Q2 2026 Papa John's International Inc Earnings Call

August 6, 2026

Speaker #1: To ask a question during this session, you will need to press *11 on your telephone. You will then hear an automated message advising that your hand is raised.

Operator: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Heather Hollander, Senior Vice President, Investor Relations, FP&A, and Strategy. Please go ahead.

Operator: To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Heather Hollander, Senior Vice President, Investor Relations, FP&A, and Strategy. Please go ahead.

Speaker #1: To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today.

Speaker #1: Heather Hollander, Senior Vice President, Investor Relations, FP&A and Strategy. Please go ahead.

Speaker #2: Good morning, and welcome to our second quarter 2026 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our investor relations website, at ir dot papajohns dot com, under the News and Events tab, or by contacting our investor relations department.

Heather Hollander: Good morning, and welcome to our Q2 2026 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our investor relations website at ir.papajohns.com under the News & Events tab or by contacting our investor relations department. Joining me on the call this morning are Todd Penegor, President and Chief Executive Officer, and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance and Principal Accounting Officer. Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings.

Heather Hollander: Good morning, and welcome to our Q2 2026 Earnings Conference Call. Earlier this morning, we issued our earnings release, which can be found on our investor relations website at ir.papajohns.com under the News & Events tab or by contacting our investor relations department. Joining me on the call this morning are Todd Penegor, President and Chief Executive Officer, and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance and Principal Accounting Officer.

Speaker #2: Joining me on the call this morning are Todd Penegor, President and Chief Executive Officer; and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance and Principal Accounting Officer.

Operator: Good day. Thank you for standing by. Welcome to the Papa John's Q2 2026 conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Heather Hollander, Senior Vice President, Investor Relations, FP&A, and Strategy. Please go ahead.

Speaker #2: Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements.

Heather Hollander: Comments made during this call will include Forward-Looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-Looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings.

Speaker #1: will then hear an automated message advising that your hand is raised. To withdraw your again. Please be advised that today's conference is being recorded. your speaker today.

Speaker #2: Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release, and the risk factors included in our SEC filings. In addition, please refer to our earnings release and our investor relations website for the required reconciliation of non-GAAP financial measures discussed on today's call.

Heather Hollander: In addition, please refer to our earnings release and our investor relations website for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, we ask that you please limit your questions to one question and one follow-up. Now I'll turn the call over to Todd.

Speaker #2: Good morning, and welcome 2026 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our Investor Relations website, at ir dot papajohns dot com, under the News and Events tab, or by contacting our Investor Relations department. morning are Todd Penegor, President and Chief Executive Officer; and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance and Principal Accounting Officer.

Heather Hollander: Good morning. Welcome to our Q2 2026 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our investor relations website at ir.papajohns.com under the News & Events tab or by contacting our investor relations department. Joining me on the call this morning are Todd Penegor, President and Chief Executive Officer, and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance, and Principal Accounting Officer. Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings.

Speaker #2: Lastly, we ask that you please limit your questions to one question and one follow-up, and now I'll turn the call over to Todd.

Speaker #3: Thank you, Heather, and good morning, everyone. Today we will discuss our second quarter financial results, and provide an update on our outlook for the remainder of the year.

Todd Penegor: Thank you, Heather, and good morning, everyone. Today we will discuss our Q2 financial results and provide an update on our outlook for the remainder of the year. Before we get to this, I'd like to briefly address the ongoing media speculation regarding Papa Johns and a potential sale of the company. The board and the management team are committed to maximizing value for our shareholders, and consistent with that commitment, we conducted a comprehensive review of our strategy over the past 18 months. We thoroughly explored whether alternative opportunities were available, including a potential sale of the business. We have been well-advised in these efforts, supported by our financial and legal advisors. This work has made clear that for Papa Johns, the value creation opportunity that is actionable is the execution of our transformation plan. Of course, the board remains open to other alternatives to maximize value.

Speaker #3: Before we get to this, I'd like to briefly address the ongoing media speculation regarding Papa Johns and a potential sale of the company. The board and the management team are committed to maximizing value for our shareholders and consistent with that commitment, we conducted a comprehensive review of our strategy over the past 18 months.

Speaker #2: Laws. Joining me on the call this These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements.

Speaker #3: We thoroughly explored whether alternative opportunities were available, including a potential sale of the business. We have been well advised in these efforts, supported by our financial and legal advisors.

Speaker #2: Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. In addition, please refer to our earnings release and our Investor Relations website for the required reconciliation of non-GAAP financial measures discussed on today's call.

Speaker #3: This work has made clear that, for Papa Johns, the value creation opportunity that is actionable is the execution of our transformation plan. Of course, the board remains open to other alternatives to maximize value.

Speaker #2: Lastly, we ask that you please limit your questions to 1 question and 1 follow-up, and now I'll turn the call over to Todd.

Speaker #3: However, these options need to be actionable, provide certainty, and serve the best interests of our shareholders. We believe it is in the best interests of the company and all of our shareholders to focus 100% of our attention on Papa Johns' transformation and the initiatives we are discussing today.

Todd Penegor: However, these options need to be actionable, provide certainty, and serve the best interest of our shareholders. We believe it is in the best interest of the company and all of our shareholders to focus 100% of our attention on Papa Johns' transformation and the initiatives we are discussing today. In the second quarter, we continued to advance our transformation while strengthening the foundation for long-term growth and value creation. We are seeing encouraging signs of progress, including a growing and highly engaged Papa Rewards membership, meaningful progress on initiatives to improve restaurant-level economics through supply chain savings and restaurant portfolio optimization, and early results from AI and digital investments that are enhancing the customer ordering experience. At the same time, we felt the impacts of the softer consumer backdrop and highly promotional QSR environment, which have continued to challenge our financial performance.

Speaker #3: Thank you, Heather, and good morning, everyone. Today we will discuss our second quarter financial results, and provide an update on our outlook for the remainder of the year.

Todd Penegor: Thank you, Heather. Good morning, everyone. Today, we will discuss our Q2 financial results and provide an update on our outlook for the remainder of the year. Before we get to this, I'd like to briefly address the ongoing media speculation regarding Papa Johns and a potential sale of the company. The board and the management team are committed to maximizing value for our shareholders. Consistent with that commitment, we conducted a comprehensive review of our strategy over the past 18 months. We thoroughly explored whether alternative opportunities were available, including a potential sale of the business. We have been well-advised in these efforts, supported by our financial and legal advisors. This work has made clear that for Papa Johns, the value creation opportunity that is actionable is the execution of our transformation plan. Of course, the board remains open to other alternatives to maximize value.

Speaker #3: Before we get to this, I'd like to briefly address the ongoing media speculation regarding PAPA JOHNS and a potential sale of the company. The board and the management team are committed to maximizing value for our shareholders and consistent with that commitment, we conducted a comprehensive review of our strategy over the past 18 months.

Speaker #3: In the second quarter, we continue to advance our transformation, while strengthening the foundation for long-term growth and value creation. We are seeing encouraging signs of progress, including a growing and highly engaged Papa Rewards membership, meaningful progress on initiatives to improve restaurant-level economics, through supply chain savings and restaurant portfolio optimization, and early results from AI and digital investments that are enhancing the customer ordering experience.

Speaker #3: This work has made clear that, for PAPA JOHNS, a value creation opportunity that is actionable is the execution of our transformation plan. Of course, the board remains open to other alternatives to maximize value.

Speaker #3: At the same time, we felt the impacts of the softer consumer backdrop and highly promotional QSR environment. Which have continued to challenge our financial performance.

Speaker #3: However, these options need to be actionable, provide certainty, and serve the best interests of our shareholders. We believe it is in the best interests of the company and all of our shareholders to focus 100% of our attention on PAPA JOHNS transformation and the initiatives we are discussing today.

Speaker #3: And while our focus is on relenting, it's clear that our transformation is taking longer than expected. We know that we must execute better, and move faster, and as we look ahead, we're making adjustments where needed across our strategic priorities and leadership team to improve results and position Papa Johns for 2027 and beyond.

Todd Penegor: While our focus is unrelenting, it's clear that our transformation is taking longer than expected. We know that we must execute better and move faster. As we look ahead, we're making adjustments where needed across our strategic priorities and leadership team to improve results and position Papa Johns for 2027 and beyond. To lead the changes we're making and ensure we drive high performance across the enterprise, we announced several key management changes today. Chris Lyn-Sue, who serves as Senior Vice President, General Manager of International, has been named Global Chief Marketing Officer. Jenna Bromberg is departing the company to pursue other opportunities. As Chris Lyn-Sue assumes this role, Chris Phylactou, who serves as Managing Director, UK, Europe, and Canada, has been named Senior Vice President, International. In this role, he will be responsible for leading our highly successful international business.

Speaker #3: In the second quarter, we continue to advance our transformation, while strengthening the foundation for long-term We are seeing encouraging signs of progress, including a growing and highly engaged PAPA Rewards on initiatives to improve restaurant-level economics through supply chain savings and restaurant portfolio optimization, and early results from AI and digital investments that are enhancing the customer ordering QSR environment.

Speaker #3: To lead the changes we're making, and ensure we drive high performance across the enterprise, we announced several key management changes today. Chris Linsu, who serves as Senior Vice President, General Manager of International, has been named Global Chief Marketing Officer.

Speaker #3: Jenna Bromberg is departing the company to pursue other opportunities. As Chris Linsu assumes this role, Chris Falaktu, who serves as Managing Director, UK, Europe, and Canada, has been named Senior Vice President, International.

Speaker #3: In this role, he will be responsible for leading our highly successful international business. Finally, John Motter, who serves as Senior Vice President, General Counsel, has been named to the newly created position of Global Chief Development Officer, where he will lead global growth and development strategy, including expansion, franchise development, and strategic partnerships.

Speaker #3: which have continued to challenge our financial performance. And while our focus is on relentlessness, it's clear that our transformation is taking longer than expected.

Todd Penegor: While our focus is unrelenting, it's clear that our transformation is taking longer than expected. We know that we must execute better and move faster. As we look ahead, we're making adjustments where needed across our strategic priorities and leadership team to improve results and position Papa Johns for 2027 and beyond. To lead the changes we're making and ensure we drive high performance across the enterprise, we announce several key management changes today. Chris Lyn-Sue, who serves as Senior Vice President, General Manager of International, has been named Global Chief Marketing Officer. Jenna Bromberg is departing the company to pursue other opportunities. As Chris Lyn-Sue assumes this role, Chris Phylactou, who serves as Managing Director, UK, Europe and Canada, has been named Senior Vice President, International. In this role, he will be responsible for leading our highly successful international business.

Todd Penegor: Finally, John Matter, who serves as Senior Vice President, General Counsel, has been named to the newly created position of Global Chief Development Officer, where he will lead global growth and development strategy, including expansion, franchise development, and strategic partnerships. These leaders have already made important contributions to our transformation, giving me great confidence in the impact they'll have in these positions. For example, Chris Lyn-Sue and Chris Phylactou were instrumental in driving meaningful change and outperformance in our international business. John has been a key leader in our highly successful international development and transformation efforts, as well as leading our North American development team, portfolio optimization work, and strategic partnership negotiations. Turning to the second quarter results. Our international business delivered 1.5% comparable sales growth in the quarter, marking our seventh consecutive quarter of positive comps and reflecting the continued benefit of our transformation work.

Speaker #3: We know that we must execute better and move faster, and as we look ahead, we're making adjustments where needed across our strategic priorities and leadership team to improve results and position Papa Johns for 2027 and beyond.

Speaker #3: These leaders have already made important contributions to our transformation, giving me great confidence in the impact they'll have in these positions. For example, Chris Linsu and Chris Falaktu were instrumental in driving meaningful change and outperformance in our international business.

Speaker #3: To lead the changes we're making and ensure we drive high performance across the enterprise, we announced several key management changes today. Chris Linsu, who serves as Senior Vice President, General Manager of International, has been named Global Chief Marketing Officer.

Speaker #3: John has been a key leader in our highly successful international development and transformation efforts, as well as leading our North American development team portfolio optimization work and strategic partnership negotiations.

Speaker #3: Jenna Bromberg is departing the company to pursue other opportunities. this role, Chris Falaktu, who serves as Managing Director, UK, Europe, and Canada, has been named Senior Vice President, As Chris Linsu assumes International.

Speaker #3: Now, turning to the second quarter results. Our international business delivered $1.5% comparable sales growth in the quarter, marking our seventh consecutive quarter of positive comps and reflecting the continued benefit of our transformation work.

Todd Penegor: Finally, John Matter, who serves as Senior Vice President, General Counsel, has been named to the newly created position of Global Chief Development Officer, where he will lead global growth and development strategy, including expansion, franchise development, and strategic partnerships. These leaders have already made important contributions to our transformation, giving me great confidence in the impact they'll have in these positions. For example, Chris Lyn-Sue and Chris Phylactou were instrumental in driving meaningful change and outperformance in our international business. John has been a key leader in our highly successful international development and transformation efforts, as well as leading our North American development team, portfolio optimization work, and strategic partnership negotiations. Now, turning to the second quarter results. Our international business delivered 1.5% comparable sales growth in the quarter, marking our seventh consecutive quarter of positive comps and reflecting the continued benefit of our transformation work.

Speaker #3: Performance was particularly strong in the UK, where comparable sales increased 10%, driven by continued strong operational execution and enhanced customer experience and increased media investment, including a 20% increase in PSAs over the course of the transformation, that is elevating brand awareness in this market.

Todd Penegor: Performance was particularly strong in the UK, where comparable sales increased 10%, driven by continued strong operational execution and enhanced customer experience and increased media investment, including a 20% increase in PSAs over the course of the transformation that is elevating brand awareness in this market. Korea also delivered strong results, with comparable sales up 9%, supported by product innovation, strategic partnerships, and holiday demand. In the Middle East, comparable sales were effectively flat as ongoing conflict in the region pressured performance. North America comparable sales declined 8.3%, driven by reduced order volume and continued pressure from lower customer acquisition. Our loyalty program remained a clear area of strength in the quarter, with comparable sales from loyalty customers outperforming non-loyalty customers by 12 percentage points, and our Papa Rewards program surpassing 42 million members in the second quarter.

Speaker #3: Korea also delivered strong results, with comparable sales up 9%, supported by product innovation, strategic partnerships, and holiday demand. In the Middle East, comparable sales were effectively flat, as ongoing conflict in the region pressured performance.

Speaker #3: North America comparable sales declined 8.3%, driven by reduced order volume and continued pressure from lower customer acquisition. Our loyalty program remained a clear area of strength in the quarter, with comparable sales from loyalty customers outperforming non-loyalty customers by 12 percentage points, and our Papa Rewards program surpassing $42 million members in the second quarter.

Speaker #3: These loyalty members are our most valuable customers, generating tickets that are 6% higher per order and ordering approximately twice as often as non-loyalty customers.

Todd Penegor: These loyalty members are our most valuable customers, generating tickets that are 6% higher per order and ordering approximately twice as often as non-loyalty customers. Within our core pizza business, orders with multiple pizzas again saw improvement with pies per order up 6%, positively impacting our overall system ticket, which was flat compared with last year. This upside was offset by pizza mix, shifting to smaller, non-specialty pizzas, resulting in mid-single digit declines in overall pizza sales. Outside of pizza, comparable sales were pressured by declines in sides and desserts. While sales of our new sandwiches almost fully offset the removal of Papadia and opened an entirely new food category for us without complicating our make line and operations. Taking into account our performance and the pressured consumer environment, which we expect to continue throughout the year, we have revised our outlook for 2026.

Speaker #3: Within our core pizza business, orders with multiple pizzas again saw improvement, with pies per order up 6%. Positively impacting our overall system ticket which was flat compared with last year.

Speaker #3: This upside was offset by Pizza Mix shifting to smaller, non-specialty pizzas resulting in mid-single-digit declines and overall pizza sales. Outside of pizza, comparable sales were pressured by declines in sides and desserts, while sales of our new sandwiches almost fully offset the removal of Papa Diaz and opened an entirely new food category for us without complicating our make line and operations.

Speaker #3: North America comparable sales declined 8.3%, driven by reduced order volume and continued pressure from lower customer acquisition. Our loyalty program remained a clear area of strength in the quarter, with comparable sales from loyalty customers outperforming non-loyalty customers by 12 percentage points, and our PAPA Rewards program surpassing $42 million members in the second quarter.

Speaker #3: Taking into account our performance and the pressured consumer environment, which we expect to continue throughout the year, we have revised our look for 2026.

Speaker #3: These loyalty members are our most valuable customers, generating tickets that are 6% higher per order and ordering approximately twice as often as non-loyalty customers.

Todd Penegor: These loyalty members are our most valuable customers, generating tickets that are 6% higher per order and ordering approximately twice as often as non-loyalty customers. Within our core pizza business, orders with multiple pizzas again saw improvement, with pies per order up 6%, positively impacting our overall system ticket, which was flat compared with last year. This upside was offset by pizza mix, shifting to smaller non-specialty pizzas, resulting in mid-single-digit declines in overall pizza sales. Outside of pizza, comparable sales were pressured by declines in sides and desserts. While sales of our new sandwiches almost fully offset the removal of Papadias and opened an entirely new food category for us without complicating our make line and operations. Taking into account our performance and the pressured consumer environment, which we expect to continue throughout the year, we have revised our outlook for 2026.

Speaker #3: Chris will provide more detail in his remarks, but at a high level, we now expect global system-wide sales to decline between 2% and 4% compared to last year, and adjusted EBITDA between $180 to $190 million.

Todd Penegor: Chris will provide more detail in his remarks, but at a high level, we now expect global system-wide sales to decline between 2% and 4% compared to last year. Adjusted EBITDA between $180 to $190 million, which now includes an incremental $18 million of investment to support our franchisees and accelerate our transformation. While our financial performance isn't where we'd like it to be, we have a clear understanding of how to improve our results and gain market share. These focus areas work in tandem with our ongoing strategic transformation efforts. As we have discussed previously, we continue to see two clear opportunities to gain share. Continuing to strengthen our value perception with more targeted, personalized offers and a consistent elevated customer experience, and attracting new customers through a sharper aggregator strategy, total addressable market expansion, our rebuilt innovation pipeline, and a re-energized local presence through reestablished co-ops.

