Dive Brief:
- Papa John's International announced Friday a partnership with private equity firm FountainVest Partners to open more than 1,350 stores in South China by 2040, according to a press release emailed to Restaurant Dive. This is the largest franchisee development agreement in the pizza chain's history, growing the chain's global unit count by 25%.
- FountainVest has also bought a majority stake in CFB Group, a Papa Johns franchisee which owns and operates roughly 160 restaurants in Shanghai and throughout southern China.
- This expansion plan comes less than four months after Papa Johns announced its biggest domestic franchise deal. Sun Holdings will open 100 stores in high-growth markets across Texas by 2029.
Dive Insight:
Papa Johns has been targeting international growth of late, and calls China one of the fastest-growing pizza delivery markets. The international market's foodservice segment has been steadily increasing and is projected to grow 7.3% annually until 2025, when it is estimated to reach $1.144 trillion, according to Mordor Intelligence.
The Chinese market is attracting other QSR heavyweights and has seen recent expansion plots from U.S. restaurants already operating in Asia. Yum China, which operates rival chain Pizza Hut, is currently the largest fast food operator in the region with more than 11,000 restaurants. In September, Yum China said it was ramping up its expansion to grow its network to 20,000 units across 2,700 cities.
Yum's dominance in China could be an obstacle for Papa Johns. But projected levels of restaurant demand could provide adequate whitespace for the chain, which had 200 units in China as of November, to carve out a niche. China's home delivery/takeaway segment is estimated to see the fastest growth among market segments through 2025, per Mordor Intelligence. This bodes well for pizza players in the market, which have historically relied on delivery and takeout sales.
"Papa Johns premium position offers an attractive opportunity in the QSR sector, which has already been proven in China and which we believe will continue to thrive," Andrew Huang, managing director of FountainVest, said in a statement.
Papa John's has been betting on international growth in markets outside of Asia, as well. Last fall, the chain signed a 220-unit deal with Drake Food Service International to open restaurants in Latin America, Spain, Portugal and the U.K. Drake already operates 280 Papa Johns units across Latin America, Spain and Portugal.
These global growth plans are buoyed by Papa Johns strong pandemic performance. The chain's Q3 systemwide sales rose 11% and comp sales increased 8.3% internationally, Lynch said during the chain's Q3 earnings call in November.
"New, well-capitalized and experienced franchisees as well as our high performing existing franchisees are signing significant long-term development deals and opening new stores," Lynch said during the earnings call.
