Q3 2024 Papa John's International Inc Earnings Call

Thank you for standing by and welcome to Papa Johns third quarter 'twenty to 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

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 one on your telephone to remove yourself from the queue. You May press star one again.

Speaker Change: I'd now like to hand, the call over to Stacie, Shirley Vice President of Investor Relations. Please go ahead.

Stacie Shirley: Good morning, and welcome to our third quarter 2024 earnings Conference call.

Stacie Shirley: This morning, we issued our third quarter earnings call.

The release can be obtained on our Investor Relations website at IR Dot Papa John's Dot com under the news releases tab or by contacting our Investor Relations Department.

That's fair underscore relation at Papa John's Dotcom.

Stacie Shirley: Joining me on the call. This morning are Tom.

Sure.

And Chief Executive Officer, and Ravi <unk>, our Chief Financial Officer, and Executive Vice President International.

Stacie Shirley: Let me 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.

Statements may involve risks and uncertainties that could cause actual results to differ materially from these statements.

Stacie Shirley: Forward looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC.

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

Stacie Shirley: 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: Thank you Stacey and good morning, everyone since joining Papa John's in August I've had the opportunity to meet with a significant number of our franchisees and team members around the globe.

Stacie Shirley: I've also engaged with many of our analysts and investors. These interactions have provided a deeper understanding of our customer needs organizational structure and operating model.

Stacie Shirley: It is clear we have opportunities to improve execution and profitability. We have work to do but based on my experience in the industry and my learning So the company, thus far I am confident.

The Papa John's has what it takes to be the best Pizza makers in U S R and to create significant sustainable shareholder value over the long term.

Stacie Shirley: Already we have made progress in bringing our new team members, who have the right skills and expertise to help us compete and win.

Stacie Shirley: Kevin VESCO and he joined US in September as Papa John's, New Chief Digital and Technology Officer.

Stacie Shirley: Kevin and I worked together at the Wendy's company, where I experienced firsthand his ability to lead technology innovation that delivered significant impact for our customers team members and franchisees.

Stacie Shirley: This morning, we also announced that <unk> will be joining Papa John's as our chief marketing officer, Janet as an experienced marketing leader in the restaurant franchisee and retail industry. She has been recognized for transformative brand campaigns.

Stacie Shirley: Consumer insights our teams will surely benefit from our unique blend of quick service restaurant modern retail marketing expertise that she brings to this role.

Stacie Shirley: Kevin in general are strong complement to the proven leaders, we have within the company, including Ravi well. In addition to serving as CFO will now be responsible for Papa John's International business and Joe <unk>, who in addition to serving as Chief restaurant in North America Development Officer will now be responsible for overseeing all global development as well as corporate and franchise.

Stacie Shirley: Restaurant operations.

Stacie Shirley: By adding industry expertise and enhancing our bench strength, we are bringing fresh insights and energy to our leadership team.

Stacie Shirley: As previously announced we will be hosting an analyst and investor meeting on December 12.

Speaker Change: Sure insights and learnings from my first hundred days at Papa John's and our journey ahead.

Speaker Change: This will also provide an opportunity for the investor community to interact with our executive management team will tasting pizza is from around the world.

Speaker Change: I'm looking forward to a more detailed discussion on December 12, I'd like to share some initial observations today.

Speaker Change: First starting with our North America business, we must accelerate profitable growth in our restaurants system and we will get there through five key elements.

Stacie Shirley: Relentlessly focusing on our core product proposition and improving innovation across the barbell traditional superior quality Pizza is the foundation of our success consumers know us for better ingredients better pizza and we need to deliver on this promise consistently every day to every customer across every restaurant.

Stacie Shirley: Additionally, we want to win the hearts and stomachs of customers with craveable menu items across occasions and value offers work is underway on core menu optimization to pave the way for more impactful product offerings.

Stacie Shirley: Need to make sure we deliver on our core menu offerings, new menu items resonate with our customers and our margins work extremely well for the system.

Stacie Shirley: Second amplifying, our marketing message to drive customer consideration and call to action across target segments.

