Papa John's is a pizza chain that is focused on delivering quality and offering customers with a better experience. At the heart of their strategy, is to use those ingredients that will have the greatest impact on creating value and enhancing the services they are providing. This helped the company to grow from a single location into one the largest restaurants in the world. However, like all successful organizations, there is a point when the industry will become oversaturated. This is because competitors are adjusting to these changes and have begun providing something similar. These transformations make it harder for them to continue to standout among cliental. As a result, they have to adjust their business model in order to remain competitive. ("Papa John's International Inc.," 2012) To achieve these objectives, Papa John's must take a new approach. This involves examining the critical issues, providing recommendations, justifying the conclusions and creating an action plan. Together, these elements will illustrate what steps must be taken to maintain and expand their customer base in the future.
The biggest problems impacting Papa John's is that they have hit a plateau in their sales and earnings. This is taking place with the company having to compete against other firms which are touting quality, price and superior service. The most notable include: McDonalds, KFC, Pizza Hut and Dominos Pizza. This is problematic, as Papa John's is forced to engage in practices which are not producing any kind of real benefits. Instead, they are seen as mainly a gimmick, which is utilized to bring customers in the door. This has hurt their sales with consumers who are seeking out value more so than quality. ("Papa John's International Inc.," 2012)
During the Great Recession, their earnings were harmed even further by sharp decreases in consumer spending. This meant that competitors began offering even larger discounts. To protect their customer base, the firm had to engage in similar practices. This was designed to show how they understand what is most important to them and the way they are providing something more. This and the desire to prepare meals at home, requires Papa John's taking a new approach, that will reach out to price conscious consumers. ("Papa John's International Inc.," 2012)
At the same time, the company is experiencing rising wholesale costs for: cheese, tomatoes, spices, wheat and meet. They are currently in the process of introducing a new order supply chain and inventory system. These areas are important, as they are increasing the short-term expenses at all of their restaurants and franchisees. In the last quarter, Papa John's reported that their expenses are rising with the CEO (John Schnatter) saying, "I couldn't be prouder of our franchisees and our operators around the world who continue to execute the fundamentals and who continue to deliver on the 'better ingredients, better pizza' brand promise each and every day. However, net income fell 2.9%, to $16.7 million. The bottom line was affected by $868,000 in expenses related to the rollout of the chain's proprietary FOCUS point-of-sale system. As of June 29, the POS system was in place in 383 restaurants, 369 of which are company-owned. The majority of installations to be completed by the end of 2014. As of the end of the second quarter, Papa John's had a system wide total of 4,487 units, a net increase of 47 locations for the quarter, and 59 for the fiscal year to date. Of those, 672 restaurants are domestic company-owned locations, 2,614 units are franchised in North America and 1,201 locations are international. Commodity prices remained challenging, particularly for cheese, which had an average price of $2.13 per pound per quarter, compared with $1.78 per pound in last year's quarter. Cheese is expected to be at an average of $2.08 for the year, which is a big hit to our P&L. High pork, beef and green pepper prices in the second quarter also challenged the brand. The POS system installation would likely decrease income before taxes by approximately $5 million for the year, or 8 cents per share." (Thorn, 2014) This is showing how higher expenses is one of the critical challenges impacting their profit margins. To reduce them, the company has rolled out a new supply chain management system. The problem is that these issues will become compounded by the upfront costs of rolling it out.
Papa John's is in a unique position. One hand, they have customers who want more for less money. While at the same time, they are experiencing an erosion of their profit margins from higher costs. To deal with these challenges Papa John's needs to focus on a number of areas. The most notable include: the menu, establishing an efficient operating system, a commitment to team member training / development and marketing. Each one of them is designed to improve quality, perceptions and encourage customers to return in the future. ("Papa John's International Inc.," 2012)
The menu requires using two different strategies (i.e. domestic and internationally). Domestically, the firm is illustrating how they use 100% mozzarella cheese, sauce prepared from vine ripened tomatoes, a mix of savory spices and special meets which are customized to the individual's tastes. These areas are designed to show how the company is focusing on quality ingredients over everything else. Internationally, they will customize their menu to specific regions and incorporate them with their different product offerings. In this case, the menu is important, as it is illustrating how the firm is providing cliental with something more. Yet, it must be augmented with something that is designed to create value. One possible approach is for the firm to have specials that reach out to a variety of customers with competitively priced products. For example, if the company had a discount on Tuesdays and Wednesday, they can be able to incorporate their menu with these kinds of offers. This will increase their popularity and draw in more price conscious consumers. ("Papa John's International Inc.," 2012)
Establishing an effective operating system is something the firm is in the process of rolling out. This is designed to streamline their costs and reduce the ability of store owners / managers to control wholesale expenses. In this situation, the expenses associated with cheese, meat, wheat and sauce will erode their profit margins. To prevent this, they are paying the upfront expenses of introducing new platforms that enhance their order and inventory management. It is focused on calculating when a store needs more supplies based upon the sales in each location. ("Papa John's International Inc.," 2012)
Training and team member development is important for allowing Papa John's to become more responsive to the needs of customers. In this case, they will understand what they want and can enhance their overall experiences. This occurs through having the company provide continuing support to the entire location and allowing them to receive greater benefits in the process. Over the course of time, this helps the company to have employees who know the industry and what is the most important too cliental. This is when they can create an atmosphere that is inviting. In the future, these experiences will have an impact on their ability to deliver something more. This is used in conjunction with quality to show how they are receiving more value. ("Papa John's International Inc.," 2012)
Marketing requires Papa John's augmenting their current approach with other avenues to stand out. In this case, they are focused on using national and local advertising to connect with consumers. This occurs by using celebrities as their spokespersons. They will discuss how Papa John's is offering something more through better taste and ingredients. While at the same time, using localized techniques to build upon the national following and identify the locations of their restaurants. These benchmarks involve utilizing traditional forms of TV, newspaper, radio and sale flyer advertising. There are limited amounts of Internet marketing that is utilized on the national level. ("Papa John's International Inc.," 2012)
To do something different, Papa John's needs to expand their current strategy. This is achieved by augmenting their message through reaching out to a younger demographic. In these situations, they need to use platforms (such as: social networking) to demonstrate what they have to offer. They can expand this message, to the local level by providing customized ads about: specials, quality and services. According to Morris (2013), there are a number of benefits realized by effectively utilizing social networking with her saying, "71% of consumers who experience a quick and effective brand response on social media are likely to recommend that brand to others, compared to just 19% of customers who do not receive a response. Consumers 18 to 29-years-old are more likely to use a brand's social media site for customer service interactions (43%) than for marketing (23%). When companies engage and respond to customer service requests over social media, those customers end up spending 20% to 40% more with the company. Brand advocates drive 33% more sales and 18%…