Q3 2025 Papa John's International Inc Earnings Call

November 6, 2025

Todd: Comprehensive testing program, which allows us to rigorously vet our new products and ensure that innovation is truly customer-led and insight driven, which will benefit the business in 2026 and beyond. In Q3, we continued to reinforce our barbell strategy by leveraging value messaging alongside full margin product, positioning our $6.99 Papa Pairings platform alongside our buy one get one offer, in addition to introducing our garlic five cheese crust in August. Combined, these offerings helped deliver another quarter of growth in total number of pizzas ordered. To remain competitive in the dynamic QSR marketplace, we must execute on our second strategic priority of amplifying our marketing message to differentiate our brand and win customer consideration. In this environment, price is a key component. Accordingly, we sharpened our value proposition.

Todd Penegor: Comprehensive testing program, which allows us to rigorously vet our new products and ensure that innovation is truly customer-led and insight driven, which will benefit the business in 2026 and beyond. In Q3, we continued to reinforce our barbell strategy by leveraging value messaging alongside full margin product, positioning our $6.99 Papa Pairings platform alongside our buy one get one offer, in addition to introducing our garlic five cheese crust in August. Combined, these offerings helped deliver another quarter of growth in total number of pizzas ordered. To remain competitive in the dynamic QSR marketplace, we must execute on our second strategic priority of amplifying our marketing message to differentiate our brand and win customer consideration. In this environment, price is a key component. Accordingly, we sharpened our value proposition.

As to rigorously vet, our new products and ensure that innovation is truly customer led and insight driven which will benefit the business in 2006 and beyond.

In the third quarter, we continued to reinforce our barbell strategy by leveraging value messaging alongside full margin product positioning our $6 99, Papa pairings platform alongside our buy one get one offer in addition to introducing our garlic five cheese crust in August combined these offerings helped deliver another quarter of growth.

Total number of pizza ordered.

To remain competitive in the dynamic USR marketplace, we must execute on our second strategic priority of amplifying, our marketing message to differentiate our brand and win customer consideration and in this environment price is a key component.

Accordingly, we sharpened our value proposition, we post an additional promotions such as buy one get one free pizza offers in mid September and mid October.

Todd: We pulsed in additional promotions such as buy one, get one free pizza offers in mid-September and mid-October, which were effective in driving orders with multiple pizzas and bending the trends for select weeks. To capture the small ticket, lower frequency customer, we recently launched a 50% off carryout offer supported by media. Very preliminary results show improved order trends, but we would like to see the offer out in the market longer before making any definitive statements. We are also very excited to have achieved our highest sales day ever in North America on Halloween last week. While we are managing the moment with a more forward-leaning value proposition, we are also building for the future with initiatives that will grow sales and expand margin, including a robust innovation pipeline, new sales layers, elevated operations, and a technology platform that delivers a seamless, connected customer experience.

Todd Penegor: We pulsed in additional promotions such as buy one, get one free pizza offers in mid-September and mid-October, which were effective in driving orders with multiple pizzas and bending the trends for select weeks. To capture the small ticket, lower frequency customer, we recently launched a 50% off carryout offer supported by media. Very preliminary results show improved order trends, but we would like to see the offer out in the market longer before making any definitive statements. We are also very excited to have achieved our highest sales day ever in North America on Halloween last week. While we are managing the moment with a more forward-leaning value proposition, we are also building for the future with initiatives that will grow sales and expand margin, including a robust innovation pipeline, new sales layers, elevated operations, and a technology platform that delivers a seamless, connected customer experience.

We're effective in driving orders with multiple pieces and bending the trends for select weeks.

To capture the small ticket lower frequency customer, we recently launched a 50% off carryout offer supported by media.

Preliminary results show improved order trends, but we would like to see the offer out in the market longer before making any definitive statements.

We are also very excited to have achieved our highest sales day ever in North America on Halloween last week.

So we are managing the moment with a more forward leaning value proposition. We're also building for the future with initiatives that will grow sales and expand margin, including a robust innovation pipeline, new sales layers elevated operations and a technology platform that delivers a seamless connected customer experience.

Todd: In Q3, we invested an incremental $4 million towards supplemental marketing to support our value proposition and build on the foundational investments we've made to the year. We directed part of this investment toward working media to support our BOGO offer during the quarter, which drove improvement in order trends while the promotion was in market. By optimizing our channel mix and audience strategy, we achieved more efficient media spending. We also invested advertising dollars in non-working media to launch a comprehensive testing program and better inform future spend. These foundational investments will continue to deliver benefits heading into 2026 as we further optimize media mix, launch products and campaigns informed by our test and learn program, and expand our social share of voice. These non-working media investments are one time and not expected to repeat in 2026.

Todd Penegor: In Q3, we invested an incremental $4 million towards supplemental marketing to support our value proposition and build on the foundational investments we've made to the year. We directed part of this investment toward working media to support our BOGO offer during the quarter, which drove improvement in order trends while the promotion was in market. By optimizing our channel mix and audience strategy, we achieved more efficient media spending. We also invested advertising dollars in non-working media to launch a comprehensive testing program and better inform future spend. These foundational investments will continue to deliver benefits heading into 2026 as we further optimize media mix, launch products and campaigns informed by our test and learn program, and expand our social share of voice. These non-working media investments are one time and not expected to repeat in 2026.

In the third quarter, we invested an incremental $4 million towards supplemental marketing to support our value proposition and build on the foundational investments we've made through the year we.

We directed part of this investment towards working media to support our bogo offer during the quarter, which drove improvement in order trends will the promotion was in market.

By optimizing our channel mix and audience strategy, we achieved more efficient media spending we also invested advertising dollars and non working media to launch a comprehensive testing program and better inform future spend.

These foundational investments will continue to deliver benefits heading into 2026 as we further optimize media mix launch products and campaigns informed by our test and learn program and expand our social share of voice.

Non working media investments are one time and not expected to repeat in 2026.

Todd: Turning to our brand positioning, we continue to showcase Papa Johns differentiation, emphasizing the six simple ingredients of our fresh, never frozen original dough. Third-party research consistently tells us that customers value high-quality real ingredients, and we believe that our commitment to fresh, quality, simple ingredients is especially important given current customer trends. For example, we have seen strong improvement in our brand perception quality score since the onset of our Meet the Makers marketing campaign, which emphasized our product differentiation and six simple ingredients. Our third strategic priority is investing in technology and our tech stack to deliver a more seamless experience across our digital assets and own channels, better connect with customers, and support greater efficiency across our operations by leveraging data and AI.

Todd Penegor: Turning to our brand positioning, we continue to showcase Papa Johns differentiation, emphasizing the six simple ingredients of our fresh, never frozen original dough. Third-party research consistently tells us that customers value high-quality real ingredients, and we believe that our commitment to fresh, quality, simple ingredients is especially important given current customer trends. For example, we have seen strong improvement in our brand perception quality score since the onset of our Meet the Makers marketing campaign, which emphasized our product differentiation and six simple ingredients. Our third strategic priority is investing in technology and our tech stack to deliver a more seamless experience across our digital assets and own channels, better connect with customers, and support greater efficiency across our operations by leveraging data and AI.

Turning to our brand positioning we continue to showcase Papa John's differentiation, emphasizing the six simple ingredients of our fresh never frozen original dough.

Third party research consistently tells us that customers value high quality real ingredients and we believe that our commitment to fresh quality simple ingredients is especially important given current customer trends.

For example, we have seen strong improvement in our brand perception quality score since the onset of our meet the makers marketing campaign, which emphasized our product differentiation and six simple ingredients.

Our third strategic priority is investing in technology, and our tech stack to deliver a more seamless experience across our digital assets and owned channels better connect with customers and support greater efficiency across our operations by leveraging data and AI.

Todd: We are especially excited about the power of building on our marketing advancements by inviting customers into the brand and then layering in hyper-personalization to drive additional engagement and retention. With approximately 70% of our sales generated through own digital platforms, delivering an effortless customer experience is essential. We recently achieved a major milestone with the launch of a modernized first-party digital ordering platform across our mobile apps on both Android and iOS, which improves navigation, reduces clicks to purchase, and improves order tracking and targeted communication. The platform improvements are already driving higher conversion rates, reflecting our continued focus on performance, usability, and speed to market. Building on this success, we are working to modernize the design and to deliver an elevated customer experience on our website, which we expect to launch in December.

Todd Penegor: We are especially excited about the power of building on our marketing advancements by inviting customers into the brand and then layering in hyper-personalization to drive additional engagement and retention. With approximately 70% of our sales generated through own digital platforms, delivering an effortless customer experience is essential. We recently achieved a major milestone with the launch of a modernized first-party digital ordering platform across our mobile apps on both Android and iOS, which improves navigation, reduces clicks to purchase, and improves order tracking and targeted communication. The platform improvements are already driving higher conversion rates, reflecting our continued focus on performance, usability, and speed to market. Building on this success, we are working to modernize the design and to deliver an elevated customer experience on our website, which we expect to launch in December.

We are especially excited about the power of building on our marketing advancements by inviting customers into the brand and then layering in hyper personalization to drive additional engagement and retention.

With approximately 70% of our sales generated through own digital platforms, delivering an effortless customer experience is essential.

We recently achieved a major milestone with the launch of a modernized first party digital ordering platform across our mobile apps on both Android and iOS, which improves navigation reduces clicks to purchase and improves order tracking and targeted communication.

The platform improvements are already driving higher conversion rates, reflecting our continued focus on performance usability and speed to market.

Building on this success, we are working to modernize the design and to deliver an elevated customer experience on our website, which we expect to launch in December.

In addition to our improved digital ordering platforms. We continue to enhance our end to end digital customer experience and CRM platform to increase engagement session conversions and repeat purchases.

Todd: In addition to our improved digital ordering platforms, we continue to enhance our end-to-end digital customer experience and CRM platform to increase engagement, session conversions, and repeat purchases. Over the last quarter, we benefited from our higher CRM engagement with customers through emails, app push notifications, and SMS communications. This is important foundational work that will continue to drive benefits in 2026. Our fourth priority is differentiating our customer experience to meet and exceed the convenience, value, and quality expectations of our customers across all of our demand channels. Starting with loyalty, our loyalty program is a prime example of how we continue to evolve and build brand advocacy amongst our most valuable customers. It's been almost one year since we launched our enhanced loyalty program with a lower redemption threshold for Papa Dough and a call to action for our loyalty members.

Todd Penegor: In addition to our improved digital ordering platforms, we continue to enhance our end-to-end digital customer experience and CRM platform to increase engagement, session conversions, and repeat purchases. Over the last quarter, we benefited from our higher CRM engagement with customers through emails, app push notifications, and SMS communications. This is important foundational work that will continue to drive benefits in 2026. Our fourth priority is differentiating our customer experience to meet and exceed the convenience, value, and quality expectations of our customers across all of our demand channels. Starting with loyalty, our loyalty program is a prime example of how we continue to evolve and build brand advocacy amongst our most valuable customers. It's been almost one year since we launched our enhanced loyalty program with a lower redemption threshold for Papa Dough and a call to action for our loyalty members.

Over the last quarter, we benefited from our higher CRM engagement with customers through E mails, App push notifications and SMS communications.

This is important foundational work that will continue to drive benefits in 2026, our fourth priority is differentiating our customer experience to meet and exceed the convenience value and quality expectations of our customers across all of our demand channels.

