Pizza Chains Seek Outside Help as Food-Delivery Market Grows
Papa John's, Pizza Hut Turn to Outsiders in Fierce Delivery Race
(Bloomberg) -- Here’s the latest sign that changes are afoot in the $500 billion U.S. restaurant market: Even the pioneers of food delivery -- big pizza chains -- are now turning to third parties for help.
Papa John’s International Inc., trying to recover from its deep sales slump, is using DoorDash Inc. in more than 1,300 of its locations. It will be expanding that partnership in the coming months, Chief Executive Officer Steve Ritchie said after the pizza chain reported revenue that missed analysts’ estimates.
With Taco Bell, McDonald’s Corp., Chipotle Mexican Grill Inc. and others doubling down on delivery, pizza chains are starting to feel the heat. It’s by no means Papa John’s only problem: The chain reported declining revenue and an 8.1 percent drop in North America comparable sales for its latest quarter amid bad public relations stemming from founder John Schnatter’s use of a racial slur last year and his lingering dispute with management. The results show that rivals may be eating into sales.
Delivery specialists like UberEats “have been growing their overall share of the restaurant industry over the last 12 months. We don’t want to lose our customers,” Ritchie said in an interview. “Our goal is to certainly convert those customers over to a Papa John’s platform.”
The company has been working with DoorDash since July 2018 and also works with Postmates Inc. The chain has been exploring working with other delivery specialists as well, a company spokeswoman said in an email.
“The competitors of the pizza chains were previously other pizza chains,” said KPMG managing director Andrew Nolan. For the convenience of having food delivered straight to the door, “pizza was the only main option.” But that’s changed, with other restaurants delving into delivery at full speed and “broadening the options available to the customer,” he said.
Pizza Hut, meanwhile, has turned to Grubhub Inc. for help improving and expanding delivery. The pizza chain’s parent, Yum! Brands Inc., invested in the delivery company last year, and Pizza Hut pies can now be ordered through the Grubhub mobile app.
On Wednesday, Pizza Hut said it’s working with FedEx Corp. to test a new robot -- dubbed Bot -- that’s able to navigate unpaved surfaces, and even stairs, to deliver pizzas. Certain U.S. markets may see Bot as as soon as this summer.
New Toppings
Delivery isn’t the only part of the business that’s changing: Consumer tastes are evolving as well. Papa John’s also wants to cater to more sophisticated pizza preferences by offering toppings like arugula, spinach and roasted red peppers.
“There’s opportunity to lean in on the premium side of ingredients,” Ritchie said.
To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net
To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Tony Robinson
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