Q2 2024 Papa John's International Inc Earnings Call

August 8, 2024

Thank you. Thank you. Thank you.

Operator: Good day, and thank you for standing by. Welcome to the Papa John's second quarter 2024 conference call and webcast. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded.

Operator: And thank you for standing by. Welcome to the Papa John's second quarter 2024 conference call and webcast. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Stacy Frole, Vice President of Investor Relations. Please go ahead.

Good day, and thank you for standing by.

Speaker Change: Welcome to the Papa John's second quarter 2024 conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker Change: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Stacy Frole, Vice President of Investor Relations. Please go ahead.

Stacy Frole: Good morning, and welcome to our second quarter 2024 earnings conference call. This morning, we issued our second quarter earnings release. A copy of the release can be obtained on our investor relations website at ir.papajohns.com under the news releases tab or by contacting our investor relations department at investor_relations at papajohns.com. Joining me on the call this morning are Todd Penegor, our President and Chief Executive Officer, and Ravi Thanawala, our Chief Financial Officer.

Stacy Frole: Good morning, and welcome to our second quarter 2024 earnings conference call. This morning, we issued our second quarter earnings release. A copy of the release can be obtained on our investor relations website at ir.papajohns.com under the news releases tab or by contacting our investor relations department at investor_relations at papajohns.com. Joining me on the call this morning are Todd Pentagore, our President and Chief Executive Officer, and Ravi Thanawala, our Chief Financial Officer.

Stacy Frole: Good morning, and welcome to our second quarter 2024 earnings conference call. This morning, we issued our second quarter earnings release.

Speaker Change: A copy of the release can be obtained on our Investor Relations website at ir.papajohns.com under the News Releases tab or by contacting our Investor Relations Department at investor underscore relations at papajohns.com.

Speaker Change: Joining me on the call this morning are Todd Pentagore, our President and Chief Executive Officer, and Ravi Thanawala, our Chief Financial Officer.

Stacy Frole: Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the Federal Securities Laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from those statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filing. In addition, please refer to our earnings release for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups. Now, let me turn the call over to Todd.

Speaker Change: Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the Federal Securities Laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements.

Speaker Change: Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings.

Speaker Change: In addition, please refer to our earnings release for the required reconciliation of non-GAAP financial measures discussed on today's call.

Speaker Change: Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups. And now, let me turn the call over to Todd.

Todd Pentagore: Thank you, Stacy, and good morning, everyone. I am honored to be with you today as I begin this journey as the CEO of Papa John's. This brand is synonymous with delivering the best pizza in the industry, and I am excited to learn from and work with our board, Ravi, team members, and our franchise community to build on this legacy. As we move forward together, our number one priority will be to create great experiences for our customers and employees in our restaurants, while also ensuring the restaurant business model is very strong.

Todd Penegor: Thank you, Stacy, and good morning, everyone. I am honored to be with you today as I begin this journey as the CEO of Papa John's. This brand is synonymous with delivering the best pizza in the industry, and I am excited to learn from and work with our board, Ravi, team members, and our franchise community to build on this legacy. As we move forward together, our number one priority will be to create great experiences for our customers and employees in our restaurants, while also ensuring the restaurant business model is very strong. My immersion into the culture is well underway.

Todd Pentagore: Thank you, Stacy, and good morning, everyone.

Todd Pentagore: I am honored to be with you today as I begin this journey as the CEO of Papa John's. This brand is synonymous with delivering the best pizza in the industry, and I am excited to learn from and work with our board, Ravi, team members, and our franchise community to build on this legacy.

Todd Pentagore: As we move forward together, our number one priority will be to create great experiences for our customers and employees in our restaurants, while also ensuring the restaurant economic model is very strong.

Todd Penegor: We have a passionate team, and a system committed to ensuring we become the best Papa John's we can be. The team understands what we need to check and adjust to compete and win in the pizza business. You'll hear some of that from Ravi today.

Speaker Change: My immersion into the culture is well underway. We have a passionate team, a system committed to ensuring we become the best Papa John's we can be. The team understands what we need to check and adjust to compete and win in the pizza business. You'll hear some of this from Ravi today.

Todd Pentagore: As I have begun to share with our organization, I believe in winning as a team and will be collaborative, yet quick and decisive as we focus on growing this premium QSR brand. Together, we need to move quickly to build on our strengths and execute today as we evolve to be even better tomorrow. I've enjoyed talking with our stakeholders this past week and look forward to meeting you all in the coming months and updating you on our progress. Thank you. Ravi

Todd Penegor: As I have begun to share with our organization, I believe in winning as a team and will be collaborative, yet quick and decisive as we focus on growing this premium QSR brand. Together, we need to move quickly to build on our strengths and execute today as we evolve to be even better tomorrow. I've enjoyed talking with our stakeholders this past week and look forward to meeting you all in the coming months and updating you on our progress.

Ravi Thanawala: As I have begun to share with our organization, I believe in winning as a team and will be collaborative yet quick and decisive as we focus on growing this premium QSR brand. Together we need to move quickly to build on our strengths and execute today as we evolve to be even better tomorrow.

Ravi Thanawala: I've enjoyed talking with our stakeholders this past week and look forward to meeting you all in the coming months and updating you on our progress.

Todd Penegor: Ravi, I'm going to turn the call over to you to discuss the current state of the business and our second quarter results, but before I do, I want to give you my sincerest thanks for the work you have done over the past five months to lead this organization through this transition period. We are deeply grateful for your leadership and dedication to Papa John's. Thank you.

Ravi Thanawala: Ravi, I'm going to turn the call over to you to discuss the current state of the business and our second quarter results. But before I do...

Ravi Thanawala: I want to give you my sincerest thanks for the work you have done over the past five months to lead this organization through this transition period. We are deeply grateful for your leadership and dedication to Papa John's. Thank you.

Ravi Thanawala: Thank you, Todd, and welcome to Papa John's. It has been a pleasure getting to know you over the past few years. I look forward to partnering with you as we unlock the full potential of Papa John's and together continue to create value for our stakeholders. Turning to our results. As you read in our earnings release this morning, the challenging sales trends we experienced in the first quarter within our North America restaurants have persisted into the second quarter. While our core product, pizza, and the quality of our brand remained in demand, the macro environment continues to be challenging as consumers pull back on their spend and increasingly focus on value.

Ravi Thanawala: It has been a pleasure getting to know you over the past few years. As you read in our earnings release this morning, the challenging sales trends we experienced in the first quarter within our North America restaurants have persisted into the second quarter. The macro environment continues to be challenging as consumers pull back on their spend and increasingly focus on value.

Ravi Thanawala: Thank you, Todd, and welcome to Papa John's.

Ravi Thanawala: It has been a pleasure getting to know you over the past few weeks. I look forward to partnering with you as we unlock the full potential of Papa John's and together continue to create value for our stakeholders.

Speaker Change: Turning to our results.

Speaker Change: As you read in our earnings release this morning, the challenging sales trends we experienced in the first quarter within our North America restaurants have persisted into the second quarter.

Speaker Change: While our core product, pizza, and the quality of our brand remain in demand, the macro environment continues to be challenging as consumers pull back on their spend and increasingly focus on value.

Ravi Thanawala: Despite these challenges, I'm very proud of our team's discipline in managing the P&L, which helped to completely offset the softer sales in the second quarter. On today's call, we'll provide context for our results and highlight the decisive actions we are taking to sharpen our focus, improve unit economics, drive unit development, and provide an excellent consumer experience. And while sales were solid, with customers buying two or more pizzas, we saw lower transactions on our lower-ticket items.

Ravi Thanawala: Despite these challenges, I'm very proud of our team's discipline in managing the P&L, which helped to completely offset the softer sales in the second quarter. On today's call, we'll provide context for our results and highlight the decisive actions we are taking to sharpen our focus, improve unit economics, drive unit development, and provide an excellent consumer experience. In the second quarter of 2024, North America comparable sales were down approximately 4% from a year ago.

Speaker Change: Despite these challenges, I'm very proud of our team's discipline in managing the P&L, which helped to completely offset the software sales in the second quarter.

Speaker Change: On today's call we'll provide context for our results and highlight the decisive actions we are taking to sharpen our focus, improve unit economics, drive unit development, and provide an excellent consumer experience.

Speaker Change: In the second quarter of 2024, North America comparable sales were down approximately 4% from a year ago.

Ravi Thanawala: Similar to our first quarter, this was primarily driven by lower transactions, as continued growth in our aggregator channel was more than offset by a decline in our organic delivery and, to a lesser extent, our carry-out business. We estimate this year-over-year shift in channel mix created an approximate 100 basis points headwind to our comparable sales in the second quarter, driven by the relatively profit-neutral impact of reduced delivery. And while sales were solid, with customers buying two or more pizzas, we saw lower transactions on our lower ticket items.

Speaker Change: Similar to our first quarter, this was primarily driven by lower transactions, as continued growth in our aggregator channel was more than offset by a decline in our organic delivery and to a lesser extent, our carry-out business.

Speaker Change: We estimate this year-over-year shift in channel mix created an approximate 100 basis points headwind to our comparable sales in the second quarter, driven by the relatively profit-neutral impact of reduced delivery fees.

Speaker Change: And while sales were solid with customers buying two or more pizzas, we saw lower transactions in our lower-ticket items.

Ravi Thanawala: In this current economic cycle, consumers have become more deliberate in managing their overall ticket and are showing a preference for brands that are offering compelling value. While we know we offer an attractive value for our customers, our marketing and innovation efforts have primarily focused on premium product offerings at premium prices. As a result, our price value perception is not as strong as it should be in this unique environment. In the second quarter, we began shifting our efforts and investments to focus on initiatives that improve our value perception while still protecting our brand position. We are being thoughtful and intentional in our approach by focusing on opportunities for modest transaction lifts without placing unneeded pressure on store-level profitability.

Speaker Change: In this current economic cycle, consumers have become more deliberate in managing their overall ticket and are showing a preference for brands that are offering compelling value.

Speaker Change: While we know we offer an attractive value for our customers, our marketing and innovation efforts have primarily focused on premium product offerings at premium price points.

Speaker Change: As a result, our price-value perception is not as strong as it should be in this unique environment.

Ravi Thanawala: In the second quarter, we began shifting our efforts and investments to focus on initiatives that improve our value perception while still protecting a brand position. We are being thoughtful and intentional in our approach by focusing on opportunities for modest transaction lifts without placing unneeded pressure on store-level profitability. We believe this is critical and are aligned with our franchisees on this core approach. First, improving our value perception. For example, in June, we launched our Cheesy Burger Pizza, a fan-favorite, limited-time offer at an attractive $9.99 price. These products are priced attractively and at parity with competitors' offers within the QSR Pizza segment.

Speaker Change: In the second quarter, we began shifting our efforts and investments to focus on initiatives that improve our value perception, while still protecting our brand positioning.

Speaker Change: We are being thoughtful and intentional in our approach by focusing on opportunities for modest transaction lifts without placing unneeded pressure on store level profitability. We believe this is critical and are aligned with our franchisees on this core approach.

Ravi Thanawala: We believe this is critical and are aligned with our franchisees on this core approach. There are three opportunities we are focused on for the balance of the year that are geared towards driving sustainable, profitable growth over the long term. First, improving our value perception. We believe showcasing our better pizzas, better ingredients, at appropriately valued price points will improve our overall value perception and improve transaction trends. For example, in June, we launched our Cheesy Burger Pizza, a fan-favorite limited-time offer at an attractive $9.99 price point.

Speaker Change: There are three opportunities we are focused on in the balance of the year that are geared towards driving sustainable, profitable growth over the long term.

Ravi Thanawala: And over the past eight weeks, we have seen our value perception improve. We know that driving trial of our product is critical to winning consumers' wallets in the future. Second, reiniting and expanding our innovation pipeline. Our teams are actively collaborating to identify new opportunities to improve overall customer satisfaction, enhance crave, and increase visual appeal to further improve the strong value proposition Papa John's provides. We attended a tasting this past week, as our teams presented various products at different stages of ideation and validation.

Speaker Change: First, improving our value perception.

Speaker Change: We believe showcasing our better pizza, better ingredients, at appropriately valued price points will improve our overall value perception and improve transaction trends.

Speaker Change: For example, in June we launched our Cheesy Burger Pizza, a fan favorite, limited time offer at an attractive $9.99 price point.

Ravi Thanawala: We also shifted more media towards our $6.99 Papa pairings, which is our mix-and-match value platform, and recently launched our extra-large New York-style pizza for $10.99, a more competitive price point than last year. These products are priced attractively and at parity with competitors' offers within the QSR Pizza segment. And over the past eight weeks, we have seen our value perception improve. This gives us confidence that if we maintain an appropriate balance of value offerings and premium products, it will lead to improved sales trends over time. We know that driving trial of our product is critical to winning consumers' wallets in the future.

Speaker Change: We also shifted more media towards our $6.99 Papa pairings, which is our mix-and-match value platform, and recently launched our extra-large New York-style pizza for $10.99, a more competitive price point than last year.

Speaker Change: These products are priced attractively and at parity with competitors' offers within the QSR pizza segment. And over the past eight weeks, we have seen our value perception improve.

Speaker Change: This gives us confidence that if we maintain an appropriate balance of value offerings and premium products, it will lead to improved sales trends over time.

Speaker Change: We know that driving trial of our product is critical to winning consumers' wallets in the future.

Ravi Thanawala: At our company-owned restaurants, we are also testing various value offers in certain markets to analyze repeat rates, identify potential basket starters, and larger basket motivators. These test and learn opportunities provide us with data points to help our entire system better understand initiatives that can increase conversion rates and enable transactions that drive growth in restaurant-level profit dollars. Second, reiniting and expanding our innovation pipeline. We are expanding our pipeline with unique and differentiated offers focused on CRE.

Speaker Change: At our company-owned restaurants, we are also testing various value offers in certain markets to analyze repeat rates, identify potential basket starters, and larger basket motivators.

Speaker Change: These test and learn opportunities provide us with data points to help our entire system better understand initiatives that can increase conversion rates and enable transactions that drive growth in restaurant-level profit dollars.

Speaker Change: Second, reigniting and expanding our innovation pipeline.

Speaker Change: We are expanding our pipeline with unique and differentiated offers focused on crades.

Ravi Thanawala: Over the past 40 years, Papa John's has built its brand on better ingredients and better pizza, and we have a strong pantry of consumer-tested innovation. Our teams are actively collaborating to identify new opportunities to improve overall customer satisfaction, enhance crave, and increase visual appeal to further improve the strong value proposition Papa John's provides. We attended a tasting this past week, as our teams presented various products at different stages of ideation and validation.

Speaker Change: Over the past 40 years, Papa John's has built its brand of better ingredients, better pizza, and we have a strong pantry of consumer-tested innovations.

Speaker Change: Our teams are actively collaborating to identify new opportunities to improve overall customer satisfaction, enhance craves, and increase the visual appeal to further improve the strong value proposition Papa John's provides.

Speaker Change: We attended a tasting this past week as our teams presented various products at different stages of ideation and validation.

Ravi Thanawala: This is one of the best parts of the job, and I must say, we can't wait to share some of these innovations over the next year. They are nothing short of absolutely delicious and are a must-try product.

Speaker Change: This is one of the best parts of the job, and I must say, we can't wait to share some of these innovations over the next year. They are nothing short of absolutely delicious and are must-try products.

Ravi Thanawala: Third, improving our digital and loyalty experience. We are focused on improving conversion and reducing friction within the customer experience. Most of our sales occur through digital channels, with nearly one-third of our sales occurring through apps with customers who tend to purchase more frequently. We are actively identifying opportunities to more quickly assess information, streamline the ordering journey, and improve the overall user experience. For example, in July, we rolled out an app update that improves call-to-actions and navigation, elevates imagery, and more prominently features loyalty rewards.

Speaker Change: Third, improving our digital and loyalty experience.

Speaker Change: We are focused on improving conversion and reducing friction within the customer experience.

Speaker Change: Most of our sales occur through digital channels with nearly one-third of our sales occurring through apps with customers who tend to purchase more frequently.

Ravi Thanawala: We are actively identifying opportunities to more quickly assess information. For example, in July, we rolled out an app update that improves call-to-actions and navigation. In addition, we are maintaining a strong focus on the customer experience in our restaurants, which we know is another key pillar in customer retention. In the third quarter, we are making incremental investments to test the marketing messages and impact when combined with our new national brand platform to drive repeat purchase and stronger conversion.

Speaker Change: We are actively identifying opportunities to more quickly assess information.

Speaker Change: streamline ordering journey, and improve the overall user experience.

Speaker Change: For example, in July , we rolled out an app update that improves call-to-actions and navigation, elevates imagery, and more prominently features loyalty rewards.

Ravi Thanawala: We are also actively evolving our holistic digital platform to improve conversion, drive repeat transactions, and streamline customer insight. In addition, we are maintaining a strong focus on the customer experience in our restaurants, which we know is another key pillar of customer retention. In the second quarter, our restaurant team continued to improve out-of-the-door times, leading to higher overall customer satisfaction scores year over year. I'd also like to touch upon our recent initiatives to enhance our national marketing efforts and be more effective. In the second quarter, we launched our all-new brand platform, Better Get Yourself, which is a modern refresh of brand visuals, tone, and message.

Speaker Change: We are also actively evolving our holistic digital platform to improve conversion, drive repeat transactions, and streamline customer insights.

Speaker Change: In addition, we are maintaining a strong focus on the customer experience in our restaurants, which we know is another key pillar in customer retention.

Speaker Change: In the second quarter, our restaurant team continued to improve out-the-door times, leading to higher overall customer satisfaction scores year over year.

Speaker Change: I'd also like to touch upon our recent initiatives to enhance our national marketing efforts and effectiveness. Thank you. Thank you. Thank you.

Speaker Change: In the second quarter, we launched our all-new brand platform, Better Get Yourself, which is a modern refresh of brand visuals, tone, and message.

Ravi Thanawala: Since the launch, we have seen quarter-over-quarter improvement in our aided brand awareness along with higher intent to purchase. Our work now is to couple this new brand platform with value messaging so that we are best positioned to convert intention to sale. In the third quarter, we are making incremental investments to test the marketing messages and impact when combined with our new national brand platform to drive repeat purchase and stronger conversion.

Speaker Change: Since the launch, we have seen quarter-over-quarter improvement in our aided brand awareness along with a higher intent to purchase.

Speaker Change: Our work now is to couple this new brand platform with value messaging so that we are best positioned to convert intention to sales.

Speaker Change: In the third quarter, we are making incremental investments to test the marketing messages and impact when combined with our new national brand platform to drive repeat purchase and stronger conversion.

