Papa John’s CEO Bets on Quality Ingredients for Pizza Turnaround

Papa John’s CEO, Steve Ritchie, is confident that the key to his pizza company’s revival lies in its superior ingredients. In an interview with Yahoo Finance, Ritchie emphasized the unique qualities that set Papa John’s apart from its competitors. With fresh, never frozen dough made from six simple ingredients and fresh-packed sauce from vine to can on the same day, Papa John’s is committed to providing a pizza experience that others cannot match.

While Domino’s and Pizza Hut declined to comment on Ritchie’s remarks, Ritchie and the new board members at Papa John’s are optimistic that consumers will choose quality over cheap promotions. In an effort to turn the tide after a challenging 2018, Papa John’s is now focusing on $12 specialty pizzas. If disgruntled founder and current board member, John Schnatter, can keep his criticisms in check, consumers may finally have the chance to hear Papa John’s new marketing message.

However, reviving a global pizza chain with over 5,200 stores and a tarnished reputation won’t be easy. Investors must also consider the complexities of Papa John’s board dynamics. This is where activist investor Jeff Smith’s Starboard Value comes into play. With a recent $200 million investment in Papa John’s, Smith has the option to buy an additional $50 million of the company’s stock. As part of the deal, Smith will become chairman of Papa John’s, while former Pinnacle Entertainment CEO, Anthony M. Sanfilippo, will join the board in support of Ritchie.

Ritchie, who has faced criticism from Schnatter since his promotion to CEO, has maintained a good relationship with the founder. Schnatter, who was ousted in mid-2018 for alleged racist comments, still holds a 30% stake in Papa John’s and sits on the board. Although Schnatter made a similar investment offer to Starboard, it was rejected by Papa John’s special committee. Schnatter has since voiced his support for Starboard.

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Smith, known for his successful activist campaign at Darden, where he revitalized the Olive Garden business, plans to take a similar approach with Papa John’s. He aims to improve the company’s ingredients, marketing, and operations, following the playbook that led to a 143% increase in Darden’s stock over the past five years.

Ritchie and Smith are determined to enhance Papa John’s operations and technology. Despite the challenges ahead, Papa John’s remains a formidable player in the industry, with over 5,200 mostly franchised restaurants worldwide and a highly regarded mobile ordering platform. If Smith’s track record is any indication, the stock price could reflect Papa John’s renewed strength in the near future.

Ritchie made it clear that Papa John’s will not bring back Schnatter for TV advertisements. Instead, the company will focus on marketing its ingredient quality and introducing six new pizzas in the coming months. While value menu options may not be available due to the higher costs associated with their pizza compared to rival chains, Papa John’s will continue to prioritize quality.

In conclusion, Papa John’s CEO Steve Ritchie and activist investor Jeff Smith are betting on the power of quality ingredients to turn around the company’s fortunes. With a strong foundation and Smith’s experience in the restaurant business, Papa John’s is poised for a resurgence. Investors eagerly await the upcoming fourth-quarter financial results and anticipate positive changes in the near future.


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