Stacie Shirley: Better gets you. Some campaign that was launched earlier this year has traction, but we must enhance the message why consumers should choose Papa John's and highlight our pizza craftsmanship.

Stacie Shirley: Third investing in modernizing our tech stack to enable commercial and operational efficiency through improvements in the end to end digital customer experience and our customer relationship management platform, we need to make it easier for our customers and franchisees to do business.

Stacie Shirley: As noted Kevin has an outstanding record of delivering innovation that drive sales and I'm confident that he will do so at Papa John's.

Stacie Shirley: Fourth differentiating our customer experience to meet and exceed the convenience value and quality expectations of our customers channel of choice.

Stacie Shirley: By simplifying our processes optimizing our menu and employing technology. Our teams will be set up to be the best pizza makers in the business, while delivering exceptional experiences regardless of the order and delivery channels.

Stacie Shirley: Our Papa rewards loyalty program is a great example of how we can evolve our customer experience in the near term, while investing in and building capabilities over the longer term to enhance the lifetime value of customers ordering from Papa John's.

Stacie Shirley: Today, roughly one quarter of our active program members have not yet reached a reward due to the current thresholds.

Stacie Shirley: In the fourth quarter, we will allow members to unlock pop adult faster activating our members at higher rates to help drive transactions and frequency. The construct of the program is simple we believe that converting points to pop adult and smaller increments to members can unlock rewards faster for more immediate customer gratification.

Stacie Shirley: This is just the first step as we plan to make further improvements to our loyalty program. We understand the importance of building a program that innovates ahead of the category our loyalty program must be flexible and easy to understand to create strong emotionally connected consumer engagement that seamlessly integrates with our creative paid earned in on messaging we see.

Stacie Shirley: So much opportunity here with the greatest impact to come from more quickly driving that all important second purchase and shrinking the number of days it takes for future visits to occur.

Stacie Shirley: It is critical that we take the time needed and make the proper investments to develop and launch a long term structure that will deliver the rewards our customers deserve with unique brand experiences that matter to them, while maintaining a strong focus on acquiring new loyalty members.

Stacie Shirley: Finally, partnering with an evolving our franchisee base to be growth oriented focusing on increasing our market share through strategic new restaurant development in priority markets.

Stacie Shirley: From a development perspective, the North American market is our most accretive development opportunity and we remain committed to accelerating the expansion of our domestic footprint moving forward.

Stacie Shirley: Teams have made substantial progress this year in identifying real time cost savings throughout the development process, which enhances the value proposition for franchisees to expand their portfolio through.

Stacie Shirley: Through these efforts we now anticipate our remaining company owned restaurant openings in 2024, we will have an average build cost of approximately $500000, excluding marketing incentives and we are continuing to look for opportunities to further reduce these costs in the future.

Stacie Shirley: I'll have more details on how we specifically plan to deliver against this road map in December but want to underscore that we're acting with urgency.

Stacie Shirley: Laser focused on strengthening our foundation in the near term, while positioning the company to capitalize on opportunities to drive success and value creation over the long term.

Stacie Shirley: Next looking at our international business, our international strategy requires a narrower and deeper focus on the most impactful territories to fuel growth and create long term earnings power.

Stacie Shirley: Simply put international is not a large generic market, we see it as a collection of markets that we will target with an informed consumer centric mindset.

Stacie Shirley: The establishment of regional restaurant support centers and the hiring of experienced leaders to create holistic strategies within their markets has helped to align global best practices in operations marketing and technology with local preferences and needs.

Stacie Shirley: In China, we are focused on establishing a sustainable operating model to accelerate growth in this important global market.

Stacie Shirley: Korea, and Spain are well established markets with a solid foundation that we can continue to build on to drive long term growth through product innovation operational excellence and new restaurant development to improve penetration and accessibility in Latin America, we continue to build on our strong market share and remain focused on being the brand of choice.

Stacie Shirley: Finally, I've had the opportunity to travel to the UK this quarter with Ravi and several others and we're incredibly proud of the work that has been done in this market over the past year.

Stacie Shirley: This progress is a great example of the power of focus and teamwork.