Ravi Thanawala: We anticipate these investments will place additional near-term pressure on company-owned restaurant margins, but the insights we gain will benefit our entire system over time. Moving to an international perspective, our cross-functional teams are executing at a high level. In the second quarter, we experienced an improving comp sales trend line, which was approximately flat when compared with last year despite continued pressure from our Middle East region. Excluding this region, our international comparable sales were up approximately 3% from a year ago. The number one focus of our international transformation initiatives has been to set the right foundation to support and drive long-term success.

Speaker Change: We anticipate these investments will place additional near-term pressure on company-owned restaurant level margins, but the insights we gain will benefit our entire system over time.

Ravi Thanawala: Moving to an international perspective, our cross-functional teams are executing at a high level. Based on these actions, and the continued operating success of our franchisees, we expect the UK market to be profit accretive in the second half of this year. Additionally, our new international hub leaders are doing a fantastic job focusing on our most important markets, driving partnership with local franchisees on local marketing strategies, and building a foundation of a strong, locally relevant brand for profitable restaurants.

Speaker Change: Bow.

Speaker Change: Moving to an international perspective, our cross-functional teams are executing at a high level.

Speaker Change: In the second quarter, we experienced an improving comp sales trendline, which was approximately flat when compared with last year despite continued pressure from our Middle East region. Excluding this region, our international comparable sales were up approximately 3% from a year ago.

Speaker Change: The number one focus of our International Transformation Initiatives has been to set the right foundation to support and drive long-term success. In particular, our team has made significant progress in advancing our efforts to optimize the UK business model.

Ravi Thanawala: In particular, our team has made significant progress in advancing our efforts to optimize the UK business model. In the second quarter, we closed 43 underperforming company restaurants in the UK, and today, we have re-franchised 60 restaurants. As a result, only 13 company-owned restaurants remain in the UK market.

Speaker Change: In the second quarter, we closed 43 underperforming company restaurants in the UK, and today we have re-franchised 60 restaurants.

Speaker Change: As a result, only 13 company-owned restaurants remain in the UK market.

Ravi Thanawala: Based on these actions and the continued operating success of our franchisees, we expect the UK market to be profit accretive in the second half of this year. Our attention is now turning towards growth, how we drive higher AUDs and partner with developing franchisees in this important market for Papa John's. Additionally, our new international hub leaders are doing a fantastic job focusing on our most important markets, driving partnership with local franchisees on local marketing strategies, and building a foundation of a strong, locally relevant brand for profitable restaurants. For example, in the second quarter, we introduced our biggest international marketing campaign in Papa John's history with the launch of Cheddar Pizza.

Speaker Change: Based on these actions, and the continued operating success of our franchisees, we expect the UK market to be profit accretive in the second half of this year.

Speaker Change: Our attention is now turning towards growth. How we drive higher AUVs and partner with developing franchisees in this important market for Papa John's.

Speaker Change: Additionally, our new international hub leaders are doing a fantastic job focusing on our most important markets, driving partnership with local franchisees on local marketing strategies, and building a foundation of a strong locally relevant brand for profitable restaurants.

Speaker Change: For example, in the second quarter, we introduced our biggest international marketing campaign in Papa John's history with the launch of Cheddar Pizza.

Ravi Thanawala: This insight-led innovation integrated with our Better Get You Some campaign and local programming led to improving global results across each regional hub. The work these teams are doing provides valuable insights that will inform our approach to operations, product innovation, and market development across the globe. All of these initiatives I've discussed today are designed to ultimately drive unit-level productivity, which is the primary driver of unit development.

Speaker Change: This insight-led innovation integrated with our Better Get You Some campaign and local programming led to improving global results across each regional hub.

Speaker Change: The work these teams are doing provides valuable insights that will inform our approach to operations, product innovation, and market development across the globe.

Speaker Change: All of these initiatives I have discussed today are designed to ultimately drive unit-level productivity, which is the primary driver of unit development.

Ravi Thanawala: Over the past five months, I've had the opportunity to spend additional time with some of our larger developing franchisees. We also have multiple initiatives in place to deliver real-time cost savings throughout the development process, in addition to greater contractor, supplier, and equipment optionality based on market and anticipated restaurant volumes. Our teams have made substantial progress this past quarter, and I'm now hearing from some of our developing franchisees that their bill costs are much more in line with industry norms.

Ravi Thanawala: Over the past five months, I've had the opportunity to spend additional time with some of our larger developing franchisees. And while comp sales remain challenged, the profit-neutral shift in channel mix, combined with the loss of lower margin transactions, has had less of an impact on their overall profitability. We also have multiple initiatives in place that deliver real-time cost savings throughout the development process, in addition to greater contractor, supplier, and equipment optionality based on market and anticipated restaurant volumes.

Speaker Change: Over the past five months, I've had the opportunity to spend additional time with some of our larger developing franchisees.

Speaker Change: And while comp sales remain challenged, the profit-neutral shift in channel mix combined with the loss of lower-margin transactions has had less of an impact on their overall profitability.

Speaker Change: We also have multiple initiatives in place to deliver real-time cost savings throughout the development process, in addition to greater contractor, supplier, and equipment optionality based on market and anticipated restaurant volumes.

Ravi Thanawala: Our teams have made substantial progress this past quarter, and I'm now hearing from some of our developing franchisees that their bill costs are much more in line with industry norms. Solid unit economics, attractive development incentives, and lower build costs are resulting in continued growth in our gross North America openings, which are on track to be 15% to 20% higher than the prior year's gross openings. It is also important to point out that many of our new restaurants that have opened over the past two years are producing AUVs that are at or higher than the system average of $1.2 million. These AUBs, for our gross openings, are significantly higher than those of the closures.

Speaker Change: Our teams have made substantial progress this past quarter and I'm now hearing from some of our developing franchisees that their bill costs are much more in line with industry norms.

Speaker Change: Solid unit economics, attractive development incentives, and lower build costs are resulting in continued growth in our gross North America openings, which are on track to be 15% to 20% higher than the prior year gross openings.

Ravi Thanawala: It is also important to point out that many of our new restaurants that have opened over the past two years are producing AUVs that are at or higher than the system average of $1.2 million. These AUBs, for our gross openings, are significantly higher than those of the closures.

Speaker Change: It is also important to point out that many of our new restaurants that have opened over the past two years are producing AUVs that are at or higher than the system average of $1.2 million.

Speaker Change: These AUBs for our gross openings are significantly higher than those of the closures.

Speaker Change: Now, to dive a little deeper into our second quarter results and outlook.

Ravi Thanawala: For the second quarter of 2024, global system-wide restaurant sales were $1.2 billion, down 1% in constant current, and a $3 million decrease in domestic company-owned restaurant revenues, reflecting lower transaction volumes somewhat offset by a higher average ticket. Turning to profit. The higher year-over-year adjusted operating income was the result of higher North America restaurant margins as we continue to drive cost discipline across our operations, as well as domestic commissary margin improvement. In addition, the second quarter benefited by approximately $2 million from local advertising savings.

Speaker Change: For the second quarter of 2024, global system-wide restaurant sales were $1.2 billion, down 1% in constant currency.

Speaker Change: The lower sales were largely attributable to lower North America comp sales, partially upset by a 2% net unit growth on a trailing 12-month basis.

Ravi Thanawala: Total revenues for the second quarter were $508 million, down 1% from a year ago, primarily reflecting a $9 million decrease in North America commissary revenues due to lower commodity prices in the quarter and, to a lesser extent, lower transaction fees, and a $3 million decrease in domestic company-owned restaurant revenues, reflecting lower transaction volumes somewhat offset by a higher average ticket. Partially offsetting these revenue declines was higher international revenues, primarily driven by the net impact of UK company-owned restaurants versus the prior period.

Speaker Change: Total revenues for the second quarter were $508 million, down 1% from a year ago.

Speaker Change: primarily reflecting a nine million dollar decrease in North America commissary revenues due to lower commodities prices in the quarter and to a lesser extent lower transaction volumes.

Speaker Change: And a $3 million decrease in domestic company-owned restaurant revenues reflecting lower transaction volumes somewhat offset by a higher average ticket.

Speaker Change: Partially offsetting these revenue declines,

Speaker Change: was higher international revenues, primarily driven by the net impact of the UK company-owned restaurants versus the prior period.

Ravi Thanawala: Turning to profit, adjusted operating income for the second quarter of 2024 was $38 million, up 4% from a year ago. The higher year-over-year adjusted operating income was the result of higher North America restaurant margins as we continue to drive cost discipline across our operations, as well as domestic commissary margin improvement. In addition, the second quarter benefited by approximately $2 million from local advertising savings.

Speaker Change: Turning to prophets.

Speaker Change: Adjusted operating income for the second quarter of 2024 was $38 million, up 4% from a year ago.

Speaker Change: The higher year-over-year adjusted operating income was the result of higher North America restaurant margins as we continued to drive cost discipline across our operations as well as domestic commissary margin improvement.

Speaker Change: In addition, the second quarter benefited by approximately $2 million from local advertising savings.

Operator: Good day, and thank you for standing by. Welcome to the Papa John's 2nd quarter, 2024, Conference Call and Webcast. At the time, all participants are in a listening mode.

Ravi Thanawala: These positive impacts were partially offset by a roughly $3 million impact related to the operations of our UK franchisee acquisitions when taking into consideration a second quarter 2024 operating loss, an approximately $2 million increase in DNA expense as we continue to invest in our restaurants and technology platforms and the consolidation of the acquired UK restaurants, and Lower North America Comp Sales. Adjusted operating margin for the second quarter was 7.6%, up from 7.2% a year ago, primarily reflecting improved margins at our domestic company-owned restaurants and supply chains.

Speaker Change: these positive impacts were partially offset by a roughly three million dollar impact related to the operations of our uk franchisethe acquisitions when taking it the consideration a second quarter two thousand and twentyfour operating loss

Operator: After the speaker's presentation, there will be a question to answer session. To ask the question during the session, you will need to press Star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 1-1 again.

Ravi Thanawala: An approximately $2 million increase in DNA expense as we continue to invest in our restaurants and technology platforms and the consolidation of the acquired UK restaurants. Adjusted operating margin for the second quarter was 7.6%, up from 7.2% a year ago, primarily reflecting improved margins at our domestic company-owned restaurants and supply chains. Driving the improved margin was an approximate 140 basis point benefit from a higher ticket and an approximately 30 basis points benefit from lower food basket costs as we continued to see relief in cheese and dough prices.

Speaker Change: An approximately $2 million increase in DNA expense as we continue to invest in our restaurants and technology platforms and the consolidation of the acquired UK restaurants.

Operator: Please be advised that today's conference has been recorded.

Stacy Frole: I would now like to turn the conference over to your speaker today, Stacy Frole, Vice President of Investor Relations. Please go ahead.

Speaker Change: and Lower North America Cop Sales.

Speaker Change: Adjusted operating margin for the second quarter was 7.6%, up from 7.2% a year ago, primarily reflecting improved margins at our domestic company-owned restaurants and supply chain.

Stacy Frole: Good morning, and welcome to our 2nd quarter, 2024 Earnings Conference Call. This morning, we issued our 2nd quarter Earnings release. A copy of the release can be obtained on our Investor Relations website at ir.papajohns.com under the news releases tab or by contacting our Investor Relations Department at Investor underscore relations at PapaJohns.com.

Ravi Thanawala: Overall, our domestic company-owned margins improved approximately 130 basis points compared with the prior year's second quarter. Driving the improved margin was an approximately 140 basis point benefit from a higher ticket and an approximately 30 basis points benefit from lower food basket costs as we continued to see relief in cheese and dough prices. Partially offsetting these benefits was an increase in labor costs of approximately $30 billion.

Speaker Change: Overall, our domestic company-owned margins improved approximately 130 basis points compared with the prior year's second quarter.

Speaker Change: Driving the improved margin was an approximate 140 basis point benefit from a higher ticket and an approximately 30 basis points benefit from lower food basket costs as we continued to see relief in cheese and dough prices.

Stacy Frole: Joining me on the call this morning are Todd Penagore, our President and Chief Executive Officer, and Ravi Thanawala, our Chief Financial Officer.

Stacy Frole: Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the Federal Security's laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our Earnings release and the risk factors included in our SEC filing. In addition, please refer to our Earnings release for the required reconciliation of non-gap financial measures discussed on today's call.

Speaker Change: Partially offsetting these benefits was an increase in labor costs of approximately 30 basis points.

Ravi Thanawala: Our teams continue to do a great job optimizing the business model and delivering an excellent customer experience while also adjusting for shifts in channel mix and consumer demand. For the trailing four quarters, our company-owned restaurant profits have increased significantly as we place a stronger focus on unit economic improvement. Moving on to Castro and our balance, For the first six months of the year, net cash provided by operating activities was $42 million. Cash Flow was $13 million, reflecting unfavorable changes in working capital and timing of cash payments for income taxes, partially offset by a $6 million decrease in capital expenditure.

Speaker Change: Our teams continue to do a great job optimizing the business model and delivering an excellent customer experience while also adjusting for shifts in channel mix and consumer demand trends.

Speaker Change: Over the trailing four quarters, our company-owned restaurant profits have increased significantly as we place a stronger focus on unit economic improvement.

Ravi Thanawala: For the first six months of the year, net cash provided by operating activities was $42 million. The cash flow was $13 million, reflecting unfavorable changes in working capital and timing of cash payments for income taxes, partially offset by a $6 million decrease in capital expenditure. We continue to operate with ample liquidity, which totaled approximately $260 million in cash and borrowings available under our revolving credit facility and a gross leverage ratio of 3.1 times.

Speaker Change: Moving on to CASEL and our Balance Sheet.

Speaker Change: For the first six months of the year, net cash provided by operating activities was $42 million.

Stacy Frole: Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups.

Speaker Change: The cash flow was $13 million, reflecting unfavorable changes in working capital and timing of cash payments for income taxes, partially offset by a $6 million decrease in capital expenditures.

Todd Penagore: And now, let me turn the call over to Todd. Thank you, Stacey, and good morning, everyone. I am honored to be with you today as I begin this journey as the CEO of PapaJohns. This brand is synonymous with delivering the best pizza in the industry, and I am excited to learn from and work with our board, Ravi, team members, and our franchise community to build on this legacy. As we move forward together, our number one priority will be to create great experiences for our customers and employees in our restaurants, while also ensuring the restaurant economic model is very strong.

Ravi Thanawala: We continue to operate with ample liquidity, which totaled approximately $260 million in cash and borrowings available under our revolving credit facility and a gross leverage ratio of 3.1 times. Overall, our teams around the world continue to take a disciplined approach to running the business. We've improved restaurant-level margins and operating profits through commodities normalization, revenue management, and labor optimization in the quarter despite lower sales. While our efforts to date have had a positive impact on our bottom line, we recognize there is more work to do. Looking at our outlook for the balance of the year, for the first four weeks of the third quarter, North America comp sales were down approximately 6%.

Speaker Change: We continue to operate with ample liquidity, which totaled approximately $260 million in cash and borrowings available under our revolving credit facility and a gross leverage ratio of 3.1 times.

Todd Pentagore: Overall, our teams around the globe continue to take a disciplined approach to running the business. For the first four weeks of the third quarter, North America comp sales were down approximately 6%. We anticipate comp sales to remain under pressure and be down mid-single digits throughout our third quarter. For the full year 2024, we anticipate North America comps to be down 3-5% as we balance transaction trends and unit economics. However, these benefits will be somewhat offset by lower North American comparable sales and higher DNA expenses.

Todd Penagore: My immersion into the culture is well underway. We have a passionate team, a system committed to ensuring we become the best Papa Johns we can be. The team understands what we need to check and adjust to compete and win in the pizza business. You'll hear some of this from Ravi today. Because they have begun to share with our organization, I believe in winning as a team and will be collaborative, yet quick and decisive, as we focus on growing this premium QSR brand.

Speaker Change: Overall, our teams around the globe continue to take a disciplined approach to running the business.

Speaker Change: We've improved restaurant-level margins and operating profits through commodities normalization.

Speaker Change: Revenue Management, and Labor Optimization in the Quarter despite the lower sales.

Speaker Change: While our efforts to date have had a positive impact on our bottom line, we recognize there is more work to do.

Todd Penagore: Together, we need to move quickly to build on our strengths and execute today as we evolve to be even better tomorrow. I've enjoyed talking with our stakeholders this past week and look forward to meeting you all in the coming months and updating you on our progress.

Speaker Change: Looking at our outlook for the balance of the year.

Speaker Change: For the first four weeks of the third quarter, North America comp sales were down approximately 6 percent.

Ravi Thanawala: We anticipate comp sales to remain under pressure and be down mid-single digits throughout our third quarter. We then expect comp sales to begin sequentially improving into the fourth quarter as seasonal demand increases. Our value perception continues to improve from the initiatives I just discussed, and we execute on our strategy. For the full year 2024, we anticipate North America comps to be down 3-5% as we balance transaction trends and unit economics. Internationally, we anticipate full year 2024 international comps will be down slightly as we remain in a dynamic environment.

Todd Penagore: Ravi, I'm going to turn the call over to you to discuss the current state of the business and our second quarter results. But before I do, I want to give you my sincerest thanks for the work you have done over the past five months to lead this organization through this transition period. We are deeply grateful for your leadership and dedication to Papa Johns. Thank you.

Speaker Change: We anticipate comp sales to remain under pressure and be down mid-single digits throughout our third quarter.

Speaker Change: We then expect comp sales to begin sequentially improving into the fourth quarter as seasonal demand increases. Our value perception continues to improve from the initiatives I just discussed, and we execute on our strategy.

Ravi Thanawala: Ravi. Thank you, Todd and welcome to Papa John. It has been a pleasure getting to know you over the past few weeks. I look forward to partnering with you as we unlock the full potential of Papa John's and together continue to create value for our stakeholders. Turning to our results. As you read in our earnings releases morning, the challenging sales trends we experienced in the first quarter within our North America restaurants have persisted into the second quarter.

Speaker Change: So the full year 2024, we anticipate North America comps to be down 3-5% as we balance transaction trends and unit economics.

Speaker Change: Internationally, we anticipate full year 2024 international comps will be down slightly as we remain in a dynamic environment.

Ravi Thanawala: We are pleased with the progress of our transformational initiatives and expect this segment of our business to be a profit contributor going forward. We anticipate 2024 adjusted operating income to be between $135 to $155 million, a broader range than we have previously guided to, as our teams focus on executing against our strategy, maintaining flexibility on pricing, and increasing testing to improve North America transaction trends. While our first half operating profits suggest we could maintain our previously stated adjusted operating income guidance, we believe additional investment flexibility is warranted to accelerate actions to drive long-term growth.

Speaker Change: We are pleased with the progress of our transformational initiative and expect this segment of our business to be a profit contributor go forward.

