Papa John’s CEO says it has won new customers during the pandemic and will hire more workers to meet demand

Rob Lynch, CEO of Papa John’s Pizza.

Anjali Sundaram | CNBC

Papa John’s is continuing its record growth streak as the pandemic shifts consumer buying habits with more Americans staying in and ordering food.

May was the best month in the company’s history, with same-store sales up 33.5%. On Thursday, the company reported second-quarter North American system-wide comparable sales of 28% and an International comparable sales increase of 5.3% in the second quarter. For July, preliminary same-store sales rose nearly 31%.

President and CEO Rob Lynch said 70% of orders are coming in digitally, with mobile being its fastest-growing platform.

Over the last three months, Papa John’s has added 3 million new customers. Lynch said customers are ordering more food and sides throughout the day and at dinner, and new customers are “stickier” with a high level of repeat business.

“We have a fully operational e-commerce platform … it’s really easy for customers to get food, which is what people are looking for during the pandemic,” Lynch said in an interview. “But the thing that we say is unique to us and the pizza industry, and that will sustain us coming out of the pandemic, is how customers are responding to our innovation.”

Menu innovation has been a focus for Lynch since taking the helm at Papa John’s last August. He has introduced Papadias sandwiches, Jalapeno Popper rolls and the new Shaq-A-Roni pizza, which raises funds for Covid-19 relief and racial injustice in partnership with board member and NBA legend Shaquille O’Neill.

This growth streak has pushed Papa John’s to hire 20,000 workers in the midst of the pandemic after it saw growing demand earlier this spring. The company made another announcement that it would bring on an additional 10,000 workers just last month, bringing the hiring spree to 30,000 at a time when enhanced unemployment benefits have expired and many are out of work.

“We’ve been really focused on staffing, and if stimulus payments [are] coming to a conclusion, we are still going to be here. We are ready to hire people and make sure people have the income they need to support their family,” Lynch said, adding that its franchisees are in strong economic shape and looking to grow.

The stock is the second-best performer in the restaurant space this year behind only Wingstop, up over 50% year to date. However, shares were down nearly 2% after the earnings report, as revenue was a bit lower than some analysts had predicted. 

Most of Papa John’s stores remain open in North America and the company works with major delivery aggregators and has its own delivery pipeline as well.

Broadly, the restaurant industry is struggling as transactions at major restaurant chains nationwide are stuck in a negative holding pattern, down 11% for the week ended July 26, per NPD Group. Separate data from AlixPartners show 26% of Americans say they are less interested in dining out, even as restrictions lift, meaning carryout and delivery will likely be important moving forward in limbo without a coronavirus vaccine.

With high unemployment and negotiations ongoing over additional stimulus, price will likely be in focus for consumers, but Lynch says the product is resilient.

“We feel like we still are a great value, pizza is actually a very resilient platform,” he says. “Pizza in general, relative to going out and eating in a sit-down restaurant, is a very good value. And we think that we sustain even if discretionary income takes a bit of a hit from a lack of stimulus spending.”

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