- New product releases were a core part of Papa John's growth strategy in 2020, when it introduced Papadias and jalapeño poppers. These products, including garlic parmesan crust that launched in 2019, helped drive a strong Q1 performance, CEO Robert Lynch said on Thursday during an earnings call. It also launched a limited-time offer Shaq-a-roni Pizza done in partnership with franchisee and board member Shaquille O'Neal in the later half of the year.
- Papadias also helped drive incremental check growth throughout the year. Instead of buying two pizzas, customers were buying two pizzas and a Papadia, Lynch said.
- The company's strategy last year was to "remove the guardrails around innovation," Lynch said. And it paid off with same-store sales increasing 17.6% in North America during the year, driven by higher check and transactions, Lynch said.
Innovation is now an integral part of Papa John's business model, and with good reason.
"Our innovation engine proved that it can drive significant comparable sales growth through new products, marketing and technology," Lynch said.
While new products isn't uncommon for the pizza segment — Domino's introduced wings and sauces and cheeseburger and chicken taco pizzas during the last half of 2020 — it wasn't a key part of Papa John's growth strategy prior to Lynch's tenure as CEO. When the chain added garlic parmesan crust, it was the first time the brand added to its original pizza dough in the company's 36-year history.
"When you are relying on your check growth to drive your sales growth and that check growth is being driven by just charging the same customers more for the same products, that’s an unsustainable model," Lynch said during the company’s Q4 2019 call in February 2020. "But as you continue to bring innovation that people are willing to pay more for ... because they feel like they are getting a good value, ... it's better products that can be a healthy sustainable check growth phenomenon."
The company's successful launches as demand spiked was boosted by working closely with franchisees and operators. Lynch spoke about the launch of its Epic Stuffed Crust, which he called the most challenging innovation the brand ever had. During the course of about a year, the company worked alongside operators, testing and developing it so when it debuted during the last week of 2020, it was very seamless, Lynch said. Papa John's had to also make sure that customers, who had been asking for this type of addition for some time, liked the stuffed crust, he said.
New products also have to be supply-chain-friendly, Lynch said.
"We're not going to add a bunch of new ingredients that kind of wreak havoc on our supply chain," Lynch said. "From a supplier standpoint, or an inventory management standpoint, that can be a really challenging dynamic, and we're a vertically integrated supply chain. So we want to make sure that we are streamlining that as much as possible."
The company said it plans to have about four or five new big promotions and LTOs over a yearly basis, Lynch said. But its model is flexibly so it can extend promotions that do well, such as its Stuffed Crust, which the company will continue to highlight a little bit longer than it would have done with something that didn't resonate well with customers, he said.