Ravi Thanawala: While our core product, pizza and the quality of our brand, remained in demand, the macro environment continues to be challenging as consumers pull back on their spend and increasingly focus on value. Despite these challenges, I'm very proud of our team's discipline in managing the PNL, which helped to completely offset the software sales in the second quarter. On today's call, we'll provide context for our results and highlight the decisive actions we are taking to sharpen our focus and improve unit economics, drive unit development, and provide an excellent consumer experience.

Speaker Change: We anticipate 2024 adjusted operating income to be between $135 to $155 million.

Speaker Change: A broader range than we have previously guided to as our teams focus on executing against our strategy, maintaining flexibility on pricing, and increasing testing to improve North America transaction trends.

Speaker Change: While our first half operating profits suggest we could maintain our previously stated adjusted operating income guidance, we believe additional investment flexibility is warranted to accelerate actions to drive long-term growth.

Ravi Thanawala: We continue to expect benefits from three areas. The increase to our fixed commissary margin. Two, our international transformation initiatives, notably the closure and re-franchising of the UK restaurants we mentioned earlier. And three, continued growth in North America development. However, these benefits will be somewhat offset by lower North American comparable sales and higher DNA expense.

Ravi Thanawala: In the second quarter of 2024, North America comparable sales were down approximately 4% from a year ago. Similar to our first quarter, this was primarily driven by lower transactions as continued growth in our aggregator channel was more than offset by a decline in our organic delivery and to a lesser extent our carry out business. We estimate this year over year shift in channel mix created an approximate 100 basis points by wind to our comparable sales in the second quarter driven by the relatively profit neutral impact of reduced delivery fees.

Speaker Change: We continue to expect benefits from three areas.

Speaker Change: The increase to our fixed commissary margin

Speaker Change: Two, our international transformation initiatives, notably the closure and refranchising of the UK restaurants we mentioned earlier. And three, continued growth in North America development.

Speaker Change: however these benefits will be somewhat offset by lower north american comparable sales and higher dna expect

Ravi Thanawala: While higher company-owned restaurant margins have been a tailwind to adjusted operating income during the first half of the year, we are anticipating lower year-over-year margins in the second half as we reinvest some of our first-half earnings into improving transactions. We also expect higher prices within our company-owned restaurants, despite increasing commodity costs, relative to last year in the second half of 2024, particularly in cheese and poach. In terms of other non-operating expense items, we expect net interest expense to be between $40 and $45 million, our capital expenditures to be between $75 and $85 million, and our tax rate to be between 23 and 26 percent, all consistent with our prior guidance.

Speaker Change: while higher company-owned restaurant margins.

Speaker Change: have been a tailwind to adjusted operating income during the first half of the year, we are anticipating lower year-over-year margins in the second half as we reinvest some of our first half earnings into improving transactions.

Ravi Thanawala: And while sales were solid with customers buying two or more pizzas, we saw lower transactions in our lower ticket items. In this current economic cycle, consumers have become more deliberate in managing their overall ticket and are showing a preference for brands that are offering compelling value. While we know we offer an attractive value for our customers, our marketing and innovation efforts have primarily focused on premium product offerings at premium price points.

Speaker Change: We also expect to hold pricing within our company-owned restaurants despite increasing commodity costs relative to last year in the second half of 2024, particularly in cheese and proteins.

Todd Pentagore: In terms of other non-operating expense items, we expect net interest expense to be between $40 and $45 million, our capital expenditures to be between $75 and $85 million, and our tax rate to be between 23 and 26 percent, all consistent with our prior guidance. These new restaurant openings were all set by 116 closures, primarily in the UK, certain Middle East markets, and China. Finally, as we look to the longer term, we see significant opportunities to drive higher system-wide sales, global development, franchisee health, and overall profitability.

Speaker Change: in terms of other non-operating expense items.

Speaker Change: We expect net interest expense to be between $40 and $45 million, our capital expenditures to be between $75 and $85 million, and our tax rate to be between 23 and 26 percent, all consistent with our prior guidance.

Ravi Thanawala: As a result, our price value perception is not as strong as it should be in this unique environment. In the second quarter, we began shifting our efforts and investments to focus on initiatives that improve our value perception while still protecting a brand positioning. We are being thoughtful and intentional in our approach by focusing on opportunities for modest transaction lifts without placing unneeded pressure on store level profitability. We believe this is critical and are aligned with our franchisees on this core approach.

Speaker Change: From a development perspective, the North America market is our most accretive development for Papa John's, and we remain committed to accelerating the expansion of our domestic footprint moving forward.

Ravi Thanawala: From a development perspective, the North America market is our most accretive development for Papa John's, and we remain committed to accelerating the expansion of our domestic footprint moving forward. Through the first six months of the year, we opened 31 new restaurants and have closed 17, resulting in a total of 14 net new North American units. This brings our total North America restaurant count to 3,447. For fiscal year 2024, we expect to open more than 100 new restaurants, but the closures of underperforming units could be slightly higher than originally anticipated, although well within the historical norm.

Speaker Change: Through the first six months of the year, we've opened 31 new restaurants and have closed 17, resulting in a total of 14 net new North America units.

Ravi Thanawala: There are three opportunities we are focused on in the balance of the year that are geared towards driving sustainable profitable growth over the long term. First, improving our value perception. We believe showcasing our better pizza, better ingredients at appropriately valued price points will improve our overall value perception and improve transaction trends. For example, in June, we launched our cheesy burger pizza, a fan favorite limited time offer at an attractive $9.99 price.

Speaker Change: This brings our total North America restaurant count to 3,447.

Ravi Thanawala: Point. We also shifted more media towards our 699 Papa pairings, which is our Mix and Match Value Platform, and recently launched our extra large New York style pizza for 1099, a more competitive price point than last year. These products are priced attractively and at parity with competitors offers within the QSR pizza segment. And over the past eight weeks, we have seen our value perception improved. This gives us confidence that if we maintain an appropriate balance of value offerings and premium products, it will lead to improved sales trends over time.

Speaker Change: For fiscal year 2024, we expect to open more than a hundred new restaurants, but the closures of underperforming units could be slightly higher than originally anticipated, although well within historical norms.

Ravi Thanawala: As such, we anticipate net new openings in 2024 to be between 45 and 65 brushstrokes. As a reminder, the AUVs of new openings are significantly higher than our anticipated closures. From an international perspective, through the first six months of the year, we've opened 79 restaurants on our gross base. These new restaurant openings were all set by 116 closures, primarily in the UK, certain Middle East markets, and China. This brings our total number of international restaurants to 2,436.

Speaker Change: As such, we anticipate net new openings in 2024 to be between 45 and 65 restaurants.

Speaker Change: As a reminder, the AUVs of new openings are significantly higher than our anticipated closures.

Speaker Change: From an international perspective, through the first six months of the year, we've opened 79 restaurants on a gross basis.

Speaker Change: These new restaurant openings were all set by 116 closures, primarily in the UK, certain Middle East markets, and China. This brings our total international restaurant count to 2,436.

Speaker Change: Our regional teams are doing an excellent job engaging with franchisees in their local markets, and we now expect gross openings to be at the higher end, if not exceeding, our current guidance of 100 to 140 new.

Ravi Thanawala: Our regional teams are doing an excellent job engaging with franchisees in their local markets, and we now expect gross openings to be at the higher end, if not exceeding our current guidance of 100 to 140 new international restaurants for fiscal 2024. We continue to review the performance of our international franchisees, and while the vast majority of strategic closures within the UK market have been completed, we may initiate additional strategic closures in other regions to improve marketplace health.

Ravi Thanawala: We know that driving trial of our product is critical to winning consumers' wallets in the future. At our company on restaurants, we are also testing various value offers in certain markets to analyze repeat rates, identify potential basket starters, and larger basket motivators. These test and learned opportunities provide us with data points to help our entire system better understand initiatives that can increase conversion rates and enable transactions that drive growth in restaurant-level profit dollars.

Speaker Change: International Restaurants for Fiscal 2024.

Speaker Change: We continue to review the performance of international franchisees, and while the vast majority of strategic closures within the UK market have been completed, we may initiate additional strategic closures in other regions to improve marketplace health.

Ravi Thanawala: As such, our net openings could be impacted by the closure of underperforming locations to strengthen our franchisee base and enhance long-term profitability. Finally, as we look to the longer term, we see significant opportunities to drive higher system-wide sales, global development, franchisee health, and overall profitability. Thank you, Ravi.

Speaker Change: As such, our net openings could be impacted by the closure of underperforming locations to strengthen our franchisee base and enhance long-term profitability.

Ravi Thanawala: Second, re-anniting and expanding our innovation pipeline. We are expanding our pipeline with unique and differentiated offers focused on craves. Over the past 40 years, Papa John has built its brand of better ingredients, better pizza, and we have a strong pantry of consumer-tested innovations. Our teams are actively collaborating to identify new opportunities to improve overall customer satisfaction, enhance craves, and increase the visual appeal to further improve the strong value proposition Papa John's provides.

Speaker Change: finally as we look to the longer term we see significant opportunities to drive higher systemw sales global development franchisee health and overall profitabilityd

Todd Pentagore: Todd

Todd Pentagore: Thank you, Ravi. In summary, we are pleased with our improved restaurant-level margins and profitability in the second quarter, which completely offset the sales shortfall for the quarter. Our brand and core product remain in demand in the highly competitive pizza category. We are also evolving our marketing to ensure we meet the consumer's value expectations. I also look forward to building a strong and collaborative partnership with our franchisees and helping to attract new franchisees to Papa John's to build an even stronger brand.

Todd Penegor: Thank you, Ravi. In summary, we are pleased with our improved restaurant-level margins and profitability in the second quarter, which completely offset the sales shortfall for the quarter. Our brand and core product remain in demand in the highly competitive pizza category. But we know there's more work to be done to realize the full potential of the Papa John's brand. We are sharpening our focus, investing in digital, and accelerating development through improved economics.

Speaker Change: Thank you, Ravi. In summary, we are pleased with our improved restaurant-level margins and profitability in the second quarter, which completely offset the sales shortfall for the quarter. Our brand and core product remain in demand in the highly competitive pizza category.

Speaker Change: But we know there is more work to be done to realize the full potential of the Papa John's brand. We are sharpening our focus, investing in digital, and accelerating development through improved economics.

Ravi Thanawala: We intended a tasting this past week as our teams presented various products at different stages of ideation and validation. This is one of the best parts of the job, and I must say, we can't wait to share some of these innovations over the next year. They are nothing short of absolutely delicious and our must-try products.

Todd Penegor: We are also evolving our marketing to ensure we meet the consumer's value expectations. By prioritizing customer experience, franchisee success, and operational excellence, we're confident in Papa John's continued growth and value creation. I am excited to be part of a culture where people feel empowered, valued, and appreciated to be their very best.

Speaker Change: We are also evolving our marketing to ensure we meet the consumer's value expectations.

Speaker Change: By prioritizing customer experience, franchisee success, and operational excellence, we're confident in Papa John's continued growth and value creation.

Ravi Thanawala: Third, improving our digital and loyalty experience. We are focused on improving conversion and reducing friction within the customer experience. Most of our sales occur through digital channels with nearly one-third of our sales occurring through apps with customers who tend to purchase more frequently. We are actively identifying opportunities to more quickly assess information, streamline ordering journey, and improve the overall user experience. For example, in July, we rolled out an app update that improves call-to-actions and navigation, elevates imagery, and more commonly features loyalty rewards.

Speaker Change: I am excited to be part of a culture where people feel empowered, valued, and appreciated to be their very best. I also look forward to building a strong and collaborative partnership with our franchisees and help to attract new franchisees to Papa John's to build an even stronger brand.

Todd Penegor: I also look forward to building a strong and collaborative partnership with our franchisees and helping to attract new franchisees to Papa John's to build an even stronger brand. Our team here at Papa John's has set up an aggressive plan to immerse me in the business over the next several months. My plan is to come back to all of you when we are ready to discuss how we'll amplify our differentiated position and unlock future value for Papa John's and all of our stakeholders. At this point, we'd like to open up the call to any questions you may have.

Speaker Change: Our team here at Papa John's has set up an aggressive plan to immerse me in the business over the next several months.

Speaker Change: My plan is to come back to all of you when we are ready to discuss how we'll amplify our differentiated position and unlock future value for Papa John's and all of our stakeholders.

Speaker Change: At this point, we'd like to open up the call for any questions you may have.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit your question to one. You may requeue for any additional questions. Our first question comes from the line of Jim Salera with Stevens Inc. Your line is now open.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.

Ravi Thanawala: We are also actively evolving our holistic digital platform to improve conversion, drive repeat transactions, and streamline customer insights. In addition, we are maintaining a strong focus on the customer experience in our restaurants, which we know is another key pillar in customer retention. In the second quarter, our restaurant team continue to improve out-of-the-door times leading to higher overall customer satisfaction scores year-over-year.

Speaker Change: To withdraw your question, please press star 1 1 again. We ask that you please limit to one question. You may requeue for any additional questions.

Speaker Change: Our first question comes from the line of Jim Salera with Stevens Inc. Your line is now open.

Jim Salera: Thanks for watching, see you next time! I'm talking to Ravi, I wanted to dig into the trends in the 3Q, you know, Ravi, you'd mentioned that in the first four weeks, down 6%. It seems like they're kind of holding that trend, you know, through 3Q. Is there a reason that we shouldn't expect maybe a little incremental lift in 3Q, just given some of the innovation you have, more media behind the pop-up pairings, and what I would think would be more kind of favorable in market activation for some of your value offerings?

Ravi Thanawala: Todd or Ravi, I wanted to dig into the trends in the 3Q. You know, Ravi, you'd mentioned that

Speaker Change: morning guys thank

Speaker Change: Thank you. Thank you.

Jim Salera: Todd or Ravi, I wanted to dig into the trends in the 3Q. You know, Ravi, you had mentioned that...

Jim Salera: in the first four weeks down 6%. It seems like kind of holding that trend, you know, through 3Q. Is there a reason?

Ravi Thanawala: I'd also like to touch upon our recent initiatives to enhance our national marketing efforts and effectiveness. In the second quarter, we launched our all-new brand platform, Better Get Your Sound, which is a modern refresh of brand visuals, tone, and message. Since the launch, we have seen quarter of a quarter improvement in our aided brand awareness along with a higher intent to purchase. With value messaging, so that we are best positioned to convert intention to sales.

Speaker Change: that we shouldn't expect maybe a little incremental lift in 3Q, just given some of the innovation you have, more media behind the Papa pairings, and what I would think would be more favorable in market activation for some of your value offerings.

Ravi Thanawala: Morning, Jim, and thanks for the question. As I shared, we're really focused on three things to continue to drive the long-term run rate of the business. The first is, as you talked about, improving the value perception, and that is by bringing Papa Perrins and our New York style, which are both a great fantastic price Fund Center in the business, too. I hope you have the app downloaded and seen how we re-skinned the digital experience.

Speaker Change: Morning Jim and thanks for the question. As I shared, we're really focused on three things to continue to drive the long-term run rate of the business improving. The first is like as you talked about improving the value perception and that is by bringing Papa Perrins and our New York style which are both a great fantastic price points.

Ravi Thanawala: In the third quarter, we are making incremental investments to test the marketing messages and impact when combined with our new national brand platform to drive repeat purchase and stronger conversion. We anticipate these investments will place additional near-term pressure on company-owned restaurant-level margins, but the insights we gain will benefit our entire system over time.

Ravi Thanawala: front and center in the business, too. I hope you have the app downloaded and seen how we reskinned the digital experience. We're really excited about those two elements of the business. But what we'd say is that what we're seeing in the consumer data is that the consumer is more value-focused right now. So we're trying to take a really balanced perspective in terms of the second half of the year, making sure we're finding that artful balance of sales comps, transaction trends, as well as unit economics. And I think more broadly, we're excited to continue to test in the market a couple of new ideas which we think are going to help the business for the long term.

Speaker Change: Fund Center in the business.

Speaker Change: I hope you have the app downloaded and seeing how we re-skinned.

Speaker Change: the digital experience, and we're really excited about those two elements of the business.

Ravi Thanawala: And we're really excited about those two elements of the business. But what we'd say is that what we're seeing in the consumer data is that the consumer is more value-focused right now. So we're trying to take a really balanced perspective in terms of the second half of the year, making sure we're finding that artful balance of sales comps focus, transaction trends focus, as well as unit economics. And I think, more broadly, we're excited to continue to test in the market a couple of new ideas which we think are going to help the business for the long term.

Jim Salera: But what we'd say is that what we're seeing in the consumer data is that the consumer is more value-focused right now.

Ravi Thanawala: Now, moving to an international perspective, our cross-functional teams are executing at a high level. In the second quarter, we experienced an approving CompSales trend line, which was approximately flat when compared with last year, despite continued pressure from our Middle East region. Excluding this region, our international comparable sales were approximately 3% from a year ago. The number one focus of our international transformation initiative has been to set the right foundation to support and drive long-term success.

Speaker Change: We're trying to take a really balanced perspective in terms of the second half of the year, making sure we're finding that artful balance of sales comps focus, transaction trends focus, as well as unit economics. And I think more broadly, we're excited to continue to test in the market.

Jim Salera: a couple of new ideas which we think are going to help the business for the long term.

Todd Penegor: Okay, and then I can follow up on the digital piece. Some of your competitors have seen frequency growth after making tweaks to the loyalty structures of their digital offerings, particularly lowering the threshold to redeem for items. You know, rather than saving up for pizzas or something after multiple visits, you can get add-ons like drinks or dipping sauces. Is that maybe something that we could see, you know, in the near term in the back half of the year that could add some incremental value and maybe provide a lift alongside the other in-market activations you guys have going on?

Ravi Thanawala: Okay, and then I can follow up on the digital piece.

Speaker Change: Okay, and then if I can follow up on the digital piece.

Speaker Change: some of your competitors have seen frequency growth after making tweets to the royalty structures of their

Ravi Thanawala: In particular, our team has made significant progress in advancing our efforts to optimize the UK business model. In the second quarter, we closed 43 under-performing company restaurants in the UK, and today we have refranchised 60 restaurants. As a result, only 13 company-owned restaurants remain in the UK market. Based on these actions, and the continued operating success of our franchisees, we expect the UK market to be profit-acredive in the second half of this year.

Speaker Change: Digital Offerings, particularly lowering the threshold to redeem for items, you know, rather than saving up for pizzas or something after multiple visits you can get.

Speaker Change: economs like druringink through living sau is that may be something that we could see in the near term in the back half of the year that could add the mincremental value and maybe provide a lift alongside the other reallying market activations you guys have going on

Todd Penegor: Yeah, Jim, this is Todd. I think that's a big opportunity for us. If you look at what it takes to earn $10 off in Papadil and to get to that $75 threshold, you know, on average, that's three visits from our consumer base. And, you know, our average consumer only comes four times a year.

