Factors That Drove Papa John’s Same-Store Sales Growth in 1Q17

SSSG (same-store sales growth) measures the rise in revenues from existing restaurants over a certain timeframe. SSSG, which is expressed as a percentage, is driven by traffic growth and the increase in ticket size.

In 1Q17, Papa John’s (PZZA) restaurants in North America posted SSSG of 2%. Company-owned restaurants posted SSSG of 3%, and franchised restaurants posted SSSG of 1.7%.

The company’s international restaurants posted systemwide same-store sales growth of 6%. In 1Q16, the company’s North American restaurants posted SSSG of 0.1%, while its international restaurants posted SSSG of 5.7%.

Papa John’s SSSG was driven by its enhancement of the customer experience through the implementation of digital advancements, marketing initiatives highlighting its use of better ingredients, and various promotional offers.

The enhancement of the digital ordering process helped the company increase its revenues from digital sales to 60% of total revenues. Of this, 70% came from mobile ordering platforms. The company launched Papa Track in March 2017, which allows customers to digitally follow their pizza from the time it’s ordered until it’s delivered.

In March 2017, the company extended its Papa Slam promotion to mark its second year as the official pizza of Major League Baseball. The promotion awarded customers a 40% discount on pizza the day after a grand slam was hit in a game.

In 1Q17, Pizza Hut, operating under the umbrella of Yum! Brands (YUM), and Domino’s Pizza (DPZ) posted SSSG of -3% and 6.6%, respectively.

Papa John’s (PZZA) management reiterated its SSSG guidance of 2%–4% in North America and 4%–6% for international markets. Building on the quality of its ingredients, the company has launched two separate menu pilot programs.

Firstly, the company uses organic vegetables in its toppings in Lexington, Kentucky. Secondly, the company’s stores in Los Angeles, Phoenix, Nashville, and St. Louis use a gluten-free crust made with ancient grains. Along with the implementation of technological advancements, marketing programs, and promotional initiatives, these factors are expected to drive Papa John’s SSSG going forward.

Next, we’ll look at Papa John’s unit growth.