Speaker #3: Within our core pizza business, orders with multiple pizzas again saw improvement, with pies per order up 6%, positively impacting our overall system ticket which was flat compared with last year.

Speaker #3: Which now includes an incremental $18 million of investment to support our franchisees and accelerate our transformation. While our financial performance isn't where we'd like it to be, we have a clear understanding of how to improve our results and gain market share, these focus areas work in tandem with our ongoing strategic transformation efforts.

Speaker #3: This upside was offset by Pizza Mix shifting to smaller, non-specialty pizzas resulting in mid-single-digit declines and overall pizza sales. Outside of pizza, comparable sales were pressured by declines in sides and desserts, while sales of our new sandwiches almost fully offset the removal of Papa Dias and opened an entirely new food category for us without complicating our Maykline and operations.

Speaker #3: Taking into account our performance and the pressured consumer environment, which we expect to continue throughout the year, we have revised our look for 2026.

Speaker #3: And attracting new customers through a sharper, aggregator strategy, total addressable market expansion, our rebuilt innovation pipeline, and a re-energized local presence through re-established co-ops.

Todd Penegor: Chris will provide more detail in his remarks, but at a high level, we now expect global system-wide sales to decline between 2% and 4% compared to last year, and adjusted EBITDA between $180 to $190 million, which now includes an incremental $18 million of investment to support our franchisees and accelerate our transformation. While our financial performance isn't where we'd like it to be, we have a clear understanding of how to improve our results and gain market share. These focus areas work in tandem with our ongoing strategic transformation efforts. As we have discussed previously, we continue to see two clear opportunities to gain share. Continuing to strengthen our value perception with more targeted, personalized offers and a consistent, elevated customer experience, and attracting new customers through a sharper aggregator strategy, total addressable market expansion, our rebuilt innovation pipeline, and a re-energized local presence through reestablished co-ops.

Speaker #3: Looking at our value proposition, we recognize the importance of meeting the customer where they are in this challenged environment. To do so, we focused on offering customers their favorite menu items at compelling price points while balancing restaurant margin.

Todd Penegor: Looking at our value proposition, we recognize the importance of meeting the customer where they are in this challenged environment. To do so, we focused on offering customers their favorite menu items at compelling price points while balancing restaurant margin. This quarter, we featured our Papa Pairings offer and local carryout specials. Our sandwiches were added to Papa Pairings, increasing choices within our mix and match. We also put our barbell to work as we featured our Epic Stuffed Crust pizza at a $13.99 price point. Looking ahead, we're taking a targeted approach to improving our value proposition rather than engaging in sustained extreme discounting at the national level, as we've seen some of our competitors do. In the H2 of the year, we'll deploy a more traditional barbell strategy, focusing on our most popular fan favorite products with short, targeted windows of disruptive value.

Speaker #3: This quarter, we featured our Papa Pairings offer and local carryout specials, our sandwiches were added to Papa Pairings, increasing choices within our mix and match.

Speaker #3: We also put our barbell to work, as we featured our Epic Stuffed Crust Pizza at a $13.99 price point. Looking ahead, we're taking a targeted approach to improving our value proposition, rather than engaging in sustained extreme discounting at the national level, as we've seen some of our competitors do.

Speaker #3: As we have discussed previously, we continue to see two clear opportunities to gain share. Continuing to strengthen our value perception with more targeted, personalized offers, and a consistent, elevated customer experience, and attracting new customers through a sharper, aggregator strategy, total addressable market expansion, our rebuilt innovation pipeline, and a re-energized local presence through re-established co-ops.

Speaker #3: In the second half of the year, we'll deploy a more traditional barbell strategy focusing on our most popular, fan-favorite products, with short, targeted windows of disruptive value.

Speaker #3: We are also in phase one of the rollout of our new personalization engine within our CRM platform. This engine is sophisticated, multi-channel AI-powered tool that leverages a mix of national and local offers and delivers a higher degree of personalization.

Todd Penegor: We are also in phase I of the rollout of our new personalization engine within our CRM platform. This engine is a sophisticated, multi-channel, AI-powered tool that leverages a mix of national and local offers and delivers a higher degree of personalization. We believe that once fully deployed, this technology will allow us to better tailor communications and offers to our customers, drive incremental purchases from both new and lapsed customers, and preserve restaurant margins while offering customers compelling value in key moments. We'll use learnings from this initial phase to optimize the broader multi-channel rollout planned for the Q4. Turning to operations, we understand that value extends beyond price. To that end, we are also continuing to elevate the customer experience to differentiate Papa Johns in the marketplace and drive incremental transactions. We have made significant progress over the last two years, strengthening execution across the system.

Todd Penegor: Looking at our value proposition, we recognize the importance of meeting the customer where they are in this challenged environment. To do so, we focused on offering customers their favorite menu items at compelling price points while balancing restaurant margin. This quarter, we featured our Papa Pairings offer and local carryout specials. Our sandwiches were added to Papa Pairings, increasing choices within our mix and match. We also put our barbell to work as we featured our Epic Stuffed Crust Pizza at a $13.99 price point. Looking ahead, we're taking a targeted approach to improving our value proposition rather than engaging in sustained extreme discounting at the national level, as we've seen some of our competitors do. In the H2 of the year, we'll deploy a more traditional barbell strategy, focusing on our most popular fan favorite products with short, targeted windows of disruptive value.

Speaker #3: This quarter, we featured our PAPA pairing's offer and local carryout specials. Our sandwiches were added to PAPA pairings, increasing choices within our mix and match.

Speaker #3: We believe that once fully deployed, this technology will allow us to better tailor communications and offers to our customers, drive incremental purchases from both new and lapse customers, and preserve restaurant margins, while offering customers compelling value in key moments.

Speaker #3: We also put our barbell to work, as we featured our epic stuffed crust pizza at a $13.99 price point. Looking ahead, we're taking a targeted approach to improving our value proposition, rather than engaging in sustained, extreme discounting at the national level, as we've seen some of our competitors do.

Speaker #3: We'll use learnings from this initial phase to optimize the broader multi-channel rollout planned for the fourth quarter. Turning to operations, we understand that value extends beyond price.

Speaker #3: To that end, we are also continuing to elevate the customer experience to differentiate Papa John's in the marketplace and drive incremental transactions. We have made significant progress over the last two years strengthening execution across the system.

Speaker #3: In the second half of the year, we'll deploy a more traditional barbell strategy focusing on our most popular, fan-favorite products, with short, targeted windows of disruptive value.

Todd Penegor: We are also in phase I of the rollout of our new personalization engine within our CRM platform. This engine is a sophisticated, multi-channel, AI-powered tool that leverages a mix of national and local offers and delivers a higher degree of personalization. We believe that once fully deployed, this technology will allow us to better tailor communications and offers to our customers, drive incremental purchases from both new and lapsed customers, and preserve restaurant margins while offering customers compelling value in key moments. We'll use learnings from this initial phase to optimize the broader multi-channel rollout planned for Q4. Turning to operations, we understand that value extends beyond price. To that end, we are also continuing to elevate the customer experience to differentiate Papa Johns in the marketplace and drive incremental transactions. We have made significant progress over the last two years, strengthening execution across the system.

Speaker #3: When we began our transformation, our operations support team and field support structure were more limited and spread across the US. Resulting in less market-level oversight and fewer in-restaurant touchpoints than we needed.

Todd Penegor: When we began our transformation, our operations support team and field support structure were more limited and spread across the US, resulting in less market-level oversight and fewer in-restaurant touchpoints than we needed. Since then, we've built a brand standards coaching team made up of pizza experts who have initiated in-person training, workshops, coaching sessions, and restaurant evaluations. However, there is still more work ahead as certain restaurants and operators are lagging behind. For example, in Q2, there was a 400 basis point gap in comparable sales, comparable orders, and restaurant margin performance between restaurants in the highest quintile of operation scores versus the lowest quintile. Raising the bar for the bottom quintile of operators is one of the single most important things we are doing to improve the consistency of our customer experience, brand perception, and top-line performance.

Speaker #3: Since then, we've built a brand standards coaching team, made up of pizza experts who have initiated in-person training, workshops, coaching sessions, and restaurant evaluations.

Speaker #3: However, there is still more work ahead, as certain restaurants and operators are lagging behind. For example, in the second quarter, there was a $400 basis point gap in comparable sales comparable orders and restaurant margin performance between restaurants and the highest quintile of operations scores versus the lowest quintile.

Speaker #3: To that end, we are also continuing to elevate the customer experience to differentiate Papa Johns in the marketplace and drive incremental transactions. We have made significant progress over the last two years strengthening execution across the system.

Speaker #3: Raising the bar for the bottom quintile of operators is one of the single most important things we are doing to improve the consistency of our customer experience, brand perception, and top-line performance.

Speaker #3: When we began our transformation, our operations support team and field support structure were more limited and spread across the U.S., resulting in less market-level oversight and fewer in-restaurant touchpoints than we needed.

Speaker #3: To help underperforming restaurants raise their level of execution, we are providing dedicated coaching, earned financial incentives which raise the bar on operational performance, and a regional franchise business director model designed to provide closer in-market support and greater accountability.

Todd Penegor: To help underperforming restaurants raise their level of execution, we are providing dedicated coaching, earned financial incentives, which raise the bar on operational performance, and a regional franchise business director model designed to provide closer in-market support and greater accountability. This includes more frequent restaurant visits, regular business reviews, documented follow-up, and standardized scorecards to drive measurable improvement. Beyond improved execution, we're also leveraging consumer insights to elevate and optimize our core product, further differentiating Papa Johns on quality in a highly competitive marketplace. This work starts with a clear understanding of what matters most to our customers: better ingredients, craveable flavor, consistent execution, and value they see and taste. We are applying those insights across the menu to improve the fundamentals of the pizza experience, from dough optimization and bake consistency to toppings, cheese, sauce, and overall product presentation.

Speaker #3: Since then, we've built a brand standards coaching team made up of pizza experts who have initiated in-person training, workshops, coaching sessions, and restaurant evaluations.

Speaker #3: This includes more frequent restaurant visits, regular business reviews, documented follow-up, and standardized scorecards to drive measurable improvement. Beyond improved execution, we're also leveraging consumer insights to elevate and optimize our core product.

Speaker #3: Further differentiating Papa John's on quality and a highly competitive marketplace. This work starts with a clear understanding of what matters most to our customers.

Speaker #3: Better ingredients, craveable flavor, consistent execution, and value they see and taste. We are applying those insights across the menu to improve the fundamentals of the pizza experience, from dough optimization and bake consistency to toppings, cheese, sauce, and overall product presentation.

Speaker #3: We are targeting refinements that enhance the customer experience while remaining operationally simple and scalable across the system. We believe these actions will strengthen brand preference, improve repeat purchase behavior, and reinforce Papa John's long-standing quality positioning.

Todd Penegor: We are targeting refinements that enhance the customer experience while remaining operationally simple and scalable across the system. We believe these actions will strengthen brand preference, improve repeat purchase behavior, and reinforce Papa Johns' longstanding quality positioning. Turning to new customer acquisition, we see a meaningful opportunity to accelerate trial through a more focused aggregator strategy. These platforms continue to play an important role in introducing new customers to the brand, and we believe there's an opportunity to improve both our visibility and effectiveness. To do so, we're optimizing our promotional approach, featuring a mix of value-driven offers and signature products, while also refining our allocation of national and local third-party marketing spend to maximize returns. As we broaden our reach through aggregators, we're also taking steps to increase brand awareness and drive consideration at a larger scale.

Speaker #3: Turning to new customer acquisition, we see a meaningful opportunity to accelerate trial through a more focused aggregator strategy. These platforms continue to play an important role in introducing new customers to the brand, and we believe there's an opportunity to improve both our visibility and effectiveness.

Speaker #3: Further differentiating PAPA JOHNS on quality and a highly competitive marketplace. This work starts with a clear understanding of what matters most to our customers.

Speaker #3: To do so, we're optimizing our promotional approach, featuring a mix of value-driven offers and signature products, while also refining our allocation of national and local third-party marketing, spend to maximize returns.

Speaker #3: Better ingredients, craveable flavor, consistent execution, and value they see and taste. We are applying those insights across the menu to improve the fundamentals of the pizza experience, from dough optimization and bake consistency, to toppings, cheese, sauce, and overall product presentation.

Speaker #3: As we broaden our reach through aggregators, we're also taking steps to increase brand awareness and drive consideration at a larger scale. To support that effort, we're rebalancing our media mix in the second half.

Todd Penegor: We are targeting refinements that enhance the customer experience while remaining operationally simple and scalable across the system. We believe these actions will strengthen brand preference, improve repeat purchase behavior, and reinforce Papa Johns' long-standing quality positioning. Turning to new customer acquisition, we see a meaningful opportunity to accelerate trial through a more focused aggregator strategy. These platforms continue to play an important role in introducing new customers to the brand, and we believe there's an opportunity to improve both our visibility and effectiveness. To do so, we're optimizing our promotional approach, featuring a mix of value-driven offers and signature products, while also refining our allocation of national and local third-party marketing spend to maximize returns. As we broaden our reach through aggregators, we're also taking steps to increase brand awareness and drive consideration at a larger scale.

Todd Penegor: To support that effort, we're rebalancing our media mix in the H2. Innovation also supports a brand proposition that drives new customer acquisition. We're working off a reinvigorated innovation pipeline, having introduced pan pizza, oven-toasted sandwiches, a cheesy garlic bread side, and our latest menu addition, personal pizzas, the perfect size for individual portions. Combined, these product launches are helping to elevate our pizza mix and expand our total addressable market beyond core pizza. While innovation remains an important lever, this quarter, we saw that innovation alone did not generate the level of new customer trial we expected. Going forward, we're pairing innovation with a sharper aggregator strategy and our new first-party CRM platform to improve reach, trial, and conversion.

Speaker #3: Innovation also supports a brand proposition that drives new customer acquisition. We're working off a reinvigorated innovation pipeline, having introduced pan pizza, oven-toasted sandwiches, a cheesy garlic bread side, and our latest menu addition, personal pizzas.

Speaker #3: The perfect size for individual portions. Combined, these product launches are helping to elevate our pizza mix and expand our total addressable market beyond core pizza.

Speaker #3: While innovation remains an important lever, this quarter we saw that innovation alone did not generate the level of new customer trial we expected. Going forward, we're pairing innovation with a sharper aggregator strategy and our new first-party CRM platform to improve reach, trial, and conversion.

Speaker #3: Our international innovation continues to raise the bar. With encouraging results, behind the launch of our artisanal sourdough pizza in the UK. A lighter, thinner, more premium pizza focused on expanding our addressable market.

Todd Penegor: Our international innovation continues to raise the bar with encouraging results behind the launch of our artisanal sourdough pizza in the UK, a lighter, thinner, more premium pizza focused on expanding our addressable market. This product is distinctive with scaled TSR pizza and attracts new customers, delivers higher profit margin, and further elevates the Papa Johns brand in the market. In addition to new menu items, we are also sharpening our marketing message to drive more meaningful impact with our customers. First, we are rebalancing our media mix toward greater mass exposure and higher TRPs. In this highly competitive environment, we recognize the importance of protecting share of voice on mass channels while still supporting a balanced channel mix to reach customers where they engage most. Maximizing the impact of our marketing investment requires balancing broad national awareness with local relevance.

Todd Penegor: To support that effort, we're rebalancing our media mix in H2. Innovation also supports a brand proposition that drives new customer acquisition. We're working off a reinvigorated innovation pipeline, having introduced pan pizza, oven-toasted sandwiches, a cheesy garlic bread side, and our latest menu addition, personal pizzas, the perfect size for individual portions. Combined, these product launches are helping to elevate our pizza mix and expand our total addressable market beyond core pizza. While innovation remains an important lever, this quarter, we saw that innovation alone did not generate the level of new customer trial we expected. Going forward, we're pairing innovation with a sharper aggregator strategy and our new first-party CRM platform to improve reach, trial, and conversion. Our international innovation continues to raise the bar, with encouraging results behind the launch of our artisanal sourdough pizza in the UK.

Speaker #3: This product is distinctive with scaled TSR pizza and attracts new customers, delivers higher profit margin, and further elevates the Papa John's brand in the market.

Speaker #3: In addition to new menu items, we're also sharpening our marketing message to drive more meaningful impact with our customers. First, we are rebalancing our media mix toward greater mass exposure and higher TRPs.

Speaker #3: They're the perfect size for individual portions. Combined, these product launches are helping to elevate our pizza mix and expand our total addressable market beyond core pizza.

Speaker #3: In this highly competitive environment, we recognize the importance of protecting share of voice on mass channels while still supporting a balanced channel mix to reach customers where they engage most.

Speaker #3: Maximizing the impact of our marketing investment requires balancing broad national awareness with local relevance. As we discussed on our last earnings call, we reinstated advertising co-ops across the US to improve market-level targeting, increase relevance, and better connect with customers in local communities.

Todd Penegor: As we discussed on our last earnings call, we reinstated advertising co-ops across the US to improve market-level targeting, increase relevance, and better connect with customers in local communities. Today, approximately 50% of our US restaurant system is supported by local co-ops, and we are encouraged by the early results. Market supported by co-ops and meaningful supplemental local spend are outperforming other markets by 200 basis points. To build on this progress, we are establishing a field marketing team that will work directly with local operators to align around effective, coordinated market strategies, ensure the local spend complements our national spend, and drive stronger market-level performance. We are committed to aligning our system on the right level of national and local spending to support the brand and reinstate co-ops for the majority of the system by the end of this year. Of course, our marketing strategy extends beyond media and market optimization.

Todd Penegor: A lighter, thinner, more premium pizza focused on expanding our addressable market. This product is distinctive with scaled Tavern-style pizza and attracts new customers, delivers higher profit margin, and further elevates the Papa Johns brand in the market. In addition to new menu items, we are also sharpening our marketing message to drive more meaningful impact with our customers. First, we are rebalancing our media mix toward greater mass exposure and higher TRPs. In this highly competitive environment, we recognize the importance of protecting share of voice on mass channels, while still supporting a balanced channel mix to reach customers where they engage most. Maximizing the impact of our marketing investment requires balancing broad national awareness with local relevance. As we discussed on our last earnings call, we reinstated advertising co-ops across the US to improve market level targeting, increase relevance, and better connect with customers in local communities.