Ravi Thanawala: Our attention is now turning towards growth, how we drive higher AUDs and partner with developing franchisees in this important market for Papa Johns. Additionally, our new international hub leaders are doing a fantastic job focusing on our most important markets, striving partnership with local franchisees on local marketing strategies, and building a foundation of a strong, locally relevant brand for profitable restaurants. For example, in the second quarter, we introduced our biggest international marketing campaign in Papa Johns Fisheries with the launch of Cheddar Pizza.

Todd Penegor: So the ability to actually start to earn rewards quicker, to get folks more active in the app, to drive frequency, and get them to return more often is a big opportunity. We'll work through that in short order to make sure we can bring that to life. The great news is that it's been on the roadmap for the team, and we know it's a big opportunity for us.

Ravi Thanawala: Yeah, maybe Todd, the only other thing I would add to this conversation, Jim, is that, you know, Todd's been here for all of the week, and we've had a number of great sessions with them. A few that we came out the gate right away with were, you know, getting right into the test kitchen to talk about innovation. Second, making sure we were talking about our digital experience. And third, was making sure our loyalty strategy was front and center in front of Todd, because we are strong believers that getting consumers into our app drives higher frequency; we think it's stickier. And to Todd's point, like, we believe that in this value-conscious world that we're living in, driving stronger immediate gratification could bear some real fruit for the

Ravi Thanawala: Yeah, maybe the only other thing I would add to this conversation, Jim, is that Todd's been here for all of the week, and we've had a number of great sessions with them. A few that we came out the gate right away with were, you know, getting right into the test kitchen to talk about innovation. Second, making sure we were talking about our digital experience. And third, was making sure our loyalty strategy was front and center in front of Todd, because we are strong believers that getting consumers into our app drives higher frequency; we think it's stickier. And to Todd's point, like, we believe that in this value-conscious world that we're living in, driving stronger immediate gratification could bear some real fruit for the...

Ravi Thanawala: This insight led innovation integrated with our Better Get yourself campaign and local programming led to improving global results across each regional hub. The work these teams are doing provides valuable insights that will inform our approach to operations, product innovation, and market development across the globe.

Ravi Thanawala: All of these initiatives I have discussed today are designed to ultimately drive unit level productivity, which is the primary driver of unit development. Over the past five months, I have had the opportunity to spend additional time with some of our larger developing franchisees. Police. And while CompSales remain challenged, the profit neutral shift in channel mix, combined with the loss of lower margin transactions, has had less of an impact on their overall profitability.

Jim Salera: Todd's point like we believe that in this value conscious world that we're living in driving stronger immediate gratification.

Speaker Change: Bear some real fruit for the fall.

Ravi Thanawala: for our franchisees in the business and also continue to drive folks into 1P, which is very

Ravi Thanawala: business and also continue to drive folks into 1P, which is very important.

Speaker Change: Our franchisees in the business and also continue to drive folks into <unk>, which is very important.

Jim Salera: I appreciate the call, guys. I'll pass it along.

Speaker Change: Great I appreciate the color guys I'll pass along.

Operator: Thank you. Our next question comes from the line of Sarah Senatore with Bank of America. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Question comes from the line of Sara Senatore with Bank of America. Your line is now open.

Ravi Thanawala: We also have multiple initiatives in place to deliver real-time cost savings throughout the development process. In addition to greater contractor, supplier and equipment optionality, based on market and anticipated restaurant volumes. Our teams have made substantial progress this past quarter, and I'm now hearing from some of our developing franchisees that their build costs are much more in line with industry norms. Solid unit economics, attractive development incentives, and lower build costs are resulting in continued growth in our gross North America openings, which are on track to be 15% to 20% higher than the prior year gross openings.

Sarah Senatore: Great, thank you very much. A question, I guess, maybe a two-part question. The question, the first part is, you know, you're seeing a lot of improvement in the kind of underlying consumer metrics, value proposition, brand awareness, and service speed. But how long should it take for that to translate into transaction growth? I guess, you know, my thought was, I know that, you know, Taja said this is kind of three times a year, but typically speaking, I guess I would have expected to see some improvement in June versus what we saw in the beginning of the quarter and into July, and we're not really seeing that.

Sarah Senatore: Great, thank you very much. A question, I guess maybe a two-part question. The question, the first part is, you know, you're seeing a lot of improvement in the kind of underlying consumer metrics, value proposition, brand awareness, and service speed. But how long should it take for that to translate into transaction growth? I guess, you know, my thought was, I know that, you know, Taja said this is kind of three times a year, but typically speaking, I guess I would have expected to see some improvement in June versus what we saw in the beginning of the quarter and into July, and we're not really seeing that.

Sara Senatore: Great. Thank you very much.

Sara Senatore: My question I guess, maybe a two part question.

Sara Senatore: Question first party.

Sara Senatore: You've seen a lot of improvement in kind of underlying consumer metrics value proposition brand awareness and service speed and how long should it take for that to translate into.

Speaker Change: Transaction growth I guess my thought was I know that Todd just said this is a kind of a three times a year, but typically speaking I guess I would have expected to see some improvement in June versus what we saw in the end.

Sara Senatore: At the beginning of the quarter into July and we're not really seeing that so just trying to understand how long. It takes for these kinds of initiatives or improvements to translate and then related to that.

Sarah Senatore: So, just trying to understand how long it takes for these kinds of initiatives or improvements to translate. And then, related to that, you know, I know you've been testing some value options in your restaurants already. But again, you didn't really see any difference in the comp trajectory for company-operated versus the broader system. So, I'm wondering, you know, how do you get these initiatives to resonate? I guess that is fundamentally the question and how long it should take.

Ravi Thanawala: It is also important to point out that many of our new restaurants that have opened over the past two years are producing AUVs that are at or higher than the system average of $1.2 million. These AUVs for our gross openings are significantly higher than those of the closures.

Speaker Change: I know you've been testing some value options in your restaurants already.

Speaker Change: But again you didn't really see any difference in the comp trajectory for company operated versus the broader system. So I'm wondering.

Speaker Change: How do you get these initiatives to resonate I guess.

Ravi Thanawala: Now to dive a little deeper into our second quarter results and outlook. For the second quarter of 2024, global system-wide restaurant sales were $1.2 billion, down 1% in constant currency. The lower sales were largely attributable to lower North America come sales, partially offset by a 2% net unit growth on a 12-month basis. Total revenues for the second quarter were $508 million, down 1% from a year ago. Primarily reflecting a $9 million decrease in North America commissary revenues due to lower commodities prices in the quarter and to a lesser extent lower transaction volumes.

Speaker Change: A question and how long should it take.

Todd Penegor: Well, Sarah, I'll start. You know, it does take a little bit of time to be out there consistently with a strong value message, and the great news is the team's made those adjustments. You know, if you think about New York style extra large at $10.99, that's great value. You think about Papa Pairings at $6.99, that's great value.

Sarah: Well Sarah I'll start.

Speaker Change: It does take a little bit of time to be out there consistently with a strong value message and the great News is the team has made those adjustments you can think about New York style extra large at 10 99, that's great value you think about Papa pairings at $6 99, Thats great value.

Todd Penegor: We just need to continue to be out there with the appropriate pressure, both nationally and locally, to make sure that the consumer understands there is great value time and again from Papa John's. And that will build over time. So we've got to work towards that. I'll turn it over to Ravi to talk about the test. I'm excited. We've got some good tests underway in the company restaurants, but it's just a little too early to have all of the learnings. But Ravi, why don't you talk a little bit more about that?

Sarah: Just need to continue to be out there with the appropriate pressure, both nationally and locally to make sure that the consumer understands there is great value time and again from Papa John's.

Ravi Thanawala: And that will build over time, so we've got to work towards that I will turn it over to Ravi to talk about the test Im exciting we've got some good tests underway in the company restaurants, but just a little too early to have all of the learnings, but Ravi why don't you talk a little bit more about that yeah. So first sorry.

Ravi Thanawala: Yeah, so first, Sarah, just on your question around progression throughout the quarter, the only thing I want to remind you about is kind of the underlying or baseline comp trend from the prior year. We did see sequential improvement in terms of the comp run rate as we progressed through the quarter, and we see that fairly directly correlated with us improving the value perception. Again, we're comping in Q3, a plus 3 from the prior year, so you can see the progression on a two-year stack.

Ravi Thanawala: And a $3 million decrease in domestic company owned restaurant revenues were fighting lower transaction volumes somewhat offset by a higher average ticket. Partially offsetting these revenue declines was higher international revenues primarily driven by the net impact of the UK company owned restaurants versus the prior period.

Speaker Change: Just on your question around progression throughout the quarter. The only thing I would remind you on is kind of the underlying or the baseline comp trend from the prior year. We did see sequential improvement in terms of the comp run rate as we progressed through the quarter and we see that fairly directly correlated with us improving the value perception.

Ravi Thanawala: Again, we're comping in Q3, a plus three from the prior year. So you can see the progression on a two year stack.

Ravi Thanawala: Turning to profits. Adjusted operating income for the second quarter of 2024 was $38 million, up 4% from a year ago. The higher year-over-year adjusted operating income was the result of higher North America restaurant margins as we continue to drive cost discipline across our operations as well as domestic commissary margin improvement. In addition, the second quarter benefited by approximately $2 million from local advertising savings. These positive impacts were partially offset by a roughly $3 million impact related to the operations of our UK franchise, the acquisitions, when taking it to consideration a second quarter of 2024 operating law.

Ravi Thanawala: From a testing standpoint in the market, what we're really focused on is making sure we are taking actions that improve repeat rate, which is another code word for long-term gains in frequency, and making sure that we're finding a really healthy balance of getting consumers into our 1P channel, buying the products that differentiate us. And third, we're really focused on making sure we're finding that artful balance of our premium product proposition. How do we continue to be very successful in these more value-conscious moments in time?

Ravi Thanawala: From a testing standpoint in markets, what we're really focused in on is making sure. We are taking actions that improve repeat rate which is another.

Speaker Change: <unk> for long term gains in frequency to making sure that we're finding a really healthy balance of getting consumers into our one P channel buying the products that differentiate us and third well.

Speaker Change: Really focused in on making sure we're finding that artful balance about premium product proposition, but how do we continue to be very successful in these more value conscious moments in time. So we don't want to share too much details on the tests Jesse I'd, given where we are in the cycle, but we're taking a highly disciplined approach.

Ravi Thanawala: So, we don't want to share too many details on the test just yet, given where we are in the cycle, but we're taking a highly disciplined approach to running and operating the business and making sure we're making the right investments in the business to improve both our digital experience and our value proposition, which should help over time. Ben DeKerb on Sales Comp and do it in a way that is going to deliver strong unit economics for our franchisees.

Ravi Thanawala: In approximately $2 million increase in DNA expense as we continue to invest in our restaurants and technology platforms and the consolidation of the acquired UK restaurants and lower North America cop sales. Adjusted operating margins for the second quarter was 7.6% up from 7.2% a year ago, primarily reflecting improved margins at our domestic company-owned restaurants and supply chain. Overall, our domestic company-owned margins improved approximately 130 basis points compared with the prior year's second quarter.

Speaker Change: They were running at operating the business and making sure we're making the right investments in the business to improve our both our digital experience and a value proposition, which should help over time.

Ravi Thanawala: Ben McCurr on Sales Comp and do it in a way that is going to deliver strong-valued economics for our franchisees. Yeah, and the focus of our programs immediately, sir, is...

Speaker Change: Bend the curve on sales comp and do it in a way that is they're going to deliver strong you did economics for our franchisees and the focus of our programs immediately says we have to get folks to show up more often at Papa John's and we're really trying to make sure that we drive transactions and get folks into the restaurant. We know if we have them show up over time, we can.

Ravi Thanawala: Yeah, and the focus of our program is immediate, Sarah. We have to get folks to show up more often at Papa John's, and we're really trying to make sure that we drive transactions and get folks into the restaurant. We know if we have them show up over time, we can trade them up across the menu. We're trying to make sure we do that in partnership with the franchise community and in concert with the restaurant economic model.

Ravi Thanawala: Yeah, and the focus of our programs immediately, Sarah, is we have to get folks to show up more often at Papa John's. We're really trying to make sure that we drive transactions and get folks into the restaurant. We know if we have them show up over time, we can trade them up across the menu. You know, we're trying to make sure we do that in partnership with the franchise community and in concert with the restaurant economic model.

Speaker Change: Trade them up across the menu.

Ravi Thanawala: Driving the improved margin was an approximate 140 basis point benefit from a higher ticket and an approximately 30 basis points benefit from lower food basket costs as we continued to see relief in cheese and dough prices. Partially offsetting these benefits was an increase in labor costs of approximately 30 basis points. Our teams continued to do a great job optimizing the business model and delivering an excellent customer experience while also adjusting for shifts in channel mix and consumer demand trends. Over the trailer four quarters, our company-owned restaurant profits have increased significantly as we place a stronger focus on unit economic improvement.

Speaker Change: We're trying to make sure we do that in partnership with the franchise community and in concert with the restaurant economic model teams working that plan really hard.

Ravi Thanawala: Teams work on that plan really hard, and I do feel like we've got some solid plans in place to start to build some momentum over the course of last year, notwithstanding the comps from a year ago that Ravi just talked about, but really starting to set up a really strong plan as we go into next year.

Speaker Change: And I do feel like we've got some solid plans in place to start to build some momentum over the course of last year, notwithstanding the comps from a year ago that Ravi just talked about but really starting to set up a really strong plan as we go into next year.

Speaker Change: Thank you.

Operator: Thank you. Our next question comes from the line of Peter Saleh with BTIG. Your line is now open. Hmm.

Operator: Thank you. Our next question comes from the line of Peter Saleh with BTIG. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Peter Saleh with <unk>. Your line is now open.

Peter Saleh: Great. Thanks for taking the time to answer the question. I did want to ask about the development costs. It sounds like you guys made some progress on reducing some of the costs, which were, I think, well above where you wanted them to be and where the franchisees wanted them to be. So can you maybe elaborate a little bit on what you're seeing in development costs, maybe in the most recent bills? And if you did see some reduction in those costs, where exactly are you seeing the savings?

Peter Saleh: Great. Thanks for taking the time to answer the question. I did want to ask about the development costs. It sounds like you guys made some progress on reducing some of the costs, which were, I think, well above where you wanted them to be and where the franchisees wanted them to be. So can you maybe elaborate a little bit on what you're seeing in development costs, maybe in the most recent build? And if you did see some reduction in those costs, where exactly are you seeing the savings?

Peter Saleh: Great. Thanks for taking the question.

Peter Saleh: I did want to ask about the development costs. It sounds like you guys made some progress on reducing.

Peter Saleh: Some of the costs, which were well above where you wanted them to be and where the franchisees wanting them to be so can you maybe elaborate a little bit on what youre seeing on development costs, maybe in the most recent bill.

Ravi Thanawala: Moving on to cash flow and our balance sheet. For the first six months of the year, net cash provided by operating activities was $42 million. The cash flow was $13 million, reflecting unfavorable changes in working capital and timing of cash payments for income taxes, partially offset by a $6 million decrease in capital expenditures. We continue to operate with ample liquidity which totaled approximately $260 million in cash and borrowings available under our revolving credit facility and a gross leverage ratio of 3.1 times.

Speaker Change: If you did see some reduction in those costs, where exactly are you seeing the savings.

Speaker Change: Okay.

Ravi Thanawala: Thanks, Peter, for the question. And I think what you're hitting on is exactly the right topics for us to kind of unpack. First, we're taking a highly disciplined approach to how we are engineering our development costs. And what I shared at the Q1 call is that we have three vectors we're focusing on. First, improving our architectural designs to ensure that we're building a box that is highly effective. We've been out there procuring new deals with our general contractors, which is absolutely delivering some benefits. And third, there is really a focus on making sure we have the right optionality in terms of furniture fixtures.

Speaker Change: Thanks, Peter for the question and I.

Speaker Change: I think what you're hitting on is exactly the right topics for us.

Speaker Change: <unk> Pak is like first we are taking a highly disciplined approach.

Speaker Change: Where we are.

Speaker Change: Engineering development costs, and what I shared at the Q1 call as like we had three vectors, we're focusing on first improving our architectural designs to ensure that we are building a box that is highly effective supports service, but it is cost effective to we've been out there.

Ravi Thanawala: Overall, our teams around the globe continue to take a disciplined approach to running the business. We've improved restaurant level margins and operating profits through mod disease normalization, revenue management and labor optimization in the quarter despite the lower sales. While our efforts to date have had a positive impact on our bottom line, we recognize there is more work to do.

Speaker Change: Caring new deals with our general contractors, which is absolutely delivering some benefits and third is really a focus on making sure. We have the right optionality in terms of furniture fixtures and across all three of these elements.

Ravi Thanawala: And across all three of these elements, which are the three critical elements of the bill, we're seeing progress. And we shared with our franchisees just in the last month or so another wave of cost savings that we'll be able to deliver. So I think it's a little bit too early for me to share a specific number. But what I can definitely tell you is that our costs are coming down year over year on our bills. I don't want to get too specific on that just yet.

Ravi Thanawala: Looking at our outlook for the balance of the year. For the first four weeks of the third quarter, North America comp sales were down approximately 6%. We anticipate comp sales to remain under pressure and be down mid-single digits throughout our third quarter. We then expect comp sales to begin sequentially improving into the fourth quarter as seasonal demand increases. Our value perception continues to improve from the initiatives I just discussed and we execute on our strategy.

Speaker Change: Are the three critical elements of the belt, we're seeing progress and we shared with our franchisees just in the last month or so another wave of cost savings that we will be able to deliver so I think it's a little bit too early for me to share a specific numbers what I can definitely tell you is that our costs are.

Speaker Change: Coming down year over year, and our builds I don't want to get too specific on that just yet, but I wanted to kind of reaffirm to you all as I said in the prepared remarks that what I'm hearing from our larger developing franchisees is that their build costs are coming in much more in line with industry norms.

Ravi Thanawala: But I want to kind of reaffirm to you, as I said in my prepared remarks, that what I'm hearing from our larger developing franchisees is that their build costs are coming in much more in line with industry norms. And we think that this is another example of how we're improving the unit economic model. As we're delivering better restaurant margins and bringing down build-out costs, we believe that both of these are critical elements to drive and gain from. I look forward to updating you on future calls on just the progress we're making on North America development. And I've been pleased to see...

Ravi Thanawala: For the full year 2024, we anticipate North America comps to be down 3 to 5% as we balance transaction trends and unit economics. Internationally, we anticipate full year 2024 international comps will be down slightly as we remain in a dynamic environment. We are pleased with the progress of our transformational initiatives and expect the segment of our business to be a profit contributor go forward.

