Papa John’s International Inc. (NASDAQ: PZZA) has exited its relationship with the NFL. Speculation is that the reason could be linked to disputes between the founder and the football league, which in turn may have undermined its sales.
There may be another explanation for the pizza chain’s problems. Its pizzas do not taste as good as its competitors.
For the three months that ended December 31, net income dropped 13% to $28.5 million. North American comparable store sales dropped 3.9% over the same period. Steve Ritchie, CEO and president of Papa John’s, said:
Actions are underway to improve our brand proposition, how we connect with customers, and how we operate at the unit level. These actions build on all the strengths of the Papa John’s brand and include a fresh perspective around marketing driven by new media and creative partnerships, hiring a new PR partner, and bringing online a new engine to drive our Papa Rewards loyalty system. Based on these initiatives, we expect to see marked improvements in sales later in 2018. Our franchise partners in the US are fully aligned with our initiatives and are excited about this next chapter of the Papa John’s brand.
Papa John’s has not done well in some recent taste tests against its primary competition. Epicurious did a test three years ago. Papa John’s finished fifth, behind Domino’s, Pizza Hut and Little Caesars. Papa John’s finished behind Pizza Hut in a Cheapism taste test in late 2015. In an independent, blind taste test of nearly 1,800 random pizza consumers from eight U.S. markets, Domino’s topped Papa John’s and Pizza Hut.
However, taste tests are subjective. Another way to look at pizza preference is demand. Papa John’s had revenue of $1.8 billion last year, which includes sales outside the United States. Private company data puts Little Caesars revenue at $3.8 billion in 2016. Domino’s sales were $2.8 billion last year, and Pizza Hut’s sales were $3.4 billion. Revenue is a strong proxy for demand. Based on this metric, Papa John’s is at the bottom of the food chain.
Papa John’s problem may not be the NFL. Rather, demand for its pizza may just be low because people do not like it as well as its competition.