Starting with loyalty our loyalty program is a Prime example of how we continue to evolve and build brand advocacy amongst our most valuable customers spent almost one year since we launched our enhanced loyalty program with a lower redemption threshold for Papa dough and a call to action for our loyalty members.

Todd: We continue to see benefits of these changes with increased Papa Dough redemptions and higher order frequency amongst our loyalty members. As of Q3, I'm pleased to say that we've reached 40 million total loyalty accounts, an increase of almost 1 million new members over the last 3 months. It's crucial that we serve our customers with excellence every time, no matter which demand channel they choose. Despite increased competitive pressure and promotional activity during the quarter, we continue to generate positive sales and order growth in our aggregator channel, with sales through our partners remaining accretive and beneficial to four-wall profitability. The aggregators deliver a customer that is, on average, more affluent compared with customers utilizing our first-party digital platforms. We believe that with our premium product position, high-quality ingredients, and our value message, Papa Johns has a compelling competitive advantage with the aggregator ecosystem.

Todd Penegor: We continue to see benefits of these changes with increased Papa Dough redemptions and higher order frequency amongst our loyalty members. As of Q3, I'm pleased to say that we've reached 40 million total loyalty accounts, an increase of almost 1 million new members over the last 3 months. It's crucial that we serve our customers with excellence every time, no matter which demand channel they choose. Despite increased competitive pressure and promotional activity during the quarter, we continue to generate positive sales and order growth in our aggregator channel, with sales through our partners remaining accretive and beneficial to four-wall profitability. The aggregators deliver a customer that is, on average, more affluent compared with customers utilizing our first-party digital platforms. We believe that with our premium product position, high-quality ingredients, and our value message, Papa Johns has a compelling competitive advantage with the aggregator ecosystem.

We continue to see benefits of these changes with increased Papa do redemptions and higher order frequency amongst our loyalty members.

As of the third quarter I'm pleased to say that we've reached $40 million total loyalty accounts, an increase of almost 1 million new members over the last three months, it's crucial that we serve our customers with excellence every time, no matter, which demand channel they choose despite increased competitive pressure and promotional activity during the quarter, we continued to.

Generate positive sales and order growth in our aggregator channel with sales through our partners remaining accretive and beneficial to four wall profitability.

The aggregators deliver a customer that is on average more affluent compared with customers utilizing our first party digital platforms, we believe that with our premium product position high quality ingredients and our value message Papa John's has a compelling competitive advantage with the aggregator ecosystem. This resulted in a low.

Todd: This resulted in a low teens improvement in total net sales across the aggregators. Turning to first-party delivery. Delivery is an important component of our business, and we are committed to consistently providing an excellent delivery experience while also improving our performance in the channel. We continue to roll out our delivery tracking service across our system with approximately 60% of the US restaurants now offering the service. We expect to substantially complete the rollout to all US restaurants by Q1 2026. Finally, our restaurant general managers and their teams are hard at work executing and delivering a more consistent experience in our restaurants. We've expanded our operations evaluation tools to additional restaurants, which is driving higher product quality, taste of food, and customer satisfaction scores.

Todd Penegor: This resulted in a low teens improvement in total net sales across the aggregators. Turning to first-party delivery. Delivery is an important component of our business, and we are committed to consistently providing an excellent delivery experience while also improving our performance in the channel. We continue to roll out our delivery tracking service across our system with approximately 60% of the US restaurants now offering the service. We expect to substantially complete the rollout to all US restaurants by Q1 2026. Finally, our restaurant general managers and their teams are hard at work executing and delivering a more consistent experience in our restaurants. We've expanded our operations evaluation tools to additional restaurants, which is driving higher product quality, taste of food, and customer satisfaction scores.

Teens improvement in total net sales across the Aggregators.

Turning to first party delivery delivery is an important component of our business and we are committed to consistently providing an excellent delivery experience. While also improving our performance in the channel. We continue to rollout our delivery tracking service across our system with approximately 60% of the U S restaurants now offering the service.

We expect to substantially complete the rollout to all U S restaurants by the first quarter of 2026.

Finally, our restaurant general managers and their teams are hard at work executing and delivering a more consistent experience in our restaurants, we've expanded our operations evaluation tools, two additional restaurants, which is driving higher product quality taste of food and customer satisfaction scores.

Todd: Our fifth strategic priority is partnering with and evolving our franchisee base to drive profitable growth by expanding our share in the most impactful markets and further improving our restaurant economic model. As mentioned at the outset of the call, we plan to accelerate our domestic refranchising program over the next two years. In terms of scale, we expect to reduce our company restaurant ownership to a mid-single-digit percent of the North American system. We believe that refranchising with strategy forward, well-capitalized growing franchisees strengthens the long-term health of the Papa Johns system and unlocks future growth opportunities. We expect to finalize the sale of our ownership stake on a joint venture that operates 85 restaurants in the Mid-Atlantic region in Q4. Those restaurants will be operated by a growth-minded franchisee with the requisite capital and strategic approach to grow their business.

Todd Penegor: Our fifth strategic priority is partnering with and evolving our franchisee base to drive profitable growth by expanding our share in the most impactful markets and further improving our restaurant economic model. As mentioned at the outset of the call, we plan to accelerate our domestic refranchising program over the next two years. In terms of scale, we expect to reduce our company restaurant ownership to a mid-single-digit percent of the North American system. We believe that refranchising with strategy forward, well-capitalized growing franchisees strengthens the long-term health of the Papa Johns system and unlocks future growth opportunities. We expect to finalize the sale of our ownership stake on a joint venture that operates 85 restaurants in the Mid-Atlantic region in Q4. Those restaurants will be operated by a growth-minded franchisee with the requisite capital and strategic approach to grow their business.

Our fifth strategic priority is partnering with an evolving our franchisee base to drive profitable growth by expanding our share in the most impactful markets and further improving our restaurant economic model as I mentioned at the outset of the call we plan to accelerate our domestic Refranchising program over the next two years in terms of scale, we expect to.

Reduced our company restaurant ownership to a mid single digit percent of the North American system.

We believe that Refranchising with strategy forward, well capitalized growing franchisees strengthens the long term health of the Papa John's system and unlock future growth opportunities.

We expect to finalize the sale of our ownership stake in a joint venture that operates 85 restaurants in the mid Atlantic region in the fourth quarter.

Those restaurants will be operated by a growth minded franchisee with the requisite capital and strategic approach to grow their business.

Todd: In summary, we are navigating a challenging consumer and competitive environment and executing a strategy to ensure Papa Johns delivers sustainable, profitable growth. While the full benefits will take some time, our transformation strategy is showing positive results, and we are taking far-reaching actions to accelerate the progress we are making. We are driving non-customer-facing costs out of the business, accelerating our refranchising program, rebuilding our innovation pipeline, sharpening our value proposition, and making returns-driven investments in technology, all while maintaining a healthy balance sheet. Transformations by their nature aren't linear, but we are managing the moment while building for the future. I am confident that the actions we are taking will position Papa Johns to deliver long-term value creation for all of our stakeholders. With that, I'd like to turn it over to Robbie to discuss our Q3 financial results in greater detail. Robbie?

Todd Penegor: In summary, we are navigating a challenging consumer and competitive environment and executing a strategy to ensure Papa Johns delivers sustainable, profitable growth. While the full benefits will take some time, our transformation strategy is showing positive results, and we are taking far-reaching actions to accelerate the progress we are making. We are driving non-customer-facing costs out of the business, accelerating our refranchising program, rebuilding our innovation pipeline, sharpening our value proposition, and making returns-driven investments in technology, all while maintaining a healthy balance sheet. Transformations by their nature aren't linear, but we are managing the moment while building for the future. I am confident that the actions we are taking will position Papa Johns to deliver long-term value creation for all of our stakeholders. With that, I'd like to turn it over to Robbie to discuss our Q3 financial results in greater detail. Robbie?

In summary, we are navigating a challenging consumer and competitive environment and executing our strategy to ensure papa John's deliver sustainable profitable growth.

While the full benefits will take some time our transformation strategy is showing positive results and we are taking far reaching actions to accelerate the progress we are making.

We are driving non customer facing costs out of the business accelerating our refranchising program rebuilding our innovation pipeline sharpening our value proposition and making returns driven investments and technology, all while maintaining a healthy balance sheet.

Transformations by their nature arent linear, but we are managing the moment, while building for the future I am confident that the actions. We are taking will position Papa Johns to deliver long term value creation for all of our stakeholders.

And with that I'd like to turn it over to Ravi to discuss our third quarter financial results in greater detail Ravi.

Thank you Todd and good morning, everyone.

Ravi Thanawala: Thank you, Todd. Good morning, everyone. I'll begin my comments with an overview of our Q3 results, followed by our financial outlook. Please note that all comparisons and growth rates referenced today are compared to the prior year period, unless otherwise noted. In Q3, global systemwide restaurant sales were $1.21 billion, up 2% in constant currency as higher international comparable sales and 1% global net restaurant growth on a trailing 12-month basis, more than offset lower North America comparable sales. As Todd discussed, North America comparable sales decreased 2.7% in Q3, with the majority of sales pressure driven by declines in products outside of our core pizza offering. To improve this trend and drive add-ons and ancillary sales, we are rebuilding our innovation pipeline, including reimagining our sides offering.

Again, my comments with an overview of our third quarter results followed by a financial outlook. Please.

Please note that all comparisons and growth rates referenced today are compared to the prior year period, unless otherwise noted and.

In the third quarter global system wide restaurant sales were $1 to $1 billion up.

Up 2% in constant currency as higher international comparable sales and 1% global net restaurant growth on a trailing 12 month basis more than offset lower North America comparable sales.

As Todd discussed North America comparable sales decreased two 7% in the third quarter with the majority of sales pressure driven by declines in products outside of our core pizza offering.

To improve this trend and drive add ons and ancillary sales, we are rebuilding our innovation pipeline, including re imagining our sides offering third quarter transaction comps decreased 4% predominantly driven by a decline in orders from small ticket web customers, we are amplifying our value.

Ravi Thanawala: Q3 transaction comps decreased 4%, predominantly driven by a decline in orders from small ticket web customers. We are amplifying our value proposition accordingly to drive transactions while maintaining our premium positioning. Q3 ticket comps increased 2% as we benefited from an increased number of pizza sold per order, partially offset by mix shift into medium pizzas with fewer toppings, strategic changes we made last year to our loyalty program, and a decline in add-ons. Turning to our international business. International comparable sales increased 7.1%, supported by our cross-functional transformation initiatives, which are yielding operational improvements as we continue our focus on priority markets, adding compelling product innovation to our menus, and taking a consumer-first mindset across our global operations, setting the stage for long-term value creation across the segment.

Opposition accordingly to drive transactions, while maintaining our premium positioning.

Third quarter ticket comps increased 2% as we benefited from an increased number of pizza sold per order, partially offset by mix shift into medium pizzas with fewer toppings strategic changes, we made last year to our loyalty program and a decline in add ons turning to our international Biz.

International comparable sales increased seven 1% supported by our quality functional transformation initiatives, which are yielding operational improvements as we continue our focus on priority markets, adding compelling product innovation to our menus and taking a consumer first mindset across.

Our global operations.

Adding the stage for long term value creation across the segment.

We expanded our exciting croissant pizza offerings at three additional markets in the third quarter generating significant media Buzz and Activations alongside solid sales and order mix improvement.

