Strategic Analysis of Papa John’s
Introduction--We already know that Papa John's is a major player in the Pizza industry but what does the future hold for them.
One of the business-level strategies that Papa John’s implemented was product differentiation through the use of fresh dough and superior-quality ingredients. John Schnatter believed that other pizza restaurants used inferior ingredients and that he could do it better. This strategy was implemented from the very beginning in the United States. Another successful business-level strategy that focused on product diversification employed by Papa John’s was the use of technology to order pizza. In 2001 they became the first pizza company to offer online ordering.
The most significant corporate-level strategy used early on by Papa John’s was mergers and acquisitions. In the late 90s, the company acquired 205 “Perfect Pizza” restaurants in the UK. They continued aggressively acquiring international restaurants until the early 2000s when they began to focus their acquisition efforts domestically. In just under 30 years since opening its first store, Papa John’s has added over 4,000 stores (papajohns.com). That’s an average of over 140 new stores every year since inception, an incredible pace. They also decided to use the franchisee model. Although this model has its critics, it can be a very useful way to generate revenue without adding to store overhead, etc. The franchisee model has been successful for Papa John’s.
Papa John’s was enjoying a 5+ percent average revenue growth rate for the previous five years. The company also boasted one of the highest returns on invested capital in the restaurant category of the markets. Total assets grew steadily from 2003 to 2007 as well. This growth was financed mostly by debt, but debt/equity ratios remained healthy. Apparently Papa John’s holds a competitive advantage in its fresher, higher-quality...