes up 2.2% of the PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ) and approximately 2.3% of the PowerShares Dynamic Food & Beverage Portfolio (PBJ).
Now let’s take a look at Papa John’s North American operations.