Stacie Shirley: I've learned a lot through this process and gained tools that we can use in the future both in the U K and in other markets. Their innovation pipeline is robust insights driven and consumer led supported by a strong marketing focus.

Stacie Shirley: I'm excited to see how these markets and our international presence will grow under Ravi's leadership and look forward to building upon this momentum.

Stacie Shirley: Over the past three months my conviction in Papa John's has only grown stronger we are refining our strategic priorities and re energizing our team members and franchisees as we position ourselves to make the restaurant system better and more effective we are.

Stacie Shirley: We're committed to making strategic investments that will enable us to build for the future propel durable growth and value creation and help ensure consumers have as their top choice in their consideration set.

Stacie Shirley: We are working with urgency to strengthen the business in the near term while also working to position Papa John's for long term success and category leadership with a challenger brand mindset.

Stacie Shirley: And with that I'd like to turn it over to Ravi to discuss our third quarter results Robby.

Ravi: Thank you Todd and good morning, everyone.

Ravi: I'd like to start by echoing Todd's comments about the heightened level of focus and dedication across Papa Johns to that.

Ravi: While we continue to face external pressures our teams have been executing well against our strategic objectives, and we are starting to gain traction.

Stacie Shirley: We will stay focused on the things in our control and positioning Papa John's for value creation, especially yes consumer spending rebounds.

Stacie Shirley: Now, let me turn to the details of the quarter.

Stacie Shirley: In line with our expectations the challenging sales trends, we saw in the first half of the year persisted into the third quarter and we expect they will likely continue as we close out 2020 for that matter 2020 thought.

Stacie Shirley: Global system wide restaurant sales for the third quarter or approximately $1 $2 billion down approximately 3% in constant currency.

Stacie Shirley: The lower sales were attributable to lower comparable sales, partially offset by a 2% net unit growth on a trailing 12 month basis.

Stacie Shirley: North America comparable sales were down approximately 6% from a year ago.

Stacie Shirley: Most of the first half of 'twenty 'twenty four we saw lower transactions as we continue to grow in our aggregator channel was more than offset by a decline in our organic delivery and to a lesser extent a carryout business.

Stacie Shirley: We estimate this shift in channel mix once again created an approximate 100 basis point it went to comparable sales in the third quarter driven by the relatively profit neutral impact of reduced delivery fees and impact which is expected to continue through the remainder of this year.

Stacie Shirley: As we discussed last quarter in this current economic cycle consumers become more deliberate in managing their overall ticket and are showing a preference for brands that are offering a compelling value.

Stacie Shirley: The third quarter, we shifted our efforts and investments towards initiatives that improve our value perception, while still protecting our brand positioning.

Stacie Shirley: Efforts are having a positive impact on transactions as we saw year over year momentum build throughout the third quarter in both Carryout and delivery channels. In fact, our carrier transactions turned positive in September and that trend continued in October it will take several more quarters to further narrow our value.

Stacie Shirley: Perception gap versus others within the <unk> segment, but the tests, we are running within our company owned restaurants give us confidence that we can produce incremental wins over time.

Stacie Shirley: I think Papa pairings always on promotion has also helped and we are working to refresh this great offering to keep it exciting for our customers.

Speaker Change: As Todd mentioned, we're moving with urgency, but it's also important to strike the right balance between volume price and unit profitability to maintain a strong competitive position for the long term.

Stacie Shirley: From an international perspective comparable sales were down 3% in the third quarter as we continue to operate in a dynamic environment across several of our key markets, including the middle East.

Stacie Shirley: Excluding this region.

Stacie Shirley: National and comparable sales were down less than 1% from a year ago.

Stacie Shirley: We remain encouraged that our international and transformation initiatives will yield gains and position us for strategic growth in the years to come.

Stacie Shirley: Total revenues for the third quarter were $507 million down 3% from last year, primarily reflecting an approximately $10 million decrease in international revenues, reflecting the closure of 43 underperforming U K company owned restaurants in the second quarter of this year.

Stacie Shirley: And the Refranchising of 60 company owned restaurants in the U K market through the first nine months of 2024, and approximately $8 $5 million decrease in domestic company owned restaurant revenues, reflecting lower transaction volumes and so a lesser extent ticket and an approximately 5 million.

