Papa John's International Inc Piper Sandler 5th Annual Growth Frontiers Conference

That's a great question. Papa John's has always been known for quality. We get a lot of credit for better ingredients, better pizza, and folks still say that to this day. They just really don't understand why we're truly better than the competitive set. When I first got here a couple of years ago, we got a little out of position on value. People saw us as more of the premium QSR pizza player. We made some moves. We had to go back to a barbell strategy and make sure that we had the news on the top end with some innovation and an appropriate price point for that innovation. We had to make sure the bottom end of the barbell was set well, and Papa Pairings became a prominent placement on our menu so we could play a good high-low.

We had to build a strong loyalty program that had true value for our 43 million-plus members, so we revamped the loyalty program to make sure there was true value there for the consumer, and started to make some real good progress. Our quality metrics, as we focused on being the best pizza makers in the business, continued to improve. Our value for the money had continued to improve, and we were making a lot of progress up through the second quarter of last year. In fact, the second quarter of last year, we were positive on sales and transactions in the first time in quite some time. Then the competitive landscape switched, right? Deep discounting, not just the major QSR pizza players, but across the broader QSR segment. We were fighting the battle truly on value from a national calendar perspective.

Our national promotions drive 20%, 25% of our business. We are running the high low and the barbell from the national side of the equation. With co-ops being disbanded and local spending being discretionary, we weren't fighting the full barbell from both a national and a local level. What we ended up doing over the course of this year, and with added incent to reestablish some co-ops, we've now got 50% of our markets up with a co-op. They're contributing 2% local spend in those markets. We incented it with a 1% contribution to the co-op as a top-off.

It really allows us to then have a coordinated message, not just in the DMA and in that co-op, but then how do you have a complementary message to what you're doing on the national calendar to make sure you're really telling the high-low story nationally and locally to optimize the P&L and the four-wall profitability. That's work that we still have in front of us to get more of the system set up in co-ops, and I'm sure we can talk about that here in a little bit. But those are things where we've made some nice progress. The ongoing journey is really how do we continue to elevate the quality of our food? How do we have the appropriate dough for the equipment that we have now in the restaurant?

What do we need to do to make sure that we're delivering consistently with the quality that our consumer deserves every day, not just on the food, but through the whole digital experience? There's a lot of work underway to continue to elevate that experience to make sure it's not just about price. It's about worth what you pay. People want us and know us for quality, but we got to deliver quality at an affordable price, and that's where our system's really focused at the moment.

We have talked a lot about what are the opportunities to really expand our TAM and think about where the total addressable market could go. We started with some early discussions with Walmart to figure out where does our footprint sit, where is their footprint? Is there some complementary opportunities where a brand with our quality halo could really help with their Walmart Express consumer. We had a lot of work to do from a technology perspective, and ultimately, we have now become their first off-premise restaurant brand. We are going to participate with them in the Walmart Express program. If you think you want a home-prepared meal from Walmart, and you also want to pick up some other home essentials, but you want a pizza delivered, they will be that fulfillment arm for us to make sure that they can deliver that pizza to you at good economics.

Their everyday low pricing, they are trying to make sure that they have got pricing that the consumer can achieve in that channel that would be similar to buying it from the restaurant, so effectively without the markups. We think we are a really good partner to do that. We got a lot of pilots with them in the back half of this year, so we will really start to see the significant impact of bringing in and connecting to customers that might not otherwise have connected to our brand through that channel into next year. We think it would be a nice tailwind to our business.

Yeah. The gap has been widening, and any brand is only as good as the lowest common denominator. What we really need to do is raise the floor, because inconsistency is the Achilles heel for the quality promise that any brand makes day in and day out. What we had to do is make sure that we had more touch points with our restaurants. As Marc Richard came into the organization, we reorganized our field team in a regional support manner so we could get more touch points into each of the individual restaurants. He brought in some really talented senior directors to partner with our DVPs in each of the regions. Then we really brought in some pizza experts to be the brand standard coaches.

They not only do the restaurant evaluations, but they're spending some really quality time in the restaurants, side by side, helping training, helping coaching, make sure that we're creating a great experience. We really saw that we needed that role to help us as we started to innovate a lot more at the beginning of this year. We hadn't had innovation in quite some time. Our innovation calendar was relatively bare, and as we started to introduce new products like the pan pizza or sandwiches or even Toy Story, we started to realize that we did need some really good coaching out in the field. We did a lot of mystery shops. We've done a lot of evaluations.