Ravi Thanawala: We expanded our exciting croissant pizza offering to three additional markets in Q3, generating significant media buzz and activations alongside solid sales and order mix improvement, demonstrating the power of compelling product innovation. I am proud of how our international teams have come together to drive improvement across global operations, achieving four quarters of positive sales comps with sequential improvement each quarter. Total consolidated revenue for Q3 was essentially flat at $508 million, as higher international revenue was mostly offset by lower revenues generated in North American restaurants and QCCs.

Demonstrating the power of compelling product innovation.

I am proud of how our international teams have come together to drive improvement across global operations, achieving four quarters of positive sales comps with sequential improvement each quarter.

Total consolidated revenue for the third quarter was essentially flat at $508 million as higher international revenue was mostly offset by lower revenues generated in north American restaurants and <unk>.

Total international revenue increased approximately $6 million as our transformation initiatives in the U K in our priority markets have resulted in better performance across all lines of business.

Ravi Thanawala: Total international revenue increased approximately $6 million as our transformation initiatives in the UK and our priority markets have resulted in better performance across all lines of business. Total North American revenues, inclusive of our full restaurant portfolio and our commissary, decreased approximately $6 million in aggregate, primarily driven by lower comparable sales during the quarter. Consolidated adjusted EBITDA declined slightly to $48 million as we continue to build on the foundational investments we have made through the year and position the brand for long-term growth. Q3 consolidated adjusted EBITDA performance was impacted by incremental marketing investments of approximately $4 million and an anticipated elevated G&A related to approximately $2 million of higher incentive compensation, partially offset by commodity deflation and outperformance in international.

Total North American revenues inclusive of our full restaurant portfolio and our commentary decrease approximately $6 million and that did primarily driven by lower comparable sales during the quarter.

Consolidated adjusted EBITDA declined slightly to $48 million as we continue to build on the foundational investments we've made through the year and position the brand for long term growth.

Third quarter consolidated adjusted EBITDA performance was impacted by incremental marketing investments of approximately $4 million and an anticipated elevated G&A related to approximately $2 million of higher incentive compensation.

Partially offset by commodity deflation and outperformance in international.

Our third quarter domestic company owned restaurants segment EBITDA margin, which includes G&A expenses was two 4% declined by approximately 20 basis points as the benefit of a higher average ticket almost fully offset lower transaction volume and labor inflation.

Ravi Thanawala: Our Q3 domestic company-owned restaurant segment EBITDA margin, which includes G&A expenses, was 2.4%, declined by approximately 20 basis points as the benefit of higher average ticket almost fully offset lower transaction volume and labor inflation. As we move forward, we are focused on driving sustainable, profitable growth. We're taking action to drive transactions and improve four wall margins through innovation, addressable market expansion, and a more efficient supply chain, while making strategic investments to further differentiate our brand over the long term. North American commissary segment adjusted EBITDA margins were 7.4% in Q3, an improvement of 100 basis points, primarily reflecting higher volumes as we sold 3% more pizzas versus last year. Turning to our balance sheet.

As we move forward, we are focused on driving sustainable profitable growth.

Taking action to drive transactions and improve four wall margins through innovation addressable market expansion and a more efficient supply chain, while making strategic investments to further differentiate our brand over the long term.

North American Commissary segment, adjusted EBITDA margins were seven 4% in the third quarter, an improvement of 100 basis points, primarily reflecting higher volumes as we sold 3% more pizza versus last year.

Turning to our balance sheet.

Ravi Thanawala: At the end of Q3, our total available liquidity was $502 million in cash and borrowings available under our credit facilities. Our gross leverage ratio was 3.4 times, well within our permissible limits. Turning now to cash flows. For the first 9 months of 2025, net cash provided by operating activities was $106 million. Free cash flow was $59 million, an increase of $50 million, primarily reflecting timing of cash payments for the national marketing fund, favorable changes in working capital, lower cash taxes, and lower spend related to our international transformation initiatives. Now turning to our outlook. We've revised our outlook to reflect the impact of a softer consumer backdrop and a more promotional QSR marketplace, which we expect to persist through the remainder of the year and into 2026.

At the end of the third quarter.

Our total available liquidity was $502 million in cash and borrowings available under our credit facilities and our gross leverage ratio was three four times well within our permissible limits.

Turning now to cash flows for.

For the first nine months of 2025 net cash provided by operating activities was $106 million free cash flow was $59 million, an increase of $50 million, primarily reflect the timing of cash payments for the national marketing fund and favorable changes in working.

Capital lower cash taxes, and lower spend related to our international transformation initiatives.

Now turning to our outlook.

We have revised our outlook to reflect the impact of a softer consumer backdrop, and a more promotional <unk> marketplace, which we expect to persist through the remainder of the year and into 2026.

Ravi Thanawala: For 2025, we expect global system-wide sales to increase between 1% to 2%. We expect North America comparable sales will be down between 2% to 2.5%. Softer comparable sales trends in September continued through October. As Todd mentioned, we recently launched our 50% off carryout offer. Very preliminary results show improved order trends, but we would like to see the offer out in market longer before making any definitive statements. Internationally, our transformation is building momentum, and we continue to deliver results that are above our expectations. Accordingly, we are raising our 2025 international comparable sales outlook to a range of 5% to 6%. As we shared last quarter, we expect to finalize the sale of our ownership stake in a joint venture that operates 85 US restaurants in the Q4.

For 2025, we expect global systemwide sales to increase between one and 2%.

We expect North America comparable sales will be down between two and two 5%.

Softer comparable sales trends in September continued through October.

As Todd mentioned, we recently launched our 50% off Chiliad off there.

The preliminary results show improved order trends, but we would like to see the offer added market longer before making any definitive statements.

Internationally, our transformation is building momentum and we continue to deliver results that are above our expectations.

Accordingly, we are raising our 2025 international comparable sales outlook to a range of 5% to 6%.

As we shared last quarter, we expect to finalize the sale of our ownership stake in a joint venture that operates 85 U S restaurants in the fourth quarter. As a reminder, this transaction is expected to reduce fourth quarter consolidated revenues by approximately $5 million, including the impact of eliminations.

Ravi Thanawala: As a reminder, this transaction is expected to reduce Q4 consolidated revenues by approximately $5 million, including the impact of eliminations. On an annualized basis, this transaction is expected to reduce consolidated revenues by approximately $60 million, including the impact of eliminations, and have a negligible impact on net income. These impacts are reflected in our financial guidance. For 2025, we expect consolidated adjusted EBITDA to be between $190 and $200 million. Our outlook embeds a more competitive value proposition to address the softer consumer outlook and heightened competitive QSR environment in North America, which we expect to continue into 2026.

On an annualized basis. This transaction is expected to reduce consolidated revenues by approximately $60 million, including the impact of elimination and have a negligible impact on net income.

These impacts are reflected in our financial guidance.

For 2025, we expect consolidated adjusted EBITDA to be between 190 and $200 million.

Our outlook Embeds, a more competitive value proposition to address the softer consumer outlook and heightened competitive <unk> environment in North America, which we expect to continue into 2026.

Ravi Thanawala: We believe that it is crucial for us to meet the consumer where they are, provide the value they expect given the near-term macro challenges, and protect transaction share while we execute on our strategy to deliver long-term profitable growth. We continue to expect that stock-based compensation will be between $4 and $5 million per quarter. For 2025 non-operating expense items, we expect net interest expense to be between $40 and $42 million, capital expenditures to be between $75 and $85 million, and adjusted D&A expense to be between $70 and $75 million, which excludes accelerated depreciation related to the deployment of our modernized digital assets and retirement of our prior systems. We expect our 2025 effective tax rate to be in the range of 27% to 30%. Finally, we expect diluted shares outstanding of approximately 33 million in Q4.

We believe that it is crucial for us to meet the consumer where they are provide.

Provide the value they expect given the near term macro challenges and protect transaction share while we execute on our strategy to deliver long term profitable growth.

We continue to expect that stock based compensation will be between four and $5 million per quarter.

For 2025, non operating expense items, we expect net interest expense to be between 40% and $42 million capital expenditures to be between 75, and $85 million and adjusted G&A expense to be between 70 and $75 million, which excludes accelerated depreciation.

<unk> related to the deployment of our modernized digital assets and retirement of our prior system.

We expect our 2025% effective tax rate to be in the range of 27% to 30%.

Finally, we expect diluted shares outstanding of approximately $33 million in the fourth quarter.

Ravi Thanawala: Turning to restaurant development. We expect to open between 85 and 95 gross new restaurants in North America in 2025, with all remaining projected openings currently in construction design or later stages. We are working to improve the long-term health of our restaurants. Making strategic closure decisions accordingly. For 2025, we anticipate North America restaurant closures will be at the higher end of our historical average of approximately 1.5% to 2%. These closures are predominantly nontraditional or small market restaurants with a blended average sales volume of around $500,000, which is less than half of our system average. Internationally, we continue to accelerate our transformation, delivering positive results across our priority markets. During the quarter, we opened 2 new restaurants in Bangalore, India, featuring a localized menu and a variety of vegetarian options paired with our high-quality ingredients.

Turning to restaurant development.

We expect to open between eight 5% to 95 gross new restaurants in North America in 2025 with all remaining projected openings currently in construction design or later stages. We are working to improve the long term health of our restaurants, and making strategic closure decisions accordingly.

For 2025, we anticipate North America restaurant closures would be at the higher end of our historical average of approximately 1.5% to 2%. These closures are predominantly non traditional or small market restaurants with a blended average sales volume of around $500000, which is less than half of our.

System average.

Internationally, we continue to accelerate our transformation.

So very positive results across our priority markets.

During the quarter, we opened two new restaurants in Bangalore in India, featuring a localized menu and a variety of vegetarian options prepared with our high quality ingredients and he is a priority market for us given its rapid growth and robust demand.

Ravi Thanawala: India is a priority market for us given its rapid growth and robust demand. For 2025, we continue to expect to open 180 to 200 gross new restaurants across our international markets. We anticipate international closures will be at the higher end of a range of 4% to 5% of our international system. Looking ahead, we are positioning Papa Johns to compete better in 2026, play the game differently while continuing to transform the brand and fuel sustainable, profitable sales growth in the future. Papa Johns is a strong brand with a healthy balance sheet. The work underway will position us to drive long-term earnings power across all aspects of our organizations. We are confident in our strategy. We recognize the substantial upside ahead. We are moving forward with excitement and focus as we transform the business.

For 2025, we continue to expect to open 180 to 200 gross new restaurants across our international markets.

We anticipate international closures will be at the higher end of our range of 4% to 5% of our international system.

Looking ahead, we are positioning Papa Johns to compete better in 2026.

Play the game differently, while continuing to transform the brand and fuel sustainable profitable sales growth in the future Papa.

Papa John's is a strong brand with a healthy balance sheet and the work underway will position us to drive long term earnings power across all aspects of our organization.

We are confident in our strategy, we recognize the substantial upside ahead, and we are moving forward with excitement and focus as we transform the business.

Ravi Thanawala: Now, we'd like to open the call up for any questions you may have. Operator?

Now we'd like to open the call up for any questions you may have.

Operator.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone. We also ask that you wait for your name and company to be announced before proceeding with your question one moment, while we compile the Q&A roster.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. The first question today will be coming from the line of Brian Mullan of Piper Sandler. Your line is open.

The first question today will be coming from the line of Brian My line of Piper Sandler Your line is open.

Okay. Thank you.