Stacie Shirley: Decrease related to preferred marketing, our formerly wholly owned print and promotions company, which was sold in the fourth quarter of 2023.

Stacie Shirley: Somewhat offsetting these revenue declines was a $5 $5 million increase in North America commissary revenues due to higher commodity prices in the quarter, partially offset by lower volumes.

Stacie Shirley: Turning to profits.

Stacie Shirley: Adjusted operating income for the third quarter of 2024 was $29 million down $4 million from a year ago.

Stacie Shirley: Year over year change in adjusted operating income was the result of anticipated lower operating margins at our domestic company owned restaurants, as we strategically reinvested some of our first <unk> savings and to improving our value perception with customers. As a reminder, the third quarter is typically our lowest margin quarter.

Stacie Shirley: Due to seasonality of sales.

Stacie Shirley: Overall, our domestic company owned restaurants segment margins declined approximately 360 basis points compared with the prior year third quarter. The lower margins were primarily driven by an approximate 190 basis point decline from higher food basket cost, particularly around cheese and <unk>.

Stacie Shirley: Checking which were anticipated and an approximately 40 basis point decline from lower average ticket.

Stacie Shirley: Restaurant labor costs were roughly flat with the prior year third quarter as our teams continue to do an excellent job optimizing the business model as we see shifts in channel mix and consumer demand trends.

Stacie Shirley: For the first nine months of 2024, our adjusted operating margin was seven 3% approximately 30 basis points higher compared with the first nine months of 2023.

Stacie Shirley: Full year, we anticipate adjusted operating margins to be roughly flat with the prior year when excluding 2020, Three's 50, <unk> week benefit.

Stacie Shirley: Moving onto cash flow and our balance sheet.

Stacie Shirley: For the first nine months of the year net cash provided by operating activities was $56 million free cash flow was $9 million.

Stacie Shirley: A decrease compared with the prior year, reflecting unfavorable changes in working capital and timing of cash payments for advertising and income tax partially offset by a $4 million decrease in capital expenditures.

Stacie Shirley: Our business operates with ample liquidity, which at the end of the third quarter totaled approximately $291 million in cash and borrowings available under our revolving credit facility and our gross leverage ratio of 3.0 times.

Stacie Shirley: Continued financial Prudence and strong balance sheet supports our ability to invest in the strategic initiatives that we've discussed today and navigate the continued challenging consumer environment, while maintaining our financial stability.

Stacie Shirley: Turning to our outlook, we are narrowing our 2020 for North America comparable sales guidance to a range of down three five to four 5%, which implies down low single digits to mid single digits in the fourth quarter through.

Stacie Shirley: Through our first four weeks of October North America comparable sales were down approximately 4% with transaction trends continuing to improve this is a result of our strategic pricing decisions as we focus on improving our value perception by prioritizing transactions over ticket in the near term.

Stacie Shirley: We expect to see gradual improvement in both value perception and sales throughout 2025, as we began to see the benefit of the strategic decisions that we have executed this year.

Stacie Shirley: Internationally, we anticipate full year 2024 sales comps will be down low single digits, but improving year over year.

Stacie Shirley: Also anticipate fourth quarter comps to be down low single digits as the softer consumer environment in China is somewhat offset by solid performance in other regions. We.

Stacie Shirley: We are pleased with the continued progress of our international transformation initiatives and we expect this segment of our business to be a profit growth contributor going forward.

Stacie Shirley: We anticipate 2024, adjusted operating income to be between $135 million to $150 million, a slightly narrower range than we spoke about previously as our teams execute against our strategy and operate with agility and making strategic investments to drive long term growth.

Stacie Shirley: We continue to expect benefits in three areas first the increase to our fixed commentary margin second.

Stacie Shirley: International transformation initiatives, notably the closure and Refranchising of the UK restaurants as mentioned earlier and third continued growth in North America development.

Stacie Shirley: However, we expect these benefits will be somewhat offset by lower North America comparable sales and incremental investments in advertising to support our year to go initiatives.

