Papa John’s is the third largest pizza chain in the United States behind Pizza Hut and Domino’s.

The company operates more than 3,500 pizzerias—about 600 company-owned and the remainder franchised—in the United States and about 30 countries. Papa John’s typically offers delivery and carryout options but no restaurant seating. CEO John Schnatter founded Papa John’s in 1985 at age 23 and owns 30% of the company.

Papa John’s has always distinguished itself from rivals by using only fresh ingredients, concentrating on quality, and limiting the number of nonpizza items on the menu. The company frequently comes out on top in national taste tests and customer service surveys. Papa John’s has received the top customer satisfaction rating among all national fast food restaurant chains every year from 1999 to 2004, as measured by the American Customer Satisfaction Index.

The Papa John’s menu includes pizza with limited side items such as breadsticks and chicken strips. Bottled soft drinks are also available. Papa John’s traditional pizza crust is made fresh, topped with 100% mozzarella cheese, meats with no fillers, and fresh vegetables.

During 2003 and 2004, Papa John’s has closed unprofitable stores, while selling a number of units to franchisees. Papa John’s opened its first store in Russia in late 2003 and expanded its number of stores in Canada and the Bahamas in 2004.

Papa John’s operates quality control centers that offer economies of scale and deliver fresh ingredients to stores twice weekly. Domestic franchises are required to purchase dough and spice mix from the quality control centers or approved suppliers to ensure consistent quality.

Its high customer satisfaction scores notwithstanding, Papa John’s has secured only about 7% of the quick-service pizza segment, behind Pizza Hut with 20% and Domino’s with 12%.

Other competitors include Pizza Inn, Little Caesar’s, and Cici’s, a low-price buffet-oriented pizza chain. Individual Papa John’s locations must also compete with various independent pizzerias that have only one or a few locations.

Since the recession of the late 2000s, Papa John’s has emphasized cost containment. About 170 additional franchises were added in the United States in 2010, but about 80 poor-performing units were closed. Recent global expansion has occurred in China, where Papa John’s owns more than 20 locations.

Case Challenges

1. Why does Papa John’s seem to be pursuing a stability strategy in a market where some of its key competitors are expanding rapidly?

2. To what extent do low-cost pizza providers like Little Caesar’s and Cici’s pose a threat to Papa John’s?
3. Should Papa John’s develop eat-in restaurants like Pizza Hut or stick to delivery and carry-out service?