The first aspect to consider when analyzing this industry is the rivalry amongst competition, which is huge in the restaurant industry. While there is an abundance of pizza restaurants, Papa John's main concern is that of other major pizza chains such as Dominos and Pizza Hut. There are hundreds of pizza shops in nearly every city, but Papa John's is not competing with those shops. Papa John's and other major pizza chains cannot afford to compete with those shops due to the low costs. Looking at the competition from this perspective, the industry is not as saturated as first thought. There are only a few major pizza chains that are in competition with each other, but considering the large market share each of these major chains has and taking into consideration the local pizza shops, there is a lot of rivalry amongst competitors in this industry.
The industry growth rate is currently 12.09%, which is not as vast as it once was. While the industry is still very competitive, market share is also very limited for new companies, so there is not as much room for growth. The only way for companies to grow in this industry is to take market share away from already-existing companies.
The competitors in the pizza industry seem to have balance and be in cooperation with each other. While there are only a few main competitors, they do not seem to be in a price war. The competitors do not differentiate themselves via price, but rather through different promotions and products. Due to the size of the companies and operating costs, Papa John's cannot afford to lower their sales prices; therefore, they must find a way to stay ahead of the competition in ways other than lowering prices.
With this type of industry, there is not much excess capacity, especially with the main competitors. After analyzing the financial statements, we found that sales have never seemed to be the problem with Papa John's. They have always had a good customer base. This appears to be the case with competitors as well. With only a few high-end pizza shops, the customer demand is stable with all.
Another factor is the threat of new entrants. This is not a real concern for Papa John's. The chances of another chain coming into the industry and gaining a threatening amount of the market are very slight. Between Papa John's and its current competitors already consuming such a large portion of the market, it would be nearly impossible for a company to join the industry and be successful.
This is largely due to the first mover advantage. This is very important in the restaurant industry. Once a place is known for something, it is hard for another company to enter that market and do quite as well because the first mover already has such a large portion of consumers.
The threat of substitute products is a concern for Papa John's. Many of the major chains offer the same products as Papa John's, so Papa John's has to find ways to stay ahead of the competition. They have to focus on areas where they excel. That is why they focus so much on the quality of their products. If a customer is unhappy with Papa John's products or prices, they could easily substitute that product with a product from a competitor. That is why Papa John's is focused on quality products and customer service. People are willing to pay higher prices for better service.
As a buyer, Papa John's is limited to their bargaining power. There are many places that offer pizza, so suppliers do not depend solely on Papa John's. If Papa John's is not willing to pay a certain price...