Speaker #3: Today, approximately 50% of our US restaurant system is supported by local co-ops, and we're encouraged by the early results. Market supported by co-ops, and meaningful supplemental local spend are outperforming other markets by 200 basis points.

Speaker #3: This product is distinctive with scaled PSR pizza and attracts new customers, delivers higher profit margin, and further elevates the PAPA JOHNS brand in the market.

Speaker #3: To build on this progress, we're establishing a field marketing team that will work directly with local operators to align around effective, coordinated market strategies.

Todd Penegor: To build on this progress, we are establishing a field marketing team that will work directly with local operators to align around effective, coordinated market strategies, ensure the local spend complements our national spend, and drive stronger market-level performance. We are committed to aligning our system on the right level of national and local spending to support the brand and reinstate co-ops for the majority of the system by the end of this year. Of course, our marketing strategy extends beyond media and market optimization.

Speaker #3: Ensure the local spend complements our national spend and drive stronger market-level performance. We are committed to aligning our system on the right level of national and local spending to support the brand and reinstate co-ops for the majority of the system, by the end of this year.

Todd Penegor: We are investing in experiences and partnerships that deepen engagement, strengthen brand affinity, and attract new customers. In June, we launched four Pizza Planet pop-ups in key locations around the world to celebrate the theatrical release of Disney and Pixar's Toy Story 5. Our retro-inspired pizza arcades invited fans to step directly into the Toy Story universe, featuring iconic characters, experiences, and themes from the beloved franchise, while reinforcing Papa Johns as a culturally relevant brand. These activations generated strong global engagement with approximately 4 billion total earned media impressions and thousands of organic social posts from enthusiastic fans. Across our four immersive retro arcade pop-up locations in Los Angeles, London, Seoul, and Madrid, demand was exceptionally strong, with reservation slots for each event claimed within minutes. Investing in technology is essential to delivering a seamless customer experience and strengthening engagement while providing operators with better tools to run their businesses.

Speaker #3: In June, we launched four pizza planet pop-ups in key locations around the world to celebrate the theatrical release of Disney and Pixar's Toy Story 5.

Todd Penegor: Today, approximately 50% of our US restaurant system is supported by local co-ops, and we are encouraged by the early results. Market supported by co-ops and meaningful supplemental local spend are outperforming other markets by 200 basis points. To build on this progress, we are establishing a field marketing team that will work directly with local operators to align around effective coordinated market strategies, ensure the local spend complements our national spend, and drive stronger market level performance. We are committed to aligning our system on the right level of national and local spending to support the brand and reinstate co-ops for the majority of the system by the end of this year. Of course, our marketing strategy extends beyond media and market optimization. We are investing in experiences and partnerships that deepen engagement, strengthen brand affinity, and attract new customers.

Speaker #3: Our retro-inspired pizza arcades invited fans to step directly into the Toy Story universe, featuring iconic characters experiences and themes from the beloved franchise, while reinforcing Papa John's as a culturally relevant brand.

Speaker #3: To build on this progress, we're establishing a field marketing team that will work directly with local operators to align around effective, coordinated market strategies.

Speaker #3: These activations generated strong global engagement, with approximately 4 billion total earned media impressions and thousands of organic social posts from enthusiastic fans. Across our four immersive retro arcade pop-up locations in Los Angeles, London, Seoul, and Madrid, demand was exceptionally strong with reservation slots for each event claimed within minutes.

Todd Penegor: These activations generated strong global engagement with approximately 4 billion total earned media impressions and thousands of organic social posts from enthusiastic fans. Across our four immersive retro arcade pop-up locations in Los Angeles, London, Seoul, and Madrid, demand was exceptionally strong, with reservation slots for each event claimed within minutes. Investing in technology is essential to delivering a seamless customer experience and strengthening engagement while providing operators with better tools to run their businesses.

Speaker #3: Of course, our marketing strategy extends beyond media and market optimization. We're investing in experiences and partnerships that deepen engagement, strengthen brand customers. In June, we launched four pizza planet pop-ups in key locations around the world to celebrate the theatrical release of Disney and Pixar's Toy Story 5.

Speaker #3: Investing in technology is essential to delivering a seamless customer experience and strengthening engagement while providing operators with better tools to run their businesses. We continue to build our AI capabilities as a means to drive customer acquisition, unlock new demand channels, and increase brand relevance.

Todd Penegor: In June, we launched four Pizza Planet pop-ups in key locations around the world to celebrate the theatrical release of Disney and Pixar's Toy Story 5. Our retro inspired pizza arcades invited fans to step directly into the Toy Story universe, featuring iconic characters, experiences, and themes from the beloved franchise, while reinforcing Papa Johns as a culturally relevant brand. These activations generated strong global engagement, with approximately 4 billion total earned media impressions and thousands of organic social posts from enthusiastic fans. Across our four immersive retro arcade pop-up locations in Los Angeles, London, Seoul, and Madrid, demand was exceptionally strong, with reservation slots for each event claimed within minutes. Investing in technology is essential to delivering a seamless customer experience and strengthening engagement while providing operators with better tools to run their businesses.

Todd Penegor: We continue to build our AI capabilities as a means to drive customer acquisition, unlock new demand channels, and increase brand relevance. As part of that effort, we are advancing our technology transformation through the rollout of Lou AI, our next generation AI powered pizza assistant, developed in partnership with Google Cloud that is available on our app. Lou AI serves as an always on digital concierge, customized for Papa Johns, and designed to simplify the ordering experience, solve customer needs in real time, and create a more frictionless path to purchase. Our agentic ordering automatically applies the best available deals and now enables fast, seamless reordering for Papa Rewards members. Early results are encouraging. Compared with non-AI assisted orders, customers using Lou AI are converting at an 18% higher rate and completing their orders approximately 3 minutes faster.

Speaker #3: As part of that effort, we're advancing our technology transformation through the rollout of Lu AI, our next-generation AI-powered pizza assistant developed in partnership with Google on our app.

Speaker #3: Lu AI serves as an always-on digital concierge customized for Papa John's and designed to simplify the ordering experience, solve customer needs, and real-time and create a more frictionless path to purchase.

Speaker #3: Our agentic ordering automatically applies the best available deals, and now enables fast, seamless reordering for proper rewards members. Early results are encouraging. Compared with non-AI assisted orders, customers using Lu AI are converting at an 18% higher rate and completing their orders approximately three minutes faster.

Speaker #3: We are also making steady progress on our transition to a new POS platform, following the successful launch of our first restaurant pilot in April.

Todd Penegor: We are also making steady progress on our transition to a new POS platform following the successful launch of our first restaurant pilot in April, with additional restaurants coming on board by the end of the year, and full deployment expected across all of our US corporate and franchise locations by the end of 2027. This modern AI native platform will provide operators with enhanced visibility into key restaurant performance metrics, improve operational decision making, and create a more connective experience across our digital ecosystem. Ultimately, these investments strengthen our ability to serve customers and support operators. We continue to differentiate our customer experience across every demand channel to support top line growth. We're leveraging our new e-commerce platform to provide unique, optimized customer experiences across app, mobile web, desktop, call center, and aggregators.

Todd Penegor: We continue to build our AI capabilities as a means to drive customer acquisition, unlock new demand channels, and increase brand relevance. As part of that effort, we are advancing our technology transformation through the rollout of Lou AI, our next generation AI powered pizza assistant, developed in partnership with Google Cloud that is available on our app. Lou AI serves as an always on digital concierge, customized for Papa Johns and designed to simplify the ordering experience, solve customer needs in real time, and create a more frictionless path to purchase. Our agentic ordering automatically applies the best available deals and now enables fast, seamless reordering for Papa Rewards members. Early results are encouraging. Compared with non-AI assisted orders, customers using Lou AI are converting at an 18% higher rate and completing their orders approximately three minutes faster.

Speaker #3: With additional restaurants coming on board by the end of the year. And full deployment expected across all of our US corporate and franchise locations by the end of 2027.

Speaker #3: As part of that effort, we're advancing our technology transformation through the rollout of Lu AI, our next-generation developed in partnership with Google Cloud that is available on our app.

Speaker #3: This modern, AI-native platform will provide operators with enhanced visibility into key restaurant performance metrics, improve operational decision-making, and create a more connective experience across our digital ecosystem.

Speaker #3: Lu AI serves as an always-on digital concierge, customized for PAPA JOHNS and designed to simplify the ordering experience, solve customer needs in real time, and create a more frictionless path to purchase.

Speaker #3: Ultimately, these investments strengthen our ability to serve customers and support operators. We continue to differentiate our customer experience across every demand channel to support top-line growth.

Speaker #3: Our agentic ordering automatically applies the best available deals and now enables fast, seamless reordering for Papa Rewards members. Early results are encouraging. Compared with non-AI-assisted orders, customers using Lu AI are converting at an 18% higher rate and completing their orders approximately three minutes faster.

Speaker #3: We're leveraging our new e-commerce platform to provide unique, optimized customer experiences across app, mobile web, desktop, call center, and aggregators. Leveraging our robust CRM platform, we are engaging customers more frequently and using targeted, personalized communications across email, push, and SMS to drive incremental visits and deepen engagement.

Todd Penegor: Leveraging our robust CRM platform, we are engaging customers more frequently and using targeted, personalized communications across email, push, and SMS to drive incremental visits and deepen engagement. Our extensive data and digital insights are key advantages for Papa Johns, and we are increasingly leveraging them to identify opportunities to improve the guest experience and drive incremental sales through continuous innovation across our brand. With more than 85% of our sales generated on digital channels, inclusive of the aggregators, it is imperative that we provide an outstanding digital experience. We're also leveraging our new e-commerce gaming platform to drive trial and repeat visits by incorporating CRM and loyalty into the user experience and fully capitalize on our partnerships. To engage with customers around Toy Story 5, we launched our first ever in-app game, Operation Pizza, that unlocked perks for Papa Rewards members.

Speaker #3: We are also making steady progress on our transition to a new POS platform following the successful launch of our first restaurant pilot in April.

Todd Penegor: We are also making steady progress on our transition to a new POS platform following the successful launch of our first restaurant pilot in April, with additional restaurants coming on board by the end of the year, and full deployment expected across all of our US corporate and franchise locations by the end of 2027. This modern AI native platform will provide operators with enhanced visibility into key restaurant performance metrics, improve operational decision making, and create a more connective experience across our digital ecosystem. Ultimately, these investments strengthen our ability to serve customers and support operators. We continue to differentiate our customer experience across every demand channel to support top-line growth. We are leveraging our new e-commerce platform to provide unique, optimized customer experiences across app, mobile web, desktop, call center, and aggregators.

Speaker #3: With additional restaurants coming on board by the end of the year. And full deployment expected across all of our US corporate and franchise locations by the end of 2027.

Speaker #3: Our extensive data and digital insights are key advantages for Papa John's and we are increasingly leveraging them to identify opportunities to improve the guest experience and drive incremental sales through continuous innovation across our brand.

Speaker #3: With more than 85% of our sales generated on digital channels, inclusive of the aggregators, it is imperative that we provide an outstanding digital experience.

Speaker #3: We're also leveraging our new e-commerce gaming platform to drive trial and repeat visits by incorporating CRM and loyalty into the user experience and fully capitalize on our partnerships.

Speaker #3: To engage with customers around Toy Story 5, we launched our first-ever in-app game, Operation Pizza, that unlocked perks for proper rewards members. Finally, we continue to partner with and evolve our franchisee base.

Todd Penegor: Leveraging our robust CRM platform, we are engaging customers more frequently and using targeted, personalized communications across email, push, and SMS to drive incremental visits and deepen engagement. Our extensive data and digital insights are key advantages for Papa Johns, and we are increasingly leveraging them to identify opportunities to improve the guest experience and drive incremental sales through continuous innovation across our brand. With more than 85% of our sales generated on digital channels, inclusive of the aggregators, it is imperative that we provide an outstanding digital experience. We are also leveraging our new e-commerce gaming platform to drive trial and repeat visits by incorporating CRM and loyalty into the user experience and fully capitalize on our partnerships. To engage with customers around Toy Story 5, we launched our first ever in-app game, Operation Pizza, that unlocked perks for Papa Rewards members.

Todd Penegor: Finally, we continue to partner with and evolve our franchisee base. Our efforts to optimize our North American supply chain continue to advance our path to unlocking the full potential of our commissary business. In Q2, we captured an additional $7 million of benefits and are on track to realize at least $25 million of savings this year. We believe that we will achieve at least $60 million of North American system-wide supply chain productivity opportunities, equating to at least 160 basis points of four wall EBITDA improvement by 2028 at both our company owned and franchise restaurants. As part of evolving our franchisee base, we are optimizing our North American system to get restaurants into the hands of great operators focused on the long term, with capital structures in place to properly support the transformation of the business.

Speaker #3: Our efforts to optimize our North American supply chain continue to advance our path to unlocking the full potential of our commissary business. In the second quarter, we captured an additional $7 million of benefits and are on track to realize at least $25 million of savings this year.

Speaker #3: Our extensive data and digital insights are key advantages for Papa Johns, and we are increasingly leveraging them to identify opportunities to improve the guest experience and drive incremental sales through continuous innovation across our brand.

Speaker #3: We believe that we will achieve at least $60 million of North American system-wide supply chain productivity opportunities equating to at least $160 basis points of four-wall EBITDA improvement by 2028 at both our company-owned and franchise restaurants.

Speaker #3: With more than 85% of our sales generated on digital channels, including the aggregators, it is imperative that we provide an outstanding digital experience.

Speaker #3: We're also leveraging our new e-commerce gaming platform to drive trial and repay visits by incorporating CRM and loyalty into the user experience and fully capitalize on our partnerships.

Speaker #3: As part of evolving our franchisee base, we are optimizing our North American system to get restaurants into the hands of great operators focused on the long-term, with capital structures in place to properly support the transformation of the business.

Speaker #3: To engage with customers around Toy Story 5, we launched our first-ever in-app game, Operation Pizza, that unlocked perks for PAPA Rewards members. Finally, we continue to partner with and evolve our franchisee base.

Speaker #3: In the second quarter, we made further progress in the optimization of our restaurant portfolio and have closed $101 of the planned $300 North American restaurants identified in our strategic closure program.

Todd Penegor: In Q2, we made further progress in the optimization of our restaurant portfolio and have closed 101 of the planned 300 North American restaurants identified in our strategic closure program. As a reminder, this program is focused on closing locations that do not meet brand standards, lack a clear path to sustainable improvement, have AUVs below $600,000, and predominantly generate negative EBITDA. Early results have been encouraging, with strong sales transfer to neighboring restaurants. Combined with the proven success of our international transformation, where a focus on priority markets and strategic closures improve franchisee health and market performance, these results give us confidence that our portfolio optimization strategy will strengthen franchisee financial health, enhance our competitiveness, and support future market share gains in North America.

Todd Penegor: Finally, we continue to partner with and evolve our franchisee base. Our efforts to optimize our North American supply chain continue to advance our path to unlocking the full potential of our commissary business. In Q2, we captured an additional $7 million of benefits, and are on track to realize at least $25 million of savings this year. We believe that we will achieve at least $60 million of North American system-wide supply chain productivity opportunities, equating to at least 160 basis points of four-wall EBITDA improvement by 2028 at both our company-owned and franchise restaurants. As part of evolving our franchisee base, we are optimizing our North American system to get restaurants into the hands of great operators focused on the long term with capital structures in place to properly support the transformation of the business.

Speaker #3: As a reminder, this program is focused on closing locations that do not meet brand standards, lack a clear path to sustainable improvement, have AUVs below $600,000, and predominantly generate negative EBITDA.

Speaker #3: Early results have been encouraging with strong sales transfer to neighboring restaurants. Combined with the proven success of our international transformation, we're a focus on priority markets and strategic closures improve franchisee health and market performance, these results give us confidence that our portfolio optimization strategy will strengthen franchisee financial health, enhance our competitiveness, and support future market share gains in North America.

Speaker #3: We believe that we will achieve at least $60 million of North American system-wide supply chain productivity opportunities, equating to at least 160 basis points of four-wall EBITDA improvement by 2028 at both our company-owned and franchise restaurants.

Speaker #3: As part of evolving our franchisee base, we are optimizing our North American system to get restaurants into the hands of great operators focused on the long term, with capital structures in place to properly support the transformation of the business.

Speaker #3: Altogether, we expect to generate at least $200 basis points of four-wall EBITDA improvement for both company and franchise restaurants over the medium term, inclusive of the supply chain savings, restaurant portfolio optimization work, and the operational efficiency programs discussed.

Todd Penegor: Altogether, we expect to generate at least 200 basis points of four-wall EBITDA improvement for both company and franchise restaurants over the medium term, inclusive of the supply chain savings, restaurant portfolio optimization work, and the operational efficiency programs discussed. Turning now to our capital allocation priorities. Our board and management team take a disciplined approach to capital allocation, prioritizing investment in the business, maintaining a strong balance sheet, and returning capital to shareholders through share repurchases and dividends. Guided by this framework and our commitment to allocating capital to the highest return opportunities, our board intends to suspend our quarterly dividend beginning in August. This action will increase flexibility to make the investments that we believe are needed to deliver on our strategic transformation and generate the greatest value for shareholders. One critical investment area is our franchisee base.

Todd Penegor: In Q2, we made further progress in the optimization of our restaurant portfolio and have closed 101 of the planned 300 North American restaurants identified in our strategic closure program. As a reminder, this program is focused on closing locations that do not meet brand standards, lack a clear path to sustainable improvement, have AUVs below 600,000, and predominantly generate negative EBITDA. Early results have been encouraging, with strong sales transfer to neighboring restaurants. Combined with the proven success of our international transformation, where a focus on priority markets and strategic closures improve franchisee health and market performance, these results give us confidence that our portfolio optimization strategy will strengthen franchisee financial health, enhance our competitiveness, and support future market share gains in North America.