Stacie Shirley: In terms of other non operating expense items, we expect our D&A expense for 2020 forward to be between 70 and $75 million, our net interest expense to be between 40% and $45 million our capital expenditures to be at the lower end of our $75 million to $85 million range.

Stacie Shirley: And our tax rate to be at the higher Ed about 23% to 26% range.

Stacie Shirley: From a development perspective, the North America market remains Papa John's most accretive development opportunity we.

Stacie Shirley: We have opened 49, new restaurants through the first nine months of the year, while closing 28, resulting in a total of 21 that North America restaurants, and as Todd mentioned earlier, we continue to be pleased with new restaurant performance.

Stacie Shirley: This brings our total North America restaurant count to 3454 for fiscal year 2024, we continue to expect to open more than 100, new restaurants.

Stacie Shirley: While also anticipating closures of underperforming restaurants to remain well within our historical norms.

Stacie Shirley: This in mind, we anticipate 2024 net new openings to be between 50, and 60 restaurants with a significant number of openings still to come in the fourth quarter.

Stacie Shirley: From an international perspective through the first nine months of the year, we have opened 115 restaurants on a gross basis.

Speaker Change: And learn we are looking at a lot of different value propositions during the course of.

Stacie Shirley: Of the quarter around 699 tests on two mediums some carryout tests at different price points and sides test some bounce back tests.

Stacie Shirley: Did a lot of work to really figure out what we needed to do to really supplement what we have in our loyalty program what would happen if folks had additional pop a doe would it drive.

Stacie Shirley: <unk>.

Stacie Shirley: Make sure that we've got a strong calendar to come out of the gate to compete early next year and then make sure we get onto the regularly scheduled programming with.

Stacie Shirley: A great balanced innovation calendar with news across both the premium core side of the equation as well as on the value side work to do to make sure we're making the best pieces in the business I know, we can continue to improve the quality not just from an execution, but from a design of our pizza says I know, we can continue to make sure.

Stacie Shirley: At Papa pairings is relevant.

Stacie Shirley: But we know we've got some headwinds too on the on the commodity front in the near term that are probably provide a little bit of pressure on margins.

Stacie Shirley: We're going to have to thread the needle both on on transactions and price realization mix.

Stacie Shirley: As we work through that any other thoughts Robby yeah. Thanks Todd.

Robby: A few more specifics I may help you.

Robby: Like the way, we're thinking about Q4 food costs is that the food basket will be up mid single digits.

Speaker Change: As Todd mentioned, our focus is first.

Speaker Change: Re engage in and those things are things that we've consistently done in the past you know as we moved into the fourth quarter here, we've traded up a bit with chaperone, yet at $12 99 price point.

Stacie Shirley: But we need to make sure that we're back in the consideration set first and foremost to be competitive on price, but we also have to amplify our message around quality and why we're uniquely different and you think about everything that we do day in and day out in our restaurants from the fresh never frozen dough to the six simple ingredients to a farm to fork on what we do with our pizza.

Stacie Shirley: We've gotten our build-out costs down to $500,000, and that's a meaningful improvement versus the run rate we were on during the pandemic and slightly thereafter. So first, that has had an impact.

Stacie Shirley: We see that as really beneficial, too. We believe that we are creating...

incentive right now for our

Stacie Shirley: Our franchisees develop and we talk about gross openings north of a hundred locations.

Stacie Shirley: This year and we're encouraged and glad that we're in that spot You know, we're going to continue to all evaluate incentives as we go forward to strike the right balance of

Stacie Shirley: developing in the right markets across the United States and across the world. But fundamentally, we think that as we continue to drive transactions

Stacie Shirley: We continue to improve, build out costs, we continue to work our core menu and be the best pizza makers. The model gets stronger and stronger over time.

are still suits 3

Stacie Shirley: 0% for three years in 2025. Those are really strong incentives.

Stacie Shirley: It really comes down to the confidence and a growth mindset of the franchise system.

Stacie Shirley: The more momentum we start to build in this business, the more confidence that we start to create as we go into next year.