Brian Mullan: Hey, thank you. Just a question on the acceleration of the refranchising program. Can you just talk about how you see the current difficult operating environment, you know, influencing this process? You know, to refranchise, obviously, we've got to find a buyer, and then there's the price you're willing to accept for your assets. Just talk about the framework you're gonna approach this with and what you're gonna prioritize the most in this process.

On the acceleration of the.

Our Refranchising program can you just talk about how you see the current difficult operating environment.

Influencing this process.

Three franchise, obviously, we've got to find a buyer and then theres the price youre willing to accept for your assets. So just talk about the framework you're going to approach it with and what youre going to prior prioritize the most in this process.

No. Thanks for the question, Brian as we think about accelerating refranchising, it's a combination of scaling up existing well capitalized franchisees that.

Todd: No, thanks for the question, Brian. As we think about accelerating refranchising, it's a combination of scaling up existing well-capitalized franchisees that are really focused forward to partner with us to really drive the business and bring in more customers more often and drive for well profitability. We also got interest on folks from outside the system. We've got the 85 restaurants that will complete the transaction here, hopefully by the end of this month. We've got a pipeline of other refranchising already in place with existing buyers at multiples that we're comfortable with.

Todd Penegor: No, thanks for the question, Brian. As we think about accelerating refranchising, it's a combination of scaling up existing well-capitalized franchisees that are really focused forward to partner with us to really drive the business and bring in more customers more often and drive for well profitability. We also got interest on folks from outside the system. We've got the 85 restaurants that will complete the transaction here, hopefully by the end of this month. We've got a pipeline of other refranchising already in place with existing buyers at multiples that we're comfortable with.

Our really focus forward to partner with us to really drive the business and bring in more customers more often and drive the four wall profitability.

We also got interest on folks from outside the system. So we've got the.

The 85 restaurants that we will complete the transaction here.

Hopefully by the end of this month, we've got a pipeline of other refranchising already in place with existing buyers at multiples that were comfortable with.

Todd: We're gonna continue to look at, you know, an appropriate pacing of the refranchising through the course of this year and into the next to make sure we work ourselves to that mid-single digit ownership as a percent of the North American fleet. Yes, the market is a little bit different. There are a lot of well-capitalized franchisees that really want an opportunity to continue to come into the system or scale up within our system. We feel very confident that there are buyers at good multiples for our business.

Todd Penegor: We're gonna continue to look at, you know, an appropriate pacing of the refranchising through the course of this year and into the next to make sure we work ourselves to that mid-single digit ownership as a percent of the North American fleet. Yes, the market is a little bit different. There are a lot of well-capitalized franchisees that really want an opportunity to continue to come into the system or scale up within our system. We feel very confident that there are buyers at good multiples for our business.

And we're going to continue to look at.

Unappropriate pacing of the Refranchising through the course of this year and into into next to make sure. We work ourselves to that mid single digit ownership as a percent of the North American fleet.

Yes, the market is a little bit different but there are a lot of well capitalized franchisees that really want an opportunity to continue to come into the system.

Or scale up within our system and we feel very confident that there are buyers.

Multiples for our business.

Okay. Thank you for that and then follow up just a question on G&A I guess, one for clarification what is embedded in the guidance for this year and then the real question is it sounds like youre going to find some efficiencies here.

Brian Mullan: Okay. Thank you for that. Todd, just a question on G&A, I guess one for clarification. What is embedded in the guidance for this year? The real question is, it sounds like you're gonna find some efficiencies here. I know you'll guide next year in a few months, but just trying to understand, have you already taken some actions or do all of these actions kinda come later on? Just trying to understand if G&A dollars are gonna be headed lower next year. Thank you.

No you'll guide next year in a few months, but just trying to understand have you already taken some actions or do all of these actions.

Come later on just trying to understand.

If G&A dollars are going to be lower next year. Thank you.

G&A dollars will be heading lower next year, we've continued to prudently manage G&A on the softer sales environment in this calendar year, but as we said in the prepared remarks, we are embarking on a on an initiative to really look at how do we become a more nimble efficient organization by by streamlining operations.

Todd: Yeah. G&A dollars will be heading lower next year. You know, we've continued to prudently manage G&A in the softer sales environment in this calendar year. As we said in the prepared remarks, we're embarking on an initiative to really look at how do we become a more nimble, efficient organization by streamlining operations, reduce non-customer facing spend, simplify our operating model, and really better align our resources to our transformation. We believe we can get at least $25 million of savings during the course of the next two years. I'd expect about half of that at a minimum to come during the course of 2026.

Todd Penegor: Yeah. G&A dollars will be heading lower next year. You know, we've continued to prudently manage G&A in the softer sales environment in this calendar year. As we said in the prepared remarks, we're embarking on an initiative to really look at how do we become a more nimble, efficient organization by streamlining operations, reduce non-customer facing spend, simplify our operating model, and really better align our resources to our transformation. We believe we can get at least $25 million of savings during the course of the next two years. I'd expect about half of that at a minimum to come during the course of 2026.

Reduced non customer facing spend simplify our operating model and really better align our resources to our transformation and we believe we can get at least $25 million of savings.

During the course of the next two years and I would expect about half of that at a minimum to come during the course of 2026, we'll give you all the details as we finish going through the work over the next couple of months here internally and reflect it in the guidance for 'twenty six appropriately and this is true G&A costs not.

Todd: We'll give you all the details as we finish going through, the work, over the next couple of months here internally and reflect it in the guidance for 2026 appropriately. This is true G&A costs, not impacting any of the marketing investments that we've made.

Todd Penegor: We'll give you all the details as we finish going through, the work, over the next couple of months here internally and reflect it in the guidance for 2026 appropriately. This is true G&A costs, not impacting any of the marketing investments that we've made.

<unk> any of the marketing investments that we've made.

Ravi Thanawala: Brian, none of these savings are embedded in the 2025 guide.

And Brian None of these savings are embedded into 2025 guidance.

Okay. Thank you both.

Brian Mullan: Okay. Thank you both. Okay.

Thank you one moment for the next question.

Operator: Thank you. One moment for the next question. Our next question will be coming from the line of Andrew Strelzik of BMO Capital Markets. Your line is open.

Our next question will be coming from the line of Andrew scaling of BMO capital markets. Your line is open.

Hey, good morning, Thanks for taking the question.

Andrew Strelzik: Hey, good morning. Thanks for taking the question. I wanted to ask Todd, you know, a little bit over a year since you joined Papa Johns, I'd be curious to get your assessment of the turnaround progress and where you are today versus where you thought you might have been when you set out on this journey. Where do you feel like you're maybe farthest along, and what areas maybe been a little bit slower to materialize?

I wanted to ask Todd.

A little bit over a year since you joined Papa John's I'd be curious to get your assessment of the turnaround progress on where you are today versus where you thought you might have been when you set out on this journey and where do you feel like you're maybe farthest along in.

There's maybe been a little bit slower to materialize.

Yeah. Thanks for that question, Andrew you know as you think about the things that I feel good about right over the course of the last 14 15 months.

Todd: Yeah, thanks for that question, Andrew. You know, as you think about the things that I feel good about, right? Over the course of the last 14, 15 months, you know, we really improved the value proposition and perception of the Papa Johns brand. We continue to improve the quality perception and our brand health, which are positive for the long run, and those are foundational work that we'll continue to do. You know, our innovation pipeline needed to be rebuilt.

Todd Penegor: Yeah, thanks for that question, Andrew. You know, as you think about the things that I feel good about, right? Over the course of the last 14, 15 months, you know, we really improved the value proposition and perception of the Papa Johns brand. We continue to improve the quality perception and our brand health, which are positive for the long run, and those are foundational work that we'll continue to do. You know, our innovation pipeline needed to be rebuilt.

We really improve the.

The value proposition in perception of the Papa John's brand, we continue to improve the quality perception and our brand health, which are positive for the long run and those are foundational work that will not continue to do.

Our innovation pipeline needed to be rebuilt youre, starting to see some of that news come to life here at the back half of 2025, but really excited around a steady dose of innovation into 2026, not just around core pies.

Todd: You're starting to see some of that news come to life here at the back half of 2025. Really excited around a steady dose of innovation into 2026, not just around core pies, but around other occasions that can help drive the business, whether that be reimagined sides, or other handheld opportunities into the future. I think there's opportunities to do that. The work we've done to really work our oven calibration and Perfect Bake to make sure we're making better core pizzas and working with our franchise community to deliver quality product time and again, work always to do on that.

Todd Penegor: You're starting to see some of that news come to life here at the back half of 2025. Really excited around a steady dose of innovation into 2026, not just around core pies, but around other occasions that can help drive the business, whether that be reimagined sides, or other handheld opportunities into the future. I think there's opportunities to do that. The work we've done to really work our oven calibration and Perfect Bake to make sure we're making better core pizzas and working with our franchise community to deliver quality product time and again, work always to do on that.

But around other occasions, they can help drive the business whether that be re imagine sides.

Or other handheld opportunities into the future. So I think theres opportunities to do that the work we've done to really work, our oven calibration and perfect bag to make sure, we're making better core pieces and working with our franchise community to deliver quality product time and again.

We used to do on that.

Todd: That has set a strong foundation for us to continue to lean into, and it allows us to really open up the opportunity to innovate even more as we get time and temperature set right in our ovens in the restaurants. In our international business, we've made a tremendous amount of progress. A lot of heavy lifting was done just before I got here. We're starting to see the fruits of all of those hard work, and it's really driving our business, and we got really some strong momentum in that business, you know, across the globe, and it's widespread.

Todd Penegor: That has set a strong foundation for us to continue to lean into, and it allows us to really open up the opportunity to innovate even more as we get time and temperature set right in our ovens in the restaurants. In our international business, we've made a tremendous amount of progress. A lot of heavy lifting was done just before I got here. We're starting to see the fruits of all of those hard work, and it's really driving our business, and we got really some strong momentum in that business, you know, across the globe, and it's widespread.

But that has set a strong foundation for us to continue to lean into and also allows us to really open up the opportunity to innovate even more as we get time and temperature set right in our ovens in the.

In the restaurants, and our international business, we've made a tremendous amount of progress a lot of heavy lifting was done.

Just before I got here, we're starting to see the fruits of all of those hard work and it's really driving our business and we got really some strong momentum in that business.

Across our across the globe and it's widespread.

Todd: You know, as you think about where the latest environment is around the consumer, around the competitive landscape, you know, we need to make sure that we can continue to compete hard on both sides of the barbell. Quality is always gonna be important. We need innovation to bring in those laps to new customers, but we also need to make sure we've got a really balanced barbell to make sure we can compete on the value proposition side too. Do it our way, do it appropriate for the Papa Johns brand, do it in a way that brings in more customers more often to drive transactions for the long run, and that's where the focus is gonna continue to be. You'll see that in the promotional cadence that we have year to go and into next year.

Todd Penegor: You know, as you think about where the latest environment is around the consumer, around the competitive landscape, you know, we need to make sure that we can continue to compete hard on both sides of the barbell. Quality is always gonna be important. We need innovation to bring in those laps to new customers, but we also need to make sure we've got a really balanced barbell to make sure we can compete on the value proposition side too. Do it our way, do it appropriate for the Papa Johns brand, do it in a way that brings in more customers more often to drive transactions for the long run, and that's where the focus is gonna continue to be. You'll see that in the promotional cadence that we have year to go and into next year.

You think about where the latest environment is around the consumer around the competitive landscape.

We need to make sure that we can continue to compete hard on both sides of the barbell quality is always going to be important we need innovation to bring in those lapsed and new customers, but we also need to make sure. We've got a really balanced barbell to make sure. We can compete on the value proposition side to do it our way do it appropriate for the Papa John's brand do it in a way.