Speaker #3: Turning now to our capital allocation priorities, our board and management team take a disciplined approach to capital allocation. Prioritizing investment in the business, maintaining a strong balance sheet, and returning capital to shareholders through share repurchases and dividends.

Speaker #3: Early results have been encouraging, with strong sales transfer to neighboring restaurants. Combined with the proven success of our international transformation, we're a focus on priority markets and strategic closures improve franchisee health and market performance, these results give us confidence that our portfolio optimization strategy will strengthen franchisee financial health, enhance our competitiveness, and support future market share gains in North America.

Speaker #3: Guided by this framework and our commitment to allocating capital to the highest return opportunities, our board intends to suspend our quarterly dividend beginning in August.

Speaker #3: This action will increase flexibility to make the investments that we believe are needed to deliver on our strategic transformation and generate the greatest value for shareholders.

Speaker #3: One critical investment area is our franchisee base. We are expanding financial incentives tied to operational excellence and restaurant image improvements while also reworking our national marketing fund agreement to better balance national and local investment.

Speaker #3: Altogether, we expect to generate at least 200 basis points of four-wall EBITDA improvement for both company and franchise restaurants over the medium term, inclusive of the supply chain savings, restaurant portfolio optimization work, and the operational efficiency programs discussed.

Todd Penegor: We are expanding financial incentives tied to operational excellence and restaurant image improvements, while also reworking our national marketing fund agreement to better balance national and local investment and establish local co-ops in the vast majority of our markets. Together, these actions will accelerate our transformation, elevate the customer experience, and deliver strong returns for both franchisees and franchisor. Other investment areas include driving new customer acquisition through a sharper aggregator strategy, expansion of our total addressable market, product innovation, and core menu improvement, advancing our technology roadmap, including our AI capabilities, new CRM platform, and next-generation POS system to deepen customer engagement, deliver personalization at scale, and drive incremental purchases, further optimizing our supply chain to improve cost leverage and drive higher four-wall EBITDA, and investing in our international business to build on our momentum and support long-term growth.

Speaker #3: And establish local co-ops in the vast majority of our markets. Together, these actions will accelerate our transformation, elevate the customer experience, and deliver strong returns for both franchisees and franchisor.

Speaker #3: Turning now to our capital allocation priorities, our disciplined approach to capital allocation. Prioritizing investment in the business, maintaining a strong balance sheet, and returning capital to shareholders through share repurchases and dividends.

Speaker #3: Other investment areas include driving new customer acquisition through a sharper aggregator strategy, expansion of our total adjustable market, product innovation, and core menu improvement.

Speaker #3: Guided by this framework and our commitment to allocating capital to the highest return opportunities, our board intends to suspend our quarterly dividend beginning in August.

Speaker #3: Advancing our technology roadmap, including our AI capabilities, new CRM platform, and next-generation POS system, to deepen customer engagement, deliver personalization at scale, and drive incremental purchases.

Speaker #3: This action will increase flexibility to make the investments that we believe are needed to deliver on our strategic transformation and generate the greatest value for shareholders.

Speaker #3: Further optimizing our supply chain to improve cost leverage and drive higher four-wall EBITDA, and investing in our international business to build on our momentum and support long-term growth.

Speaker #3: One critical investment area is our franchisee base. We are expanding financial incentives tied to operational excellence and restaurant image improvements, while also reworking our national marketing fund agreement to better balance national and local investment.

Todd Penegor: We are expanding financial incentives tied to operational excellence and restaurant image improvements, while also reworking our national marketing fund agreement to better balance national and local investment, establish local co-ops in the vast majority of our markets. Together, these actions will accelerate our transformation, elevate the customer experience, and deliver strong returns for both franchisees and franchisor. Other investment areas include driving new customer acquisition through a sharper aggregator strategy, expansion of our total addressable market, product innovation, core menu improvement. Advancing our technology roadmap, including our AI capabilities, new CRM platform, next generation POS system to deepen customer engagement, deliver personalization at scale, drive incremental purchases. Further optimizing our supply chain to improve cost leverage and drive higher four-wall EBITDA, investing in our international business to build on our momentum and support long-term growth.

Speaker #3: We have clearly defined success criteria. Our rigorously tracking returns and our already seeing encouraging early signs of progress. As we realize the benefits of our transformation over time, we intend to revisit how to most effectively return capital to shareholders through share buybacks and dividends.

Todd Penegor: We have clearly defined success criteria, are rigorously tracking returns, and are already seeing encouraging early signs of progress. As we realize the benefits of our transformation over time, we intend to revisit how to most effectively return capital to shareholders through share buybacks and dividends. In summary, we are executing with discipline, investing for the long term, and positioning the business for improved comparable sales trends in 2027. Ultimately, our goal is to reengage customers with what is new, better, and distinct about Papa Johns. With our six simple ingredients, we have a meaningful point of differentiation on quality and an opportunity to deliver products that feel closer to neighborhood pizza experience at an accessible price point with greater convenience. This reinforces our confidence in the strength of the brand and our ability to compete more effectively and capture market share over time.

Speaker #3: In summary, we are executing with discipline, investing for the long term, and positioning the business for improved comparable sales trends in 2027. Ultimately, our goal is to re-engage customers with what is new, better, and distinct about PAPA JOHNS.

Speaker #3: Other investment areas include driving new customer acquisition through a sharper aggregator strategy, expansion of our total addressable market, product innovation, and core menu improvement.

Speaker #3: With our six simple ingredients, we have a meaningful point of differentiation on quality, and an opportunity to deliver products that feel closer to neighborhood pizza experience at an accessible price point with greater convenience.

Speaker #3: This reinforces our confidence in the strength of the brand and our ability to compete more effectively and capture market share over time. While our transformation is taking longer than we anticipated, we are building the operational and financial foundation to drive sustainable growth.

Todd Penegor: While our transformation is taking longer than we anticipated, we are building the operational and financial foundation to drive sustainable growth. As I've laid out today, we'll achieve this by competing on value with more targeted, personalized offers and consistent elevated customer experience, targeted investments in customer acquisition and brand elevation, and disciplined portfolio optimization and supply chain improvements that strengthen unit economics. This strategy is similar to the transformation playbook that has proven successful internationally, and we are confident it will allow us to compete better and win in North America. I want to now welcome Chris Collins to the call. Chris has assumed the role of our interim Chief Financial Officer and brings a deep financial knowledge of Papa Johns. The board and I appreciate Chris stepping into this additional role while we conduct a comprehensive search process to identify Papa Johns' next CFO. Chris, over to you.

Todd Penegor: We have clearly defined success criteria, are rigorously tracking returns, are already seeing encouraging early signs of progress. As we realize the benefits of our transformation over time, we intend to revisit how to most effectively return capital to shareholders through share buybacks and dividends. In summary, we are executing with discipline, investing for the long term, positioning the business for improved comparable sales trends in 2027. Ultimately, our goal is to reengage customers with what is new, better, and distinct about Papa Johns. With our six simple ingredients, we have a meaningful point of differentiation on quality an opportunity to deliver products that feel closer to neighborhood pizza experience at an accessible price point with greater convenience. This reinforces our confidence in the strength of the brand our ability to compete more effectively and capture market share over time.

Speaker #3: As I've laid out today, we'll achieve this by competing on value with more targeted, personalized offers, and consistent elevated customer experience, targeted investments in customer acquisition and brand elevation, and disciplined portfolio optimization and supply chain improvements that strengthen unit economics.

Speaker #3: This strategy is similar to the transformation playbook that has proven successful internationally, and we are confident it will allow us to compete better and win in North America.

Speaker #3: With our six simple ingredients, we have a meaningful point of differentiation on quality, and an opportunity to deliver products that feel closer to the neighborhood pizza experience at an accessible price point with greater convenience.

Speaker #3: I want to now welcome Chris Collins to the call. Chris has assumed the role of our interim Chief Financial Officer and brings a deep financial knowledge of PAPA JOHNS.

Speaker #3: The board and I appreciate Chris stepping into this additional role while we conduct a comprehensive search process to identify PAPA JOHNS' next CFO. Chris, over to you.

Speaker #3: Thank you, Todd, and good morning, everyone. I'm excited to join the call today as the PAPA JOHNS Interim Chief Financial Officer and look forward to working alongside you and our team to advance our transformation.

Todd Penegor: While our transformation is taking longer than we anticipated, we are building the operational and financial foundation to drive sustainable growth. As I've laid out today, we'll achieve this by competing on value with more targeted, personalized offers and consistent elevated customer experience, targeted investments in customer acquisition and brand elevation, disciplined portfolio optimization and supply chain improvements that strengthen unit economics. This strategy is similar to the transformation playbook that has proven successful internationally, we are confident it will allow us to compete better and win in North America. I want to now welcome Chris Collins to the call. Chris has assumed the role of our interim Chief Financial Officer and brings a deep financial knowledge of Papa Johns. The board and I appreciate Chris stepping into this additional role while we conduct a comprehensive search process to identify Papa Johns' next CFO. Chris, over to you.

Chris Collins: Thank you, Todd, and good morning, everyone. I'm excited to join the call today as the Papa Johns interim chief financial officer and look forward to working alongside you and our team to advance our transformation. I'll begin by reviewing our Q2 results in further detail, and then I'll share our updated 2026 outlook. Please note that all comparisons and growth rates referenced today are compared to the prior year period, unless otherwise noted. For the Q2, global system-wide restaurant sales were $1.2 billion, down 5% in constant currency as higher international comparable sales were more than offset by lower comparable sales in North America, as well as strategic closures to strengthen our system. As Todd shared, our international business continues to outperform, with comparable sales growing 1.5%, even as we saw pressure in the markets directly impacted by the Middle East conflict.

Speaker #3: I'll begin by reviewing our second quarter results and further detail and then I'll share our updated 2026 outlook. Please note that all comparisons and growth rates referenced today are compared to the prior year period unless otherwise noted.

Speaker #3: This strategy is similar to the transformation playbook that has proven successful internationally, and we are confident it will allow us to compete better and win in North America.

Speaker #3: For the second quarter, global system-wide restaurant sales were $1.2 billion down 5% in constant currency as higher international comparable sales were more than offset by lower comparable sales in North America as well as strategic closures to strengthen our system.

Speaker #3: I want to now welcome Chris Collins to the call. Chris has assumed the role of our interim chief financial officer and brings a deep financial knowledge of PAPA JOHNS.

Speaker #3: The Board and I appreciate Chris stepping into this additional role while we conduct a comprehensive search process to identify Papa John’s next CFO. Chris, over to you.

Speaker #3: As Todd shared, our international business continues to outperform with comparable sales growing 1.5% even as we saw pressure in the markets directly impacted by the Middle East conflict.

Speaker #3: Thank you, Todd, and good morning, everyone. I'm excited to join the call today as the Papa John's interim Chief Financial Officer and look forward to working alongside you and our team to advance our transformation.

Chris Collins: Thank you, Todd, and good morning, everyone. I am excited to join the call today as the Papa Johns Interim Chief Financial Officer, and look forward to working alongside you and our team to advance our transformation. I will begin by reviewing our Q2 results in further detail, and then I will share our updated 2026 outlook. Please note that all comparisons and growth rates referenced today are compared to the prior year period, unless otherwise noted. For the Q2, global system-wide restaurant sales were $1.2 billion, down 5% in constant currency, as higher international comparable sales were more than offset by lower comparable sales in North America, as well as strategic closures to strengthen our system. As Todd shared, our international business continues to outperform, with comparable sales growing 1.5%, even as we saw pressure in the markets directly impacted by the Middle East conflict.

Speaker #3: Total consolidated revenue for the second quarter was $482 million, down 9% as lower revenue for our domestic company-owned restaurants North America commissary North America franchising and all other business units was partially offset by higher international revenues.

Chris Collins: Total consolidated revenue for the Q2 was $482 million, down 9%, as lower revenue for our domestic company-owned restaurants, North America Commissary, North America Franchising, and all other business units was partially offset by higher international revenues. Domestic company-owned restaurant revenues decreased $37 million, primarily due to the refranchising of 85 corporate restaurants in the Q4 2025, in addition to lower comparable sales. Revenues in our North America Commissary segment decreased $12 million, primarily due to lower volumes, partially offset by higher pricing. Revenues in our North America Franchising segment decreased $3 million, primarily due to lower comparable sales at our franchise restaurants, and all other business unit revenues decreased $8 million, driven by lower advertising fund revenue and digital fees as a function of lower system sales. Partially offsetting these declines was a $1 million increase in the international revenue.

Speaker #3: Domestic company-owned restaurant revenues decreased 37 million primarily due to the refranchising of 85 corporate restaurants in the fourth quarter of 2025 in addition to lower comparable sales.

Speaker #3: Revenues in our North America commissary segment decreased 12 million primarily due to lower volumes partially offset by higher pricing. Revenues in our North America franchising segment decreased 3 million primarily due to lower comparable sales at our franchise restaurants and all other business unit revenues decreased 8 million driven by lower advertising fund revenue and digital fees as a function of lower system sales.

Speaker #3: As Todd shared, our international business continues to outperform with comparable sales growing 1.5%, even as we saw pressure in the markets directly impacted by the Middle East conflict.

Chris Collins: Total consolidated revenue for the Q2 was $482 million, down 9%, as lower revenue for our domestic company-owned restaurants, North America Commissaries, North America Franchising, and all other business units was partially offset by higher international revenues. Domestic company-owned restaurant revenues decreased $37 million, primarily due to the refranchising of 85 corporate restaurants in the Q4 of 2025, in addition to lower comparable sales. Revenues in our North America Commissaries segment decreased $12 million, primarily due to lower volumes, partially offset by higher pricing. Revenues in our North America Franchising segment decreased $3 million, primarily due to lower comparable sales at our franchise restaurants. All other business unit revenues decreased $8 million, driven by lower advertising fund revenue and digital fees as a function of lower system sales. Partially offsetting these declines was a $1 million increase in international revenue.

Speaker #3: Partially offsetting these declines was $1 million increase in international revenue. Consolidated adjusted EBITDA of $53 million was up slightly despite top-line pressure primarily driven by lower overall GNA spend due to strong cost management and lower supplemental advertising spend.

Chris Collins: Consolidated adjusted EBITDA of $53 million was up slightly despite top-line pressure, primarily driven by lower overall G&A spend due to strong cost management and lower supplemental advertising spend, lower cost of sales due to lower volumes in the prior year refranchising transaction, and improved performance in our international markets. These gains were partially offset by lower sales flow-through and softer QCC volumes in North America. We captured approximately $7 million in system-wide supply chain benefits during the Q2 through increased efficiency and reduced cost to serve at our North America Commissary. Through Q2, we have captured approximately $16 million in supply chain savings, representing 43 basis points of restaurant margin benefit North America commissary segment adjusted EBITDA margins were 8.7%, an improvement of approximately 140 basis points, primarily reflecting supply chain cost savings benefits and higher pricing, partially offset by lower volumes during the quarter.

Speaker #3: Lower cost of sales due to lower volumes and the prior year refranchising transaction and improved performance in our international markets. These gains were partially offset by lower sales flow-through and softer QCC volumes in North America.

Speaker #3: Revenues in our North America commissary segment decreased $12 million, primarily due to lower volumes, partially offset by higher pricing. Revenues in our North America franchising segment decreased $3 million, primarily due to lower comparable sales at our franchise restaurants.

Speaker #3: We captured approximately $7 million in system-wide supply chain benefits during the second quarter through increased efficiency and reduced cost to serve at our North America commissary.

Speaker #3: And all other business unit revenues decreased 8 million driven by lower advertising fund revenue and digital fees as a function of lower system sales.

Speaker #3: Through Q2, we have captured approximately $16 million in supply chain savings representing 43 basis points of restaurant margin benefit. North America commissary segment adjusted EBITDA margins were 8.7% and improvement of approximately $140 basis points primarily reflecting supply chain cost savings benefits and higher pricing partially offset by lower volumes during the quarter.

Chris Collins: Consolidated adjusted EBITDA of $53 million was up slightly despite top-line pressure, primarily driven by lower overall G&A spend due to strong cost management and lower supplemental advertising spend, lower cost of sales due to lower volumes in the prior year refranchising transaction, and improved performance in our international markets. These gains were partially offset by lower sales flow through and softer QCC volumes in North America. We captured approximately $7 million in system-wide supply chain benefits during the Q2 through increased efficiency and reduced cost to serve at our North America Commissaries. Through Q2, we have captured approximately $16 million in supply chain savings, representing 43 basis points of restaurant margin benefit. North America Commissaries segment adjusted EBITDA margins were 8.7%, an improvement of approximately 140 basis points, primarily reflecting supply chain cost savings benefits and higher pricing, partially offset by lower volumes during the quarter.

Speaker #3: Domestic company-owned restaurants delivered four-wall EBITDA of $15.6 million and four-wall margins of 11.2%, a decrease of 130 basis points primarily driven by lower transactions and higher food the benefits of our transformation initiatives including restaurant labor productivity and refranchising activity.

Chris Collins: Domestic company-owned restaurants delivered wall EBITDA of $15.6 million and four-wall margins of 11.2%, a decrease of 130 basis points, primarily driven by lower transactions and higher food costs, partially offset by the benefits of our transformation initiatives, including restaurant, labor productivity, and re-franchisee activity. Turning to our balance sheet. At the end of the quarter, our total available liquidity was approximately $500 million, and our covenant leverage ratio was 3.3 times, as we continue to maintain a very strong balance sheet, which provides flexibility to support our transformation initiatives. Turning now to cash flows. Net cash provided by operating activities through the Q2 was $36 million.

Speaker #3: Turning to our balance sheet, at the end of the quarter, our total available liquidity was approximately $500 million and our covenant leverage ratio was 3.3 times as we continue to maintain a very strong balance sheet which provides flexibility to support our transformation initiatives.

Speaker #3: Turning now to cash flows, net cash provided by operating activities through the second quarter was $36 million. Free cash flow through the first half was $9 million compared with last year's $37 million.