Stacie Shirley: As we look at our development pipeline for 2025, where we sit today, we've probably got more visibility.

Stacie Shirley: right now than where we would have been a year ago at this time for visibility into this year.

Stacie Shirley: in other businesses and into the trade areas that we know we should be able to serve and that's our job. There have been some trends.

Stacie Shirley: have an attractive incentive, make sure the economic model is really strong, and really start to lean in to provide more access to our brand. And we're working that hard.

Speaker Change: And just to clarify on the guidance, you know, $135,000 to $150,000 in operating income for the year.

It's a pretty wide range for 4Q.

Speaker Change: given that guidance. Is that a reflection of just the investments and the test and learn that you guys are still doing or is there something else that keeps that range rather large for 4Q?

Speaker Change: I'm more a testament to some of the flexibility that we want to continue to invest to compete to finish out the year and build a little momentum and some of the work that we're doing on some testing as we evolve some of the digital programs out there.

Speaker Change: So we kept it purposely a little bit wide to to account for the unknown on a couple of those things and give us a little more flexibility to finish out the year with some momentum.

Understood. Thank you very much.

Thank you.

Speaker Change: Our next question comes from the line of Brian Mullen of Piper Sandler. Your line is open, Brian.

Brian Mullen: Thank you. Just a follow-up on development. Todd, wondering if you view the domestic system still being about 15% company-owned. Is that something that makes sense for Papa John's over the long term? And, you know, in your prior answer, you know, as you continue to stabilize the business, build up that confidence with franchisees.

Brian Mullen: Also, make progress with cost to build. Could you envision doing any kind of re-franchising with development agreements attached with franchisees that might be willing to build?

Brian Mullen: Yeah, no, thanks for the question, Brian, and, you know, we clearly did some refranchising as part of the transformational work in the UK already before my time.

Brian Mullen: you know, continue that into the third quarter. You know, in the third quarter, we've re-franchised 13 restaurants in Wisconsin.

Brian Mullen: You know, we are actively evaluating the appropriate mix of company ownership versus franchise ownership and re-franchising really has to come with.

Brian Mullen: How do you put restaurants in the right hands of operators that are growth minded, thinking about investing into the future, want to re-image storefronts, want to sign new development commitments?

Brian Mullen: and are really partners of the brand to continue to drive all of us forward into the future.

Brian Mullen: You know, as we're going through all of our strategic initiatives, we are looking actively at what's the right level of company ownership.

Brian Mullen: What's the role of re-franchising and how does that help stimulate even more growth for our system?

Brian Mullen: as we scale up franchisees that are growth-minded and bring some new folks into the system to make sure we got some new growth-minded franchisees that want to be part of the Papa John's journey in the future. So we are actively looking at that and we'll talk more about that at future dates as we get together.

Speaker Change: Thank you and just a quick follow-up to that and thank you for all the the answer there. You know five percent seems to be a level that other QSR systems stop at and there I think there's benefits to continue to own restaurants. If you were to go down this path would you envision wanting to continue to own some restaurants?

Speaker Change: I think it's always important to own some restaurants, Brian, whether it was in the last system or the system. I mean, you have to have the operating backbone so you can buy and or sell over time, depending on what happening when in the system with the franchise community. You know, it's the right number 5%. I think the right numbers have enough skin in the game to actually be a great brand steward.

Thank you.

Thank you.

Speaker Change: Our next question comes from the line of Dennis Gager of UBS. Your question please, Dennis.

Speaker Change: From a comp basis, driven by transactions similar in terms of some of our key markets in EMEA up high single digits or low double digit growth and then Korea. Another one of our important markets were up mid single digit. So there were some puts and takes across the across the markets, but I just wanted to reinforce where we want to grow we are.

Speaker Change: We're putting our time and energy and we're starting to see the proof points come to life of where where we lean in and focus and we're seeing gains, but narrow and deep in a really thoughtful approach to how we develop is critical to my international strategy and it's been great as I've had the opportunity to learn the business.

Speaker Change: And get out into some of the markets that the work that we've done in the U K to set it up for long term success. It's not just the things we talked about on the prepared remarks, but spending a lot of time with the franchise leaders willing to lean in and invest back into marketing to compete in that market, that's exciting right because they've got the confidence into the future.