That brings in more customers more often to drive transactions for the long run.

And that's where the focus is going to continue to be youll see that in the promotional cadence that we have year to going into next year and you'll also see that in how we bring our innovation to life to make sure they're priced appropriate for where the consumer is today. So we're going to meet the consumer where they're at today, we'll continue to build this brand for the future.

Todd: You'll also see that in how we bring our innovation to life to make sure they're priced appropriate for where the consumer is today. We're gonna meet the consumer where they're at today. We'll continue to build this brand for the future.

Todd Penegor: You'll also see that in how we bring our innovation to life to make sure they're priced appropriate for where the consumer is today. We're gonna meet the consumer where they're at today. We'll continue to build this brand for the future.

Okay that was helpful color and then I just wanted to ask.

Andrew Strelzik: Okay. That was helpful color. I just wanted to ask, you know, with the new-- the 50% off, can you talk a little bit about, you know, the impact or how you're balancing franchisee profitability and kind of the ability to stick with something with that kind of construct from a promotional perspective or from a value perspective, kind of longer term, pulsing in and out, or what have you? How are you balancing that? Thanks.

With the new the 50% off can you talk a little bit about.

The impact or how youre balancing franchisee profitability and kind of.

The the ability to stick with something with that kind of construct from a promotional perspective or from a value perspective kind of longer term.

Pulling in and out or what have you how are you balancing that thanks.

Hey, you got to remember when you pulse anything thats on a national message, it's only about a quarter of our business. So some of it does provide a halo around.

Todd: You got to remember, when you pulse anything that's on a national message, it's only about a quarter of our business. Some of it does provide a halo around the affordability of our brand. You know, we can play the barbell 'cause if we can get them in the consideration set, we can convert them either with news or with price. You know, as you think about how we went through the quarter, you know, we pulsed in some BOGO offers. Clearly helped us on our core pie business as we've seen, you know, our overall pizza sales flat and pies up. We did know we had some challenges, you know, on that single order customer, web customer, which is on the lower income cohort.

Todd Penegor: You got to remember, when you pulse anything that's on a national message, it's only about a quarter of our business. Some of it does provide a halo around the affordability of our brand. You know, we can play the barbell 'cause if we can get them in the consideration set, we can convert them either with news or with price. You know, as you think about how we went through the quarter, you know, we pulsed in some BOGO offers. Clearly helped us on our core pie business as we've seen, you know, our overall pizza sales flat and pies up. We did know we had some challenges, you know, on that single order customer, web customer, which is on the lower income cohort.

The affordability of our brand and we can play the barbell because if we can get them in the consideration set we convert them either with news or with with price as you think about how we went through the quarter. We pulsed in some some bogo offers clearly helped us on our core Pi business as we've seen.

Our overall pizza sales flat and pies hub, but we didn't know we had some challenges on.

That single order customer web customer, which is on the lower income cohorts. So we wanted to make sure. There was an offer there for them too and that was the 50% off promotion. It takes a little bit of time, you've got to stay out there to make sure. It wears in so the consumer is aware that that offer is there.

Todd: We wanted to make sure there was an offer there for them too, and that was the 50% off promotion. It takes a little bit of time. You got to stay out there to make sure it wears in so the consumer is aware that that offer is there. And we'll continue to partner with our franchise community to make sure that these promotions work not just for the consumer, but they work for the four-wall economic model. Remember, our business is a high variable margin business. We bring in incremental transactions. The flow-through can be quite nice, and that's where we need to stay focused. It's less about margin and more about driving penny profit and dollars to the bottom line.

Todd Penegor: We wanted to make sure there was an offer there for them too, and that was the 50% off promotion. It takes a little bit of time. You got to stay out there to make sure it wears in so the consumer is aware that that offer is there. And we'll continue to partner with our franchise community to make sure that these promotions work not just for the consumer, but they work for the four-wall economic model. Remember, our business is a high variable margin business. We bring in incremental transactions. The flow-through can be quite nice, and that's where we need to stay focused. It's less about margin and more about driving penny profit and dollars to the bottom line.

And we will continue to partner with our franchise community to make sure that these promotions work not just for the consumer but they work for the four wall economic model remember our business is a high variable margin business, we bring in incremental transactions the flow through can be quite nice and that's where we need to stay focused it's less about.

Margin and more about driving penny profit dollars to the bottom line.

Ravi Thanawala: Andrew, the only other thing I'd want to add is the 50% off carryout is really a basket starter, we see the consumers build a more holistic basket once they get into that promotion.

The only other thing I'd want to add is the 50% off to out.

It's really a basket starter.

And we see the consumers build a more holistic basket once they get into that promotion.

Got it okay. Thank you very much.

Andrew Strelzik: Got it. Okay. Thank you very much.

Todd: Thanks, Andrew.

Todd Penegor: Thanks, Andrew.

Thanks, Andrew.

Thank you one moment, while we proceed with the next question.

Operator: Thank you. One moment while we proceed with the next question. The next question will be coming from the line of Jim Salaria of Stephens. Your line is open.

The next question will be coming from the line of James Malaria of Stephens. Your line is open.

Tyler Phillips: Good morning. This is Tyler Phillips on for Jim. I was curious if you could give us some color on the US restaurants within your system that are outperforming. Is this regional based, tenure based, updated ovens, et cetera? Additionally, are there any learnings that you can incorporate to the broader store base, or is it mostly sentiment driven right now with macro?

Tyler Klaus: Good morning. This is Tyler Phillips on for Jim. I was curious if you could give us some color on the US restaurants within your system that are outperforming. Is this regional based, tenure based, updated ovens, et cetera? Additionally, are there any learnings that you can incorporate to the broader store base, or is it mostly sentiment driven right now with macro?

Good morning. This is Tyler prowess on for Jim I was curious if you could give us some color on the U S restaurants within your system that are outperforming is this regional based tenure based data et cetera. Additionally are there any learnings that you can incorporate to the broader store base or is it mostly sentiment driven right now with macro.

Yes, I'll start and I'll, let Ravi talk a little bit about some of the regional differences, but as you think about any franchise system. There is a range.

Todd: Yeah, no, I'll start, and I'll let Robbie talk a little bit about some of the regional differences. You know, as you think about any franchise system, there is a range, you know, across our operators out there. You know, the folks that have leaned into transactions that have been really focused on bringing in more customers more often, to really drive that variable margin profit, have performed better than the folks that have really been focused on how do they protect margin and food costs.

Todd Penegor: Yeah, no, I'll start, and I'll let Robbie talk a little bit about some of the regional differences. You know, as you think about any franchise system, there is a range, you know, across our operators out there. You know, the folks that have leaned into transactions that have been really focused on bringing in more customers more often, to really drive that variable margin profit, have performed better than the folks that have really been focused on how do they protect margin and food costs.

Across.

Our operators out there the folks that have leaned into transactions that had been really focused on bringing in more customers more often on to really drive that variable margin profit.

We have performed better than the folks that have really been focused on how do we protect margin in food cost and our job as leaders is to make sure we find the sweet spot for.

Todd: Our job, as leaders is to make sure we find a sweet spot, for both of those mindsets, to make sure that we're executing and delivering as one system, with our national messaging, and then complement it with appropriate local message for whatever that consumer base looks like in those individual local markets. We're working that hard with our system. You know, we got work to do to stand up some co-ops into next year, and we're focused to do that in our priority markets. That will help us fight at the local level with some of these regional differences. Robbie, why don't you talk a little bit about some of the regional differences we've seen?

Todd Penegor: Our job, as leaders is to make sure we find a sweet spot, for both of those mindsets, to make sure that we're executing and delivering as one system, with our national messaging, and then complement it with appropriate local message for whatever that consumer base looks like in those individual local markets. We're working that hard with our system. You know, we got work to do to stand up some co-ops into next year, and we're focused to do that in our priority markets. That will help us fight at the local level with some of these regional differences. Robbie, why don't you talk a little bit about some of the regional differences we've seen?

For both of those mindsets to make sure that we're executing and delivering its one system with our national messaging and then complement it with appropriate local message for whatever that consumer base looks like in those individual local markets. So we're working that hard with our system. We got work to do to standup some co ops into next year.

And we're focused to do that in our priority markets that will help us fight at the local level with some of these regional differences, but Robin why don't you talked a little bit about some of the regional differences we've seen.

Ravi Thanawala: Yeah. We've seen strong performance, particularly in some of our top markets across the US. We kind of talked about, in some of our top 15 markets, there's still really meaningful market share to go get. Second is strong, compelling carry out offers on both a national and local level matter. Relentless focus on promoting Papa Pairings on a local level absolutely helps. More than anything, just like a clear focus to a transaction driving mindset that is evergreen and the franchisees who have been in transaction driving mode for multiple years are performing very well. For us, this is maybe a little bit less about region. It's really about strength of operators, transaction driving mindset, where the brand is strong in some of these top 15 markets.

We've seen strong performance, particularly in some of our top markets across the U S and we've kind of talked about.

And some of our top 15 markets Theres still really meaningful market share to go get.

Second is us strong compelling carryout offers on both a bachelor or local level matter.

Relentless focus on promoting Papa pairings on a local level are absolutely helps and more than anything just like a clear focus on transaction drive the mindset that is evergreen and the franchisees who have been in transaction driving mode for multiple years are.

<unk> very well so for US this was maybe a little bit less about region. It's really about strength of operators transaction driving mindset, where the brand is strong and some of these top 50 markets and.

Ravi Thanawala: It gives us some real clarity in terms of conversations with the franchisee base when there's differing perspective. The data is exceptionally clear that transaction driving mindset is good for variable profitability, it's good for brand health, it's good for taking market share for the long term.

It gives us some real clarity in terms of conversation with our franchisee base when theres different perspective, the data is exceptionally clear that transaction driving mindset is good for variable profitability is good for brand health is good for taking market share for the long term.

Great Super helpful and just one follow up several of your competitors have called out the specific headwinds the younger spanning demographics.

Tyler Phillips: Great. That was super helpful. Just one follow-up. You know, several of your competitors have called out a specific headwind to the younger and Hispanic demographics. We were just curious if you saw any noticeable step change amongst those cohorts during the quarter.

Tyler Klaus: Great. That was super helpful. Just one follow-up. You know, several of your competitors have called out a specific headwind to the younger and Hispanic demographics. We were just curious if you saw any noticeable step change amongst those cohorts during the quarter.

Just curious if you saw any noticeable step change amongst those quarter cohorts during the quarter.

So.

Ravi Thanawala: What we see is like a very clear occasion that we're seeing a little bit of a headwind. It's small transaction size, potentially, like, where consumers are making a trade-off decision on whether to eat at home or not. You know, we've seen maybe a slightly higher pullback in the younger consumer. That really reinforces why we've been relentless focused on Papa Pairings, bringing the 50% carry out offer front and center. Our Papa Dipper, particularly around dipping sauces, like, speaks to that younger consumer well. We're pulling multiple levers across that front. More than anything, we kind of want to zone in as the occasion is really around this notion of, like, small transaction sizes is where the transaction loss has been.

What we see is a very clear occasion.

That we're seeing a little bit of a headwind and it's small transaction size.

Tangela.

Like.

Where consumers are making a trade off decision or whether it would be that home or not.

We've seen maybe a slightly higher pulled back in the <unk>.

Young girl consumer that really reinforces why we have been relentless focus on.

