Papa John's CEO Rob Lynch joins Yahoo Finance Live to discuss the company's latest franchising announcement, company growth, and plans for the future.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Papa John's said this morning and has inked its largest US franchisee development agreement in its history. The deal will see Papa John's open 100 new stores in Texas by 2029. Let's dive into this one with the deal-making CEO of Papa John's, Rob Lynch.

Rob, always good to see you, appreciate you taking the time. It has been an interesting third quarter for you. In addition to this deal, you're just coming off another development deal international that will bring 220 new units by 2025. Now Papa John's hasn't been opening up a lot of restaurants. So this is, I imagine good news for you. What's your message to investors this morning?

ROB LYNCH: Thanks, Brian, this is great news for Papa John's and all of our investors. You know, the big key leading indicator of a system's health is franchisees, sophisticated great franchisees, who are willing to invest their capital in the future of the brand. And over the last couple of months, we've had some very large franchisees make big commitments to open up a lot more Papa John's.

And you know, you got to ask yourself why wouldn't they? The unit economics are great, there's a ton of sales momentum, we've got a great team in place who's really focused on making sure that we take great care of our franchisees. We always recognize we can't win if our franchisees aren't winning, and we're all starting to reap the rewards of that.

There's a ton of white space globally for us, Brian, to go out and build restaurants. We're really underdeveloped in a lot of geographies both internationally as well as domestically. So we're bringing on franchisees that we believe can help us build out those geographies and be great operators once those restaurants are open.

JULIE HYMAN: Hey, Rob, it's Julie here. As we were just showing on the full screen, you guys have 5,000 locations. Actually, I believe it's more than 5,000 locations at this point, especially with this deal. What's the goal here? Five years from now, how many Papa John's should there be globally?

ROB LYNCH: Well, you know, as I was just mentioning, our big global competitors have two to three times more restaurants that we do globally. So we think that over the next five years, we're going to work to double the number of restaurants that we have and we don't even think that that's going to top us out. We're currently operating in about 50 countries globally, whereas our two largest international competitors are operating in about 100. So there's about 50 countries that we can go into we believe that are primed for a better ingredients, better pizza, platform to come in and compete there.

We also are underdeveloped in the markets that we already have penetrated, markets like China and most of Continental Europe. So we're focused on taking advantage of white space, but we're also looking to increase the penetration that we have in the markets we already compete in. That'll make our supply chain more efficient, make our unit economics even better, and continue to spur that flywheel, which drives development.

BRIAN CHEUNG: Hey, Rob. Brian Cheung here. I want to ask about what changed between, let's say two years ago and now in the domestic franchise business because you noted in the earnings call recently that two years ago almost none of the domestic franchisees were talking about development. Very different story today. I think people might even be surprised that that's the sentiment as we still are in a pandemic. So what is it about the business environment, certain markets that's making it attractive to start thinking about this type of strategy right now?

ROB LYNCH: Yeah, I could say almost everything has changed. You know, the unit economics at the restaurant level two years ago were in a much different situation that they are today. You know, we have really built a team that is focused on driving profitable sales growth across our platform.

And that's what we've done. We've done that through product innovation. We've done that through productivity enhancements at the restaurant level. We've done that through supply chain optimization. We've really worked hard to make sure that our franchisees are set up, not only to grow sales but also to profitably grow sales.

And that really motivates franchisees. And right now, we've got seven straight quarters of industry outperformance, and so our franchisees have a lot of capital that they want to invest and we want them to invest it in Papa John's and they're signing up to do that. So we think that we can deliver as good or better return on their investment than anywhere else they can put their cash.

BRIAN SOZZI: Rob, this labor shortage, it continues to get worse. Every time we talk to you, the industry shortage in restaurants, it's something I've not seen before in all my time covering restaurants. Do you think franchisees are going to be able to find the humans, the bodies to put into these new locations over the next few years?

ROB LYNCH: You know, you're absolutely right, Brian. It is a challenge that we're all dealing with and it's exacerbated in the restaurant industry but I would tell you it's not just the restaurant industry, it's really across every sector of our economy. A lot of our suppliers who supply us with ingredients are also having to pay more and having to really work to find people to come in and work.

And you know, my hope is that we will get back to normal, we will get back to a place where everyone feels like they can come in and contribute to society and show up for work every day. But until then, we're doing our best to be the employer of choice.

We have implemented a lot of programs throughout the pandemic to make sure that we are taking care of our employees, making them feel safe when they come to work every day but also giving them benefits that make us differentiated in the space. We've offered free telehealth medicine to all of our employees, and that's across our system, our franchisees have signed up for that. We also offer free college to any of our employees. So people, it's not just about coming in and delivering pizzas, it's about coming in, working, earning an income but also opportunity to get an education and go wherever you know, you want to go in your career. So we've really tried to make sure that we're an employer of choice so that we can be very competitive but there's no question, staffing is our number one challenge right now.

BRIAN SOZZI: Rob, I remember talking to you on the day you got hired or announced as the CEO of Papa John's. And you've had a couple chapters in your career so far at the company. First was cleaning up the mess from many years before, you did that. Ignited innovation, you've done that. You've reignited now apparently, just opening up more restaurants, that's done. And now, I would say you're entering your fourth chapter, and that includes a new headquarters out in Atlanta. Why is that so important for you and the brand?

ROB LYNCH: You know, we have five core values of Papa John's, and the first two are everyone belongs, and people first. We are focused on making sure that we can all come together and work together and build the kind of culture and the kind of company that we all can be proud of. And over the last two years you mentioned, that's us trying to build out of where we were, and build the future of where we want to go. And so you know, opening up a new headquarters in Atlanta is a new start for a lot of our team members, is an opportunity for people to come in and feel inspired about the future and not necessarily you know, beholden to the past.

Now, I'd like to say we also are going to continue to have a big presence in Louisville. We've got a lot of team members up there who are bought into our future, who are doing a great job. So we're going to have multiple offices, everyone's going to play a role, everyone is important to the organization. And we just can't wait to get back to work and do the work that we love together again.

BRIAN SOZZI: Fair enough. Papa John CEO, Rob Lynch, good to see the news. Stay safe. We'll talk to you soon.