Papa John’s International Inc. sales suffered after franchisees started charging more than diners were willing to spend, Chief Executive Officer Rob Lynch said.
Franchisees, who run the bulk of the company’s locations, have been trying to preserve margins amid broad-based inflation in ingredient and labor costs. But in doing so they raised pizza prices faster than those at company-operated stores, Lynch said during a call with analysts on Thursday.
“As a result, they have experienced a larger decline in transactions relative to our restaurants this past quarter,” the CEO said.
Same-store sales at franchised restaurants in North America declined 2.3% during the quarter through June 25, Papa John’s said. Meanwhile, domestic company-owned stores registered a 2.2% increase in the metric over the same period.
Read More: Papa John’s Falls on NA Comp. Sales Pressure, Guidance Cut
Papa John’s said it is working with franchisees to review how they set prices and promotions. Sales already have started improving thanks in part to new products, and the chain expects to deliver positive same-store sales in North America in the second half of the year.
However, that won’t offset the challenges franchisees already experienced this year, Lynch said.
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Author: Daniela Sirtori-Cortina