Papa pairings, bringing the 50% Carryout offer front and center, our Papa Depo, particularly around dipping sauces like speaks to that younger consumer while so we're pulling multiple levers across that front, but more than anything we kind of wanted to zone in that.

The occasion is really around this notion of like small transaction sizes is where that transaction.

<unk> loss as bad on the other side of the coin is like on peak days, such as Halloween. The brand is performing really really well. So on key pizza moments. We are seeing the brand performed really well and transactions that are two pieces or more we're continuing to grow.

Ravi Thanawala: On the other side of the coin is, like, on peak days such as Halloween, the brand is performing really well. On key pizza moments, we are seeing the brand perform really well. In transactions that are two pizzas or more, we're continuing to grow. We're seeing the consumer really focus in on the center of plate right now. Pizza sales, from a unit standpoint are up. Our pullback has really been in some of the sides business.

We're seeing the consumer really focus in on the center of plate right now pizza sales from a unit standpoint are up our pullback is really bad and some of the sides business well. That's why we want to continue to drive folks into our loyalty program, adding another million folks into the loyalty program, where there's <unk>.

Todd: Well, that's why we want to continue to drive folks into our loyalty program. Adding another 1 million folks into the loyalty program, where there's great value over the course of the last quarter, is gonna be super important for all income cohorts, all demographics. What we're seeing across the loyalty program is that our customer counts are up across every frequency cohort year-over-year. The loyalty program's working how it needs to work. You know, can we drive more add-on? You know, if we get appropriately priced sides, that could be some good add-on for those existing customers. The opportunity is really to bring in those lapsed and new, that's where we're gonna really amp up and lean into a more steady cadence of meaningful innovation at appropriate price points in 2026.

Todd Penegor: Well, that's why we want to continue to drive folks into our loyalty program. Adding another 1 million folks into the loyalty program, where there's great value over the course of the last quarter, is gonna be super important for all income cohorts, all demographics. What we're seeing across the loyalty program is that our customer counts are up across every frequency cohort year-over-year. The loyalty program's working how it needs to work. You know, can we drive more add-on? You know, if we get appropriately priced sides, that could be some good add-on for those existing customers. The opportunity is really to bring in those lapsed and new, that's where we're gonna really amp up and lean into a more steady cadence of meaningful innovation at appropriate price points in 2026.

Value over the course of the last quarter is going to be super important for all income cohorts.

All demographics.

And what we're seeing across our loyalty program is that our customer counts are up across every frequency cohort year over year. So the loyalty programs working how it needs to work can.

Can we drive more add on.

If we get appropriately price side that could be some some good add on for those existing customers. The opportunity is really to bring in those lapsed and new and that's where we're going to really amp up and lean into them.

A more steady cadence of meaningful innovation at appropriate price points in 2026.

Ravi Thanawala: Yeah. Our active counts, from a loyalty standpoint are up across all cohorts from light consumers all the way up to our super frequent. What we feel good about the long term about is, like, there's brand advocacy there. There's loyalty to the business and to the brand. Our center of plate is doing well. There's clear opportunities for us to continue to drive AUVs and comps. I think we've laid out both from a transaction standpoint as well as from a product standpoint, where those opportunities for the brand exist.

Our active counts from a loyalty standpoint are up across all cohorts from light consumers all the way up to our Super frequent so what we feel good about the long term about as like Theres brand advocacy there theres loyalty to.

To the business and to the brand.

Our center of plate is doing well there is clear opportunity for us to continue to drive the au vs in comps and I think we've laid out both from a transaction.

Transaction standpoint, as well as from a product standpoint, where those opportunities for the brand exists.

Yeah.

Thank you one moment for the next question.

Operator: Thank you. One moment for the next question. The next question will come from the line of Alexander Slagle of Jefferies. Your line is open.

And the next question will come from the line of Alex <unk> of Jefferies. Your line is open.

Thanks, Good morning Wonder.

Alexander Slagle: Thanks. Morning. Wondering if you could dissect the strong international results a bit and what actions really delivered the biggest improvements there and sort of what other external dynamics are at play just as we try to assess sustainability of this momentum. You know, it sounds like Q4 you expect it to continue. As we look ahead to 2026.

I'm wondering if you could dissect the strong international results a bit what actions really delivered the biggest improvements there and sort of what other external dynamics are at play just as we try to assess the sustainability of this momentum it sounds like <unk>.

Do you expect it to the opinion, but as we look ahead the 2026.

Yeah.

Ravi Thanawala: Yeah. Thanks for the question. Couple of drivers we'd wanna lay out. In the UK, we've been on a multi-year journey, and we're starting to reap the rewards of that. A couple of things. We've really focused in on the priority trade zones that we wanted to compete well in. We've seen substantial sales comp acceleration in the UK, particularly when we've driven franchise to franchise transfers to make sure we're building really solid trade zones where a franchisee can really dominate their marketplace. Third, we've continued to have a real focus on product execution at the restaurant level. Lastly, like we've continued to like see the benefits of the Perfect Bake program, and that's really paid off. The UK ran high single digit positive comps in Q3.

Thanks for the question a couple a couple of drivers we would want to lay out in the U K.

We've been on a multi year journey and we're starting to reap the rewards of that a couple of things we've really focused in on the priority trade zones that we wanted to compete well in.

We've seen substantial sales comp acceleration in the U K, particularly where we've driven franchise to franchise transfers to make sure. We're building really solid trade zones, where a franchisee can can really dominate the marketplace.

Third as we've continued to have a real focus on product execution at the restaurant level and then lastly, we've continued to like.

See the benefits of the perfect baked program and that's really paid off in the UK ran high single digit positive comps in Q3, those trends have continued into Q4.

Ravi Thanawala: Those trends have continued into Q4. Another market where we've been in transformation mode is in China. Very similar playbook. We focused in on the cities and trade zones that mattered. As you remember in Q2, we actually took some strategic closures in that market to make sure we were really dialed in on what markets and cities matter most for us right now in China. We continue to expand points of demand generation with further integration with more aggregators. Probably again, there we did a holistic consumer review of what are consumers loving about our product and our service and where the opportunities were, and we found some opportunities.

Another market, where we've been in transformation mode in China.

Very similar playbook, we focused in on the cities and trade zones that matter as you remember in Q2, we actually took some strategic closures in that market to make sure. We were really dialed in on what markets and cities matter most for US right now in China.

We continue to expand points of demand generation.

With further integration with more Aggregators and probably again, there we did a holistic consumer review of what our consumers are loving about our product and our service are where the opportunities wherever we found some opportunities.

Ravi Thanawala: we're going around the globe right now, kind of executing this playbook of consumer first, product driven mindset with a very sharp focus on the priority markets that matter most for us. you know, we've been encouraged by the sequential gains over the last couple of quarters and continue to be encouraged by what we see in Q4.

We're going around the globe right now kind of executing this playbook of consumer first product driven mindset with a very sharp focus on the priority markets.

That matter most for us and we've been encouraged by the sequential gains over the last couple of quarters and continue to be encouraged by what we see in Q4.

Todd: You know, just a big credit to the team with the focus on the priority markets across the globe, and then having that kind of amplify to the rest of the globe. We've built a lot of momentum, continues into end of the Q4. The pipeline for news and innovation is really strong going into 26. You know, they've across the globe, have had a steady dose of news and innovation, not just croissant pizza, which resonated across the globe. Innovation has been there on the heels of the Perfect Bake project, you know, for the course of the last year, and all those things are paying dividends in that business.

Todd Penegor: You know, just a big credit to the team with the focus on the priority markets across the globe, and then having that kind of amplify to the rest of the globe. We've built a lot of momentum, continues into end of the Q4. The pipeline for news and innovation is really strong going into 26. You know, they've across the globe, have had a steady dose of news and innovation, not just croissant pizza, which resonated across the globe. Innovation has been there on the heels of the Perfect Bake project, you know, for the course of the last year, and all those things are paying dividends in that business.

A big credit to the team with the focus on on the priority markets across the globe and then having that kind of amplify too to the rest of the globe. We've built a lot of momentum continues into our into the fourth quarter. The pipeline for news and innovation is really strong going into 'twenty six.

This across the globe have had a steady dose of up news and innovation, not just croissant pizza, which resonated across the across the globe, but innovation has been there on the heels of the perfect baked project.

For the course of the last year and all of those things are paying dividends in that business and when you look at our.

Ravi Thanawala: When you look at our footprint relative to the competitive set, we still have a lot of runway to go in international and in these priority markets. We're making sure that we are executing as well as we can and driving AUV. There is real long-term value creation here for the brand and the business, but we're focused on doing it the right way.

Footprint relative to the competitive side, we still have a lot of runway to go international and then these priority markets, where we're making sure that we are executing as well as we can in driving <unk> felt that there is real long term value creation here for the brand and the <unk>.

Business, but we're focused on doing it the right way.

Alright, Thats great progress.

Alexander Slagle: Nice. That's great progress. A follow-up on the US and I guess the outlook for more innovations and more focus on sides and add-ons. I mean, how do you ensure you're not sort of adding too much complexity or rhythm breakers as you kind of go down that route?

The follow up on the U S and I get that.

The outlook for more innovation more focus on side not on I mean, how do you ensure you are not sort of adding too much complexity or rhythm breakers as you kind of go down that route.

Yes, I do think there is some stuff that are naturally.

Todd: Yeah, I do think there are some stuff that are naturally, you know, paring down within our portfolio today. You think about where Papa Bites are, where Papadias play. You know, as we talk about some of the sides or other add-on purchases, you know, those have led themselves down during the course of this year. Those are opportunities to, you know, potentially come out of the restaurant or be leveraged more regionally. I do think we free up some capacity then to come back with some of the new news.

Todd Penegor: Yeah, I do think there are some stuff that are naturally, you know, paring down within our portfolio today. You think about where Papa Bites are, where Papadias play. You know, as we talk about some of the sides or other add-on purchases, you know, those have led themselves down during the course of this year. Those are opportunities to, you know, potentially come out of the restaurant or be leveraged more regionally. I do think we free up some capacity then to come back with some of the new news.

Paring down within our portfolio today, you think about where Papa bites are where Papa <unk> play and as we talk about some of the sides or other add on purchases and those have led themselves down during the course of this year. So those are opportunities too.

Potentially come out of the restaurant or be leveraged more regionally. So I do think we free up some capacity then to come back with some of the new news.

Todd: You know, slowing the ovens down, getting the Perfect Bake project right, thinking about how we design the product, not only for the consumer, but for the operator, and our folks in the restaurants to make sure that these new products have easy builds that can really drive a high quality product out of the work we're doing with the ovens is paramount. We're really working hard to make sure we set up our teams for success. Coaching, training, and going back to look at how we're leveraging the tools that we have in our restaurants. We're very conscious to not overcomplicate the restaurant.

Todd Penegor: You know, slowing the ovens down, getting the Perfect Bake project right, thinking about how we design the product, not only for the consumer, but for the operator, and our folks in the restaurants to make sure that these new products have easy builds that can really drive a high quality product out of the work we're doing with the ovens is paramount. We're really working hard to make sure we set up our teams for success. Coaching, training, and going back to look at how we're leveraging the tools that we have in our restaurants. We're very conscious to not overcomplicate the restaurant.

Slowing the ovens down getting the perfect baked project right thinking about how we design the product not only for the consumer but for the operator and and our folks in the restaurants to make sure that these new products have easy builds.

That can really drive a high quality product out of the work we're doing with the ovens is paramount.

