Papa John’s (PZZA) CEO Rob Lynch has some words for Domino’s (DPZ) delivery deal: Bring it on.
The pizza chain’s CEO is confident the chain will maintain its top spot in delivery as Domino’s joins forces with Uber (UBER) in a 12-month partnership to offer pizzas on its delivery apps.
Papa John’s entered the third-party delivery market back in 2019, when Lynch joined the pizza chain as CEO, with Uber Eats, Postmates, DoorDash (DASH), and Grubhub (JTKWY).
“Domino’s is coming in, but we’ve been competing with like 30,000 pizza shops since we got there,” Lynch told Yahoo Finance in a phone call following Papa John’s earnings results. “I mean, Mom and Pops and everybody else is all over the aggregator, so we’re still the leader. We’re going to hold that position. … It’s a big source of growth for us, so I say the more the merrier.”
Papa John’s stock is down 1.4% year to date, while Domino’s Pizza shares are up more than 14%.
Papa John’s-Domino’s pizza competition heats up
Domino’s agreement with Uber has been a major catalyst for the stock over the last month. The Papa John’s rival plans to roll out an initial test in the US with four markets this fall before expanding across the country by the end of 2023.
On a call with investors, Domino’s CEO Russell Weiner said the company aims to compete for its “fair share of this [third-party delivery] market over time” and believes there is an opportunity for roughly $1 billion of incremental sales in the US from the partnership.
The move wasn’t a complete surprise, as Wall Street thought Domino’s would eventually move beyond using its own internal app for online orders and join others including Little Caesars and Pizza Hut on delivery apps.
But for Cowen analyst Andrew Charles, Domino’s struck the deal with Uber Eats “sooner than we expected.” The analyst estimated the results of the partnership would have a relatively small impact on Domino’s sales.
“Based on other native delivery concepts that have added third-party delivery, this will result in a low-single-digit percent lift to same-store sales,” Charles wrote in a note to clients.
“I know Domino’s gets a ton of credit for being kind of a technology digital-first company,” Lynch said. “I’m not trying to diminish that, but we were the first to do that. … We made the strategic decision that we wanted to be where the customer was going, and that’s how we’ve always focused.”
Pizza pricing ‘kind of inconsistent’ with customer expectations
The competition on the delivery apps comes as consumers have pushed back against pricing at Papa John’s.
Last quarter, the company’s North America same-store sales dropped 1%, dragged lower by a 2% decline in franchisee restaurants’ same-store sales.
Lynch said franchisees raised prices too fast, which was “kind of inconsistent with what the customer expectation is.” He noted margins and “the hyperinflationary environment” as reasons for the franchisee increases.
For the full year, Papa John’s now expects same-store sales to remain flat to up to 2% given the softness in the first half of the year.
But Lynch is optimistic that Papa John’s value offerings will perform well in this environment.
“We’re bullish on the back half of the year,” he told Yahoo Finance. “I think our value relative to traditional quick-service restaurants has never been stronger.”
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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