Speaker Change: And we think that this is another example of how we're improving the unit economic model.

Speaker Change: We are delivering better restaurant margins, bringing down buildout costs. We believe that both of these are critical elements to driving gains and I look forward to updating you in future calls on all the progress we're making on North America development and I've been pleased to see the work underway on a lot of the value engineering and I know, we're making a lot of progress.

Ravi Thanawala: We anticipate 2024 adjusted operating income to be between $135 to $155 million. A broader range than we have previously guided to, as our teams focus on executing against our strategy, maintaining flexibility on pricing and increasing testing to improve North America transaction trends. While our first half operating profits suggest we can maintain our previously stated adjusted operating income guidance, we believe additional investment flexibility is warranted to accelerate actions to drive long-term growth.

Todd Penegor: And now I've been pleased to see the work underway on a lot of the value engineering, and I know we're making a lot of progress and are committed to making that progress very quickly. And in the interim, we'll look to make sure we've got the right incentive plans in place to bridge the gap until we get those costs in line to make sure we continue to put shovels in the ground to get new restaurants open and build a really strong pipeline into the future.

Todd Pentagore: And now I've been pleased to see the work underway on a lot of the value engineering, and I know we're making a lot of progress and are committed to making that progress very quickly. And in the interim, we'll look to make sure we've got the right incentive plans in place to bridge the gap until we get those costs in line to make sure we continue to put shovels in the ground to get new restaurants open and build a really strong pipeline into the future.

Speaker Change: <unk> committed to making that progress very quick and in the interim we will look to make sure. We've got the right incentive plans in place to bridge the gap until we get those costs in line to make sure. We're continuing to put shovels in the ground to get new restaurants open and and build a really.

Speaker Change: Strong pipeline into the future.

Peter Saleh: And then just, Todd, you know, I think you guys mentioned potentially making changes to the rewards program to allow customers to earn rewards faster.

Speaker Change: Understood and then just Tom.

Speaker Change: Todd.

Tom: I think you guys mentioned potentially you know made.

Speaker Change: You made changes to the rewards program to allow customers to earn rewards faster.

Todd Penegor: Just trying to understand how heavy a lift this is. Is this something that could happen in the second half of 24, or is this more of a 2025 type of event?

Speaker Change: Just trying to understand how heavy lift. This is this something that could happen in the second half of 'twenty four or is this more of a 2025 type of events.

Ravi Thanawala: We continue to expect benefits from three areas. The increase to our fixed commissary margin, two, our international transformation initiatives, notably the closure and refranchising of the UK restaurants we mentioned earlier, and three continued growth in North America development. However, these benefits will be somewhat offset by lower North American comparable sales and higher DNA expects. While higher company-owned restaurant margins have been a tailwind to adjusted operating income during the first half of the year, we are anticipating lower year-to-year margins in the second half as we re-invest some of our first half earnings into improving transactions.

Todd Penegor: Yeah, so, new to the role, Peter, to see, and to be fair to my technology team, I think it'd take a little bit of time. We've got a little bit of work to do to, one, optimize what that program truly looks like, and then to work through the internal technology work to make sure the platform sets itself up to deliver on that promise seamlessly and very easily for the consumer. I know some of the work has already started, so I'll have Ravi comment if he has anything more to add. Yeah, Great

Todd Pentagore: So new to the role, Peter, and to be fair to my technology team, I think it'd take a little bit of time. We've got a little bit of work to do to, one, optimize what that program truly looks like, and then to work through the internal technology work to make sure the platform sets itself up to deliver on that promise seamlessly and very easily for the consumer. I know some of the work has already started, so I'll have Ravi comment if he has anything more to add. Yeah. Thank you.

Speaker Change: Yeah. So.

Speaker Change: So new into the role Peter to see.

Peter Saleh: To be fair to my technology team.

Speaker Change: You can take a little bit of time, we've got a little bit of work to do to one optimize what that program truly looks like and then to work through the internal.

Ravi Thanawala: Technology work to make sure the platform sets itself up to deliver on that promise seamless and very easily for the consumer I know some of the work has already started so you'll have Ravi comment if he has anything more to add yeah first we're not taking a waterfall approach to how we how we evolve our digital platforms.

Ravi Thanawala: Yeah, first, we're not taking a waterfall approach to how we evolve our digital platforms; we're acting in a really agile way. So if you'll actually look at our recent app update, one of the simple but important changes that we made is that we put loyalty rewards front and center for the consumer. As soon as you get to the homepage, it immediately tells you if you have any value and can redeem some Papa dough. So I think that's one example.

Ravi Thanawala: Acting in a really agile way so if you'll actually look at our recent app update at one of the simple but important changes that we made is that we put loyalty rewards front and center for the consumer as soon as you get to the homepage. It immediately tells you if you have a value add.

Ravi Thanawala: We also expect to hold pricing within our company-owned restaurants despite increasing commodity costs relative to last year in the second half of 2024, particularly in cheese and proteins. In terms of other non-operating expense items, we expect net interest expense to be between $40 and $45 million, our capital expenditures to be between $75 and $85 million, and our tax rate to be between 23 and 26% all consistent with our prior guidance.

Speaker Change: Can redeem so papa dose so I think Thats. One example, and second is we're constantly working the digital road map in terms of feature updates that we're going to make so as I think about how we create more value for the consumer from our loyalty program. One is the mechanics of the actual program.

Ravi Thanawala: And second, we're constantly working on the digital roadmap in terms of future updates that we're going to make. So as I think about how we create more value for the consumer from a loyalty program, one is the mechanics of the actual program; it's the natural things that great digital companies do to elevate for the consumer how they can earn and redeem rewards. And one of the last things I just wanted to share about that is in this recent app update, we made deals much more front and center for our actually no change from like a pure promotion standpoint, but just how we were showcasing our deals and simplifying navigation has increased the penetration of the number of consumers who are opting in.

Ravi Thanawala: From a development perspective, the North America market is our most accretive development for Papa Johns, and we remain committed to accelerating the expansion of our domestic footprint moving forward. Through the first six months of the year, we've opened 31 new restaurants and have closed 17, resulting in a total of 14 net new North America units. This brings our total North America restaurant count to 3,447. For fiscal year 2024, we expect to open more than 100 new restaurants, but the closures of underperforming units could be slightly higher than originally anticipated, although well within historical norms. As such, we anticipate net new openings in 2024 to be between 45 and 65 restaurants, as a reminder, the AUVs of new openings are significantly higher than our anticipated closures.

Peter Saleh: Two it's the natural things that great digital companies do to elevate for the consumer how they can earn and redeem rewards in one of the last things I just wanted to share on that is in this recent app update we made deals much more front and center for Arkansas.

Peter Saleh: There's actually no change from like a pure promotion standpoint, but just how we were showcasing our deals simplifying navigation has increased the penetration of the number of consumers who are opting in and I think this is an example of how we're working really cross functionally to make sure that we're fine the opportune.

Ravi Thanawala: And I think this is an example of how we're working really cross-functionally to make sure that we're finding opportunities to bring value to our consumer. And I'm excited to partner with Todd on the future of our loyalty program because driving the loyalty program is going to drive 1P, it's going to drive frequency, and will support our strategy around continuing to gain share through our better ingredients and better pizza mindset. Thank you. Our next question comes from the line of Eric Gonzalez with KeyBank. Your line is now open. Good morning, and thanks for the question. It seems like international business is becoming more and more like that.

Peter Saleh: <unk> to bring value to a consumer and I'm excited to partner with Todd on the future of our loyalty program because driving the loyalty program is going to drive one P. It's going to drive frequency and.

Speaker Change: We will support our strategy around continuing to gain share there our better ingredients better pizza mindset.

Ravi Thanawala: From an international perspective, through the first six months of the year, we've opened 79 restaurants on our gross basis. These new restaurants openings were all set by 116 closures, primarily in the UK, certain Middle East markets, and China. This brings our total international restaurant count to 2,436.

Operator: Thank you. Our next question comes from the line of Eric Gonzalez with KeyBank. Your line is now open.

Eric Gonzalez: Yeah, thanks for the question, Eric. And I think this quarter in international is a little bit of an example of how we're taking a thoughtful and structured approach to our international transformation. We have GMs now based across the globe in key markets or in key hubs such as Singapore, clearly the U.K., as well as in Dubai. And what that's really done is pushed the Papa John's management team much closer to consumer centricity and deeper understanding and partnership with the franchisees.

Speaker Change: Thank you. Our next question comes from the line of Eric Gonzalez with Keybanc. Your line is now open.

Speaker Change: Good morning, and thanks for the question it seems like the international business is really turning the corner, particularly outside the middle East and China. So perhaps you could discuss where some of the upside is coming from and maybe also address those problem areas such as the middle East and China, and how you see those markets evolving over the next few quarters, although it might be helpful. If you could talk about the content.

Ravi Thanawala: Awards. Our regional teams are doing an excellent job engaging with franchisees in their local markets and we now expect gross openings to be at the higher end if not exceeding our current and guidance of 100 to 140 new international restaurants for fiscal 2024. We continue to review the performance of an international franchisees and while the vast majority of strategic closures within the UK market have been completed, we may initiate additional strategic closures in other regions to improve market place health. As such, our net openings could be impacted by the closure of underperforming locations to strengthen our franchisee base and enhance long-term profitability.

Speaker Change: U K, specifically, just given the size of that market and its contribution to profitability. Thanks.

Ravi Thanawala: Yeah, thanks for the question, Eric. And I think this quarter in international is a little bit of an example of how we're taking a thoughtful and structured approach to our international transformation. We have GMs now based across the globe in key markets or in key hubs such as Singapore, clearly the U.K., as well as in Dubai. And what that's really done is pushed the Papa John's management team much closer to consumer centricity and deeper understanding and partnership with the franchisees.

Peter Saleh: Yeah.

Peter Saleh: Thanks for the question Eric.

Speaker Change: I think this quarter in international is a little bit of an example of how we're taking a thoughtful and structured approach to our international transformation.

Speaker Change: We have gms now based across.

Peter Saleh: The globe in key markets or in key hubs, such as Singapore, clearly the U K as well as in Dubai, and what that's really Dod is broaden the Papa John's management team much closer to consumer Centricity and deeper understanding and partnership.

Ravi Thanawala: Finally, as we look to the longer term, we see significant opportunities to drive higher system like sales, global development, franchisee health and overall profitability.

Peter Saleh: With the franchisees. So we are just getting better at being highly consumer centric to partnering with our franchisees to identify opportunities around menu innovation to making sure we're partnering to understand which store formats restaurant formats are working well when I think about like more broadly what we're seeing in <unk>.

Eric Gonzalez: So we are just getting better at being highly consumer-centric and partnering with the franchisees to identify opportunities around menu innovation and making sure we're partnering to understand which store formats and restaurant formats are working well. When I think about more broadly what we're seeing in terms of success, like we're seeing strong gains in some of our really strong hold markets that we have in Latin America, which is fantastic to see, but we're also seeing pockets of strength all across the globe.

Ravi Thanawala: So we're just getting better at being highly consumer-centric and partnering with the franchisees to identify opportunities around menu innovation and making sure we're partnering to understand which store formats and restaurant formats are working well. When I think about more broadly what we're seeing in terms of success, like we're seeing strong gains in some of our really strong hold markets that we have in Latin America, which is fantastic to see, but we're also seeing pockets of strength all across the globe.

Todd Penagore: Todd? Thank you, Ravi. In summary, we are pleased with our improved restaurant level margins and profitability in the second quarter, which completely offset the sales shortfall for the quarter. Our brand and core product remain in demand in the highly competitive pizza category but we know there's more work to be done to realize the full potential of the Papa John's brand. We are sharpening our focus, investing in digital, and accelerating development through improved economics. We are also evolving our marketing to ensure we meet the consumer's value expectations. By prioritizing customer experience, franchisee success, and operational excellence were confident in Papa John's continued growth and value creation.

Peter Saleh: A success like we are seeing strong gains in some of our really strong whole markets that we have in Latin America, which is fantastic to see but we're also seeing pockets of strength all across the globe and we're spending time.

Ravi Thanawala: And we're spending time consistently talking about those shared best practices and thinking a little bit further out on how we're going to gain additional momentum. Within the corridor, we also used the power of our marketing offense and our consumer centricity to launch Cheddar Pizza. It was launched across 23 countries.

Eric Gonzalez: And we're spending time consistently talking about those shared best practices and thinking a little bit further out on how we're going to gain additional momentum. Within the corridor, we also used the power of our marketing offense and our consumer centricity to launch Cheddar Pizza. It was launched across 23 countries.

Peter Saleh: Like consistently talking about those share best practices and thinking a little bit further out on how we're going to gain.

Speaker Change: Additional momentum within the quarter. We also use the power of our marketing all fans and our consumer Centricity the launched Cheddar pizza launched across 23 countries. It.

Todd Penagore: I am excited to be part of a culture where people feel empowered, valued and appreciated, to be their very best. I also look forward to building a strong and collaborative partnership with our franchisee's and help to attract new franchisee's to Papa John's to build an even stronger brand. Our team here at Papa John's has set up an aggressive plan to immerse me in the business over the next several months.

Ravi Thanawala: It was one of those LTOs where we had great consumer research, and that LTO, in terms of penetration, grew and improved the run rate across the globe. We think we're identifying a recipe of success there. Specific to the UK, we're really four quarters into the real work here.

Speaker Change: It was one of the those <unk>, where we had great consumer research and L. T O in terms of penetration grew and improve the run rate across the globe. So we think we're identifying a recipe of success.

Todd Penagore: My plan is to come back to all of you when we are ready to discuss how we'll amplify our differentiated position and unlock future value for Papa John's and all of our stakeholders.

Speaker Change: Specific to the UK, where were really four quarters into the real work here. This quarter really represented the culmination of Refranchising 60 locations and closing 43 stores. So the market did shrink a little bit in size, but we did in a highly strategic.

Operator: At this point, we'd like to open up the call for any questions you may have. Thank you. As a reminder to ask a question, please prestar one one of your telephone away for your name to be announced. To withdraw your question, please prestar one one again. We ask that you please limit to one question. You may re-cue for any additional questions.

Ravi Thanawala: This quarter really represented the culmination of re-franchising 60 locations and closing 43 stores, so the market did shrink a little bit in size, but we did it in a highly strategic way to make sure we were setting up franchisees to have better unit economics, and second, being really thoughtful in partnering with the franchisees to improve the sales trend. What I'll say is, as we look at the results, the stores that are changing hands between our franchisees, we're seeing either high single-digit or low double-digit increases in terms of comp sales performance in those stores that are changing hands.

Ravi Thanawala: So the market did shrink a little bit in size, but we did it in a highly strategic way to make sure we were setting up franchisees to have better unit economics and, second, being really thoughtful in partnering with the franchisees to improve the sales trend. And what I'll say is that as we look at the results, the stores that are changing hands between our franchisees, we're seeing either high single-digit or low double-digit increases in terms of comp sales performance in those stores that are changing hands. So competitions are improving in the UK.

Ravi Thanawala: Way to make sure we were setting up franchisees better unit economics.

Peter Saleh: And being really thoughtful and partnering with our franchisees to.

Jim Salera: Our first question comes from the line of Jim Solera with Steven's ink. You're on itself and. I want to ask the next question.

Ravi Thanawala: Improved sales trends I'll say is like as we look at the results that the stores that are changing hands between our franchisees.

Todd Penagore: Todd, I want you to dig into the trends into 3Q. You know, Rob, you had mentioned that in the first four weeks down 6%, it seems like kind of holding that trend through 3Q. Is there a reason that we shouldn't expect maybe a little incremental lift in 3Q just given some of the innovation you have more media behind the Papa pairings and what I would think would be a more favorable and market activation for some of your value offerings?

Peter Saleh: We're seeing either high single digit or low double digit increases in terms of comp sales performance in those stores that are changing and so comps are improving in the UK my attention right now in the U K has really turned to like setting that innovation engine up in a way that is going to drive great value perception as.

Ravi Thanawala: Comps are improving in the UK. My attention right now in the UK has really turned to setting that innovation engine up, in a way that is going to drive great value perception, as well as have a premium positioning, and second, continuing to evolve our marketing model. From my standpoint, I'm not done focusing on the UK, but I am increasing my attention to some other markets, such as China, because I believe that there's a lot of opportunity for us to unlock there.

Ravi Thanawala: My attention right now in the UK is really turned to setting that innovation engine up in a way that is going to drive great value perception, as well as have a premium positioning. And second, continuing to evolve our marketing model. So from my standpoint, I'm not done focusing on the UK, but I am increasing my attention to some other markets, such as China, because I believe that there's a lot of opportunity for us to unlock there.

Ravi Thanawala: Well as had a premium positioning and secondly, continuing to evolve our marketing model. So in my from my standpoint, I'm not done focusing on the U K, but I am increasing my attention to some other markets such as China, because I believe that theres a lot of opportunity for us to unlock there and I.

Todd Penagore: Morning, Jim. And thanks for the question. As I showed, we're really focused on three things to continue to drive the long-term run rate of the business improving the versus, like as you talked about, improving the value perception and that is by bringing Papa pairings and our New York style, which are both a great, fantastic price points fund center in the business. I hope you have the app downloaded and I've seen how we re-skinned the digital experience and we're really excited about those two elements of the business.

Ravi Thanawala: And I was just talking to our international team about how they're planning on getting out on the road, and in just a few weeks, they'll really attack our 2025 planning from both a menu standpoint, as well as from a restaurant format standpoint. And I'm excited about what that market can deliver for us for the long term. But we also recognize that the world is dynamic. Yeah What I'm pleased to see is the team.

Ravi Thanawala: I was just talking to our international team about them planning on getting out on the road in just a few weeks to really attack our 2025 planning, from both a menu standpoint and from a restaurant format standpoint. I'm excited about what that market can deliver for us for the long term, but we also recognize that the world is dynamic. Yeah, what I'm pleased to see is the team...

Speaker Change: Was just talking to our international team that they're planning on getting out on the road and in just a few weeks they'll really attack 2025 planning from both the menu standpoint, as well as a from a restaurant format standpoint.

Ravi Thanawala: I am excited for what that market can deliver for us for the long term, but we also recognize that the world is dynamic.

Ravi Thanawala: Yeah, what I'm pleased to see is the team has really built a really strong playbook, the team that can partner, the team that can execute to really enhance and turn around these markets in concert with the franchise community there. So credit to the work that's been done in the UK. I think that sets us up to continue to strengthen the brand across the globe.

Ravi Thanawala: Pleased to see is the <unk>.