We're really working hard to make sure we set up our teams for success coaching training goes.

Going back to look at how we're leveraging the tools that we have in our restaurants. So we're very conscious to not over complicate the restaurant.

Todd: We will have an appropriate pace of innovation next year, but we'll do a really good job around training and set our teams up to deliver a great consumer experience, because that's gonna be key, right? As we bring in those lapsed, we bring in some new customers, we need to wow them with an unbelievable experience to keep them coming back and drive the frequency through the course of next year. We haven't had a steady pace dose of innovation that's really incremental, that can drive our business for a little bit of time. We're working hard to bring that to life next year. I feel really good about the commercial calendar that's in place at the moment and the work that the culinaries team's been doing to really deliver on our promise around being better.

Todd Penegor: We will have an appropriate pace of innovation next year, but we'll do a really good job around training and set our teams up to deliver a great consumer experience, because that's gonna be key, right? As we bring in those lapsed, we bring in some new customers, we need to wow them with an unbelievable experience to keep them coming back and drive the frequency through the course of next year. We haven't had a steady pace dose of innovation that's really incremental, that can drive our business for a little bit of time. We're working hard to bring that to life next year. I feel really good about the commercial calendar that's in place at the moment and the work that the culinaries team's been doing to really deliver on our promise around being better.

We will have an appropriate pace of innovation next year, but we will do a really good job around training and set our teams up to deliver a great consumer experience because thats going to be key right. There because we bring in those lapsed we bring in some new customers, we need to wow them with an unbelievable experience to keep them coming back and drive the frequency through the course of next year.

But we haven't had a steady pace dose of of innovation.

Incremental that can drive our business for for a little bit of time, and we're working hard to bring that to life next year and I feel really good about the commercial calendar that's in place at the moment and.

And the work that the culinary team has been doing to really deliver.

On our promise around being better maybe two things I would add is we've talked about it in Q3, the vast majority of the negative comp came from our sides business.

Ravi Thanawala: Yeah. maybe 2 things I would add is, we talked about it in Q3, the vast majority of the negative comp came from our sides business. We did not wanna simply just pull forward innovations before they were ready. The team has spent the last year really being consumer-led and obsessed on where does this brand have a right to play and what does the consumer really want. We talked about it in our prepared remarks, like multiple platforms of innovation are to come. They're designed to be operationally simple as well as TAM expanders for us because we wanna make sure we are capturing the total addressable market we can for our brand and business.

We did not want is simply just pull forward innovations before they were ready. The team has spent the last year really being consumer led and obsess fall where does this brand have a right to play and what does the consumer really want so we talked about in our prepared remarks like multiple platforms of innovation.

Our <unk> com, they're designed to be operationally simple as well as Tam expander for us because we wanted to make sure. We are capturing the total addressable market. We can move for our branded business, but do it truly from a place but this brand has the right to play.

Ravi Thanawala: Do it truly from a place where this brand has a right to play and it's operationally simple enough where it's gonna generate four wall margins and strong execution.

And it's operationally simple enough, where it's going to generate a four wall margins and strong execution.

Yeah.

Alexander Slagle: Great. Thank you.

Great. Thank you.

Thanks.

Todd: Thanks.

Todd Penegor: Thanks.

Thank you one moment for the next question.

Operator: Thank you. One moment for the next question.

And our next question will be coming from the line of Dennis Geiger of UBS. Your line is open.

Operator: Our next question will be coming from the line of Dennis Geiger of UBS. Your line is open.

Dennis Geiger: Great. Thank you, guys. I wanted to ask another one on value. A lot of good detail here, but Todd, it sounds like you're driving product quality, taste of food, customer satisfaction scores broadly. I think you mentioned in one of the questions, value scores also improving. Wanted to confirm that, though, if the scores are improving or if you are seeing anything concerning on the value scores. As it relates to all those value opportunities that you've been talking about, including the 50% off promo, could you summarize sort of the primary value gaps maybe? Is it on the promotion side of things? Is it maybe some newer menu items at sharper price points?

Great. Thank you guys I wanted to ask another one on value a lot of good detail here, but.

It sounds like Youre driving product quality taste of food customer satisfaction scores broadly and I think you mentioned.

And one of them one of the questions value scores also improving.

Wanted to confirm that though if the scores are improving your view or if you are seeing anything concerning on the value scores and then as it relates to all those value opportunities that you've been talking about including the 50% off promo could you summarize sort of the primary value gaps maybe is it is it on the.

Promotion side of things is it maybe some newer menu items at sharper price points is it the marketing and the customer just recognizing.

Dennis Geiger: Is it the marketing and the customer just recognizing the value that the brand offers? Just a bit of a high-level summary take from you on that, please.

The value of the brand offers just a bit of a high level summary, taper from you on that please.

Yeah. So a couple of thoughts so on the over the course of the last 12 months our value perception has steadily improved we were out of position little over a year ago. We continue to make improvements that's not just with how we're playing the barbell strategy, but the loyalty program plays a role in that and our personalization through <unk>.

Todd: A couple of thoughts. On the, you know, over the course of the last 12 months, you know, our value perception has steadily improved. We were out of position a little over a year ago. We continued to make improvements. That's not just with how we're playing the barbell strategy, but the loyalty program plays a role in that. Our personalization through CRM certainly helps too. It's not just about value perception, around price. It's around worth what you pay, at the end of the day. We continue to make sure that, you know, our Better Ingredients, Better Pizza message, and pay it off with why we're better. 6 simple ingredients, fresh, never frozen, original dough, those things are actually driving our brand health.

Todd Penegor: A couple of thoughts. On the, you know, over the course of the last 12 months, you know, our value perception has steadily improved. We were out of position a little over a year ago. We continued to make improvements. That's not just with how we're playing the barbell strategy, but the loyalty program plays a role in that. Our personalization through CRM certainly helps too. It's not just about value perception, around price. It's around worth what you pay, at the end of the day. We continue to make sure that, you know, our Better Ingredients, Better Pizza message, and pay it off with why we're better. 6 simple ingredients, fresh, never frozen, original dough, those things are actually driving our brand health.

I am certainly helps too.

But it's not just about value perception around price it's around worth what you pay at the end of the day and we continue to make sure that you know.

Our our better ingredients better pizza message and pay it off with why we're better six simple ingredients fresh never frozen original dough those things are actually driving our brand health.

Todd: You know, what we need to be conscious of is the consumer and meeting them where they are today, as we know the consumer is more strapped. We have to have an appropriate pace of news on the promotional side with some innovation. You know, you think about what we launched in this quarter, you know, the Papa Dipper, a great food form, a lot of excitement, a lot of social engagement. We learned a lot from it. You know, the flight of dipping sauces, especially the Roasted Garlic Parmesan, played very well. It came out at a price point at $13.99 at a time when the competitive and the consumer landscape pivoted dramatically.

Todd Penegor: You know, what we need to be conscious of is the consumer and meeting them where they are today, as we know the consumer is more strapped. We have to have an appropriate pace of news on the promotional side with some innovation. You know, you think about what we launched in this quarter, you know, the Papa Dipper, a great food form, a lot of excitement, a lot of social engagement. We learned a lot from it. You know, the flight of dipping sauces, especially the Roasted Garlic Parmesan, played very well. It came out at a price point at $13.99 at a time when the competitive and the consumer landscape pivoted dramatically.

You know what we need to be conscious of is the consumer and meeting them, where they are today.

As a as we know that the consumer is it's more strapped and we'd have to have an appropriate pace of of of news on the promotional side with some innovation you think about what we launched in this quarter. The Papa Dipper, a great food form a lot of excitement a lot.

Social engagement.

We learned a lot from it you know the flight of dipping sauces, especially the roasted garlic parmesan.

Very well, but it came out at a point to point at $13 99 at a time when the competitive and the consumer landscape pivoted dramatically. So I wouldn't say that it wasn't a failure. It was a failure by any stretch the imagination. It did its role on the menu I think there's a time and place for it in the future.

Todd: I wouldn't say that it wasn't a failure. It was a failure by any stretch of the imagination. It did its role on the menu. I think there's a time and place for it in the future. We were just caught at a time when the consumer and the competitive landscape shifted, and it wasn't as incremental as we probably would have hoped. We're conscious of that as we move forward. I mean, GrandPapa is just, you know, our biggest pizza, big deli sliced pepperoni. It's great value for the money when you think about the value for the money and the slice. Our large pizzas continue to do quite well when they're promoted.

Todd Penegor: I wouldn't say that it wasn't a failure. It was a failure by any stretch of the imagination. It did its role on the menu. I think there's a time and place for it in the future. We were just caught at a time when the consumer and the competitive landscape shifted, and it wasn't as incremental as we probably would have hoped. We're conscious of that as we move forward. I mean, GrandPapa is just, you know, our biggest pizza, big deli sliced pepperoni. It's great value for the money when you think about the value for the money and the slice. Our large pizzas continue to do quite well when they're promoted.

But we were just got at a time when the consumer and the competitive landscape shifted and it wasn't as incremental as we probably would have hoped and we're conscious of that as we move forward I mean grandpapa. It's just.

Our biggest pizza big Deli slice pepperoni, it's great value for the money when you think about the value for the money in this space and our large pieces continue to do quite well when not when they're promoted AMR and be really conscious of that when we drive our innovation into next year to not only bring the news, but make sure there's an appropriate price point to really drive that trial.

Todd: We're gonna be really conscious of that when we drive our innovation into next year to not only bring the news but make sure there's an appropriate price point to really drive that trial to get folks to fall in love with our great food all over again when they come back to try those things. That's how we're gonna continue to amplify that message. Any other comments, Ravi?

Todd Penegor: We're gonna be really conscious of that when we drive our innovation into next year to not only bring the news but make sure there's an appropriate price point to really drive that trial to get folks to fall in love with our great food all over again when they come back to try those things. That's how we're gonna continue to amplify that message. Any other comments, Ravi?

To get folks to fall in love with our great food all over again when they come back to try those things and that's how we're going to continue to amplify that message any other comments Ravi consumers are finding value in our center of plate.

Ravi Thanawala: Consumers are finding value in our center of plate. Pizza unit sales are up 3%. We are seeing consumers make different decisions in terms of what pizza they're buying. More mediums are being bought than larges, more create your own with less toppings right now. That just may be a little bit of a reflection of where the consumers are putting their dollars and how many dollars they have to spend right now. What's really important for us is we want to be able to communicate six simple ingredients, our fresh never frozen original dough, keep center of plate like very much top of mind for the consumer with our great pizzas and continue to build from there.

Pizza unit sales are up 30%, we are seeing consumers made different decisions in terms of the.

What pizza, thereby more mediums are being bought the larges more create your own it with less toppings right now and that just maybe a little bit of a reflection of where the consumers are putting their dollars and how many dollars they have.

To spend right now, but what's really important for US is we want to be able to communicate simple ingredients, our fresh never frozen original dough.

Keep center of plate like very much top of mind for the consumer with our great Pizza and continued to build from there.

Ravi Thanawala: In terms of, like, opportunities from a value standpoint, like we're really focused in on making sure we have this seamless digital experience. That's important for the consumer, especially when they're juggling many things in their lives. Then continue to remind them that we offer great value in our menu today, and we need to like be on that steady drumbeat every single day right now. We made that pivot 14 months ago or so that we were gonna talk about value every single day. We're not done doing that. We need to continue to bring that notion to every consumer's mind and make sure they don't forget that Papa Johns has great value and exceptional quality.

