Papa John's International Q3 Earnings Call Highlights

Key Points

• Third-quarter performance weakened: Global system-wide sales fell 5.6% to $1.15 billion, revenue declined 10.5% to $455 million, and adjusted EBITDA dropped $10 million to $38 million. Promotional competition and softer customer acquisition pressured North American sales.
• Papa John’s launched its Unbox Better turnaround plan, focused on improving food quality, marketing and franchisee support. The company will increase total marketing spending to 7% and provide about $35 million in supplemental marketing and franchise investment through 2027.
• The 2026 outlook assumes conditions do not improve: Papa John’s forecasts system-wide sales down about 5%, North American comparable sales down about 8%, and adjusted EBITDA of approximately $175 million. It also expects 200–250 North American restaurant closures.

Papa John's International NASDAQ: PZZA reported lower third-quarter sales and adjusted earnings as promotional competition and weaker customer acquisition weighed on its North American business. The pizza chain also introduced a turnaround plan centered on food quality, marketing and support for franchisees.

Global system-wide restaurant sales fell 5.6% in constant currency to $1.15 billion, while consolidated revenue declined 10.5% to $455 million. Adjusted EBITDA fell $10 million to $38 million, primarily because of lower North American sales and volumes, Interim Chief Financial Officer Chris Collins said.

President and CEO Todd Penegor said top-line performance came in below the company’s expectations. Carryout was relatively stronger than delivery, he said, with the company’s own delivery channel under the most pressure. Orders containing multiple pizzas held up better than single-pizza orders, sides and desserts.

Turnaround plan targets food and franchise operations

Penegor described the new strategy, called Unbox Better, as a company-wide effort to strengthen the brand and improve execution across its restaurant system. The plan includes work on dough, bake consistency, toppings and presentation, alongside a renewed emphasis on value.

“In a very promotional category, we chose to protect margin over deep discounting, and transactions declined as a result,” Penegor said. The company plans to pair signature products with prices intended to drive traffic, although he said it could take several quarters of consistency for customers to recognize the changes.

As part of the effort, Papa John’s plans to launch an offer asking customers to submit pizza photos in exchange for a free pizza. Penegor said the feedback would be shared with restaurants to help improve the customer experience.

The company is also testing a new point-of-sale system and expects an initial group of restaurants to be live by year-end, with the bulk of its U.S. system moving to the platform in 2027. Penegor said the technology is intended to improve forecasting, labor scheduling and promotional flexibility.

A new marketing framework received 98% of votes cast, Penegor said. Under it, total marketing spending will rise to 7% from 6%, comprising 5% nationally and 2% locally. Roughly half the U.S. system is supported by re-established local marketing co-ops, with the rest expected to be established by the end of 2027.

Markets with co-ops have seen a sales performance advantage of a little over 200 basis points, Penegor said. He added that the company has an opportunity to better coordinate local spending with its national marketing calendar.

Franchise support and restaurant closures

Papa John’s is reducing its supply chain margin to 4% and plans to lower its technology fee to 1.5% from 1.75% in 2027. The company expects approximately $35 million in supplemental marketing and franchise investment to continue into 2027, with support declining in later years as the supply chain margin rises.

The company captured approximately $21 million in supply chain savings through the third quarter and remains on track for at least $25 million this year and at least $60 million by 2028, Penegor said.

Papa John’s closed 239 restaurants system-wide through the third quarter, including 146 in North America. Penegor said the company remains comfortable with its target of 300 North American closures through 2027, citing franchise support and sales transferred to nearby restaurants.

The company is also pursuing a more asset-light model. It refranchised 28 company-owned restaurants in Orlando, Florida, in August and is assessing additional North American markets, Collins said.

Updated outlook assumes no improvement in conditions

Papa John’s revised its 2026 outlook to reflect year-to-date results and the current consumer and economic environment. Its updated forecast includes:

• System-wide sales declining approximately 5% and North American comparable sales declining approximately 8%.
• International comparable sales ranging from flat to growth of 1%.
• Adjusted EBITDA of approximately $175 million, excluding approximately $16 million in stock-based compensation.
• Gross closures of 200 to 250 restaurants in North America and 5% to 6% of the international system.

Collins said the outlook does not assume improvement in the current environment or include a benefit from Unbox Better in 2026. He said it implies fourth-quarter comparable sales, revenue and EBITDA similar to the third quarter.

International comparable sales fell 1.8% in the third quarter, although U.K. comparable sales rose 7.2%. Penegor attributed international pressure in part to the regional conflict in the Middle East and said trends were also soft in parts of Latin America and China.

Free cash flow for the first nine months was $19 million, down from $59 million a year earlier. The company ended the quarter with approximately $500 million in available liquidity and a covenant leverage ratio of 3.3 times, Collins said.

About Papa John's International (NASDAQ:PZZA)

Papa John's International, Inc operates and franchises restaurants under the Papa Johns brand. The company specializes in pizza and related food products, serving customers primarily through delivery, carryout and dine-in locations, as well as online and mobile ordering platforms.

Its menu includes a variety of pizzas with different crusts and toppings, along with sides such as breadsticks, chicken products and desserts. Papa Johns also offers soft drinks, dipping sauces and other complementary items, with menus and promotions adapted to local markets.

Founded in 1984 by John Schnatter, Papa Johns has grown into an international restaurant system with locations across North America and various markets in Europe, the Middle East, Latin America and other regions.

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