Dive Brief:
- Papa Johns, which posted same-store sales declines of 5% in North America during Q4 2025, plans to close 300 underperforming restaurants — mostly franchisee owned — across the region, Ravi Thanawala, Papa Johns CFO and North America president, said Thursday during an earnings call.
- These restaurants don’t meet brand expectations and don’t have a path to sustainable financial improvement, he said. They are over a decade old, generate average unit volume of under $600,000 and typically generate negative four-wall income.
- The company has also been working on reducing its overall cost structure as part of its ongoing transformation plan and has cut its corporate workforce by 7%, Thanawala added. These reductions will help the chain “better align corporate and field resources with our transformation priorities and optimize spans and layers in our organization,” CEO Todd Penegor said during the call.
Dive Insight:
This same closure strategy was deployed in the United Kingdom while Thanawala was managing Papa Johns’ international business. That plan improved AUVs in the country by 17%, Thanawala said.
“Similarly, select strategic closures will allow our North American franchisees to redirect resources to drive operational excellence in their core restaurants and accelerate growth in priority markets,” Thanawala said.
The chain performed a strategic review of its restaurant fleet, which revealed that a vast majority of its global footprint has performed well and delivered strong returns for both company and franchise owners, he said.
“We took a pretty surgical approach of looking at quality of operation, quality of the trade zone, quality of the assets itself, and made a pretty clear determination restaurant by restaurant, which are the ones that we thought should close,” Thanawala said. “We've had great partnerships with the franchisees to make sure [when] we're thinking about each market holistically that we're setting ourselves on for a stronger system.”
Papa Johns expects to close a majority of these restaurants by the end of 2027, with 200 expected to shutter this year, Thanawala said.
The closures also echo what’s happening at competitor Pizza Hut, which plans to shut down 250 stores in the U.S. during the first half of 2026. Parent company Yum Brands is also considering selling the beleaguered brand.
Papa Johns has also been focusing on becoming more asset light and has been refranchising corporate-owned units to reduce its company-owned restaurants in North America to mid-single digit percentages, Penegor said. It has been partnering with well-capitalized operators that can work better at the local level. In November, the chain refranchised 85 units and it is currently in negotiations to refranchise 29 additional restaurants in the Southeast.
The restaurant brand’s closure plan won’t impact ongoing openings, with the chain expecting 40 to 50 gross North American restaurants for this year.
“We are focused on elevating four-wall economics and our consumer experience with the intent of accelerating new restaurant development and capitalizing on significant market share opportunities over the medium term,” Thanawala said.
After 2027, Papa Johns expects its North America restaurant growth to be comparable to 2025, when it opened 96 units, and its closures to return to 1.5% to 2% per year, he added.
