Papa Johns Admits Serious Mistake: Skipping Local Ads Was a ‘Big Miss’

Papa Johns has had a turbulent history over the past decade, including the well-publicized departure of founder and oft-times CEO John Schnatter — Papa John himself — in January 2018 under a shroud of controversy. Since then, the company has redoubled efforts to reclaim space in the pizza business, despite facing recent store closures overseas, per The Guardian, and lukewarm investor reaction to a solid November earnings call, as Simply Wall St. outlined.

Now, as Restaurant Business reported, it appears that the company is admitting to a fairly serious error it made concerning a recent national ad campaign.

Papa Johns CEO Admits National Ad Campaign a ‘Big Miss’

Early on in 2024, Papa Johns pivoted to focus on a glitzy new campaign titled “Back to Better 2.0,” perhaps echoing the same strategy that had turned the fortunes of competitor Domino’s Pizza around years prior.

Under the direction of then-CEO Rob Lynch, who has since exited the chair to take the helm at upscale burger chain Shake Shack, the company planned to exclusively focus all ad spend on national-level campaigns. Operators would contribute to these campaigns in the hopes that a huge nationwide spend would drive business to all markets.

Ignoring the local spend, however, had a significant downside in the end. The man who replaced Lynch as CEO, Todd Penegor, spoke to the results of his predecessor’s campaign.

“We made local optional,” Penegor said. “All the co-ops went away. And not having the co-ops to be able to put the franchise community together in the communities that we serve, have the company sitting around the table is a big mess in a business that is a very regional business, especially pizza being so localized.”

The thinking at the time was that allocating all funds toward a concerted national ad effort would be more efficient. Instead, same-store sales sagged by 4% in the quarter after the nationwide campaign launched, then fell by 6% the quarter after. Finally, three quarters after the ad pivot, sales slightly recovered — but still declined by 4%.

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Papa Johns Goes Back to the Drawing Board Under CEO Todd Penegor

Referring to the swing toward an exclusively national focus as a “big miss,” Penegor almost immediately set to righting the wrongs of Papa Johns’ marketing misstep.

Calling it a “re-trade” of marketing spending back to franchisees — essentially due to a need to revitalize and rebuild co-op relationships that had fallen into disrepair or disuse during the shift to a national effort exclusively — Penegor signaled that a mix of local and national was his vision for the pizza company’s immediate future.

“Where we really want to put the incremental dollars to work is to go prove out the business case that having a right mix of local and national really drives this business,” Penegor said. “And whether we can re-trade all of that and get the entire franchise community moving in one direction, or we go front-run it across a lot of the company markets and go prove the business case. We’ll go figure that out in the coming months.”

“Incremental spending in the company markets is probably our best investment and return,” he added.