Chris Collins: Free cash flow through H1 was $9 million, compared with last year's $37 million, primarily reflecting lower net income, timing of marketing spend within our advertising fund, more normalized incentive payments, and investments in the company's enterprise transformation plan, offset somewhat by lower H1 cash taxes due to new tax legislation passed in July 2025. Turning to our 2026 outlook. As discussed, we are revising our outlook to incorporate year-to-date results in a challenging environment, which we expect to continue for the balance of the year. For 2026, we now expect global system-wide sales declines to range between 2% and 4%. For North America, we expect comparable sales to be down 6% to 8%. July North America comparable sales trended in line with Q2 on a year-over-year basis, but decelerated on a three-year stack.

Speaker #3: Domestic company-owned restaurants delivered four-wall EBITDA of $15.6 million and four-wall margins of 11.2%, a decrease of 130 basis points primarily driven by lower transactions and higher food cost partially offset by the benefits of our transformation initiatives including restaurant labor productivity and refranchising activity.

Chris Collins: Domestic company-owned restaurants delivered four-wall EBITDA of $15.6 million and four-wall margins of 11.2%, a decrease of 130 basis points, primarily driven by lower transactions and higher food cost, partially offset by the benefits of our transformation initiatives, including restaurant, labor productivity, and refranchising activity. Turning to our balance sheet. At the end of the quarter, our total available liquidity was approximately $500 million, and our covenant leverage ratio was 3.3 times as we continue to maintain a very strong balance sheet, which provides flexibility to support our transformation initiatives. Turning now to cash flows. Net cash provided by operating activities through the Q2 was $36 million. Free cash flow through the H1 was $9 million, compared with last year's $37 million.

Speaker #3: Primarily reflecting lower net income timing of marketing spend within our advertising fund, more normalized incentive payments, and investments in the company's enterprise transformation plan.

Speaker #3: Offset somewhat by lower first half cash taxes due to new tax legislation passed in July last year. Now turning to our 2026 outlook, as discussed, we're revising our outlook to incorporate year-to-date results and a challenging environment which we expect to continue for the balance of the year.

Speaker #3: For 2026, we now expect global system-wide sales declines to range between 2% and 4%. For North America, we expect comparable sales to be down 6% to 8%.

Speaker #3: July North America comparable sales trended in line with Q2 on a year-over-year basis but decelerated on a three-year stack. We expect sequential improvement in North America comp sales in the second half of the year supported by our marketing co-op activations as strengthened aggregator marketing strategy our new CRM program and prior year comparisons.

Chris Collins: Primarily reflecting lower net income, timing of marketing spend within our advertising fund, more normalized incentive payments, and investments in the company's enterprise transformation plan, offset somewhat by lower H1 cash taxes due to new tax legislation passed in July last year. Now turning to our 2026 outlook. As discussed, we are revising our outlook to incorporate year-to-date results in a challenging environment, which we expect to continue for the balance of the year. For 2026, we now expect global system-wide sales declines to range between 2% and 4%. For North America, we expect comparable sales to be down 6% to 8%. July North America comparable sales trended in line with Q2 on a year-over-year basis, but decelerated on a three-year stack.

Chris Collins: We expect sequential improvement in North America comp sales in H2 of the year, supported by our marketing co-op activations, a strengthened aggregator marketing strategy, our new CRM program, and prior year comparisons. Accounting for the impact of geopolitical and consumer conditions, we now expect international comparable sales to increase between 1% and 3%. We have entered into an asset purchase agreement to re-franchise 28 company restaurants in Orlando, Florida, and expect to close the transaction in Q3. With the closing timeline shifting to the end of Q3, we now expect that this transaction will reduce 2026 consolidated revenues by approximately $4 million, including the impact of eliminations and benefit-adjusted EBITDA by approximately $500,000, all of which is factored into our 2026 financial guidance.

Speaker #3: Offset somewhat by lower first-half cash taxes due to new tax legislation passed in July last year. Now, turning to our 2026 outlook—as discussed, we are revising our outlook to incorporate year-to-date results and a challenging environment, which we expect to continue for the balance of the year.

Speaker #3: Accounting for the impact of geopolitical and consumer conditions we now expect international comparable sales to increase between 1% and 3%. We have entered into an asset purchase agreement to refranchise 28 company restaurants in Orlando, Florida and expect to close the transaction in the third quarter with the closing timeline shifting to the end of third quarter we now expect that this transaction will reduce 2026 consolidated revenues by approximately $4 million including the impact of eliminations and benefit adjusted EBITDA by approximately $500,000.

Speaker #3: For 2026, we now expect global system-wide sales declines to range between 2% and 4%. For North America, we expect comparable sales to be down 6% to 8%.

Speaker #3: July North America comparable sales trended in line with Q2 on a year-over-year basis but decelerated on a three-year stack. We expect sequential improvement in North America comp sales in the second half of the year, supported by our marketing co-op activations as strengthened aggregator marketing strategy our new CRM program and prior year comparisons.

Chris Collins: We expect sequential improvement in North America comp sales in the H2 of the year, supported by our marketing co-op activations, a strengthened aggregator marketing strategy, our new CRM program, and prior year comparisons. Accounting for the impact of geopolitical and consumer conditions, we now expect international comparable sales to increase between 1% and 3%. We have entered into an asset purchase agreement to refranchise 28 company restaurants in Orlando, Florida, and expect to close the transaction in Q3. With the closing timeline shifting to the end of Q3, we now expect that this transaction will reduce 2026 consolidated revenues by approximately $4 million, including the impact of eliminations and benefit-adjusted EBITDA by approximately $500,000, all of which is factored into our 2026 financial guidance.

Speaker #3: All of which is factored into our 2026 financial guidance. As we pursue an asset-light model, we remain on track to reduce company restaurant ownership to mid-single-digit percentage of our North America system.

Chris Collins: As we pursue an asset-light model, we remain on track to reduce company restaurant ownership to mid-single digit percentage of our North America system. We are actively assessing several additional North America markets for re-franchising while also evaluating opportunities internationally. We expect these actions will support incremental growth opportunities and strengthen our franchise network by transitioning select restaurants to high-performing franchise partners. We look forward to providing updates as these transactions progress. For 2026, we now expect consolidated adjusted EBITDA to be between $180 and $190 million. We now plan to invest approximately $35 million in total supplemental marketing and franchisee subsidies, including the incremental $18 million added for H2 2026 to accelerate our transformation as Todd described. We expect that elevated investment to continue into 2027.

Speaker #3: Accounting for the impact of geopolitical and consumer conditions, we now expect international comparable sales to increase between 1% and 3%. We have entered into an asset purchase agreement to refranchise 28 company restaurants in Orlando, Florida and expect to close the transaction in the third quarter with the closing timeline shifting to the end of third quarter we now expect that this transaction will reduce 2026 consolidated revenues by approximately $4 million including the impact of eliminations and benefit adjusted EBITDA by approximately $500,000.

Speaker #3: We are actively assessing several additional North America markets for refranchising while also evaluating opportunities internationally. We expect these actions will support incremental growth opportunities and strengthen our transitioning select restaurants to high-performing franchise partners and we look forward to providing updates as these transactions progress.

Speaker #3: For 2026, we now expect consolidated adjusted EBITDA to be between $100 and $80 and $190 million. We now plan to invest approximately $35 million in total supplemental marketing and franchisee subsidies including the incremental $18 million added for the back half of this year to accelerate our transformation as Todd described.

Chris Collins: As we pursue an asset-light model, we remain on track to reduce company restaurant ownership to mid-single-digit percentage of our North America system. We are actively assessing several additional North America markets for refranchising while also evaluating opportunities internationally. We expect these actions will support incremental growth opportunities and strengthen our franchise network by transitioning select restaurants to high-performing franchise partners, and we look forward to providing updates as these transactions progress. For 2026, we now expect consolidated adjusted EBITDA to be between $180 million and $190 million. We now plan to invest approximately $35 million in total supplemental marketing and franchisee subsidies, including the incremental $18 million added for the H2 of this year to accelerate our transformation as Todd described. We expect that elevated investment to continue into 2027.

Speaker #3: We expect that elevated investment to continue into 2027. Our 2026 consolidated adjusted EBITDA outlook reflects continued discipline cost management and includes $13 million of GNA savings excluding marketing looking ahead we have line of sight to generate at least $30 million of cumulative cost savings by the end of 2027.

Speaker #3: We are actively assessing several additional North America markets for refranchising while also evaluating opportunities internationally. We expect these actions will support incremental growth opportunities and strengthen our franchise network by transitioning select restaurants to high-performing franchise partners and we look forward to providing updates as these transactions progress.

Chris Collins: Our 2026 consolidated adjusted EBITDA outlook reflects continued disciplined cost management and includes $13 million of G&A savings, excluding marketing. Looking ahead, we have line of sight to generate at least $30 million of cumulative cost savings by the end of 2027. We also expect the stock-based compensation will be approximately $5 million per quarter. Consistent with our prior guidance for non-operating expense items, we expect net interest between $35 and $40 million, adjusted D&A between $70 and $75 million, and capital expenditures between $70 and $80 million. We expect our 2026 GAAP effective tax rate to be in the range of 30% to 34%. Finally, we expect diluted shares outstanding of approximately 33 million. Turning to restaurant development, we are on track to open between 40 and 50 gross new restaurants in North America in 2026, having opened 17 restaurants through Q2.

Speaker #3: We also expect the stock-based compensation will be approximately $5 million per quarter. Consistent with our prior guidance for non-operating expense items, we expect net interest between $35 and $40 million adjusted DNA between $70 and $75 million, and capital expenditures between $70 and $80 million.

Speaker #3: We expect our 2026 gap effective tax rate to be in the range of $30 to $34%. Finally, we expect diluted shares outstanding of approximately $33 million.

Chris Collins: Our 2026 consolidated adjusted EBITDA outlook reflects continued disciplined cost management and includes $13 million of G&A savings, excluding marketing. Looking ahead, we have line of sight to generate at least $30 million of cumulative cost savings by the end of 2027. We also expect the stock-based compensation will be approximately $5 million per quarter. Consistent with our prior guidance for non-operating expense items, we expect net interest between $35 million and $40 million, adjusted D&A between $70 million and $75 million, and capital expenditures between $70 million and $80 million. We expect our 2026 GAAP effective tax rate to be in the range of 30% to 34%. Finally, we expect diluted shares outstanding of approximately 33 million. Turning to restaurant development, we are on track to open between 40 and 50 gross new restaurants in North America in 2026, having opened 17 restaurants through Q2.

Speaker #3: Turning to restaurant development, we are on track to open between 40 and 50 gross new restaurants in North America in 2026 having opened 17 restaurants through the second quarter.

Speaker #3: We now expect 2026 North America restaurant closures to range between 200 and 250 as our portfolio optimization work with our franchisees is progressing faster than expected.

Chris Collins: We now expect 2026 North America restaurant closures to range between 200 and 250, as our portfolio optimization work with our franchisees is progressing faster than expected. For our international business, we still expect 180 to 220 gross restaurant openings in 2026, and we expect closures within the range of 5% to 6% of our international system. We are also exploring new formats and distribution channels, such as non-traditional locations, to expand our footprint and attract new customers to the Papa Johns brand. As we invest to accelerate our transformation, we remain committed to maintaining our strong balance sheet and positioning the business for stronger cash flow generation. Through re-franchising, we are creating a more asset-light model. Through disciplined cost reduction and operating model optimization, we will build a more efficient, profitable system.

Speaker #3: For our international business, we still expect 180 to 220 gross restaurant openings in 2026 and we expect closures within the range of 5 to 6 percent of our international system.

Speaker #3: We're also exploring new formats and distribution channels such as non-traditional locations to expand our footprint and attract new customers to the PAPA JOHNS brand.

Speaker #3: As we invest to accelerate our transformation, we remain committed to maintaining our strong balance sheet and positioning the business for stronger cash flow generation.

Speaker #3: Through refranchising, we are creating a more asset-light light model and through discipline cost reduction and operating model optimization, we will build a more efficient profitable system.

Chris Collins: We now expect 2026 North America restaurant closures to range between 200 to 250, as our portfolio optimization work with our franchisees is progressing faster than expected. For our international business, we still expect 180 to 220 gross restaurant openings in 2026, and we expect closures within the range of 5% to 6% of our international system. We're also exploring new formats and distribution channels, such as non-traditional locations, to expand our footprint and attract new customers to the Papa Johns brand. As we invest to accelerate our transformation, we remain committed to maintaining our strong balance sheet and positioning the business for stronger cash flow generation. Through refranchising, we are creating a more asset-light model, and through disciplined cost reduction and operating model optimization, we will build a more efficient, profitable system.

Speaker #3: Overall, we remain focused on executing our transformation strategy to improve the customer experience, drive sales growth, enhance profitability, and deliver value for our stakeholders.

Chris Collins: Overall, we remain focused on executing our transformation strategy to improve the customer experience, drive sales growth, enhance profitability, and deliver value for our stakeholders. With that, we would like to open the call up for any questions you may have. Operator?

Speaker #3: And with that, we'd like to open the call up for any questions you may have.

Speaker #1: All right.

Speaker #3: Operator?

Speaker #1: As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, please limit yourself to one question and one follow-up. Please stand by while we compile our Q&A roster. Our first question will be coming from the line of Andrew Strelzik of BMO. Your line is open, Andrew.

Speaker #1: In the interest of time, please limit yourself to one question and one follow-up. Please stand by while we compile our Q&A roster. And our first question will be coming from the line of Andrew Strelzik, of BMO.

Speaker #1: Your line is open, Andrew.

Speaker #2: Hey, good morning. Thanks for taking the question. Obviously, a lot going on, a lot of strategies that you're implementing and working through. I guess if you take a step back, in your view, where have broadly the turnaround strategies had the intended impact or had the most impact as you intended and kind of where are you most lagging versus your expectations in trying to make up ground understanding, obviously, it's a difficult operating environment?

Andrew Strelzik: Hey, good morning. Thanks for taking the question. Obviously, a lot going on, a lot of strategies that you are implementing and working through. I guess if you take a step back, in your view, where have, broadly, the turnaround strategies had the intended impact or had the most impact, as you intended? Where are you most lagging versus your expectations in trying to make up ground, understanding, obviously, it is a difficult operating environment?

Chris Collins: Overall, we remain focused on executing our transformation strategy to improve the customer experience, drive sales growth, enhance profitability, and deliver value for our stakeholders. With that, we'd like to open the call up for any questions you may have. Operator?

Speaker #4: Yeah, thanks, Andrew, for the question. On the transformation, I think some of the work that we've done over the course of the last a couple of years to really rebuild our technology platform create less friction in our ordering through our app, through the website, the work we've done with AI to leverage the data and better connect to the consumer through our CRM program.

Chris Collins: Yeah. Thanks, Andrew, for the question. On the transformation, I think some of the work that we've done over the course of the last couple of years to really rebuild our technology platform, create less friction in our ordering through our app, through the website, the work we've done with AI to leverage the data and better connect to the consumer through our CRM program. All of those are strong foundational elements that we've continued to build. We rebuilt our innovation pipeline. We brought some news to the table. We're not bringing in as many new consumers with the innovation as we had expected. I do feel good that we've done a nice job on those fronts, and we've raised the bar on operational excellence, even though we know we've got some inconsistencies and opportunities to continue to do that.

Todd Penegor: Yeah. Thanks, Andrew, for the question. On the transformation, I think some of the work that we've done over the course of the last couple of years to really rebuild our technology platform, create less friction in our ordering through our app, through the website, the work we've done with AI to leverage the data and better connect to the consumer through our CRM program. All of those are strong foundational elements that we've continued to build. We rebuilt our innovation pipeline. We brought some news to the table. We're not bringing in as many new consumers with the innovation as we had expected. I do feel good that we've done a nice job on those fronts, and we've raised the bar on operational excellence, even though we know we've got some inconsistencies and opportunities to continue to do that.

Speaker #4: All of those are strong foundational elements that we've continued to build. We rebuilt our innovation pipeline. We brought some news to the table. We're not bringing in as many new consumers with the innovation as we had expected.

Andrew Strelzik: Hey, good morning. Thanks for taking the question. Obviously a lot going on, a lot of strategies that you're implementing and working through. I guess if you take a step back, in your view, where have, broadly, the turnaround strategies had the intended impact or had the most impact, as you intended? Where are you most lagging versus your expectations in trying to make up ground, understanding, obviously, it's a difficult operating environment?

Speaker #4: But I do feel good that we've done a nice job on those fronts and we've raised the bar on operational excellence even though we know we've got some inconsistencies and opportunities to continue to do that.

Speaker #4: I think where we've been probably the most challenged is we haven't been able to get the full force of the local co-ops reestablished across the entire system.

Chris Collins: I think where we've been probably the most challenged, is we haven't been able to get the full force of the local co-ops reestablished across the entire system. We're making progress on that front, but we've now hired out our field marketing team to better support those co-ops and make sure we've got a really balanced and thoughtful approach to what national messaging does, as well as local messaging, to really compete, and win, and really have a strong barbell at both the national and the local level. Importantly, what we need to really get aligned on is, where do we find the right balance between driving transactions and protecting margin? We know we have to meet the consumer where they're at. We can't just live on the quality and the messaging of better ingredients, better pizza.

Todd Penegor: I think where we've been probably the most challenged, is we haven't been able to get the full force of the local co-ops reestablished across the entire system. We're making progress on that front, but we've now hired out our field marketing team to better support those co-ops and make sure we've got a really balanced and thoughtful approach to what national messaging does, as well as local messaging, to really compete, and win, and really have a strong barbell at both the national and the local level. Importantly, what we need to really get aligned on is, where do we find the right balance between driving transactions and protecting margin? We know we have to meet the consumer where they're at. We can't just live on the quality and the messaging of better ingredients, better pizza.

Speaker #4: We've making progress on that front, but we've now hired out our field marketing team to better support those co-ops and make sure we've got a really balanced and thoughtful approach to what national messaging does as well as local messaging to really compete and win and really have a strong barbell at both the national and the local level.