Speaker Change: Was that a another board meeting and and and.

Speaker Change: Chile met with our folks down in that market clearly driving a lot of sales on a lot of growth.

Speaker Change: In another market in Latin America, and I know, we've got a couple of markets, Chile, Peru, they've been doing quite well, but you know there's a couple of handfuls of market in the spirit of narrow and deep that I know Robbie is going to spend a disproportionate amount of his time.

Speaker Change: And even within those markets go narrow on where you really need to scale up key markets to make sure. Our brand is relevant accessible and has the brand presence it needs to drive the economics, if you will even more growth in those markets. So looking forward to that journey and ravi's partnership with <unk> to bring that to life.

Speaker Change: Thanks, guys and then just one more if I could quickly flip it and just because it comes up.

Speaker Change: How do you think about the competitor intrusion, maybe next year in the key areas of strength for you third party select key menu items anything you'd do differently to plan for that or do you kind of play the game that you that you outlined in that.

Speaker Change: We will take care of themselves. Thank you.

Speaker Change: Yes, I think we play the game, we outline I mean as you think about.

Speaker Change: Other folks picking up other platforms and third party.

Speaker Change: We've competed well on innovation, we've competed well on price.

Speaker Change: Pizza category still is an opportunity I think in third party to drive even more penetration as we've been traditional first party but.

Speaker Change: But I do think if we play our playbook find the right balance to compete in and three P. Make sure we get the best deals and the best experience in <unk>.

Speaker Change: We can start to bend some trends on a net net between the two channels and what we're doing on the delivery business and it's going to be a great balance of making sure that.

Speaker Change: There is good value there.

Speaker Change: Absolutely like the QRS or space. It is dynamic and aggressive right now, but our Carryout business did turn positive in October and we continue to be encouraged by those results and three like you know like we really leaned in to the data science on the marketing side and were Denver.

Speaker Change: L T OS that specifically drive repeat didn't reach and engage our frequent and super frequent consumer so as Todd said, we're going to play our game, but.

Speaker Change: We are closely watching the business and checking and adjusting.

Speaker Change: Mike.

Mike: Great Digital Native company what.

Speaker Change: Which has been great for me to see rate as I as we walk watch this business and learn this business for me personally it through my first almost 100 days now I mean, ensuring that where consumer led insight driven in everything we do.

Speaker Change: Make sure that when we go act, we've got confidence that we're going to get a return for for the actions that we're taking.

Speaker Change: And really making sure that we have that challenger brand mindset to play the game a little different to be disruptive.

Speaker Change: All opportunities ahead.

Speaker Change: I feel great finally got to build out the team you know haven't Kevin on board, Jonathan Bromberg getting announced today on the marketing side, Joe and Ravi picking up expanded responsibilities.

Speaker Change: Team that I'm Super proud of a team that works really well together and.

Speaker Change: And I think youre going to see that.

Speaker Change: Those benefits play out and not only how the senior team works together here. The talent, we have below the senior team, but our partnership with the franchise community to lean in and play a different game to compete even stronger as we finish this year and get into 2025, I'm really excited about those days ahead.

Speaker Change: Thank you. Our next question comes from Jim Solera of Stephens, Inc. Your question. Please Jim.

Speaker Change: Hey, guys. Thanks for fitness and Todd I wanted to go back to something you said earlier about pizza competing for bigger share of voice and stomach on third party.

Speaker Change: Think that there's still a big incremental awareness opportunity on those apps or is it really just about getting customers to kind of reengage at a higher frequency with be the Papa John's pizza category more broadly.

Speaker Change: Yeah no. Thanks for the question, Jim I do think Theres, a little bit on the awareness front I mean folks are so traditionally used to.

Speaker Change: They're calling the restaurant are ordering on the web or the app buy directly from.

Speaker Change: Our first party.

Speaker Change: So they are starting to learn that pizza and it's now available also on third party. So I think there is a little bit on the awareness.

