Isiah Austin

Isiah Austin inquired about Papa John's strategy for competing on value against larger-scale competitors and how the company plans to drive growth across both aggregator and first-party platforms.

Answer

Todd Penegor, President and CEO, explained that value competition involves meeting consumers with offers like 50% carryout and $9.99 Create Your Own, while also driving margin with premium innovations like Pan Pizza. He emphasized re-recruiting customers into the Papa Rewards program for higher frequency and Papa Dough redemptions, and competing effectively in 3P channels. Ravi Thanawala, CFO and President, North America, noted a target of 200 basis points of Four-Wall margin upside from supply chain, labor, and market efficiency. Both executives confirmed opportunities for growth in both 1P (carryout) and 3P (aggregators), focusing on agility, improving delivery satisfaction, and leveraging innovation.

Isiah Austin asked how Papa John's plans to compete on value against larger-scale competitors and whether future growth is expected more from aggregator platforms or the first-party platform.

Answer

Todd Penegor (President and CEO, Papa John's International) discussed meeting consumers with targeted offers (50% carryout, $9.99 Create Your Own), balancing value with premium innovation (Pan Pizza at $11.99), and leveraging Papa Rewards for higher frequency. Ravi Thanawala (CFO and President, North America, Papa John's International) highlighted a 200 basis point margin upside opportunity and noted that growth is expected from both first-party (especially carryout) and third-party channels, with innovation supporting all platforms.

Isiah Austin inquired about the correlation between Cracker Barrel's Google Star Rating and traffic, including how far ahead it leads, and whether the corporate restructuring could cause concern around long-term performance.

Answer

Senior Vice President and CFO Craig Pommells and President and CEO Julie Masino confirmed the strong correlation between Google Star Rating and traffic, noting it's a longer-term indicator (over about a year) due to guest frequency, and remains valid. Craig Pommells stated that the corporate restructuring is designed to drive focus on the guest experience, pulling back on some longer-term value-creating workstreams for now, and accelerates prior commitments to historical G&A rates, ensuring resources for regaining momentum.

Isiah Austin, on behalf of Sara Senatore, asked about the correlation between the Google Star Rating and traffic, specifically how far ahead it leads. He also inquired whether the corporate restructuring could cause concern for long-term performance and what specific areas are being cut.

Answer

Senior Vice President and CFO Craig Pommells explained that the Google Star Rating analysis is a longer-tail indicator, typically observed over about a year, given the average guest frequency. President and CEO Julie Masino confirmed that the Google Star Rating remains highly correlated with same-store sales growth, a metric tracked since its launch two years prior. Regarding the restructuring, Pommells stated that it is driving incredible focus on the highest priority: food and guest experience. He noted that some longer-term, value-creating work streams have been temporarily pulled back, but the company believes it has sufficient resources to regain momentum and is accelerating its commitment to return to historical G&A run rates.

Isiah Austin from Bank of America, on for Sarah Senatore, asked how COGS performed better than expected despite peak inflation. He also questioned whether top-line drivers in the second half would be more segment-specific (e.g., breakfast trends) or company-specific.

Answer

CFO Mel Hope explained that while inflation took a bite, the company benefited from a broad commodity basket where some favorability offset highs in other areas, along with mindful management. CEO Chris Tomasso attributed top-line strength to company-specific execution across operations, unit growth, and culinary innovation, noting that the brand is well-positioned to meet consumer demand for hospitality and quality, with positive trends across all dayparts.

Isiah Austin, on for Sara Senatore, asked why the demand falloff in the broader McDonald's rollout was not observed in the initial test markets and questioned if the profitability issues are borne exclusively by Krispy Kreme.

Answer

CEO Joshua Charlesworth responded that the partnership's execution has been good, but the focus is now on making the model sustainable and profitable for the long term before expanding. He emphasized working with McDonald's to improve doughnut visibility and streamline operations for mutual profitability.

Speaking for Sara Senatore, Isaiah Austin asked about trends in the value and promotional environment and the reason for slightly lower operating leverage in Q3 versus Q2 despite similar sales growth.

Answer

CEO Kevin Hochman noted that while the promotional environment is intensifying, it is not impacting their business due to their strong value equation of price plus experience. CFO Mika Ware explained the lower leverage was due to labor costs normalizing in Q3; the company had 'over-earned' on labor in Q2 when it was understaffed before ramping up hiring.