Chris Collins: Yeah. Thanks, Andrew Strelzik, for the question. On the transformation, I think some of the work that we've done over the course of the last couple of years to really rebuild our technology platform

Todd Penegor: Yeah. Thanks, Andrew Strelzik, for the question. On the transformation, I think some of the work that we've done over the course of the last couple of years to really rebuild our technology platform

Todd Penegor: Create less friction in our ordering through our app, through the website, the work we've done with AI to leverage the data and better connect to the consumer through our CRM program. All of those are strong foundational elements that we've continued to build. We rebuilt our innovation pipeline. We brought some news to the table. We're not bringing in as many new consumers with the innovation as we had expected. I do feel good that we've done a nice job on those fronts, and we've raised the bar on operational excellence, even though we know we've got some inconsistencies and opportunities to continue to do that. I think where we've been probably the most challenged, is we haven't been able to get the full force of the local co-ops reestablished across the entire system.

Speaker #4: And importantly, what we need to really get aligned on is where do we find the right balance between driving transactions and protecting margin? We know we have to meet the consumer where they're at.

Speaker #4: We can't just live on the quality and the messaging of better ingredients, better pizza. We're going to continue to do that with our fan favorites at affordable price points and continue to deliver on the rest of this year, but we know we're going to have to pulse in some appropriate discounting to continue to drive frequency and keep our existing customers engaged.

Chris Collins: We're going to continue to do that with our fan favorites at affordable price points and continue to deliver on the rest of this year. We know we're going to have to pulse in some appropriate discounting to continue to drive frequency and keep our existing customers engaged, but we try to recruit some new customers through that. We're going to be smart about the discounting. We're going to pulse it appropriately, and we're going to leverage the tools at our disposal, especially CRM, with some of the optimized AI engine work that we've done to really target those investments.

Speaker #4: But we try to recruit some new customers through that, but we're going to be smart about the discounting. We're going to pulse it appropriately and we're going to leverage the tools at our disposal especially CRM with some of the optimized AI engine work that we've done to really target those investments.

Todd Penegor: We're making progress on that front, but we've now hired out our field marketing team to better support those co-ops and make sure we've got a really balanced and thoughtful approach to what national messaging does, as well as local messaging, to really compete and win and really have a strong barbell at both the national and the local level. Importantly, what we need to really get aligned on is, where do we find the right balance between driving transactions and protecting margin? We know we have to meet the consumer where they're at. We can't just live on the quality and the messaging of better ingredients, better pizza. We're going to continue to do that with our fan favorites at affordable price points and continue to deliver on the rest of this year.

Speaker #2: Okay. That's helpful. And I wanted to ask about the franchisee incentives that you talked about this morning. Can you kind of help us better understand how that's incorporated into the outlook?

Andrew Strelzik: Okay. That's helpful. I wanted to ask about the franchisee incentives that you talked about this morning. Can you help us better understand how that's incorporated into the outlook, how that's going to impact the P&L? A little more color on that would be helpful. Thanks.

Speaker #2: How that's going to impact the P&L a little more color on that would be helpful. Thanks.

Speaker #4: Yeah. So within our guidance of 100 to 180 to 190 million, as we said in the prepared remarks, total investment that we're making off of our P&L in 2026 is about 35 million dollars.

Chris Collins: Yeah. Within our guidance of $180 million to $190 million, as we said in the prepared remarks, total investment that we're making off of our P&L in 2026 is about $35 million. We've got about $10 million that's really been established to support the setup of local co-ops, where we've co-invested with franchisees that established the co-ops and are investing at the local level. We've got about $13 million of supplemental marketing that we put in place to make sure we've got the right pressure to tell our story on both the premium and the value side of the barbell. We've got about $5 million in operational incentives to

Todd Penegor: Yeah. Within our guidance of $180 million to $190 million, as we said in the prepared remarks, total investment that we're making off of our P&L in 2026 is about $35 million. We've got about $10 million that's really been established to support the setup of local co-ops, where we've co-invested with franchisees that established the co-ops and are investing at the local level. We've got about $13 million of supplemental marketing that we put in place to make sure we've got the right pressure to tell our story on both the premium and the value side of the barbell.

Speaker #4: We've got about 10 million dollars that's really been established to support the setup of local co-ops where we've co-invested with franchisees that have established the co-ops and are investing at the local level.

Todd Penegor: We know we're going to have to pulse in some appropriate discounting to continue to drive frequency and keep our existing customers engaged while we try to recruit some new customers through that. We're going to be smart about the discounting. We're going to pulse it appropriately, and we're going to leverage the tools at our disposal, especially CRM, with some of the optimized AI engine work that we've done to really target those investments.

Speaker #4: We've got about 13 million dollars of supplemental marketing that we put in place to make sure we've got the right pressure to tell our story on both the premium and the value side of the barbell.

Speaker #4: We've got about 5 million dollars in operational incentives to allow franchisees to continue to earn incentives with strong customer overall satisfaction scores and strong restaurant inspection scores.

Todd Penegor: We've got about $5 million in operational incentives to allow franchisees to continue to earn incentives with strong customer overall satisfaction scores, strong restaurant inspection scores, and good out-the-door times. That's a nice incentive to continue to raise the bar. We've got about $7 million of what I would call subsidies, where we help support the system to co-invest, to go drive some of the promotional activity that we've had year to date and plan to do for the rest of this year. That level of spending, we would expect would continue into 2027, pending some of the conversations that we have with our franchise community to align on how we want to co-invest together to compete.

Todd Penegor: allow franchisees to continue to earn incentives with strong customer overall satisfaction scores, strong restaurant inspection scores, and good out-the-door times. That's a nice incentive to continue to raise the bar. We've got about $7 million of what I would call subsidies, where we help support the system to co-invest, to go drive some of the promotional activity that we've had year to date and plan to do for the rest of this year. That level of spending, we would expect would continue into 2027, pending some of the conversations that we have with our franchise community to align on how we want to co-invest together to compete.

Andrew Strelzik: Okay. That's helpful. I wanted to ask about the franchisee incentives that you talked about this morning. Can you kind of help us better understand how that's incorporated into the outlook, how that's going to impact the P&L? A little more color on that would be helpful. Thanks.

Speaker #4: And good out-the-door times. So that's a nice incentive to continue to raise the bar. And we've got about 7 million dollars of what I would call subsidies where we help support the system to co-invest to go drive some of the promotional activity that we've had year to date and plan to do for the rest of this year.

Todd Penegor: Yeah. Within our guidance of $80 to $190 million, as we said in the prepared remarks, total investment that we're making off of our P&L in 2026 is about $35 million. We've got about $10 million that's really been established to support the setup of local co-ops, where we've co-invested with franchisees that have established the co-ops and are investing at the local level. We've got about $13 million of supplemental marketing that we put in place to make sure we've got the right pressure to tell our story on both the premium and the value side of the barbell. We've got about $5 million in operational incentives to allow franchisees to continue to earn incentives with strong customer overall satisfaction scores, strong restaurant inspection scores, and good out-the-door times. That's a nice incentive to continue to raise the bar.

Speaker #4: That level of spending we would expect would continue into 2027. Pending some of the conversations that we have with our franchise community to align on how we want to co-invest together to compete.

Speaker #2: Great. Okay. Super helpful. Thank you.

Andrew Strelzik: Great. Okay. Super helpful. Thank you.

Speaker #1: And our next question will be coming from the line of Brian Bittner, of Oppenheimer & Company. Your line is open, Brian.

Operator: Our next question will be coming from the line of Brian Bittner of Oppenheimer and Company. Your line is open, Brian.

Speaker #5: Hi. Thanks. Good morning. This is Mike Tameson for Brian. Todd, you deployed a lot of new initiatives and I would have thought that you'd see some improvements in the business by now.

Mike Tamas: Hi. Thanks. Good morning. This is Mike Tamas for Brian. Todd, you deployed a lot of new initiatives and I would've thought that you'd see some improvements in the business by now. Do you think there's a category headwind that you're fighting? Maybe specifically to Q2, what do you believe the category sales trends were in the quarter versus the -8% that you guys saw? Thank you.

Speaker #5: So do you think there's a category headwind that you're fighting and maybe specifically the second quarter? What do you believe the category sales trends were in the quarter versus the negative 8% that you guys saw?

Todd Penegor: We've got about $7 million of what I would call subsidies, where we help support the system to co-invest, to go drive some of the promotional activity that we've had year to date and plan to do for the rest of this year. That level of spending, we would expect, would continue into 2027, pending some of the conversations that we have with our franchise community to align on how we want to co-invest together to compete.

Speaker #5: Thank you.

Speaker #4: Yeah, no, it's a great question. I do think all of QSR has had a lot of aggressive discounting. Pizza QSR has been even more so aggressive and we probably didn't meet the consumer as much as we should have in the course of the second quarter as we protected margin a little bit more.

Todd Penegor: Yeah, no, it's a great question. I do think all of QSR has had a lot of aggressive discounting. Pizza QSR has been even more so aggressive, we probably didn't meet the consumer as much as we should have in the course of Q2 as we protected margin a little bit more. From where we sit, we'd say that the QSR pizza category was down slightly within the quarter. The pizza category is quite broad. There's a lot of other folks now competing in pizza when you think about convenience stores, gas stations, et cetera. There still is an appetite for broader pizza, we got to really consider how we compete, where we show up, and how we provide access to the brand.

Speaker #4: But I would from where we sit, we would say that the QSR pizza category was down slightly within the quarter. But the pizza category is quite broad.

Andrew Strelzik: Great. Okay. Super helpful. Thank you.

Speaker #4: There's a lot of other folks now competing in pizza when you think about convenience stores, gas stations, etc. So there still is an appetite for broader pizza and we got to really consider how we compete where we show up and how we provide access to the brand.

Operator: Our next question will be coming from the line of Brian Bittner of Oppenheimer and Company. Your line is open, Brian.

Michael Tamas: Hi. Thanks. Good morning. This is Michael Tamas for Brian. Todd, you deployed a lot of new initiatives. I would've thought that you'd see some improvement in the business by now. Do you think there's a category headwind that you're fighting? Maybe specifically to Q2, what do you believe the category sales trends were in the quarter versus the -8% that you guys saw? Thank you.

Speaker #4: And those are all things that we're addressing in the acceleration of the transformation efforts that we have with the investment that we discussed today.

Todd Penegor: Those are all things that we're addressing in the acceleration of the transformation efforts that we have with the investment that we discussed today.

Speaker #5: Thank you.

Mike Tamas: Thank you.

Speaker #1: Our next question will be coming from the line of Jim Salara of Stevens Inc. Your line is open, Jim.

Operator: Our next question will be coming from the line of Jim Salera of Stephens Inc.. Your line is open, Jim.

Todd Penegor: Yeah, no, it's a great question. I do think all of QSR has had a lot of aggressive discounting. Pizza QSR has been even more so aggressive. We probably didn't meet the consumer as much as we should have in the course of Q2 as we protected margin a little bit more. I would, from where we sit, we'd say that the QSR pizza category was down slightly within the quarter. The pizza category is quite broad. There's a lot of other folks now competing in pizza when you think about convenience stores, gas stations, et cetera. There still is an appetite for broader pizza, and we got to really consider how we compete, where we show up, and how we provide access to the brand.

Speaker #6: Hi. This is Tyler Prouse for Jim. Thanks for taking my question. We appreciate all the color on internal initiatives, but as we look at 2027, given no material change in the operating environment, is it more likely than not that there are comps will be negative again for the year?

Tyler Prause: Hi, this is Tyler Prause. I am from Jim. Thanks for taking our question. We appreciate all the color around internal initiatives, but as we look to 2027, given no material change in the operating environment, is it more likely than not that your comps will be negative again for the year?

Speaker #4: Yeah. A little too early to be refining guidance. We would expect clearly sequential improvement on our same restaurant sales comps into 2027 with the investments that we're making.

Todd Penegor: Yeah. It is a little too early to be providing guidance. We would expect clearly sequential improvement on our same-restaurant sales comps into 2027 with the investments that we are making. We do know that we are in a stage where we are going to have to continue to co-invest with our franchise community to raise the bar on operational excellence, meet the consumer where they are at, and continue to tell the story on why we are better, unique, and different than the competitive set. We are going to be methodical around where we invest. We are going to be really smart about making sure we can get a good return, some of it offensive, some of it defensive. And what we really want to do is leverage the co-investment to get the entire system all rowing in the same direction.

Speaker #4: We do know that we're in a stage where we're going to have to continue to co-invest with our franchise community to raise the bar on our operational excellence, meet the consumer where they're at, and continue to tell the story on why we're better, unique, and different than the competitive set.

Todd Penegor: Those are all things that we're addressing in the acceleration of the transformation efforts that we have with the investment that we discussed today.

Speaker #4: But we're going to be methodical around where we invest. We're going to be really smart about making sure we can get a good return some of it offensive, some of it defensive.

Michael Tamas: Thank you.

Operator: Our next question will be coming from the line of Jim Salera of Stephens Inc. Your line is open, Jim.

Speaker #4: And what we really want to do is leverage the co-investment to get the entire system all rolling in the same direction. So whatever initiatives and whatever focus we have as we go into '27, we execute with excellence as one system moving forward.

Tyler Prause: Hi, this is Tyler Prause. I'm from Jim. Thanks for taking our question. We appreciate all the color around internal initiatives, as we look to 2027, given no material change in the operating environment, is it more likely than not that North America comps will be negative again for the year?

Todd Penegor: Whatever initiatives and whatever focus we have as we go into 2027, we execute with excellence as one system moving forward. And that is why we are going to continue to invest together. We want to really set this brand up for long-term success, not just chasing short-term sales. And we are making all of the foundational moves through technology, raising the bar on operational excellence, continuing to tell our story on why we are unique, better, different through the marketing messaging that we have had. Those are things that are foundational to build this brand for the long run.

Speaker #4: And that's why we're going to continue to invest together. We want to really set this brand up for long-term success, not just chase some short-term sales.

Speaker #4: And we're making all of the foundational moves through technology, raising the bar on operational excellence, continue to tell our story on why we're unique, better, different to the marketing messaging that we've had.

Todd Penegor: Yeah. A little too early to be providing guidance. We would expect clearly sequential improvement on our same-restaurant sales comps into 2027 with the investments that we're making. We do know that we're in a stage where we're going to have to continue to co-invest with our franchise community to raise the bar on operational excellence, meet the consumer where they're at, and continue to tell the story on why we're better, unique, and different than the competitive set. We're going to be methodical around where we invest. We're going to be really smart about making sure we can get a good return, some of it offensive, some of it defensive. What we really want to do is leverage the co-investment to get the entire system all rowing in the same direction.

Speaker #4: Those are things that are foundational to build this brand for the long run.

Speaker #6: Great. Very helpful. And then were there any geographies that you can point to that performed ahead of the system?

Tyler Prause: Great. Very helpful. Were there any geographies that you can point to that performed ahead of the system?

Speaker #4: Yeah. I mean, if you look at where the second quarter ended and you look at the Northeast was probably a little bit softer than the rest of the country.

Todd Penegor: Yeah. If you look at where the Q2 ended, you look at the Northeast, was probably a little bit softer than the rest of the country. That was primarily a function of them actually being stronger last year. If you look at where we performed across Midwest, Southeast, that was probably our better performing regions. The West was somewhere in between. Nothing that was dramatically outsized when you look at it on a two-year basis.

Speaker #4: That was primarily a function of them actually being stronger last year. But if you look at where we performed across mid-west, southeast, that was probably our better performing regions and the West was somewhere in between.

Todd Penegor: Whatever initiatives and whatever focus we have as we go into 2027, we execute with excellence as one system moving forward. That's why we're going to continue to invest together. We want to really set this brand up for long-term success, not just chasing short-term sales. We're making all of the foundational moves through technology, raising the bar on operational excellence, continuing to tell our story on why we're unique, better, different through the marketing messaging that we've had. Those are things that are foundational to build this brand for the long run.

Speaker #4: But nothing that was dramatically outsized when you look at it on a two-year basis.

Speaker #6: Great. That's all from us. Thank you.

Tyler Prause: Great. That's all from us. Thank you.

Speaker #4: Thanks.

Todd Penegor: Thanks.

Speaker #1: Thank you. Our next question will be coming from the line of Todd Brooks of Benchmark Stonex. Your line is open, Todd.

Operator: Thank you. Our next question will be coming from the line of Todd Brooks of Benchmark StoneX. Your line is open, Todd.

Speaker #7: Hey. Thanks. And good morning, everyone. I think at the end of the year, we got a partial stat from you folks about franchisee unit-level profitability.

Todd Brooks: Hey, thanks, and good morning, everyone. I think at the end of the year, we got a partial stat from you folks about franchisee unit level profitability. I think there was a stat that the top 75% of franchisees were making about $125,000 per unit. Is there a final stat for the whole system? Are some of these actions that we're seeing you take, whether it's on incentives, marketing investment besides the franchisees, kind of symptomatic that there's not much more to give on franchisee profitability over these next couple of years as you work to improve profitability out of the supply chain and build momentum in the business?

Tyler Prause: Great. Very helpful. Then, were there any geographies that you can point to that performed ahead of the system?

Speaker #7: I think there was a stat that top 75% of franchisees were making about $125K per unit. Is there a final stat for the whole system?

Todd Penegor: If you look at where the Q2 ended, and you look at the Northeast, was probably a little bit softer than the rest of the country. That was primarily a function of them actually being stronger last year. If you look at where we performed across Midwest, Southeast, that was probably our better performing regions. The West was somewhere in between. Nothing that was dramatically outsized when you look at it on a 2-year basis.

Speaker #7: And are some of these actions that we're seeing you take, whether it's on incentives, marketing investment besides the franchisees, kind of symptomatic that there's not much more to give on franchisee profitability over these next couple of years as you work to improve profitability out of the supply chain and build momentum in the business?

Speaker #4: Yeah, Todd. I think the biggest opportunity we have right now is we've done a really nice job managing labor in the restaurants. We've got the four-wall wired pretty tight.

Todd Penegor: Yeah, Todd. I think the biggest opportunity we have right now is we've done a really nice job managing labor in the restaurants. We've got the four-wall wired pretty tight. Each incremental transaction that we can actually bring through a restaurant, the variable profit margin is quite high. That is the same on supply chain. With every case unit that we move through our supply chain, we can actually provide some good cost efficiencies to the system. Our biggest opportunity at this stage is to continue to drive transactions. What we're trying to do is incent the system to raise the bar on operational excellence. We don't want to just discount to drive transactions. We want to make sure the consumer understands the total experience is worth what you pay. A great experience with a high-quality pizza to get customers to come back time and again.

