FIVE FORCES

DIFFERENTIATION

HISTORY

1984

1996

1985

1993

1989 1986

1999 2005

John Schnatter and partner Bob Ehringer begin selling pizza out of a converted broom closet of Mick's Lounge in Jeffersonville, Indiana

Schnatter opens the first Papa John's restaurant in a retail space next to the bar.

Franchising of Papa John's begins.

Company headquarters are shifted to Louisville, Kentucky.

1998

Papa John's goes public, raising about $12 million through an initial public offering (IPO).

The thousandth Papa John's is opened.

International expansion begins with opening of units in Mexico and Puerto Rico.

Company opens the 2,000th Papa John's restaurant; the U.K. pizza chain Perfect Pizza Holdings, Ltd. is acquired; Papa John's moves into third place among U.S. pizza chains.

Nigel Travis is hired as president and CEO, with Schnatter remaining chairman.

FIVE FORCES ANALYSIS

THREAT OF NEW

ENTRANTS LOW Though the restaurant industry requires relatively low capital requirements, there were relatively high fixed costs. Barriers to entry:

1. Though product differentiation is difficult, Papa John possess brand identification; its ongoing passion to offer the perfect pizza.

2. There is cost advantages possessed by Papa John; favorable access to raw materials. Papa John partnered with BIBP Commodities, Inc. to reduce cheese price volatility.

THREAT OF

RIVALRY HIGH • There is large number of competing firms that are roughly

the same size (Pizza Hut, Domino’s Pizza, Little Caesars) • The restaurant, pizza industry has already mature and

saturated, leads to slow industry growth.

THREAT OF SUPPLIERS MEDIUM

• To reduce the cheese price volatility, Papa John’s partnered with a third-party entity formed by franchisees thus it allowed Papa John’s to purchase cheese from BIBP at a fixed quarterly price.

• Profits and losses from BIBP were then passed on to Papa John’s.

• Forward pricing to stabilize food cost.

THREAT OF

BUYERS LOW • Number of buyers is high • Products sold to buyer is differentiated (high quality and

focused product)

THREAT OF SUBSTITUTES HIGH

In restaurant industry, there are so many variants of product that can be substitutes for pizza

SWOT ANALYSIS

STRENGTH • Good brand name

and high brand loyalty.

• High quality ingredients.

• Strong employee training program.

• Efficient restaurant layout.

WEAKNESS • Limited menu items. • Franchise

management. • Limited number of

stores.

OPPORTUNITY • International and

emerging market expansion.

• Diversification of business.

• The boom of social sites.

THREAT • Intense competition

in fast food pizza industry.

• National economic instability.

• Mature industry. • Health-conscious

people.

VRIO

VALUE

•Papa John’s resources are its commissary and high quality ingredients (raw materials).

•Why these resources are considered highly valuable?

•Because both resources are in line with Papa John’s mission, core values, and slogan.

RARITY •The high quality resources are not rare and can be found easily since flour, dough, cheese, and other spices and ingredients are common even in the supermarket.

•Commissary system is common among restaurant industry because it is part of food service system.

IMITABILITY •Though it’s not hard to imitate, these resources are definitely costly to imitate.

•Why? Because competitors need to add extra costs to build commissary, to sustain the quality of the ingredients, etc.

•Besides, it’s hard to maintain a fixed price for the high quality resources because of the price volatility.

ORGANIZATION

•Papa John’s is ready, organized, and able to exploit these resources since it already established some commissaries and maintain its quality of the ingredients by cooperating with BIBP and forward pricing.

DIFFERENTIATION

1 DIFFERENTIATION OF PRODUCTS

Focuses on creating: superior quality pizzas

customized pizzas

2 DIFFERENTIATION OF MARKETING CAMPAIGN

Partnerships

CSR

Direct Mailings and Direct Store-to-Door

Couponing

3 DIFFERENTIATION OF SUPPLY CHAIN

COMMISSARY SYSTEM

Reduces labor cost and waste.

Maintains quality and consistency.

PROPOSED STRATEGY

1 INCREASED DOMESTIC MARKET PENETRATION

MATURE INDUSTRY

Boosts the number of franchisees.

Focuses on The numbers in the restaurant. Develops Online Ordering system.

Creates interactive marketing campaign.

2 INTERNATIONAL MARKET EXPANSION

QUALITY-CENTERED PREFERENCE GROWING INCOME BASE

Keeps the premium price.

Integrates with local culture.

Secures local government approval. Creates interactive marketing campaign.

3 DIVERSIFYING FROM PIZZA

Mexican-themed Restaurants

CHINESE FOOD Restaurants BAKERY

PASTA RESTAURANTS

Diversifies through acquisition.

Chooses F&B business using

almost the same ingredients.