Ravi Thanawala: Team has really built a really strong playbook.

Todd Penagore: But what we'd say is that what we're seeing in the consumer data is that the consumer is more value focused right now. So we're trying to take a really balanced perspective in terms of the second half of the year, making sure we're finding that our full balance of sales, comps, focus, transaction, trends, focus as well as unit economics. And I think more broadly, we're excited to continue to test in the market a couple of new ideas, which we think are going to help the business for the long term.

Ravi Thanawala: That can go partner the team that can go execute two are really enhancing turnaround. These markets in concert with franchise community. There so credit to the work that's been done in the U K I think that sets us up to continue to strengthen the brand across the globe.

Operator: Thank you. Our next question comes from the line of Alexander Slagle with Jefferies. Your line is now open.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Alexander Slagle with Jefferies. Your line is now open.

Alexander Slagle: Thanks. Good morning.

Alexander Slagle: Thanks, Good morning.

Alexander Slagle: Really good job on the restaurant level profit line, despite the softer traffic and you provided some good deeds.

Todd Penagore: And then if I can follow up on the digital piece, some of your competitors have seen frequency growth after making tweets to the loyalty structures of their digital offerings, particularly lowering the threshold to redeem for items, you know, rather than saving up for pizzas or something after multiple visits you can get icons like drinks or dipping sauces, is that maybe something that we could see, you know, in the near term in the back after the year, they could add some incremental value and maybe provide a lift alongside the other viewing market activation you guys have going on. Yeah, Jim, this is Todd.

Alexander Slagle: Details on the moving pieces, but just wanted to clarify.

Ravi Thanawala: Really good job on the restaurant level profit line, despite the softer traffic, and you provided some good details on the moving pieces, but just wanted to clarify some things. I guess the local marketing spend reduction, I think that falls in the restaurant level line. And then I guess how that shift in spend might impact the restaurant level line, if you have a dollar impact to talk about, and also if that local spend had any impact on the software company-owned North America same store sales or if that was pretty immaterial.

Alexander Slagle: Some things that I guess, the local marketing spend reduction I think that falls in the restaurant level line just wanted to clarify that and then I guess how that.

Ravi Thanawala: In spend might impact the restaurant level line.

Ravi Thanawala: Have any dollar impact to talk about.

Ravi Thanawala: And also of that local spend had any impact on the software company in North America same store sales or if that was pretty immaterial.

Todd Penagore: I think that's a big opportunity for us. If you look at what it takes to earn $10 off in Papadil and to get to that $75 threshold, you know, on average, that's three visits from our consumer base and, you know, our average consumer only comes four times a year. So the ability to actually start to earn rewards quicker to get far more active in the app to drive frequency and get them to return more often is a big opportunity.

Ravi Thanawala: Yeah, so first, uh... Yes, local marketing savings are part of restaurant margins. So, first, I just want to make sure I answer that question for you.

Ravi Thanawala: Okay.

Speaker Change: Yeah. So first.

Ravi Thanawala: Yes, local marketing savings are part of restaurant margin. So one I just want to make sure I answer that question for you to we're taking a really thoughtful approach to assessing our overall marketing strategy, what youll see as we went through the quarter of Q2.

Ravi Thanawala: Two, we're taking a really, like, thoughtful approach to assessing our overall marketing strategy. What you'll see as we went through the quarter of Q2, we started with company pepperoni. We saw the consumer trends, and we rebalanced our media mix at a national level to have a higher mix towards our mix-and-match $6.99 offer, which we call Popup Pairing. That's the price point we've been running it at, and it's at parity with some of our key competitors.

Ravi Thanawala: Two, we're taking a really, like, thoughtful approach to assessing our overall marketing strategy. What you'll see as we went through the quarter of Q2, we started with company pepperoni. We saw the consumer trends. We rebalanced our media mix at a national level to have a higher mix towards our mix-and-match $6.99 offer, which we call thought preparation. Actually, that's the price point we've been running it at, and it's at parity with some of our key competitors.

Speaker Change: We started with <unk>.

Ravi Thanawala: W. Pepperoni, we saw the consumer trends, we rebalanced, our media mix at a national level to have a higher mix towards our mix in that $6 99 offer which we call Bob.

Todd Penagore: We'll work through that in short order to make sure we can bring that to life. The great news is that's been on the road map for the team and we know it's a big opportunity for us.

Ravi Thanawala: Yeah, maybe Todd, maybe the only thing I'd add to this conversation, Jim is like, you know, like Todd's been here for all of a week and, you know, we've had a number of great sessions with them. A few that we came out the gate right away with is getting right into the test kitchen to talk about innovation second, making sure we were talking about our digital experience. And third was making sure our loyalty strategy was front and center in front of Todd because we are strong believers that getting consumers into our app.

Ravi Thanawala: It's actually a price point, we've been running it out and it's at parity with with some of our key competitors one of the things that we are doing as we progress into Q3 is like we are in certain of our corporate markets testing different value offers and the goal of our value offers and stuff.

Ravi Thanawala: One of the things that we are doing as we progress into Q3 is, like, in certain of our corporate markets, testing different value offers. And the goal of our value offers here is to find that balance. Great Value Perception, things that drive basket starters or larger baskets as a whole, and continue to assess what is the right mix between national and local marketing. And we have to be very thoughtful about the fact that the consumer is dynamic, and we need to continue to be agile and check and adjust along the way.

Ravi Thanawala: One of the things that we are doing as we progress into Q3 is, in certain of our corporate markets, testing different value offers. And the goal of our value offers here is to find that balance.

Ravi Thanawala: Find that balance.

Speaker Change: Great value perception things that drive.

Ravi Thanawala: Basket starters or larger basket as a whole and continue the SaaS like what is the right mix between national and local marketing and you know like we have to be very thoughtful that the consumer is dynamic and we need to continue to be agile and checking the jobs along the way.

Ravi Thanawala: They drive higher frequency. We think it's stickier and into Todd's point, like we believe that in this value, conscious world that we're living in driving stronger immediate gratification could bear some real fruit for the for our franchisees and the business. And also continue to drive folks into one P, which is very important. Appreciate the color guys.

Jim Salera: I'll pass it on. Thank you.

Todd Pentagore: I do think, Ravi, just an observation from where I sit, as we made some of the shifts in the late first quarter into the second quarter and put a really big bet on the national plan, pulled a little bit back on the local advertising with the new campaign, the new agency, and at a time where we've actually focused a little bit more on our premium quality messaging, it's a great plan, but it was probably at the wrong time.

Todd Penegor: I do think, Ravi, just an observation from where I sit, as we made some of the shifts in the late first quarter into the second quarter and put a really big bet on the national plan, pulled a little bit back on the local advertising, with the new campaign, the new agency, and at a time when we've actually focused a little bit more on our premium quality messaging, it's a great plan, but it was probably at With all the shifts, I didn't have enough focus on value.

Ravi Thanawala: I do think Ravi and just an observation from where I sit is we made some of the shifts in the in the late first quarter into the second quarter and put a really big bet on the on the National plan pulled a little bit back on the on the local advertising, but the new campaign, the new agency and at a time, where we've actually focused a little bit more on our premium <unk>.

Sarah Senatore: Our next question comes from the line of Sarah Senator with Bank of America. You want to know if then. Great. Thank you very much.

Sarah Senatore: I question, I guess maybe two part questions. The question first part is, you know, you're seeing a lot of improvement in kind of underlying consumer metrics, value proposition, brand awareness, service speed. I mean, how long should it take for that to translate into transaction growth? I guess, you know, my thought was, I know that you had just said this is a kind of three times of year, but you're typically speaking. I guess I would have expected to see some improvement in June versus, you know, what we saw in in, you know, the beginning recorder into July.

Todd Pentagore: <unk> messaging.

Todd Pentagore: <unk> planned, but it was probably at the wrong time for the consumer environment with all the shift didn't have enough focus on value.

Todd Penegor: With the shift, you know, we probably didn't have the pressure that we needed balanced at the local level to really compete with some of the regional differences. So it's one for me to continue to look at as we move forward. Do we have that right balance between the kind of national message that's very efficient and effective, supplemented and complemented by some strong local messaging along the way? So I know we'll have some work to do to have some conversations with our franchise community moving forward. So stay tuned on that front. And maybe Todd, the only thing I would add.

Todd Pentagore: With the shift.

Todd Pentagore: We probably didn't have the pressure that we needed balanced at the local level to really compete with some of the regional differences. So it's one for me to continue to look at as we move forward do we have that right balance between kind of the the national message, that's very efficient and effective was supplemented and then complemented with some local strong messaging.

Speaker Change: The way so.

Sarah Senatore: And we're not really seeing that. So just trying to understand how long it takes for these kinds of initiatives or improvements to translate. And then related to that, you know, I know you've been testing some value options in your restaurants already. But again, you didn't really see any difference in the comp trajectory for company operated versus the broader system. So I'm wondering, you know, how do you get these initiatives to resonate? I guess is fundamentally a question and how long should it? Take.

Todd Pentagore: So I know lots of work to do to have some conversations with the franchise community moving forward.

Todd Pentagore: So stay tuned on that front.

Ravi Thanawala: And maybe, Todd, the only thing I would add is that's really why we're taking this clear focus on actions we're taking to drive value perception.

Todd Penegor: And maybe, Todd, the only thing I would add is that's really why we're taking this clear focus on actions we're taking to drive value perception, having a clear perspective on how we're reinitiating and expanding our innovation pipeline for the long term and looking at opportunities that improve our digital and loyalty experience. So those are things that cut across all parts of the business and ultimately truly impact how the consumer psyche is, and we think that will lead to transaction growth over time.

Tom: And maybe Tom the only thing I would add is that that's really why we're taking this clear focus on options that we've taken to drive value perception.

Todd Pentagore: Having a clear perspective on how we are reigniting and expanding our innovation pipeline for the long term and looking at opportunities that improve our digital and loyalty experience. So those are things that cut across all parts of the business and ultimately truly impact how the consumer psyche is and we think that will.

Todd Penagore: Well, Sara, I'll start. You know, it does take a little bit of time to be out there consistently with a strong value message. And the great news is the teams made those adjustments, you know, if you think about New York style extra large at 1099, that's great value. You think about pop appearance at 699, that's great value. We just need to continue to be out there with the appropriate pressure, both nationally and locally, to make sure that the consumer understands there is great value time and again from Papa John's. And that will build over time. So we've got to work towards that.

Todd Pentagore: Transaction growth over time.

Ravi Thanawala: Thanks.

Operator: Thanks. Thank you. Our next question comes from the line of Crystal Cole with Steeple. Your line is now open.

Todd Pentagore: Thank you.

Operator: Our next question comes from the line of Crystal Cole with Steeple. Your line is now open. Thanks, Todd.

Crystal call: Our next question comes from the line of Crystal call with Stifel. Your line is now open.

Ravi Thanawala: Thanks, Todd congratulations on the new role.

Speaker Change: I'm curious whether you believe the brand's positioning is unique enough to take share in the category.

Todd Pentagore: Whether you believe there needs to be more fundamental work done just to differentiate its positioning.

Ravi Thanawala: I'll turn it over to Ravi to talk about the test. I'm exciting. We've got some good tests underway in the company restaurants, but just a little too early to have all of the learnings. But Ravi, why don't you talk a little bit more about that? Yeah. So first, Sara, just on your question around progression throughout the quarter, the only on our remind you on is kind of the underlying or the baseline com trend from the prior year.

Todd Penegor: Yeah, no, thanks for the congratulations, Chris. You know, where we start with better ingredients, better pizza, you know, high quality, fresh ingredients, fresh, never frozen dough on most of our offerings, six core ingredients, you know, signature sauces, real cheese, fresh toppings. I mean, what a great spot to start with. I think we've got all the tools in the toolbox to really emphasize and talk about our unique differences. The team's doing a great job executing that day in and day out at the restaurant level. We'll always have work to do to be even more consistent in execution day in and day out, but the elements are there.

Todd Pentagore: Yeah, no. Thanks for the congrats Chris.

Speaker Change: Where we start better ingredients better pizza high quality fresh ingredients fresh never frozen dough on most of our offering six core ingredients.

Speaker Change: Signature sauces real cheese fresh toppings, I mean, what a great spot to start with I think we've got all the tools in the toolbox to really amplify and talk about our unique differences teams doing a great job of executing that day in and day out at the restaurant level. We will always have work to do to be even more consistent on execution day in and day out but the elements are.

Ravi Thanawala: We did see sequential improvement in terms of the compromise. We're on right as we progressed to the quarter and we see that fairly directly correlated with us improving the value perception. Again, for we're comping in Q3 a plus three from the prior year. So you can see the progression on a two year stack from a testing standpoint and market. What we're really focused on is making sure we are taking actions that improve repeat rate, which is another code word for for long term gains and frequently.

Todd Penegor: I think we're just going to have to figure out how we make sure we amplify that message as part of our overall campaign moving forward, both nationally and locally, but balancing it in the context of we're in a very value-centric value for money environment today, and that doesn't mean just price.

Todd Pentagore: There I think we're just going to have to figure out how we make sure we amplify that message as part of our overall campaign moving forward.

Todd Pentagore: Both nationally and locally but balancing it in the context of we're in a very value centric value for the money.

Todd Pentagore: <unk> today and that doesn't mean, just price that means making sure folks understand that the best pieces in the business come from Papa John's and then you can trust and believe that Youre going to get that every single time with every single visit and then have some great innovation that you can only get from Papa John's over time to make sure that that all reinforces that messaging.

Ravi Thanawala: To making sure that we're finding a really healthy balance of getting consumers into our one P channel, find the products that differentiate us. And third, we're really focused in on making sure we're finding that our full balance of our premium product proposition. But how do we continue to be very successful in these more value conscious moments and time. So we don't want to share too many details on the test just to give them where we are in the cycle, but we're taking a highly disciplined approach.

Operator: That means making sure folks understand that the best pizzas in the business come from Papa John's. And then you can trust and believe that you're going to get that every single day. Every single time, with every single visit, and then have some great innovation that you can only get from Papa John's over time to make sure that that all reinforces that messaging. So a lot of great things in the pipeline, as Robbie said, he got to do food testing. I think day one, probably hour two, I was in the kitchen with the team.

Todd Pentagore: So a lot of great things in our pipeline as Ravi said, he got do food testing I think day, one probably our two I was in the kitchen with the team. There's a lot of creative stuff in the pipeline that can complement all of that messaging moving forward and we'll see where things need to evolve to really make sure the consumer understands why we're uniquely different.

Ravi Thanawala: They're running and operating the business and making sure we're making the right investments in the business to improve our both our digital experience and our value proposition, which should help over time. Bed in the curve on sales comp and do it in a way that is going to deliver strong. You did economics for our franchise. And the focus of our programs immediately, sir, we have to get folks to show up more often at Papa John's and we're really trying to make sure that we drive transactions and get folks into the restaurant.

Speaker Change: Great. Thanks, guys.

Todd Pentagore: Thank you.

Operator: Our next question comes from the line of Brian Mullan with Piper Sandler. Your line is now open.

Operator: There's a lot of creative stuff in the pipeline that can complement all of that messaging moving forward, and we'll see where things need to evolve to really make sure the consumer understands why we're uniquely great. Thanks, guys. Thank you. Our next question comes from the line of Brian Mullan with Piper Sandler. Your line is now open.

Speaker Change: Our next question comes from the line of Brian Mullan with Piper Sandler Your line is now open.

Brian Mullan: Okay, thank you.

Brian Mullan: Okay. Thank you I'll just follow up on the domestic development given all the work you've been doing on improving the unit economics I'm wondering if when that is completed the organization might be willing to build more company owned stores more aggressively than the path. Even if it's just for a couple of year period of time.

Ravi Thanawala: We know if we have them show up over time, we can trade them up across the menu. You know, we're trying to make sure we do that in partnership with the franchise community and in concert with the restaurant economic model teams working that planned really hard. And I do feel like we've got some solid plans in place to start to build some momentum over the course of last year. It's notwithstanding the cons from year ago that Robbie just talked about, but really starting to set up a really strong plan as we go into next year.

Speaker Change: In order to force that development growth issue, a little bit take medicine in your own hands again, I know, there's a lot to tackle but.

Brian Mullan: your own hands. Again, I know there's a lot to tackle.

Sarah Senatore: Thank you.

Brian Mullan: I'm wondering if that's part of the consideration set as we go forward.

Todd Penegor: Well, Brian, I'll take that. We've got some work to do to really understand our long-range outlook and our capital allocation strategy. But you know, first and foremost, it is going to be investing in growth. We have got to do a lot to really continue to make sure that the digital experience is more seamless, that we have our loyalty program working, and that the tech stack is solid to build and layer all of this on.

Speaker Change: Brian I'll take that we've got some some work to do to really understand our long range outlook and our capital allocation strategy, but first and foremost it is going to be invest in growth. We got to do a lot to really continue to make sure that the digital experience more seamless that we got our loyalty program work and that the tech stack is solid to build in.

Peter Saleh: Our next question comes from the line of Peter Salay with BTIG. Your line is now open. Great. Thanks for taking the question. I did want to ask about the development costs. It sounds like you guys made some progress on reducing some of the costs which were, I think, well above where you wanted them to be and where the franchise is wanting them to be. So can you maybe elaborate a little bit on what you're seeing on development costs, maybe in the most recent build. And if you did see some reduction in those costs, we're exactly are you seeing the savings.

Speaker Change: Layer all of this on.

Speaker Change: But there is a role to be a great brand steward on on putting some restaurants down we'll have to see how that works and fits within.

Todd Penegor: But there is a role to be a great brand steward on putting some restaurants down, we'll have to see how that works and fits within, you know, our, our capital allocation strategy. So I would just ask, give us a little bit of time to work through that to really make sure that we're doing the right things to be that great brand steward to lead the system to create the confidence. I do think, you know, we're going to have to take a look at what I would call is ongoing system optimization teams been doing it, you know, buy and or sell restaurants, bring some new franchisees in, scale up some existing franchisees, really make sure that as we do some of that work, we get some strong development commitments along the way, to continue to make sure that not only is the company leading the way, but we've got some great, really excited franchisees, it's really setting the pace on growth moving forward.

Ravi Thanawala: Lee. Thanks, creator for the question, and I think what you're hitting on is exactly the right topics for us to kind of unpack is like first we're taking a highly disciplined approach to how we're engineering our development costs and what I should. At the Q1 call is like we had three vectors we're focusing on first improving our architectural designs to ensure that we're building a box that is highly effective. Support service, but it is cost effective to we've been out there procuring new deals with our general contractors, which is absolutely delivering some benefits and third is really a focus on making sure we have the right optionality in terms of furniture fixtures and it costs all three of these elements, which are the three critical elements of the belt what we're seeing progress and we shared with our franchisees just in the last minute.

