Papa Johns Returns to Local Marketing Amid Sales Slump | Franchise News

National advertising is more effective than local, then-CEO Rob Lynch told the ICR investor conference audience early last year as he detailed planned spending shifts at Papa Johns.

Not so, it appears, as Papa Johns is now working to walk back a change to its marketing fund approach and again ask franchisees to invest in local efforts.

“We’re a super-regional pizza brand and you do need that local support to complement the national advertising,” new CEO Todd Penagor said this week at the same conference where his predecessor had detailed the merits of a move away from local spending. Lynch left for the top post at Shake Shack five months after his ICR presentation; Papa Johns hired Penegor, the former CEO of Wendy’s, in August.

As part of the brand’s Back to Better 2.0 plan announced at the start of 2024, Papa Johns franchisees agreed to a 1 percent increase—from 5 to 6 percent—in their national marketing fund contribution. They in turn were no longer required to spend 3 percent of their revenues on local marketing.

The change, said Penegor, was a “big miss,” and the April 2024 ad campaign that was largely funded by the increased national contribution didn’t help sales. North American same-store sales declined 2 percent in the first quarter last year, and slid again by 4 percent in the second. The company’s third-quarter results showed a 6 percent same-store sales dip, and in its preliminary fourth quarter financial results it reported a 4 percent decline. Transactions and tickets were each down 2 percent.

“When we made local optional, all the co-ops went away,” Penegor said. “And not having the co-ops to be able to put the franchise community together in the communities that we serve, have the company sitting around the table, is a big miss in a business that is a very regional business, especially pizza being so localized.

“So there may be some investments that we’re going to have to front-run in some company markets to stand up some of those co-ops a lot quicker.”

Franchisees generally are “cautiously optimistic,” Penegor noted, but are looking for some continuity in leadership—he’s the third CEO in the past year, counting Chief Financial Officer Ravi Thanawala, who served as interim chief—and “they know we need to chase transactions a little harder.”

“By and large, I think there’s a hope and optimism in the future,” he continued. “They do know we need to re-trade on the local and national. … We just have to work and spend a little time to regain their trust.”

Papa Johns in November hired Jenna Bromberg, who came from apparel company Carter’s Inc, as chief marketing officer. Kevin Vasconi, who was chief information officer at Wendy’s, joined in September as Papa Johns’ chief digital and technology officer. Both will be instrumental as the brand works to improve its one-to-one marketing efforts and grow its loyalty program, said Penegor.

A reset to the loyalty program in November included lowering the amount customers had to spend to earn rewards. Papa Johns loyalty customers previously needed to spend $75 to get $10 in rewards dollars; now for every $15 spent, they get $2 in rewards.

The move, said Penegor, came at the cost of a lower average check but boosted the brand’s value proposition and is driving frequency. Papa Johns, he noted, “got out of position on value” and is working to correct that while maintaining its “better ingredients, better pizza” roots.

Papa Johns ended 2024 with the opening of its 6,000^th restaurant, a store in Pittsburgh owned by franchisee Yasir Hussain. On the development front, Penegor said the company is looking at some “healthy refranchising” of corporate units “because we do need to bring some fresh blood into the system.”

Globally—Papa Johns has 2,516 stores in international markets—the brand’s strategy is to go “narrow and deeper” in key countries such as South Korea and Japan, steal share in Chile, Peru and the United Arab Emirates, and reestablish sustainable operations in the United Kingdom and China.