You Never Don't Want Pizza / Papa John's Case Study
Updated: Aug 29, 2022
Was Written on June 13 2020 for MBA 512 Strategic Management Class at Stony Brook University
Discussion Question #1
Does saturation of the market suggest a stability strategy for Papa John’s, or are there sufficient opportunities globally to justify aggressive growth? Explain.
Yes, there is proper justification for the constant growth of Papa Johns and the reason is – demand. According to Mintel Report, 2019: “Pizza restaurant chains make up 7.8% of the Top 200 restaurant chains’ sales, which represents a $23.6 billion industry as of 2018.” The report also indicates that there is a constant rise in demand for Pizza, with a 3% rise in Pizza sales over the prior year, according to Nation’s Restaurant News/Mintel.
In comparison to other “specialty restaurants” that only offer a specific single menu item, Pizza is in the 3rd place (7.8%). Burger chains in 1st place (28.2) and chicken chains are in 2nd place (8.8%). This shows that Pizza restaurants are in high demand, with an annual growing demand, especially from generation Z.
For example, the report noted a growing preference of gen Z to eat pizza at fast-food chains over independent pizza restaurants. Also, “Roughly three-quarters of Gen Zs and Millennials want to be able to track where their pizza delivery order is en route, and over half of these young consumers think there should be more ways to order pizza for delivery” (Failla, 2019). Since Papa Johns has only introduced pizza tracking while in delivery in Feb this year, there are certainly more opportunities for Papa Johns to grow technologically.
Discussion Question #2
To what extent do low-cost pizza providers like Little Caesar’s and Cici’s pose a threat to Papa John’s?
Low(er) cost pizza providers to pose a competition to Papa Johns, but not a threat. The company’s biggest threat is its recent problems in leadership, and negative news reports.
According to Owen, 2018, despite threats from independents, frozen pizza, and other restaurants getting into delivery, the largest pizza chains (Dominos, Pizza Hut, Little Caesar, and Papa Johns) continue to grow 4% / year on average.
Research shows that younger consumers (18-24 years old) are interested in low-cost pizza that is convenient and utilizes the latest technology in service and delivery. (Failla, 2019). This shows that Papa Johns can expend and develop if the company will stay up to date with the latest technology that includes app-ordering and third party delivery. However, there has been a bigger emphasis on low-cost pizza since the economic crisis of 2008. Since then, “Papa John’s has placed a greater emphasis on cost containment.” (Parnell, 2017).
On the other hand, Papa Johns must solve its recent negative social issues, or it will face bigger problems than slow sales. For example, the 2015 lawsuit for NYC employees for overtime payment (Parnell, 2017); the 2017 racist comment of Papa Johns CEO John Schnatter by blaming his slow sales on the NFL players’ protests (Failla, 2019); and the 2018 infamous conference call comments. All of these issues directly affect the company’s reputation and can destroy the company as a whole.
Discussion Question #3
Should Papa John’s develop eat-in restaurants like Pizza Hut or stick to delivery and carryout service?
Papa Johns should not invest in eat-in restaurants and should only stick to high-quality delivery.
According to Spencer (2019), dining at restaurants is in significant decline. “Americans are dining at restaurants less and ordering delivery and pickup significantly more in 2019 versus in 2016,” (Spencer, 2019). The report also notes that delivery is more common among younger generations, while the older generations are struggling to adjust. “Restaurants’ investments in delivery appear to be paying off, as more than six in 10 consumers believe that delivery has gotten better over time,” (spencer, 2019)
Parnell, J., 2017. Strategic Management: Theory And Practice. 5th ed. The University of North Carolina at Pembroke: Academic Media Solutions.
Failla, J., 2019. Pizza Restaurants - US - November 2019. [online] Mintel.Com. Available at: <https://reports-mintel-com.proxy.library.stonybrook.edu/display/919268/?fromSearch=%3Ffreetext%3Dpapa%2520johns#> [Accessed 13 June 2020].
Owen, J., 2018. QUICK SERVICE RESTAURANTS - US - MAY 2018. [online] Mintel.com. Available at: <https://reports-mintel-com.proxy.library.stonybrook.edu/display/860815/?fromSearch=%3Ffreetext%3Dpapa%2520johns#> [Accessed 13 June 2020].
Spencer, H., 2019. Restaurant Ordering And Delivery - US - November 2019. [online] Mintel Reports. Available at: <https://reports-mintel-com.proxy.library.stonybrook.edu/display/919274/?fromSearch=%3Ffreetext%3Ddelivery%2520food#> [Accessed 13 June 2020].