Speaker Change: Our capital allocation strategy. So I would just ask give us a little bit of time to work through that to really make sure that we're doing the right things to be that great brand steward the lead the system to create the confidence I do think you know we're gonna have to take a look at what I would call is ongoing system optimization team has been doing it by <unk> cel restaurant.

Speaker Change: Spring, some new franchisees and scale up some existing franchisees are really make sure that as we do some of that work we get some strong development commitments along the way to continue to make sure that not only is the company leading the way, but we've got some great really excited franchisees, it's really setting the pace on growth moving forward and we've got some.

Speaker Change: Some of that in pockets across the organization today.

Todd Penegor: And we've got some of that in pockets across the organization today. But I'd turn it over to you, Ravi, you've been looking at the longer-range plan, and I haven't got a chance to go through that with you yet. Yeah, and just like just a reminder over the last couple of weeks.

Operator: Ill turn it over to you Ravi you been looking at the longer range plan and I haven't got a chance to go through that with you yet yeah and just like just a reminder, over the last 12 months, we've done some real things to improve the fundamental unit economic model that we have seen restaurant margins improved 200 basis points on a trailing trailing 12 month basis.

Ravi Thanawala: And just like, just a reminder, over the last 12 months, we've done some real things to improve the fundamental unit economic model. We've seen restaurant margins improve 200 basis points on a trailing, trailing 12 month basis. We've talked about how our build-out costs are becoming much more in line with industry norms that are larger developing franchisees. We are taking steps to improve our Digital Experience, which ultimately drives conversion and repeat.

Speaker Change: We've talked about how our build out costs are becoming much more in line with industry norms at our larger developing franchisees, we are taking steps to improve our.

Brian Mullan: Digital Experience, which ultimately drives conversion and repeat. So we're building for the long-term.

Speaker Change: Digital experience, which ultimately drives conversion and repeat so we're building those long term recipe for sustainable growth and I think.

Ravi Thanawala: So we're building long-term sustainable growth, and I think maybe in week two or three we're gonna really sit down with Todd and spend some more time on these key topics. But, like, this is very top of mind for me and the team, and I'll tell you that we are spending a lot of time making sure we're setting up our franchisees to have durable sustainable growth that really solid unit economics.

Ravi Thanawala: So another wave of cost savings that we'll be able to deliver. So I think it's a little bit too early for me to share a specific numbers, what I can definitely tell you is that our costs are coming down year over year in our builds, I don't want to get too specific on that just yet, but I want to kind of reaffirmed to you, as I said, in the prepared remarks that what I'm hearing from our larger developing franchisees is that their build costs are coming.

Speaker Change: Maybe a week two or three we're going to really sit down with Todd it spend some more time on these key topics, but like this is very top of mind for me and the team and I will tell you, though we are spending a lot of time, making sure we're setting up our franchisees to have durable sustainable growth that really solid.

Speaker Change: Unit economics.

Brian Mullan: Okay.

Operator: Thank you. Our next question comes from the line of Nick Setyan with Wedbush. Your line is now open.

Brian Mullan: Thank you.

Speaker Change: Our next question comes from the line of Nick <unk> with Wedbush. Your line is now open.

Ravi Thanawala: Coming in much more in line with industry norms and we think that this is another example of how we're improving the unit economic model. As we're delivering better restaurant margins, bringing down build out costs, we believe that both of these are critical elements that drive and gains and I look forward to updating you in future calls on just the progress we're making on North America development. And now I've been pleased to see the work underway on a lot of the value engineering and I know we're making a lot of progress and committed to making that progress very quick and in the interim, we'll look to make sure we've got the right incentive plans in place to bridge the gap until we get those costs in line to make sure we continue to put shovels in the ground to get new restaurants open and build a really strong pipeline into the future.

Brian Mullan: Yes.

Brian Mullan: Yeah.

Nick Setyan: Thank you. I want to get some clarity on the margin trajectory around international in the second half. You know, just given all the changes, how should we think about the international margins in Q3 and Q4?

Ravi Thanawala: Thank you. I just wanted to get some clarity on the margin trajectory around international in the second half. You know, just given all the changes, what should we think about the international margins in Q3 and Q4?

Brian Mullan: Thank you.

Speaker Change: Good to get some clarity on the margin trajectory around international in the second half.

Speaker Change: Just given all the all the changes how should we think about the international margins in Q3 and Q4.

Ravi Thanawala: Well, maybe I'll most squarely hit on the UK as that's the most fundamental driver of the margin structure in international. And we only have, will we only have 13 company-owned restaurants in the UK at the end of So we are moving back to what is our go forward business model and international, which is to be a franchise. Did I answer your question, Nick?

Ravi Thanawala: Well.

Speaker Change: All most squarely hit on the U K is that's the most fundamental driver of the margin.

Speaker Change: Margin structure in international and <unk>.

Speaker Change: We are only how we will we only have 13 company owned restaurants.

Speaker Change: In the U K at the end of Q2.

Ravi Thanawala: So we are moving back to what is our go-forward business model and international, which is to be a franchise. Did I answer your question, Nick?

Speaker Change: So we are moving back to what is our go forward business model and international which is to be a franchise or.

Todd Penagore: Understood, and then just Todd, you know, I think you guys mentioned potentially, you know, made changes to the rewards program to allow customers to earn rewards faster. Just trying to understand how heavy a lift this is, is this something that could happen in the second half of 24, or is this more of a 2025 type of event? Yeah, not so new into the role Peter to see and to be fair to my technology team.

Ravi Thanawala: Did I answer your question Nick.

Nick Setyan: It does, it just, you know, I mean, relative to kind of where we were, let's say, pre-acquisition, there's just been so many changes. So, the question, I mean, it would be a lot more helpful if we kind of got a little bit more directionality, or at least some guidance in terms of where the margin could settle in the second half, but I also understand, you know, the challenges of doing that.

Ravi Thanawala: Okay.

Nick: It does.

Nick: No what I mean.

Nick: And relative to kind of where we were let's say pre the acquisition.

Nick: There's just been so many changes though.

Nick: The question I mean, it would be a lot more helpful. If we kind of got a little bit more directionality.

Todd Penagore: I think it take a little bit of time. We've got a little bit of work to do to one, optimize what that program truly looks like and then to work through the internal technology work to make sure the platform sets itself up to deliver on that promise seamless and very easily for the consumer. I know some of the work has already started so you'll have Robbie comment if he has anything more to add.

Nick: Or at least some brackets in terms of where the margin could.

Nick: Could settle in the second half, but I also understand.

Ravi Thanawala: You know, the challenges of doing that.

Nick: The challenges of doing that.

Ravi Thanawala: Yeah, and I guess, from an international standpoint, maybe the easiest way to frame this up is, like, we're going back to more of a traditional franchisee model. So that's going to allow us to go back to more historical levels, if not slightly higher, in the second half of the year from a margin structure standpoint. So maybe that'll give you some relative metrics to look at versus prior years. But ultimately, what was really impacting the international margins was the UK company ownership.

Ravi Thanawala: Yeah, and I guess from an international standpoint, maybe the easiest way to frame this up is like we're going back to more of a traditional franchisee model. So that's going to allow us to go back to more historical levels, if not slightly higher, in the second half of the year from a margin structure standpoint. So maybe that'll give you some relative metrics to look at versus prior years. But ultimately, what was really impacting the international margins was the UK company ownership.

Speaker Change: Yeah, and I guess from an international standpoint, maybe the easiest way to frame. This up is like we're going back to more of a traditional franchisee model. So that's going to allow us to go back to more historical levels if.

Nick Setyan: That is helpful; thank you.

Todd Penagore: Yeah, first we're not taking a wonderful approach to how we how we evolve our digital platforms, like we're acting in a really agile way. So if you'll actually look at our recent app update, one of the simple but important changes that we've made is that we put loyalty for rewards front and center for the consumer. As soon as you get to the homepage, you can immediately tell you if you have value and can redeem some pop it does.

Ravi Thanawala: If not slightly higher and the.

Todd Penagore: So I think that's one example. And second is we're constantly working the digital roadmap in terms of future updates that we're going to make. So as I think about how we create more value for the consumer from a loyalty program, one is the mechanics of the actual program. Two, it's the natural things that great digital companies do to elevate for the consumer how they can earn and redeem rewards. And one of the last things I just wanted to share on that is in this recent app update, we need deals much more front and center for our, consumers.

Ravi Thanawala: In the second half of the year from a margin structure standpoint, so maybe that'll give you some relative metric.

Ravi Thanawala: Metrics to look out versus prior years.

Ravi Thanawala: Ultimately what was really impacting the international margins was the U K company ownership structure.

Speaker Change: That is helpful. Thank you.

Ed: Thanks, Ed.

Operator: Thank you. Our next question comes from the line of Jim Sanderson with North Coast Research. Your line is now open.

Ravi Thanawala: Our next question comes from the line of Jim Sanderson with Northcoast Research. Your line is now open.

Jim Sanderson: Hey, thanks for the question. I just wanted to follow up on the promotion you had in market, the $9.99 cheeseburger promo. Did that meet expectations on yield? Because I'm trying to reconcile the value perception gains you've reported with the deceleration in same store sales through July. Just any feedback on kind of how that impacted the benefit of the quarter? What do you think of that? Yeah.

Speaker Change: Hey, Thanks for the question I just wanted to follow up on the promotion you had in market. The 900 to nine cheeseburger promo did that meet expectations on yield because I'm trying to reconcile the value perception gains you've reported with the deceleration in same store sales through July just any feedback on kind of how that.

Speaker Change: Impacted benefited the quarter how to think about it.

Ravi Thanawala: Thanks for the question, Jim. A few things on Cheesy Burger are like when we actually look at the ticket. Thank you all so much for joining us today, and we hope to see you back as we progress through the quarter. So we just want to make sure we keep in mind that, you know, like there was the launch of a different product in the prior year that influenced what the CommTrend was like.

Ravi Thanawala: Yeah.

Ravi Thanawala: Thanks for the question Jim a few things on cheesy Burger is like when we actually look at the ticket.

Todd Penagore: Actually, no change from like, if you're a promotion standpoint, but just how we were showcasing our deals, simplifying navigation has increased the penetration of the number of consumers who are opting in. And I think this is an example of how we're working really cross functionally to make sure that we're finding opportunities to bring value to our consumer. And I'm excited to partner with Todd on the future of our loyalty program because driving the loyalty program is going to drive one P. It's going to drive frequency and we'll support our strategy around continuing to gain share. There are better ingredients, better pizza mindset.

Speaker Change: Size when cheesy Burger was actually in the promotion that ticket was very healthy and accretive to our average ticket. So first.

Ravi Thanawala: Thank you.

Speaker Change: <unk> really attracted 999 price point for the first 500000 pieces.

Speaker Change: Was really healthy in terms of why what it did to take it because consumers have a certain amount of money that they were going to spend and that allowed them to make sense out of pockets as well. So that's one thing. So the second is we are we did see sequential improvement on a two year stack as we progressed through the quarter. So we just wanted to make sure we keep in mind.

Speaker Change: That you know like there was the launch of a different product in the prior year.

Eric Gonzalez: Our next question comes from the line of Eric Gonzalez with Keybank. Your line is out. Good morning and thanks for the question. It seems like the international business is really turning the corner, you know, particularly outside the Middle East and China. So, perhaps you could discuss where some of the upside is coming from and maybe also address those problem areas such as the Middle East and China and how you see those markets evolving over the next few quarters. Also, it might be helpful if you could talk about the conference in UK specifically just given the size of that market and its contribution and profitability. Thanks. Yeah, thanks for the question, Eric.

Speaker Change: That influence what the comp trend was like up second it was a fan favorite at 999.

Ravi Thanawala: Second, it was a fan favorite at $9.99. It created excitement and made us more top of mind with our consumers, which we think drove a lot of value. And now we've had a really healthy balance as we've moved through the last couple months from a premium innovation like Cup of Pepperoni at the beginning of the quarter to the time that we got to the middle of the quarter. We were talking about Cheesy Burger at $9.99, and it still delivered a fantastic ticket, and we were in the market at parity relative to other competitors in terms of our mix and match offer.

Speaker Change: It created the excitement and made us more top of mind with our with our consumers, which we think drove a lot of value and now we have like a really healthy balance as we move through the last couple of months from a premium innovation like pepperoni at the beginning of the beginning of the quarter. So the time that we got to the middle of the quarter, we were talking about cheesy.

Speaker Change: Burger at 999, and still delivered a fantastic ticket and where we're at in market at parity relative to other competitors in terms of our mix and match offer. So we think that this recipe of finding the right balance of premium innovations that only Papa John's can deliver showing spots as parity.

Ravi Thanawala: I think this quarter in international is a little bit of an example of how we're taking a thoughtful and structured approach to our international transformation. We have GMs now based across the globe in key markets or in key hubs such as Singapore, clearly the UK as well as in Dubai and what that's really done is broaden the Papa Johns management team much closer to consumer centricity and deeper understanding and partnership with the franchisees.

Ravi Thanawala: So we think that this recipe of finding the right balance of premium innovations that only Papa John's can deliver, showing spots of parity in the market on more value offerings, is a way that we believe that will continue to drive positive momentum on transactions over the next couple of quarters. But we are taking a really pragmatic approach to where the consumer is today and, you know, the things that are on consumers' minds, and we're going to stay agile, we're going to keep testing, we're going to keep making really good decisions that balance transaction growth, sales comp growth, and unit economics for our franchises.

Speaker Change: In the market on more value offering it as a way that we believe that will continue to drive positive momentum on transactions over the next couple of quarters, but we are taking it will be pragmatic approach of where the consumer is today and.

Speaker Change: The things that are wrong, consumers' minds, and we're going to stay agile, we're going to keep testing, we're going to keep making really good decisions that balance transfer.

Ravi Thanawala: So, we are just getting better at being highly consumer-centric to partnering with the franchisees to identify opportunities around menu innovation to making sure we're partnering to understand which store formats, restaurant formats are working well. When I think about like more broadly what we're seeing in terms of success, like we're seeing strong gains and some of our really stronghold markets that we have in land America which is fantastic to see. But we're also seeing pockets of strength all across the globe and we're spending time like consistently talking about those shared best practices and thinking a little bit further out on how we're going to gain additional momentum.

Ravi Thanawala: Transaction growth sales comp growth and unit economics for our franchisees.

Jim Sanderson: And just to follow up, you said you saw sequential improvement on a two-year stack, so there is no concern there with cannibalization, having your consumer just trade down to the promotion without incremental traffic. I just want to make sure I understood.

Speaker Change: And just a follow up you said you saw sequential improvement on a two year stack. So no concern there with cannibalization.

Speaker Change: Consumer just a trade down to the promotion without incremental traffic.

Ravi Thanawala: Just want to make sure I understood. Yeah, let me make sure I frame it up.

Speaker Change: Want to make sure I understood.

Ravi Thanawala: Yeah, let me make sure I frame this. So, like, when I look at what's happening in the last couple of more value-oriented LTOs that we've been putting media against, and there's a mix of them, we've seen really healthy tickets across all of them, and all three of them have actually been comparable to the total blended or the blended average ticket. So, while there may be trade that's happening within the consumer's baskets, what we're trying to ensure we do through the digital experience is give consumers the optionality for add-ons that make their pizza even better, being able to do the right cross-sells.

Ravi Thanawala: So, when I look at what's happening in the last couple of more value-oriented LTOs that we've been putting media against, and there's a mix of them, we've seen really healthy tickets across all of them, and all three of them have actually been comparable to the total blended or the blended average ticket. So while there may be trade that's happening within the consumer's baskets, what we're trying to ensure we do through the digital experience and give consumers the optionality for add-ons that make their pizza even better, being able to do the right cross sells.

Speaker Change: Yeah, Let me make sure I frame up so like when I look at what's happening in the last couple of more value oriented <unk> that we've been putting media again and there is a mix of them.

Ravi Thanawala: Within the quarter we also used the power of our marketing offense and our consumer centricity to launch checker pizza, launch across 23 countries. It was one of those LTOs where we had great consumer research and at LTO in terms of penetration, grew and improved the run rate across as well. So we think we're identifying a recipe of success there.

Ravi Thanawala: We've seen really healthy tickets across all of that and then all three of them have actually been net accretive to the total blended or the blended average ticket. So while there may be trade that's happening within the consumer's baskets, what we're trying to ensure that we do do the digital experience and give consumers the optionality for.

Ravi Thanawala: Add ons that make the pizza, even better being able to do the right Cross sells and we think this mix.

Ravi Thanawala: And we think this mix of strong value orientation that makes sure the consumers can get great value, but they can also build their basket the way they want, allows us to, like, prevent any material cannibalization and drive really healthy tickets, driving great value perception. So I guess, Ravi, it's probably helpful for Jim. Why don't you just talk a little bit about a couple of leaky buckets?

Jim: Strong value orientation that make sure that consumers can get a great value, but they can also build their basket. The way. They want allows us to like prevent any material cannibalization and drive really healthy ticket driving great value perception for the consumer So I guess Ravi it's probably helpful for Jim why don't you just talk a little bit about a couple of leaky.

Ravi Thanawala: Specific to the UK, we're really four quarters into the real work here. This quarter really represented the culmination of refranchising 60 locations and closing 43 stores. So the market did shrink a little bit in size but we did in a highly strategic way to make sure we were setting up franchisees to have better unit economics. Second being really thoughtful and partnering with the franchisees to improve the sales trend and I'll say is like as we look at the results, the stores that are changing hands between our franchisees, we're seeing either high single digital or low double digit increases in terms of comp sales performance and those stores that are changing hands.

Ravi Thanawala: And we think this mix of strong value orientation and making sure the consumers can get great value, but they can also build their basket the way they want, allows us to, like, prevent any material cannibalization, and drive really healthy tickets, driving a great value perception for the consumer.

Ravi Thanawala: So, I guess, Ravi, it's probably helpful for Jim, why don't you just talk a little bit about a couple of leaky buckets. I know we've talked about the plans to address those already, but it's probably worth just reiterating where those leaky buckets were in the quarter. Yeah. So, we've spent...

Todd Penegor: I know we've talked about the plans to address those already, but it's probably worth just reiterating where those leaky buckets were in the quarter. Yeah, so we've spent a bunch of time doing diagnostics on the business, both from a product grain standpoint and from a consumer grain standpoint. And what we want to reinforce is where our transactions have been really healthy, in consumers who are buying for either social occasions or slightly larger orders, two pies or more, we actually saw a really strong performance, and we were up in those sorts of transaction types for the quarter.