Speaker Change: But the more reps that folks get right, they're not going to carry that many apps around.

Speaker Change: I think that once they start to look at the variety. They look at the time of the quality and ultimately look at the value for the money. When you think about what pizza can do feed a family of four.

Speaker Change: An extra large pizza.

Speaker Change: Syed and and a drink, it's a really affordable price even on even delivered with a tip. So I do think folks will start to see there is real value in pizza.

Speaker Change: Third party will then.

Speaker Change: As they start to realize that between the awareness.

Speaker Change: And the reps I think you'll start to see more frequency and an opportunity to grab a little bit of share.

Speaker Change: The pizza category and three P M.

Speaker Change: And then we will continue to drive the heck out of making sure we get the best deals and the best experiences one Peter Abbott balanced, but anything else Ravi yes.

Speaker Change: Maybe a few quick comments specific to Papa Johns. So first we saw a consideration for our brand improve as we progressed through <unk>.

Speaker Change: We're pleased that we're continuing to make progress on consideration that as a long term strategy for us to continue to drive that second is like actually as you tear down the Papa John's brand by region by market Papa John's is actually the number two player from a market share standpoint in a number right key strategic.

Speaker Change: <unk> markets, particularly when you look at the southeast.

Speaker Change: Midwest So as we've doubled down on this focus on continuing to drive consideration focus on where we want to win we believe that with a great value message with the right balance of premium with a focus on being the best.

Speaker Change: Pizza in the game and this targeted focus on the markets that matter most.

Speaker Change: We think that that's part of the recipe to take share over time.

Speaker Change: Thank you. Our next question comes from the line of Jim Sanderson of Northcoast Research. Your question. Please Jim.

Jim Sanderson: Hey, Thanks for the question I, just wanted to follow up a little bit more on the discussion related to third party. Just how are you looking at that marketplace next year.

Jim Sanderson: If one of your.

Jim Sanderson: Top competitors partners with door dash and expense that.

Jim Sanderson: Penetration and third party channels as it might.

Jim Sanderson: <unk> to be able to maintain share a little concerned about the share shift.

Speaker Change: Yes. Thanks for the question Jim a couple of things. So first is like we're going to focus both on our <unk> business as well as three P. As Todd talked about the number of things we're doing on the tech stack side as well as some of the royalty work that we're doing in Q4 socket.

Speaker Change: We've been watching the trends as competitors have rolled on to the Aggregators and we continue to believe we are gaining our fair share if not more.

Jim Sanderson: We look at particularly what's happening at both we continue to see in both of the large scale Aggregators. We are continuing to see growth year on year, and we think that this category has room for for us to continue to grow regardless of what competitive Dru comes on.

Jim Sanderson: We want to be where the consumer is and we want to serve them, where it where they want to be served.

Jim Sanderson: That's a little bit why we're taking a really equal balance focus on one P and three P. M. We have a number of years of history now in the <unk> business and our team is dialed in to how to compete in that marketplace and we have a really solid team that has lots of experience whether it's working in the business here at Papa John's.

Jim Sanderson: <unk> on that business or from their experiences prior to being at Papa John's and I think we're well positioned I mean, we've got great partnerships will make sure we drive awareness with those partnerships innovation will play a role our premium positioning certainly helps in that channel and we also have great value.

Jim Sanderson: In that channel. So I do think we're well positioned to compete I think there is room for category expansion as we talked a little bit earlier, and the lunch and the and the late night opportunities for us to continue to grow our moral opportunities in that aggregator channels. So just complement some of the things that Ravi said.

Jim Sanderson: I think we're in a good position to continue to compete no matter what the competition does in that channel.

Speaker Change: I would now like to turn the conference back to Todd Pentagon for closing remarks, Sir.

Todd Pentagon: Well, thanks, and thanks for all the questions today, guys I really appreciate it I'd like to sincerely. Thank you for your time. This morning, and your continued support of Papa John's.

Todd Pentagon: Thank you to our team members and our franchisees for the resiliency and the agility you continue to show during these unique times look forward to meeting many of you in person on December the 12th in Atlanta that that's right around the corner. So she also thanks everyone.

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

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