Tyler Prause: Great. That's all from us. Thank you.

Todd Penegor: Thanks.

Operator: Thank you. Our next question will be coming from the line of Todd Brooks of Benchmark StoneX. Your line is open, Todd.

Speaker #4: So each incremental transaction that we can actually bring through a restaurant, the variable profit margin is quite high. And that is the same on supply chain with every case unit that we move through our supply chain, we can actually provide some good cost efficiencies to the system.

Todd Brooks: Hey, thanks. Good morning, everyone. I think at the end of the year, we got a partial stat from you folks about franchisee unit level profitability. I think there was a stat that the top 75% of franchisees were making about $125,000 per unit. Is there a final stat for the whole system? Are some of these actions that we're seeing you take, whether it's on incentives, marketing investment besides the franchisees, kind of symptomatic that there's not much more to give on franchisee profitability over these next couple of years as you work to improve profitability out of the supply chain and build momentum in the business?

Speaker #4: So our biggest opportunity at this stage is to continue to drive transactions but we're trying to do is incentive system to raise the bar on operational excellence.

Speaker #4: We don't want to just discount to drive transactions. We want to make sure the consumer understands the total experience is worth what you pay.

Speaker #4: A great experience with a high-quality pizza to get customers to come back time and again. And what we're trying to do is make sure that we incent the system to get ourselves in a position to compete better, get all the co-ops set back up so we can have a strong coordinated national and local message continue to work to make sure that the bottom quintile of our restaurants continues to raise the bar on operational excellence.

Todd Penegor: What we're trying to do is make sure that we incent the system to get ourselves in a position to compete better, get all the co-ops set back up so we can have a strong, coordinated national and local message. Continue to work to make sure that the bottom quintile of our restaurants continues to raise the bar on operational excellence, so we don't have the Achilles heel of inconsistency as a perception across the United States for our consumer base. I do think there is a lot of opportunity for our system to continue to work together to accelerate profitability from where we stand today. We're going to be part of the solution with some of the co-investment, but the system knows they're going to have to fight also at the local and partner with us in the national level to bring that to reality.

Speaker #4: So we don't have the Achilles heel of inconsistency as a perception across the United States for our consumer base. But I do think there is a lot of opportunity for our system to continue to work together to accelerate profitability from where we stand today.

Speaker #4: We're going to be part of the solution with some of the co-investment. But the system knows they're going to have to fight also at the local and partner with us in the national level to bring that to reality.

Speaker #7: Okay. Great. And then my follow-up, Todd, is not a good innovation was a driver that you got and actually more of a strategy because of it coming into this year versus just trying to compete on value.

Todd Brooks: Okay, great. My follow-up, Todd, is product innovation was a driver that you guys, and actually more of a strategy pivot coming into this year versus just trying to compete on value. You spoke about in which is almost offsetting the loss revenues from Papadia and Papa Bites. I'm just wondering, given that we're not necessarily seeing it in the same store sales results, how are the different innovations performing relative to plan? Is this just a tough environment to get a consumer that's so value-focused to want to try something new versus just the tried and true at a lower price point? Thanks.

Speaker #7: You spoke about and which is almost offsetting the loss revenues from Papa Diaz and Papa Bites. I'm just wondering given that we're not necessarily seeing it in the same sort of sales results, how are the different innovations performing relative to plan?

Speaker #7: And is this just a tough environment to get a consumer that's so value-focused to want to try something new versus just the tried and true at a lower price point?

Speaker #7: Thanks.

Speaker #4: Yeah. No, I think the consumer is very cautious in making choices with their hard-earned dollars. And in an environment where you want to make sure every one of your dollars works as hard as possible for yourself, you do kind of go back to your tried and true favorites.

Todd Penegor: No, I think the consumer is very cautious in making choices with their hard-earned dollars. In an environment where you want to make sure every one of your dollars works as hard as possible for yourself, you do go back to your tried and true favorites, folks that you know can deliver on the experience and not disappoint. In an environment like that, the role of innovation is a little more challenging to break through. We think about our pan launch. It mixed really well with our existing consumers but didn't bring in the number of new consumers that we probably would have expected. The same thing with Toy Story. We got a lot of great excitement to keep the brand cool, hip, and in the discussion. It mixed well with existing customers, but didn't bring as many new in as we would have wanted.

Speaker #4: Folks that you know can deliver on the experience and not disappoint. And in an environment like that, the role of innovation is a little more challenging to break through.

Todd Brooks: Okay, great. My follow-up, Todd, is product innovation was a driver that actually more of a strategy pivot coming into this year versus just trying to compete on value. You spoke about sandwiches almost offsetting the loss revenues from Papadias and Papa Bites. I am just wondering, given that we are not necessarily seeing it in the same store sales results, how are the different innovations performing relative to plan? Is this just a tough environment to get a consumer that is so value-focused to want to try something new versus just the tried and true at a lower price point? Thanks.

Speaker #4: We think about our pan launch it mixed really well with our existing consumers. But didn't bring in the number of new consumers that we probably would have expected.

Speaker #4: The same thing with Toy Story. We got a lot of great excitement to keep the brand cool hip in the discussion. But it mixed well with existing customers but didn't bring as many new in as we would have wanted.

Speaker #4: And I would look at sandwiches as a little more of a long-term opportunity to expand our TAM. As we really think about that as a replacement for Papa Diaz and taking the rhythm breakers out of the restaurant.

Todd Penegor: I would look at sandwiches as a little more of a long-term opportunity to expand our TAM, because we really think about that as a replacement for Papadia and taking the rhythm breakers out of the restaurant. You are right. Innovation, in and of itself, is a little more challenged to bring in new customers in this environment. I think we can do a better job really telling our story on the third-party aggregator channel and what we can bring that's new, unique, and different to provide new access to innovation. We're adjusting some of our plans moving forward to do that. I think that's an opportunity for us.

Papadas and pop-up bites. I'm just wondering given that we're not necessarily seeing it in the same sort of sales results. How are the different Innovations performing? Uh relative to plan and is this just a top environment?

Speaker #4: But you are right. Innovation in and of itself is a little more challenged to bring in new customers in this environment. I think we can do a better job.

To get a consumer. It's so valued focused to want to try something new versus just the tried and true in a lower price point. Thanks.

Todd Penegor: No, I think the consumer is very cautious in making choices with their hard-earned dollars. In an environment where you want to make sure every one of your dollars works as hard as possible for yourself, you do go back to your tried and true favorites, folks that you know can deliver on the experience and not disappoint. In an environment like that, the role of innovation is a little more challenging to break through. We think about our pan launch. It mixed really well with our existing consumers, but did not bring in the number of new consumers that we probably would have expected. The same thing with Toy Story. We got a lot of great excitement to keep the brand cool, hip, and in the discussion. It mixed well with existing customers, but did not bring as many new in as we would have wanted.

Speaker #4: Really telling our story on the third part or aggregator channel and what we can bring that's new, unique, and different to provide new access to innovation and we're adjusting some of our plans moving forward to do that.

Speaker #4: I think that's an opportunity for us. And we're going to continue to really make sure that we find that right balance between innovation, talking about our tried and true favorites on the more premium side of the menu at affordable price points, and being a little sharper and pulsing a little more value messaging to make sure that we've got a really strong barbell to drive awareness.

Todd Penegor: We're going to continue to really make sure that we find that right balance between innovation, talking about our tried and true favorites on the more premium side of the menu at affordable price points, and being a little sharper and pulse in a little more value messaging to make sure that we've got a really strong barbell to drive awareness. Those are good innovations. They're going to play a nice role on our calendar. Over time, I do think they will bring in new customers. We're just not seeing that in the environment today.

Speaker #4: But those are good innovations. They're going to play a nice role on our calendar over time. I do think they will bring in new customers or just not seeing that in the environment today.

Todd Penegor: I would look at sandwiches as a little more of a long-term opportunity to expand our TAM, because we really think about that as a replacement for Papadias and taking the Rhythm Breakers out of the restaurant. You are right, innovation, in and of itself, is a little more challenged to bring in new customers in this environment. I think we can do a better job really telling our story on the third-party aggregator channel and what we can bring that is new, unique, and different to provide new access to innovation. We are adjusting some of our plans moving forward to do that. I think that is an opportunity for us.

Speaker #7: Okay. Thanks, Todd.

Todd Brooks: Okay. Thanks, Todd.

Speaker #3: And our next question will be coming from the line of Jim Sanderson of North Coast Research. Your line is open, Jim.

Operator: Our next question will be coming from the line of Jim Sanderson of Northcoast Research. Your line is open, Jim.

You know, can deliver on the experience and not disappoint and in an environment like that. Um, you know, the role of innovation, uh, is a little more challenging to break through. Um, you know, we think about our pan launch, uh, it mixed really well with our existing consumers. Um, but didn't bring in the number of new consumers that we probably would have expected, you know, uh, the same thing, uh, with Toy Story. We got a lot of great excitement to keep the brand cool hip in, uh, in the discussion. Uh, but it mixed well with existing customers but then bringing as many new in as we would have wanted. Um, and I would look at sandwiches as a little more of a long-term opportunity to expand our Tam.

Speaker #7: Hey, thanks for the question. I wanted to go back to the second quarter to see if you could break out for us same store sales or sales trends for carryout versus one-party, first-party, and third-party delivery.

Jim Sanderson: Hey, thanks for the question. I wanted to go back to the Q2 to see if you could break out for us same-store sales or sales trends for carryout versus first party and third-party delivery.

Speaker #4: Yeah. So if you think about our second quarter, I mean, we are down in North America 8.3%. That was almost entirely driven by transactions as check was flat.

Todd Penegor: Yeah. If you think about our Q2, we are down in North America 8.3%. That was almost entirely driven by transactions, as check was flat. If you look at across carryout for first party and third party, our carryout business was down but hung in there relatively good. I would say that would have been down mid-single digit. Our third-party aggregator business would have been down low single digit, our first-party delivery business would have been down double digit. We got an opportunity to continue to work to optimize the mix across all of our delivery channels and carryout channel. You see in more recent times, we've rebalanced our calendar a little bit more with Epic Pepperoni-Stuffed Crust at a nice price point of $14.99, while having a 50% carryout offer that's great value for our consumers.

Speaker #4: If you look at across carryout for first-party and third-party, our carryout business was down but hung in there relatively good. So I would say that would have been down mid-single digit.

Todd Penegor: We are going to continue to really make sure that we find that right balance between innovation, talking about our tried and true favorites on the more premium side of the menu at affordable price points, and being a little sharper and pulse in a little more value messaging to make sure that we have got a really strong barbell to drive awareness. Those are good innovations. They are going to play a nice role on our calendar. Over time, I do think they will bring in new customers. We are just not seeing that in the environment today.

Speaker #4: Our third-party aggregator business would have been down low single digit. And then our first-party delivery business would have been down double digits. So we got an opportunity to continue to work to optimize the mix across all of our delivery channels and carryout channel.

Because we really think about that as a replacement for papadias and taking the Rhythm breakers out of the restaurant. But you are right. Uh Innovation uh in and of itself is a little more challenged to bring in new customers in this environment. I think we can do a better job, you know, really, telling our story on the third part of aggregator Channel and what we can bring that's new unique and different to provide new access to Innovation uh and we're adjusting some of our plans moving forward to do that. Um I think that's an opportunity for us um and we're going to continue to really make sure that um we find that right balance between Innovation talking about our um our tried and true favorites on the more premium side of the menu at affordable price points uh and being a little sharper and and pulse, in a little more value messaging to make sure that we've got a really strong barbell to drive awareness. But

Todd Brooks: Okay. Thanks, Todd.

Those are good Innovations. They're going to play a nice role on our calendar over time. I do think they will bring in new customers or just not seeing that in the environment today.

Thanks Todd.

Speaker #4: And you see in more recent times, we've rebalanced our calendar a little bit more with epic stuff pepperoni at a nice price point of $14.99 while having a 50% carryout offer that's great value for our consumers.

Operator: Our next question will be coming from the line of Jim Sanderson of Northcoast Research. Your line is open, Jim.

And our next question will be coming from the line of Jim Sanderson of North Coast research. Your line is open. Jim

Jim Sanderson: Hey, thanks for the question. I wanted to go back to Q2 to see if you could break out for us same-store sales or sales trends for carryout versus first party and third party delivery.

Speaker #4: So we've already gone and made the adjustments to rework our barbell a little stronger to compete better in the back half of the year.

Todd Penegor: We've already gone and made the adjustments to rework our barbell a little stronger to compete better in the H2.

Hey, thanks for the question. I wanted to go back to the second quarter to see if you could break out for us, same store, sales, or sales Trends or carry out versus 1 party. First party and third party delivery

Todd Penegor: Yeah. If you think about our Q2, we are down in North America 8.3%. That was almost entirely driven by transactions, as check was flat. If you look at across carryout for first party and third party, our carryout business was down but hung in there relatively good. I would say that would've been down mid-single digit. Our third-party aggregator business would've been down low single digit. Our first-party delivery business would've been down double digit. We got an opportunity to continue to work to optimize the mix across all of our delivery channels and carryout channel. You see in more recent times, we've rebalanced our calendar a little bit more with Epic Stuffed Pepperoni at a nice price point of $14.99, while having a 50% carryout offer that's great value for our consumers.

Speaker #7: And a follow-up to that, as you lean into third-party delivery as a sales channel, how do you plan to drive client acquisition through that channel with the market investment you're going to make?

Jim Sanderson: A follow-up to that. As you lean into third-party delivery as a sales channel, how do you plan to drive client acquisition through that channel with the marketing investment you're going to make?

Speaker #4: Yeah. We were an early mover as you know in 3P. So we got to ride that wave. If you go back five or six years ago, and now it's gotten a lot more crowded.

Todd Penegor: Yeah, we were an early mover, as you know, in 3P. We got to ride that wave if you go back five or six years ago. Now it's gotten a lot more crowded. I think what we really need to do is make sure that as we spend the dollars, and I believe we're spending enough dollars in that channel, we've got an opportunity to make those dollars work harder with the promotions that we're putting in place to become more effective, and we're going to make those adjustments in H2. We do know that we're going to have to fight in the 3P channel, not just from a national perspective, but also strongly coordinated at a local perspective, and that's why getting the co-op set up are so important.

Speaker #4: I think what we really need to do is make sure that as we spend the dollars and I believe we're spending enough dollars in that channel, we've got an opportunity to make those dollars work harder with the promotions that we're putting in place to become more effective and we're going to make those adjustments in the back half of the year.

Speaker #4: And we do know that we're going to have to fight in the 3P channel not just from a national perspective but also strongly coordinated at a local perspective.

Speaker #4: And that's why getting the co-op set up are so important. We've got some small things that we can do on how our brand shows up from a visibility perspective.

Todd Penegor: We've already gone and made the adjustments to rework our barbell a little stronger to compete better in the back half of the year.

Todd Penegor: We've got some small things that we can do on how our brand shows up, from a visibility perspective in 3P, but we've got good visibility into the things we need to do to check and adjust to compete even stronger in that channel. We do think that's a great channel to provide some visibility and opportunity into our innovation to get the consumer to trial us.

Yeah, so if you think about our, uh, our second quarter, I mean, we are down in North America 8.3%, that was almost entirely driven by transactions. This check was flat. You look at, um, across carry out, um, for first party and third party, uh, our carry out business, um, you know was down but, uh, but hung in there, uh, relatively good. So, I would say that would have been down mid single digit. Um, our third-party, aggregator business would have been down low single digit, and then, um, our first party delivery business would have been down double digits. So we got an opportunity to continue to work to, optimize the mix across uh, all of our delivery channels and uh, and Carry Out channel. Uh, and you see in more recent times, we've rebalanced our calendar a little bit more with epic stuffed. Pepperoni at a nice price point at 14.99, while having a 50% carry out offer, that's great value for our consumers. So, um, we've already gone and made the adjustments to, to re

Speaker #4: And 3P, but we've got good visibility into the things we need to do to check and adjust to compete even stronger in that channel.

We work our our barbell, a little stronger to compete better in the back half of the year.

Speaker #4: And we do think that's a great channel to provide and we do think it's a great channel to provide some visibility and opportunity into our innovation to get the consumer to trial us.

And the a follow-up to that, as you lean into a third-party delivery, as a sales Channel, how do you plan to uh, drive a client acquisition through that Channel, with the marketing investment? You're going to make?

Todd Penegor: Yeah, we were an early mover, as you know, in 3P. We got to ride that wave if you go back five or six years ago. Now it's gotten to be a lot more crowded. I think what we really need to do is make sure that as we spend the dollars, and I believe we're spending enough dollars in that channel, we've got an opportunity to make those dollars work harder with the promotions that we're putting in place to become more effective, and we're going to make those adjustments in the back half of the year. We do know that we're going to have to fight in the 3P channel, not just from a national perspective, but also strongly coordinated at a local perspective, and that's why getting the co-ops set up are so important.

Speaker #7: Trial as well. And just the last question from me is the rework of the national and local co-ops advertising. How does that fundamentally change the contribution that franchisees pay and the type of budget you could develop over time as your gross sales improve?

Jim Sanderson: All right, well, just a last question from me is, the rework of the national and local co-ops advertising, how does that fundamentally change the contribution that franchisees pay and the type of budget you could develop over time as your gross sales improve?

Speaker #4: Yeah. So today, the way we're set is 6% national contribution and local is an entirely optional. But if we look at what the system's doing between the co-ops that have been reestablished and folks just spending at the local level, we're probably spending in the one and a half to 2% range today.

Todd Penegor: Today, the way we're set is, it's 6% national contribution, and local is entirely optional. If we look at what the system's doing between the co-ops that have been reestablished and folks just spending at the local level, we're probably spending in the 1.5% to 2% range today. There's probably almost an 8%, 7.5%, 8% total that's being spent out there in the marketplace. What we do know is we probably got to rebalance that. We probably could use a little bit less on the national contribution and ensure that we've got a mandated amount at the local level.

Speaker #4: So there's probably almost an 8%, 7 and a half, 8% total that's being spent out there in the marketplace. What we do know is we probably got to rebalance that.