Ravi Thanawala: It's I know we've talked about the plans to address those already but probably worth just reiterating where those leaky buckets were in the quarter. Yeah. So we've spent a bunch of time doing diagnostics on the business both from a powder Greens standpoint from a consumer grain standpoint, and what we want to reinforce is where our transactions.

Speaker Change: Had been really healthy is in consumers, who are buying for either social occasions are slightly larger orders two pies or more we actually saw really strong performance and we were up.

Ravi Thanawala: So comps are improving in the UK. My attention right now in the UK has really turned to like setting that innovation engine up in a way that is going to drive great value perception as well as have a premium positioning. And second, like continuing to evolve our marketing model. So from my standpoint, I'm not done focusing on the UK but I am increasing my attention to some other markets such as China because I believe that there's a lot of opportunity for us to unlock there and I was just talking to our international team that they're planning on getting out on the road in just a few weeks to really attack our 2025 planning from both a menu standpoint as well as a from a restaurant format standpoint.

Speaker Change: And those sorts of transaction types for the quarter, where we're really seeing weeks in terms of transaction trends was with consumers who were only purchasing one pizza or no pizza is underway. There are only purchasing aside so when we looked at the composition of where we need to regain transactions it gave us.

Todd Penegor: Where we're really seeing leaks in terms of transaction trends are with consumers who are only purchasing one pizza or no pizzas, and they're only purchasing a side. So when we looked at the composition of where we need to regain transactions, it gave us some real insights on how to adjust our barbell to allow us to continue to find that right balance of value orientation and premiumness. And that's actually what is special about this brand, that we have a right to play, and we can play at both ends of these barbells, and we're just getting sharper at how we actually do that effectively in this consumer cycle and in future consumer cycles.

Speaker Change: Some real insights on how to adjust our barbell to allow us to continue to find that right balance of value orientation and premium this and Thats actually what is special about this brand that we have a right to play and we can play at both ends of these barbells and we're just getting sharper at how we actually do that effect.

Ravi Thanawala: And this consumer cycle and future consumer cycles.

Ravi Thanawala: And I'm excited for what that market can deliver for us for the long term. But we also recognize that the world is dynamic. What I'm pleased to see is the team is really built a really strong playbook. The team that can go partner, the team that can go execute to really enhance and turn around these markets and concert with franchise community there. So credit to the work that's been done in the UK. I think that sets us up to continue to strengthen the brand across the globe.

Ravi Thanawala: Yeah.

Eric Gonzalez: Thank you.

Operator: All right, thank you. Thank you. Our next question comes from the line of Fred Whiteman with Wolf Research. Your line is now open.

Jim: Alright. Thank you. Thank you.

Operator: Thank you. The next question comes from...

Speaker Change: Our next question comes from the line of Fred Wightman with Wolfe Research. Your line is now open.

Fred Whiteman: Hey, guys just one follow up.

Fred Whiteman: Question, I guess, probably the the occasions that you were just touching on sort of the one pizza or less with the sides only it's not really a proxy for lower income consumers or do you think it's something else and then.

Fred Whiteman: The main question is just when you guys talk about the need to improve value and the value perception, I'm wondering where you're seeing the biggest gap versus target is it versus pizza peers is versus other parts of <unk> are maybe versus your historical levels.

Alexander Slagle: Our next question comes from the line of Alexander Slagle with Jeffries. You'll let us know open. Thanks.

Ravi Thanawala: Good morning. Really good job on the restaurant level profit line, despite the software traffic, and we provided some good details on the moving pieces, but I just wanted to clarify some things. I guess the local marketing spend reduction, I think that falls in the restaurant level line, just wanted to clarify that. And then I guess how that shift in spend might impact the restaurant level line, if you have any dollar impact to talk about.

Speaker Change: Yeah. So I'll take the first part of that question and then Todd maybe I'll, let you share some outside in perspective since you're new in a complement so.

Speaker Change: We think about the pizza business because pizza is for every one and we think that this is one of those categories that serves everyone that there is multiple occasions that consumers choose to.

Speaker Change: Purchase pizza and we think that when you are in that value oriented occasion.

Speaker Change: Smaller purchase size that is where we're seeing maybe a little bit less of that impulse buy to just pick up that small order and that's really why we started we'll evolve our media mix and what we're marketing to and I don't know if you've seen a recent new York style spot, but if you listen to the voice over we are really talk.

Ravi Thanawala: And also if that local spend had any impact on the software company of North America, same source sales, or if that was pretty immaterial. Yeah, so first, yes, local marketing savings are part of restaurant margins. So one, just want to make sure I answer that question for you too. We're thinking a really like thoughtful approach to assessing our overall marketing strategy. What you'll see as we went through the quarter of Q2, we started with a copy pepperoni.

Speaker Change: Looking about the incredible value that you can get a 10 99, an extra large pizza for $10 99, and it's a fantastic needs at the Abbott drive so.

Speaker Change: Well you are starting to see how we're taking it a rich consumer insights partnering with our franchisees and a great fantastic price point to a talk where our leak in the bucket.

Ravi Thanawala: We saw the consumer trends, we rebalanced our media mix at a national level to have a higher mix towards our mix and match 699 offer, which we called by preparing. Joshi, that's the price point we've been running it at. And it's at parity with some of our key competitors. One of the things that we are doing as we progress into Q3 is like we are in certain of our corporate markets testing different value offers.

Speaker Change: The pizza business Pizza category is a big category to continue to compete in and if you think about where I think we have the biggest challenge relative value. It's more versus are our competitors within the pizza category.

Speaker Change: It's a different occasion, there is great value for the money and pizza you can have it as a leftover.

Speaker Change: So when you think about what the consumer thinks about on overall value piece is just a great spot to play and we got to make sure that our relative value versus the peer group is quite strong well keep an eye on the other categories in the shifting across categories. Because there is a lot of value centricity out there today, but we got to compete and win in the pizza category first and foremost.

Ravi Thanawala: And the goal of our value offer is to find that balance of great value perception, things that drive basket starters or larger baskets as a whole and to do to assess what is the right mix between national and local marketing. And we have to be very thoughtful that the consumer is dynamic. And we need to continue to be agile and checking the just along the way. I know I do think Robbie and just an observation from where I said is we made some of the shifts in the in the late first quarter into the second quarter and put a really big bet on the national plan, pulled a little bit back on the on the local advertising but the new campaign, the new agency and you know at a time where we've focused a little bit more on our premium quality messaging.

Speaker Change: Well I'd like to sincerely. Thank you for your time. This morning, and your continued support of Papa John's I appreciated all the questions today. Thank you to our team members and franchisees for the resiliency and the agility you have shown during these unique times, it's exciting to see the way everyone has.

Speaker Change: Worked together and I can't see what wait to see what we accomplished together in the future. Thanks, everyone have a great day.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Ravi Thanawala: You know it's a great plan but it's probably at the wrong time for the consumer environment with all the shift. Didn't have enough focus on value with the shift. You know we probably didn't have the pressure that we needed balanced at the local level to really compete with some of the regional differences. So it's one for me to continue to look at as we move forward. Do we have that right balance between kind of the national message that's very efficient, effective, was supplemented and then complemented with some local strong messaging along the way.

Operator: Yeah.

Operator: [music].

Operator: Yeah.

Operator: Okay.

Operator: Yes.

Operator: [music].

Operator: Okay.

Operator: [music].

Ravi Thanawala: So I know we'll have some work to do to have some conversations with our franchise community moving forward. So stay tuned on that front. And maybe Tom, the only thing I would add is that's really why we're taking this clear focus on actions we're taking to drive value perception, and having a clear perspective on how we're reigniting and expanding our innovation pipeline for the long term, and looking at opportunities that improve our digital and loyalty experience. So those are things that cut across all parts of the business, and ultimately truly impact how the consumer psyche is, and we think that leads to transaction growth over time. Thanks.

Fred Whiteman: Thank you.

Operator: Okay.

Todd Penagore: Our next question comes from the light of Crystal Cole. Let's see if all your money's not open. Thanks, Todd.

Todd Penagore: Congratulations on the new role. I'm curious whether you believe the brand's positioning is unique enough to take share in the category, or whether you believe there needs to be more fundamental work done, just to differentiate its positioning? Yeah, no, thanks for the congrats, Chris. You know, where we start better ingredients, better pizza,[inaudible] amplify that message as part of our overall campaign moving forward, both nationally and locally. But balancing it in the context of we're in a very value centric value for the money environment today.

Todd Penagore: And that doesn't mean just price. That means making sure folks understand that the best pieces in the business come from Papa Johns. And then you can trust and believe that you're going to get that every single time with every single visit. And then have some great innovation that you can only get from Papa Johns over. Time to make sure that that I'll reinforces that messaging. So a lot of great things in a pipeline.

Todd Penagore: As Robbie said, he got to do food testing. I think day one probably hour two. I was in the kitchen with the team. There's a lot of creative stuff in the pipeline that can complement all of that messaging moving forward. And we'll see where things need to evolve to really make sure the consumer understands why we're uniquely different.

Todd Penagore: Great. Thanks guys. Thank you.

Brian Moses: Our next question comes from the line of Brian Moses. Ellen with Piper Sandler. Your line is now open.

Todd Penagore: Thank you. I just follow up on the domestic development, given all the work you've been doing on improving the unit economics. You know, I'm wondering if when that is completed, you know, if the organization might be willing to build more company on stores more aggressively than the past, you know, even if it's just for a couple of year period of time. In order to force that development growth issue a little bit, take management your own hands.

Todd Penagore: Again, I know there's a lot to tackle, but wondering if that's part of the consideration set as we go forward. Brian, I'll take that. We've got some some work to do to really understand our long range outlook and our capital allocation strategy. But, you know, first and foremost, it is going to be invest in growth. We've got to do a lot to really continue to make sure that the digital experience is more seamless that we got our loyalty program work and that the tech stack is solid to build and layer all of this on.

Todd Penagore: But there is a role to be a great brand steward on on putting some restaurants down. We'll have to see how that works and fits within, you know, our capital allocation strategy. So I would just ask give us a little bit of time to work through that to really make sure that we're doing the right things to be that great brand steward, the lead system to create the confidence. I do think, you know, we're going to have to take a look at what I would call as ongoing system optimization team's been doing it, you know, by end or sell restaurants, bring some new franchisees in scale up some existing franchisees.

Todd Penagore: Really make sure that as we do some of that work, we get some strong development commitments along the way. To continue to make sure that not only is the company leading the way, but we've got some great, really excited franchisees. It's really setting the pace on growth moving forward. And we've got some of that in pockets across the organization today.

Ravi Thanawala: But I'd turn it over to you, Ravi, you've been looking at the longer range plan and I haven't got a chance to go through that with you yet. Yeah, and just like just a reminder over the last 12 months, like we've done some real things to improve the fundamentality of an economic model. We've seen best practices. We've got our margins to improve 200 basis points on a trailing 12 month basis. We've talked about how our build out costs are becoming much more in line with industry norms that are larger developing franchisees.

Ravi Thanawala: We are taking steps to improve our. Digital Experience, which ultimately drives conversion and repeat. So we're building their long-term recipe for sustainable growth. And I think maybe in week two or three, we're going to really sit down with Todd and spend some more time on these key topics. But like this is very top of mind for me and the team. And I'll tell you that we are spending a lot of time making sure we're setting up our franchisees to have durable, sustainable growth and really solid unit economics.

Ravi Thanawala: Thank you.

Nick Setyan: Our next question comes from the line of Nick Setyan with Wedbush.

Ravi Thanawala: Your line is not open. Thank you. I wanted to get some clarity on the margin trajectory around international in a second half. Just given all the changes, how should we think about the international margins in Q3 and Q4? Well, maybe our most squarely hit on the UK is that's the most fundamental driver of the margin structure in international. And we are only have we will we only have 13 puppy owned rash draws in the UK at the end of Q2. So we are moving back to what is our go forward business model and international, which is to be a franchise or.

Ravi Thanawala: Did Angie question Nick? It does. I just, you know, I mean, it gets around to kind of where we were, let's say pre acquisition. There's been so many changes. So the question, I mean, it would be a lot more helpful if we kind of got a little bit more directionality or at least some brackets in terms of where the margin could settle in a second half, but I also understand, you know, the challenges of doing that.

Ravi Thanawala: Yeah, and I guess like from an international standpoint, maybe the easiest way to frame this up is like we're going back to more traditional franchise, the model. So that's going to allow us to go back to more historical levels, if not slightly higher in the in the second half of the year from a margin structure standpoint. So maybe I'll give you some relative metrics to look at versus prior years. Ultimately, what was really impacting the international margins was the UK company ownership structure. That is helpful.

Nick Setyan: Thank you. Thanks.

Jim Sanderson: Our next question comes from the line of Jim Sanderson with North Coast research. You're on his now open. Hey, thanks for the question. I just wanted to follow up on the promotion you had in market the 999 cheeseburger promo. Did that meet expectations on yield because I'm trying to reconcile the value perception gains you've reported with the deceleration and same store sales through July. Just any feedback on kind of how that impacted benefit of the quarter, to think about.

Jim Sanderson: Yeah, thanks for the question, Jim. A few things on cheesy burger is like when we actually look at the ticket size when cheesy burger was actually in the promotion, the ticket was very healthy and accrued to our average ticket. So first, while it was at a really attractive 99 price point for the first 500,000 pizzas, it was really healthy in terms of what it did to take it because the consumers had a certain amount of money that they were going to spend, and that allowed them to mix into other products as well.

Jim Sanderson: That's one thing. So the second is we did see sequential improvement on a two year stack as we possessed to the quarter. So we just want to make sure we keep in mind that, you know, like there was the launch of a different product in the prior year that informs what the Comtrend was like. Second, it was a fan favorite at 9.99. You know, it created the excitement and made us more top of mind with our consumers, which we think drove a lot of value.

Jim Sanderson: And now we've had like a really healthy balance as we move through the last couple of months from a premium innovation like cup of pepperoni at the beginning of the quarter to the time that we got to the middle of the quarter. We were talking about cheesy burger at 9.99. It's still delivered a fantastic ticket. And we were in market at parity relative to other competitors in terms of our mix and match offer.

Jim Sanderson: So we think that this recipe of finding the right balance of premium innovations that only Papa John can deliver showing spots of parity in the market on more value offering. It is a way that we believe that will continue to drive positive momentum on transactions over the next couple of quarters, but we are taking a really pragmatic approach where the consumer is today. And, you know, the things that are wrong consumers minds.

Jim Sanderson: And we're going to stay agile. We're going to keep testing. We're going to keep making really good decisions that balance transaction growth sales comp growth and unit economics for our franchises. And just to follow, you said you saw sequential improvement on a two-year stack. So no concern there with animalization having your consumer just trade down to the promotion without incremental traffic. Just want to make sure I frame up. So like when I look at what's happening in the last couple of more valued oriented LTOs that we've been putting media against.

Jim Sanderson: And there's a mix of them. We've seen really healthy tickets across all of them and all three of them have actually been netacled to the total blended or the blended average ticket. So while there may be trade that's happening within the consumer's baskets, what we're trying to ensure we do through the digital experience and give consumers the optionality for add-ons that make their pizza even better, being able to do the right cross-sales.

Jim Sanderson: And we think this mix of strong value orientation and make sure the consumers can get a great value. But they can also build their baskets the way they want, allows us to like prevent any material cannibalization and drive really healthy tickets, driving great value perceptible, for the Consumer. I guess, Robbie, it's probably helpful for Jim. Why don't you just talk a little bit about a couple of leaky buckets. I know we talked about the plans to address those already, but probably worth just reiterating where those leaky buckets were in the quarter.

Jim Sanderson: Yeah, so we've spent a bunch of time doing diagnostics on the business both from a crowd of grains standpoint from a consumer grain standpoint. And what we want to reinforce is where our transactions have been really healthy is in consumers who are buying for either social engagements or slightly larger orders to pies or more. We actually saw a really strong performance and we were up in those sorts of transactions types to the quarter.

Jim Sanderson: We were really seeing leaks in terms of transaction trends was with consumers who were only purchasing one pizza or no pizzas in the way they're only purchasing a side. So when we looked at the composition of where we needed to regain transactions. It gave us some real insights on how to adjust our barbells to allow us to continue to find that right balance of value orientation and premiumness. And that's actually what is special about this brand that we have a right to play and we can play at both ends of these barbells. And we're just getting sharper how we actually do that effectively in this consumer cycle and in future consumer cycles.

Jim Sanderson: All right, thank you.

Fred Whiteman: Thank you.

Todd Penagore: Our next question comes from the line of Fred Whiteman with Wolf Research who on is now open. Hey guys, just one follow up and then a question. I guess probably the the occasions that you were just touching on sort of the one pizza or less or the sides only is that really a proxy for lower income consumers. Should you think it's something else. And then the main question is just when you guys talk about the need to improve value and the value perception.

Todd Penagore: Wondering where you're seeing the biggest gap versus target is it versus pizza peers as a versus other parts of QSR or maybe versus your historical levels. Thanks. Yeah, so I'll take that with the first part of that question and then Todd, maybe I'll let you share some outside in perspective that's your new complement. So we think about the pizza business because pizza is for everyone. And we think that this is one of those categories that serves everyone that there's multiple occasions that consumers choose to purchase pizza and we think that when you're in that value oriented occasion.

Todd Penagore: Smaller purchase side that is where we're seeing maybe a little bit less of that impulse by to just pick up that small order. And that's really why we started to evolve our media mix and what we were marketing to and I don't know if you've seen our recent New York style spot, but if you listen to the voice over. We are really talking about the incredible value that you can get at 1099 an extra large pizza for 1099 and it's a fantastic pizza if you haven't tried.

Todd Penagore: So hopefully you'll start to see how we're taking a rich consumer insight partnering with our franchisees at a great fantastic price point to a talk where our leak is in the bucket. You know, the pizza business pizza category is a big category to continue to compete in and if you think about where I think we have the biggest challenge relative value, it's more versus our competitors within the pizza category. You know, it's a different occasion.

Todd Penagore: There's great value for the money in pizza. You can have it as a leftover. So when you think about what the consumer thinks about on overall value, pizza is just a great spot to play. And we're going to make sure that our relative value versus the pure group is quite strong. We'll keep an eye on the other categories and the shifting across categories because there is a lot of value centricity out there today. But we got to compete and win in the pizza category first.

Todd Penagore: Formos. Well, I'd like to sincerely thank you for your time this morning and your continued support of Papa John's. Appreciate it all the questions today. Thank you to our team members and franchisees for the resiliency and the agility you have shown during these unique times. It's exciting to see the way everyone has worked together and I can't see what, wait to see what we accomplished together in the future. Thanks everyone. Have a great day.

Operator: This concludes today's conference call. Thank you for your participation.

Operator: You may now disconnect.

Q2 2024 Papa John's International Inc Earnings Call

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