Like opportunities from a value standpoint, like we were really focused in on making sure we have this.

Seamless digital experience that that's important for the consumer, especially with the juggling many things in their lives and then continuing to remind them that we offer a great value in our menu today and we need a like beyond that steady drumbeat every single day right now and we made that pivot.

14 months ago, or so that we were going to talk about value every single day or we're not done doing that we need to continue to bring that notion to every consumer's mind and make sure. They don't forget that Papa John's has the value and the exceptional quality and Thats why were taking the initiatives that we talked about today, we know we need to create.

Todd: That's why we're taking the initiatives that we talked about today. We know we need to create the fuel for growth. We need to be able to compete no matter what the consumer and competitive landscape is. You know, we've been talking about how do we drive supply chain savings even harder to make sure we improve the four-wall economics. Very confident on $20 million of those savings coming into 2026. We've talked about $50 million plus over the between now and 2028. We're working hard to find even more. You know, the G&A savings play an important role to provide some fuel. Refranchising provides some fuel. Our strong balance sheet provides fuel.

Todd Penegor: That's why we're taking the initiatives that we talked about today. We know we need to create the fuel for growth. We need to be able to compete no matter what the consumer and competitive landscape is. You know, we've been talking about how do we drive supply chain savings even harder to make sure we improve the four-wall economics. Very confident on $20 million of those savings coming into 2026. We've talked about $50 million plus over the between now and 2028. We're working hard to find even more. You know, the G&A savings play an important role to provide some fuel. Refranchising provides some fuel. Our strong balance sheet provides fuel.

Fuel for growth, we need to be able to compete no matter, what the consumer and competitive landscape as we've been talking about how do we drive supply chain savings even harder to make sure we improve the four wall economics, very confident on $20 million of those savings coming into into 2026, and we've talked to about $50 million plus over the between now and 2028.

We're working hard to find even more.

The the G&A savings play an important role to provide some fuel refranchising provide some fuel our strong balance sheet provides fuel. So we got a lot of optionality to really set ourselves up to compete well no matter what the landscape looks like.

Todd: You know, we got a lot of optionality to really set ourselves up to compete well, no matter what the landscape looks like, while we work to continue to drive the transformation of our brand. We're still in those early innings. We're building a stronger foundation. We still got levers to pull, but we know we can build a lot of momentum in this business over time. We're gonna continue to stay focused on that.

Todd Penegor: You know, we got a lot of optionality to really set ourselves up to compete well, no matter what the landscape looks like, while we work to continue to drive the transformation of our brand. We're still in those early innings. We're building a stronger foundation. We still got levers to pull, but we know we can build a lot of momentum in this business over time. We're gonna continue to stay focused on that.

While we work to continue to drive the transformation of our brand and we're still in those early innings. We're building a stronger foundation, we still got levers to pull but we know we can build a lot of momentum in this business over time.

And we're going to continue to stay focused on that.

Very helpful. Thanks, guys.

Dennis Geiger: Very helpful. Thanks, guys.

Todd: Thanks.

Todd Penegor: Thanks.

Thanks.

Thank you.

Operator: Thank you. Our last question will be coming from the line of Jim Sanderson of Northcoast Research. Your line is open.

And our last question will be coming from behind Kim sentence. There of Northcoast Research. Your line is open.

Okay. Thanks for the question I wanted to go back to marketing spending I think <unk> invested about $17 million incrementally, what's the plan for fourth quarter and without quantifying. It how should we look at that potential investment going into 2026, the importance or lack of incremental marketing spending for Papa John's.

Jim Sanderson: Hey, thanks for the question. I wanted to go back to marketing spending. I think you've invested about $17 million incrementally. What's the plan for Q4? Without quantifying it, how should we look at that potential investment going into 2026, the importance or lack of incremental marketing spending for Papa Johns?

If you look at how we laid out our guidance for this year and what we've talked to in the past as you know we would spend up to $25 million of incremental marketing so 17 through the third quarter.

Todd: You know, if you look at how we laid out our guidance for this year and what we've talked to in the past is, you know, we'll spend up to $25 million of incremental marketing. You know, 17 through Q3, you know, we'll continue to do the right things to compete to finish the year. As you look at the bookends of our guidance to complement, it has, you know, up to that $25 million. During the course of this year, some of that $25 has been in non-working to really test and learn to make sure our testing protocol is set up. We've used some of that money to support some of our incremental advertising around some of the promotions that we had out there.

Todd Penegor: You know, if you look at how we laid out our guidance for this year and what we've talked to in the past is, you know, we'll spend up to $25 million of incremental marketing. You know, 17 through Q3, you know, we'll continue to do the right things to compete to finish the year. As you look at the bookends of our guidance to complement, it has, you know, up to that $25 million. During the course of this year, some of that $25 has been in non-working to really test and learn to make sure our testing protocol is set up. We've used some of that money to support some of our incremental advertising around some of the promotions that we had out there.

We'll continue to do the right things to compete hard to finish the year. So if you look at the book ends of our guidance of complement.

It has.

Up to that 25 billion during the course of this year. Some of that 25 has been in non working to really test and learn to make sure our testing protocols set up.

We've used some of that money to to support some of our incremental advertising around some of the promotions that we had out there but.

Todd: We also used it to help our franchise community to subsidize appropriately to compete. We've used a lot of those levers to make sure we can lean in and make sure the right pressure's in the market to make sure that our brand breaks through and resonates. We're also supportive of the franchise economics to make that happen. You know, as we look to 2026, and we're not providing any guidance for 2026, but we're really trying to provide a lot of fuel to make sure that we have the optionality to invest back to our brand, to appropriately connect to the consumer, and appropriately support the four-wall economics of the franchise community. More to come on that. Any other thoughts, Ravi, that you'd put out there?

Todd Penegor: We also used it to help our franchise community to subsidize appropriately to compete. We've used a lot of those levers to make sure we can lean in and make sure the right pressure's in the market to make sure that our brand breaks through and resonates. We're also supportive of the franchise economics to make that happen. You know, as we look to 2026, and we're not providing any guidance for 2026, but we're really trying to provide a lot of fuel to make sure that we have the optionality to invest back to our brand, to appropriately connect to the consumer, and appropriately support the four-wall economics of the franchise community. More to come on that. Any other thoughts, Ravi, that you'd put out there?

But we also use that to help our franchise community to to subsidize appropriately to compete so we've used a lot of those levers too to make sure. We can can lean in and make sure the rate pressures in the market to make sure that our brand breakthrough and resonates and were also supportive of the franchise economics to make that happen.

You know as we look to 2026, and we're not providing any guidance for 2026, but we're really trying to provide a lot of fuel to make sure that we have the optionality to invest back into.

Two our brand to appropriately connect to the consumer <unk>.

And appropriately to support the four wall economics of the franchise community, but more to come on that but any other thoughts robin that you'd put out there over the last couple of quarters. We've launched a couple of efficiency initiatives to ensure that we have the right capacity.

Ravi Thanawala: Yeah. Over the last couple of quarters, we've launched a couple of efficiency initiatives to ensure that we have the right capacity within the franchisor model and the four-wall economic model to make sure that we can compete and then invest for the long term in this business. The pizza category is a large category. We think that there is more transaction share we can go get. We wanna make sure we're balancing transactions, sales, and four-wall profitability, and that's why we're really getting aggressive on efficiency levers.

Then the franchise or model I under four wall economic model to make sure that we can compete in and invest for the long term in this business the.

Pizza category is a large category, we think that there is more transaction share. We can go get we want to make sure. We're balancing transactions sales are four wall profitability and that's why we're really getting aggressive on efficiency levers.

Okay, and just a quick follow up question.

Jim Sanderson: Okay, just a quick follow-up question. One of your large QSR competitors indicated that about 30% of their sales are exposed to lower income consumers. Is there any way you could give us a context on how PJ's Papa Johns is exposed to that lower income or low ticket web-based consumer?

One of your large curious or competitors indicated that about 30% of their sales are exposed to lower income consumers is there any way you could give us some context on how pizza pumper Johns is exposed to that lower income or low ticket web based consumer.

Yes.

Ravi Thanawala: Yeah. Maybe the way I'd frame it up is, like, we talked about more than 50% of our sales come from consumers above $100,000 in income. That's one data point that we've shared in prior periods. Second, just like as you think about the composition of our business, aggregators are 20% of our business at this point. Second, our loyalty program is nearly half the business. We talk about that loyalty business, we're up across all cohorts. That will give you a couple of data points that helps you to triangulate kind of like that web-based consumer. Obviously, not all of that web-based consumer is small transaction.

Frame. It up is you talked about more than 50% of all of our sales come from consumers above 100000 in income. So that's one data point.

<unk> shared in prior periods.

Second just like as you think about the composition of our business. The Aggregators are 20% of our business at this point.

Our loyalty program is nearly half the half the business and we talk about that that that loyalty business were up across all cohorts. So that'll give you a couple of data points that helps you to triangulate kind of like that web based consumer obviously, not all about web base.

Consumer and small transaction, but this is why we've been so relentlessly focused on driving our loyalty business, making sure we maintain or take appropriate share in the aggregate or marketplace, making sure that we are speaking with compelling messages across the top end of our barbell.

Ravi Thanawala: This is why we've been so relentlessly focused on driving our loyalty business, making sure we maintain or take appropriate share in the aggregator marketplace, making sure that we're speaking with compelling messages across the top end of our barbell as well as the bottom end of our barbell.

As well as the bottom end of our barbell.

Alright, Thank you very much.

Jim Sanderson: All right. Thank you very much.

Thank you and thanks for that Ravi.

Todd: Thank you.

Todd Penegor: Thank you.

Ravi Thanawala: Thank you.

Todd: Thanks for that, Ravi. I'd like to thank everyone for joining the call this morning and for your continued interest in Papa Johns. Especially wanna thank our team members and franchisees for their dedication to serving our customers. Our teams are hard at work. We're taking immediate action to streamline our organizational structure and become more efficient, while also advancing the strategic priorities that will ensure Papa Johns delivers profitable, sustainable growth. We're confident we have the right plan in place to create meaningful value across the organization for our team members, franchisees, and our shareholders. We look forward to the journey ahead. Have a great day, everyone. Talk to you soon.

Todd Penegor: Thanks for that, Ravi. I'd like to thank everyone for joining the call this morning and for your continued interest in Papa Johns. Especially wanna thank our team members and franchisees for their dedication to serving our customers. Our teams are hard at work. We're taking immediate action to streamline our organizational structure and become more efficient, while also advancing the strategic priorities that will ensure Papa Johns delivers profitable, sustainable growth. We're confident we have the right plan in place to create meaningful value across the organization for our team members, franchisees, and our shareholders. We look forward to the journey ahead. Have a great day, everyone. Talk to you soon.

Like to thank everyone for joining the call. This morning and for your continued interest in Papa John's, especially want to thank our team members and franchisees for their dedication to serving our customers. Our teams are hard at work for taken immediate action to streamline our organizational structure and become more efficient while also advancing the strategic priorities that will ensure Papa don's delivers.

<unk> sustainable growth.

We're confident we have the right plan in place to create meaningful value across the organization for our team members franchisees and our shareholders. We look forward to the journey ahead have a great day, everyone talk to you soon.

Thank you for joining the conference call today, you may now disconnect.

Operator: Thank you for joining the conference call today. You may now disconnect.

Okay.

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Q3 2025 Papa John's International Inc Earnings Call

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