Todd Penegor: We've got some small things that we can do on how our brand shows up from a visibility perspective in 3P, but we've got good visibility into the things we need to do to check and adjust to compete even stronger in that channel. We do think that's a great channel to provide some visibility and opportunity into our innovation to get the consumer to trial us.

Speaker #4: We probably could use a little bit less on the national contribution and ensure that we've got a mandated amount at the local level. But more importantly, have the mandated amount to allow us to set up the co-ops to make sure that we got a voice at the table, that we're working with the franchisees in the communities that they're competing in, to have a unified message at the local level that then complements the messaging that we have at the national level.

Yeah we were an early mover as you know in uh in 3 PS. So um you know we got to ride that wave if you go back 5 or 6 years ago, um, and now it's gotten a bit a lot more crowded. Uh, I think what we really need to do is make sure that uh, as we spend the dollars and I believe we're spending enough dollars in that channel, we've got an opportunity to, uh, to make those dollars. Work harder with the promotions that we're putting in place to become more effective. And we're going to make those adjustments in the back half of the year. Uh, and we do know that we're going to have to fight in the 3p. Channel, not just from a national perspective but also um strongly coordinated at a local perspective and that's why getting the coop set up, uh, are so important. We've got some small things that we can do on how our brand shows up, um, from a visibility perspective uh and 3p but we've got good visibility into the things we need to do to check and adjust uh to compete even stronger in that channel.

Todd Penegor: More importantly, have the mandated amount to allow us to set up the co-ops to make sure that we got a voice at the table, that we're working with the franchisees and the communities that they're competing in to have a unified message at the local level that then complements the messaging that we have at the national level. We just haven't had that coordination. We're making progress on it. We need to get the whole system there, and we will have to work with the broader system to get a vote to get the right level of national and local in place. We did that vote the last time around back in 2023, and we're having those active discussions with the franchise community right now.

Jim Sanderson: Trial as well. Just a last question from me is, the rework of the national and local co-ops, the advertising, how does that fundamentally change the contribution that franchisees pay and the type of budget you could develop over time as your gross sales improve?

And we do think that's a great channel to provide. And we do think it's a great channel to provide some uh some visibility and and opportunity into our Innovation to get the consumer to trial us

Speaker #4: And we just haven't had that coordination. We're making progress on it. But we need to get the whole system there and we will have to work with the broader system to get a vote to get the right level of national and local in place.

Well um, just the last question for me, is the rework of the national and local co-ops advertising. How does that fundamentally change? The contribution that franchisees pay and the type of budget you could develop over time as your growth sales improved,

Todd Penegor: Yeah. Today, the way we're set is 6% national contribution and local is entirely optional. If we look at what the system's doing between the co-ops that have been reestablished and folks just spending at the local level, we're probably spending in the 1.5% to 2% range today. There's probably almost an 8%, 7.5%, 8% total that's being spent out there in the marketplace. What we do know is we probably got to rebalance that. We probably could use a little bit less on the national contribution and ensure that we've got a mandated amount at the local level.

Speaker #4: Because we did that vote the last time around back in 2023 and we're having those active discussions with the franchise community right now.

Speaker #7: All right. Thank you.

Jim Sanderson: All right. Thank you.

Speaker #3: And our last question will come from the line of Sarah Senatore from Bank of America. Sarah, your line is open.

Operator: Our last question will come from the line of Sara Senatore from Bank of America. Sara, your line is open.

Speaker #5: Hi. Good morning. Thank you for taking my question. This is Grace on for Sarah. You cited a softer consumer environment as a reason for the US comp weakness, but some of the restaurants have reported stronger results this quarter.

[Analyst] (Bank of America): Hi. Good morning. Thank you for taking my question. This is Grace on for Sara. You cited a softer consumer environment as a reason for the US comp weakness, but some other restaurants have reported stronger results this quarter. What do you believe explains that difference? Is the difference the customer base, since Papa Johns skews lower income than other QSRs? Is it the competition within the pizza category, including independents on the aggregators, or maybe competition from non-pizza competitors, other QSRs, and also convenience stores? I have one follow-up after that. Thank you.

Speaker #5: What do you believe explains that difference? Is the difference the customer base since Papa John's skews lower income than other QSRs? Is it the competition within the pizza category, including independence on the aggregators, or maybe competition from non-pizza competitors?

Todd Penegor: More importantly, have the mandated amount to allow us to set up the co-ops to make sure that we got a voice at the table, that we're working with the franchisees in the communities that they're competing in to have a unified message at the local level that then complements the messaging that we have at the national level. We just haven't had that coordination. We're making progress on it, but we need to get the whole system there, and we will have to work with the broader system to get a vote to get the right level of national and local in place. Because we did that vote the last time around back in 2023, and we're having those active discussions with the franchise community right now.

Speaker #5: Other QSRs and also convenience stores? And then I have one follow-up after that. Thank you.

Speaker #4: Yeah. I think the pizza category has evolved, not just on who competes in the third-party aggregator space. And it's not just competition now against pizza.

Todd Penegor: Yeah. I think the pizza category has evolved, not just on who competes in the third-party aggregator space, and it's not just competition now against pizza, it's competition against all of QSR. Good quality pizza is showing up everywhere. You look at some of the big C-store chains, your local gas stations, they all have pizza. We got to be positioned to compete both on price and quality in a broader environment moving forward. If you look at QSR pizza category, as I said earlier, it would be down slightly. What has happened in our category, it's become very competitive on price. We had our two largest competitors have deep discounting for the better part of at least half the quarter in one instance and the full quarter in another instance. We didn't answer the bell as strongly as we should have.

Folks, just spending at the local level. Um, we're probably spending, you know, in the 1 and a half to to 2% range today. So there's probably, you know, uh uh, uh, you know, almost an 8% 7 and a half 8% total that's being spent out there in the marketplace. What we do know is we probably got a rebalance that um, we probably could use a little bit less on the national contribution and uh, ensure that we've got a mandated uh, amount at the local level. Um, but more importantly have the mandated amount to allow us to set up the co-ops to make sure that we got a voice at the table that we're working with the franchisees and the communities, that they're competing in to have a unified message at the local level. That then complements the messaging that we have. The national level and we just haven't had that coordination. We're making progress on it, um, but we need to get the whole system there, and we will have to work with the broader system to get a vote to get the right level of national and local in place. Um,

Speaker #4: It's competition against all the QSR. But good quality pizza is showing up everywhere. You look at some of the big C store chains, your local gas stations, they all have pizzas.

Because we did that vote the last time around back in 2023 and we're having those active discussions with the franchise Community right now.

Jim Sanderson: All right. Thank you.

All right. Thank you.

Operator: Our last question will come from the line of Sara Senatore from Bank of America. Sara, your line is open.

Speaker #4: So we got to be positioned to compete both on price and quality in a broader environment moving forward. But if you look at QSR pizza categories, I said earlier, it would be down slightly.

And our last question will come from the line of Sarah, senator, from Bank of America.

Sarah, your line is open.

[Analyst] (Bank of America): Hi. Good morning. Thank you for taking my question. This is Grace on for Sara. You cited a softer consumer environment as a reason for the US comp weakness. Some of the restaurants have reported stronger results this quarter. What do you believe explains that difference? Is the difference the customer base, since Papa Johns skews lower income than other QSRs? Is it the competition within the pizza category, including independents on the aggregators, or maybe competition from non-pizza competitors, other QSRs, and also convenience stores? I have one follow-up after that. Thank you.

Grace Nguyen: Hi. Good morning. Thank you for taking my question. This is Grace on for Sara. You cited a softer consumer environment as a reason for the US comp weakness. Some of the restaurants have reported stronger results this quarter. What do you believe explains that difference? Is the difference the customer base, since Papa Johns skews lower income than other QSRs? Is it the competition within the pizza category, including independents on the aggregators, or maybe competition from non-pizza competitors, other QSRs, and also convenience stores? I have one follow-up after that. Thank you.

Hi. Good morning. Thank you for taking my questions. This is Grace on for Sarah.

Speaker #4: But what has happened in our category has become very competitive on price. We had our two largest competitors have deep discounting for the better part of at least half the quarter in one instance and the full quarter in another instance.

Speaker #4: And we didn't answer the bell as strongly as we should have. We had deep discounting for one week in the quarter. We had Papa pairings running throughout.

Todd Penegor: We had deep discounting for one week in the quarter. We had Papa Pairings running throughout. We had sharp price points on our everyday favorites on the premium side of the menu. We got to get the balance of the barbell reworked to compete more strongly in the competitive and the consumer landscape that we're faced in today.

You cited a softer consumer environment as a reason for the US comp weakness. But some of the restaurants have reported stronger results. This quarter, what do you believe explains that difference is the difference, the customer base and Papa John's skews lower income than other qsrs, uh, is it the competition within the pizza category including Independence on the aggregators or maybe competition from non Pizza, competitors?

Speaker #4: We had sharp price points on our everyday favorites on the premium side of the menu. But we got to get that the balance of the barbell reworked to compete more strongly in the competitive and the consumer landscape that we're faced in today.

Uh, other qsrs and also convenience stores and then I have 1 follow-up after that. Thank you.

Todd Penegor: I think the pizza category has evolved, not just on who competes in the third-party aggregator space, it's not just competition now against pizza, it's competition against all of QSR. Good quality pizza is showing up everywhere. You look at some of the big C-store chains, your local gas stations, they all have pizza. We got to be positioned to compete both on price and quality in a broader environment moving forward. If you look at QSR pizza category, as I said earlier, it would be down slightly. What has happened in our category, it's become very competitive on price. We had our two largest competitors have deep discounting for the better part of at least half the quarter in one instance, and the full quarter in another instance. We didn't answer the bell as strongly as we should have.

Speaker #5: Okay. Thank you. Thank you for that. And then you also discussed the possibility of more strategic closures in the 10Q. And you just mentioned the Northeast as being a bit softer.

[Analyst] (Bank of America): Okay. Thank you. Thank you for that. You also discussed the possibility of more strategic closures in the 10-Q, and you just mentioned the Northeast as being a bit softer. Are there specific geographies that are underperforming? Prior store closures don't seem to have bolstered comps for the remaining system. Where have the sales gone? Thank you.

Speaker #5: Are there specific geographies that are underperforming? Prior stores, prior store closures don't seem to have bolstered comps for the remaining system. So where have those where have the sales gone?

Speaker #5: Thank you.

Speaker #4: Yeah. So it's a little early. So if you think about where we are in closures, we've got about 100 closures to date and those closures have just been happening.

Todd Penegor: Yeah. It's a little early. As you think about where we are on closures, we've got about 100 closures to date, and those closures have just been happening, so you're not really seeing the full impact of the closures yet on the recapture. We are seeing good recapture on many of those restaurants. As you go through the rest of this year, we've now telegraphed that with the work that we're doing, partnering with the franchise community, of the 300 closures we expected between 2026 and 2027, we may now see about 200 to 250 of those happen in this calendar year. That is really strong portfolio optimization, and we know we can get some good recapture on many of those restaurants that we closed to shore up on not only the restaurant economic model, and the existing restaurants, but bolster the balance sheet for our franchise community.

Speaker #4: So you're not really seeing the full impact of the closures yet on the recapture. We are seeing good recapture on many of those restaurants.

Yeah, I think the uh the the pizza category has evolved not just on who competes in uh in the third party aggregator space and it's not just competition. Now against Pizza, its competition against all of qsr, but good quality Pizza is showing up everywhere. You look at um, you know, some of the big sea store chains, um, you know, your local gas stations, they all have pizzas so we got to be positioned to compete both on price and quality in a broader environment. Um, moving forward. But you know, if you look at qsr Pizza categories, they said earlier it would be down slightly. But what has happened in our category is become very competitive on price. Um we had our 2 largest competitors, have deep discounting for the better part of it, at least half the quarter and 1 instance and the full quarter and another instance, uh and we didn't

Speaker #4: As you go through the rest of this year, we've now telegraphed that with the work that we're doing, partnering with the franchise community of the 300 closures we expected between 2026 and 2027, we may now see about 200 to 250 of those happen in this calendar year.

Speaker #4: That is really strong portfolio optimization and we know we can get some good recapture on many of those restaurants that we closed shore up, not only the restaurant economic model, and the existing restaurants, but bolster the balance sheet for our franchise community.

Answer. The Bell is strongly as we should have. We uh, had deep discounting for 1 week. In in the quarter. You know, we had Papa pairings running throughout. Um, we had sharp price points, on our on our, um, you know, everyday favorites on the premium side of the menu, but we got to get that uh, the balance of the barbell reworked to compete, more strongly uh in the competitive uh, and the consumer landscape that we're faced in today.

Grace Nguyen: Okay. Thank you. Thank you for that. You also discussed the possibility of more strategic closures in the 10-Q, and you just mentioned the Northeast as being a bit softer. Are there specific geographies that are underperforming? Prior store closures don't seem to have bolstered comps for the remaining system. Where have the sales gone? Thank you.

Speaker #4: So we think we are pulling some of those closures into this year. I think we're still there, thereabouts on 300 between this year and next year.

Todd Penegor: We think we are pulling some of those closures into this year. I think we're still there, thereabouts on 300 between this year and next year. We're feeling pretty good about that, especially with some of the co-investment incentives and investment that we're going to put out into the system to support, to compete better as we move forward.

Speaker #4: So we're feeling pretty good about that, especially with some of the co-investment incentives and investment that we're going to put out into the system to support, to compete better as we move forward.

Okay, thank you. Um, thank you for that. And then you also discussed the possibility of more strategic closures in the 10q and, um, you just mentioned the Northeast as being a bit softer. Are there specific geographies that are underperforming? Um, prior stores prior store closures, don't seem to have bolstered comps for the remaining system, so aware of those um where of the sales gone,

Todd Penegor: Yeah. It's a little early. As you think about where we are on closures, we've got about 100 closures to date, and those closures have just been happening, so you're not really seeing the full impact of the closures yet on the recapture. We are seeing good recapture on many of those restaurants. As you go through the rest of this year, we've now telegraphed that with the work that we're doing, partnering with the franchise community, of the 300 closures we expected between 2026 and 2027, we may now see about 200 to 250 of those happen in this calendar year. That is really strong portfolio optimization, and we know we can get some good recapture on many of those restaurants that we closed to shore up on not only the restaurant economic model in the existing restaurants, but bolster the balance sheet for our franchise community.

Speaker #5: Okay. Thank you. Thank you so much.

[Analyst] (Bank of America): Okay. Thank you so much.

Speaker #3: And this concludes today's Q&A.

Operator: This concludes today's conference call.

Todd Penegor: I guess that was the last question. I just want to say, hey, thank you everybody for tuning into the call. I know we provided a lot in the earnings call to continue to drive and accelerate our transformation moving forward. I really appreciate our teams and everything they do day in and day out to help support and fight for this brand to drive our long-term success and the partnership with the franchise community to invest together, to continue to move the brand forward. Thanks for tuning in. We're super confident that we're taking the right steps to achieve our goals and deliver on sustainable growth and value creation for all of our stakeholders. We look forward to keeping you updated on our progress. Have a great day, everyone.

Speaker #4: Well, I guess that was the last question. So I just want to say, hey, thank you, everybody, for tuning into the call. I know we provided a lot in the earnings call to continue to drive our and accelerate our transformation moving forward.

Speaker #4: I really appreciate our teams and everything they do day in and day out to help support and fight for this brand to drive our long-term success and the partnership with the franchise community to invest together to continue to move the brand forward.

Thank you. Yeah, so it's a little early. So, if you think about where we are enclosures, we've got about a 1008. And those closures have just been happening. So you're not really seeing, um, the full impact of the closures, yet on the, uh, recapture we are seeing good recapture on, uh, on many of those restaurants. You know, if you go through the rest of this year, we've now telegraphed that, um, with the work that we're doing, um, partnering with the franchise community of the 300 closures, we expected between 2026 and 2027. We may now see about 200 to 250 of those happen in this calendar year, uh, that is really strong, portfolio optimization and we know we can get some

Speaker #4: So thanks for tuning in. We're super confident that we're taking the right steps to achieve our goals and deliver on sustainable growth and value creation for all of our stakeholders.

Todd Penegor: We think we are pulling some of those closures into this year. I think we're still thereabouts on 300 between this year and next year. We're feeling pretty good about that, especially with some of the co-investment incentives and investment that we're going to put out into the system to support, to compete better as we move forward.

[Analyst] (Bank of America): Okay. Thank you so much.

Grace Nguyen: Okay. Thank you so much.

Good recapture on many of those restaurants that we closed, uh, Shore up on, not only the restaurant economic model, um, uh, and the existing restaurants, but bolster the balance sheet for a franchise community. So we think we are pulling some of those closures into this year. I think we're still there there, abouts on 300 between this year and next year, um, so we're feeling pretty good about that especially with some of the co-investment, uh, incentives and investment that we're going to put out into the system to, uh, to support to compete better as we move forward.

Okay, thank you. Thank you so much.

Operator: This concludes today's conference.

Todd Penegor: I guess that was the last question. I just want to say, hey, thank you, everybody, for tuning into the call. I know we provided a lot in the earnings call to continue to drive and accelerate our transformation moving forward. I really appreciate our teams and everything they do day in and day out to help support and fight for this brand to drive our long-term success and the partnership with the franchise community to invest together to continue to move the brand forward. Thanks for tuning in. We're super confident that we're taking the right steps to achieve our goals and deliver on sustainable growth and value creation for all of our stakeholders. We look forward to keeping you updated on our progress. Have a great day, everyone.

Ask questions. So I just want to say, hey, thank you everybody, for for tuning in to the call. I know we, uh, provided a lot. Um, in the earnings call, to continue to drive our an accelerate, our transformation moving forward, I really appreciate our teams and everything they do day in and day out to, uh, help support and fight for this brand to, to drive our long-term success, and the partnership with the franchise Community to, uh, investig together, uh, to continue to move the brand forward. Uh, so thanks for tuning in. We're super confident that we're taking the right steps to uh achieve our goals and and deliver on sustainable growth and value creation. For all of our stakeholders. We look forward to keeping you updated on our progress. Have a great day, everyone.

Q2 2026 Papa John's International Inc Earnings Call

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