December 1, 2008

Industry Headlines

Papa John's Surpasses $1 Million in Mobile Web Orders

Papa John's International, Inc. (NASDAQ: PZZA) has surpassed $1 million in sales by mobile Web since launching the technology in July.

The milestone is the latest in a rise in "alternative ordering" channels and sales for the chain, which earlier this year eclipsed $1 billion in overall online sales and recently rolled out a Facebook page that captured more than 175,000 fans in less than a week.

"We pride ourselves on being the quality pizza leader and for bringing the most convenient high-tech resources to our customers," said Jim Ensign, Papa John's vice president, marketing communications. "This latest milestone of reaching $1 million in mobile web orders in such a short time proves that consumers are increasingly using alternative methods for purchases, and we look forward to growing our technology capabilities to fit consumers' evolving purchasing trends."

"Papa John's recognizes that people are using their handheld devices to make everything they can more convenient, and that includes viewing an entire menu before ordering their pizza," said Nigel Travis, Papa John's president and CEO. "The trend now is to leave the laptop at home when traveling. Almost everything can be done right from your phone, including viewing an entire menu and making the selection of what's right for dinner."

The popularity of Papa John's mobile Web ordering could see another spike as the country enters holiday shopping season. With many shoppers at the computers on "Cyber Monday," the way in which consumers handle food orders could continue to drive toward these alternative channels.

Papa John's online sales have grown exponentially since 2001, with online sales on average growing more than 50% each year and nearly reaching $400 million in 2007 alone. Today, more than 20 percent of all Papa John's sales come online or through text, widget, or smart mobile device, and the company believes sales via alternative access channels could one day surpass traditional telephone orders.

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Modest Gain in Restaurant Performance Index, though Restaurant Industry Activity Remains Sluggish

While the Restaurant Performance Index (RPI) posted a slight gain, the outlook for the restaurant industry remained dampened in October, as the National Restaurant Association’s comprehensive index of restaurant activity stood below 100 for the 12th consecutive month.  The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 97.1 in October, up 0.4 percent from September’s record low of 96.7.
 
“Although the Restaurant Performance Index remained at near historic low levels in October, there was a modest uptick in operator optimism,” said Hudson Riehle, senior vice president of Research and Information Services for the Association.  “Restaurant operators were somewhat more optimistic about sales growth and the economy in the months ahead, but were still reticent to make plans for additional capital expenditures.”

“The Current Situation indicators remained weak, however, with a solid majority of restaurant operators reporting declines in both same-store sales and customer traffic,” Riehle added.  “Not surprisingly, a record 44 percent of operators said the economy is the number-one challenge currently facing their business.”

The RPI is based on the responses to the National Restaurant Association’s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures.  The RPI consists of two components – the Current Situation Index and the Expectations Index.  (Click here to view this month's report.

The RPI is constructed so that the health of the restaurant industry is measured in relation to a steady-state level of 100.  Index values above 100 indicate that key industry indicators are in a period of expansion, while index values under 100 represent a period of contraction for key industry indicators.  

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 96.6 in October – up 0.2 percent from September’s record low.  In addition, October marked the 14th consecutive month below 100, which signifies contraction in the current situation component.  

Restaurant operators continued to report negative same-store sales in October.  Twenty-nine percent of restaurant operators reported a same-store sales gain between October 2007 and October 2008, up slightly from 26 percent who reported a sales gain in September.  Sixty percent of operators reported a same-store sales decline in October, matching the proportion that reported negative sales in September.    

Customer traffic levels also remained extremely soft in October.  Twenty percent of restaurant operators reported an increase in customer traffic between October 2007 and October 2008, up slightly from 15 percent who reported similarly in September.  Sixty-five percent of operators reported a traffic decline in October, compared to 66 percent who reported negative traffic in September.

With sales and traffic levels remaining soft, restaurant operators continue to cut back on capital spending.  Just 39 percent of operators said they made a capital expenditure for equipment, expansion or remodeling during the last three months, the lowest level on record.

The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 97.6 in October – up 0.6 percent from September’s record low level.  Despite the gain, October represented the 12th consecutive month in which the Expectations Index stood below 100.  

The uptick in the Expectations Index was the result of a modest improvement in operators’ outlook for sales growth and the economy, though pessimistic operators still outnumbered optimistic operators by a two-to-one margin.  
Twenty-one percent of restaurant operators expect to have higher sales in six months (compared to the same period in the previous year), up from 15 percent who reported similarly last month.  Forty-three percent of restaurant operators expect their sales volume in six months to be lower than it was during the same period in the previous year, down from 50 percent who reported similarly last months.

Restaurant operators are also slightly less pessimistic about the direction of the economy.  Eighteen percent of operators expect economic conditions to improve in six months, up from 14 percent who reported similarly last month.  Forty percent of operators said they expect economic conditions to worsen in six months, down from 50 percent who reported similarly last month.  

Restaurant operators continue to cut back on plans for capital spending. Just 37 percent of restaurant operators plan to make a capital expenditure for equipment, expansion or remodeling in the next six months, down from 41 percent last month and the lowest level on record.  

 
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Marco's Debuts Deep Pan Pizza

Marco’s Pizza will introduce Deep Pan Pizza in select Indiana, Michigan and Wisconsin markets today, following successful store testing.

“Marco’s experimented with the Deep Pan Pizza recipe for some time,” said Marco’s CEO Jack Butorac. “We created an exciting new product the Marco’s way, with the fresh ingredients our customers expect.”

“We tested Deep Pan in several stores and it received rave reviews, so the pressure has been on to roll it out more broadly. Marco’s will introduce the product in three states, and we’re hopeful that a strong reception will lead us to expand its geographic availability. I’m glad the Marco’s Pizza team can begin delivering Deep Pan to customers this holiday season,” added Butorac.

Like all Marco’s pizzas, Deep Pan is made with fresh dough prepared daily in stores and features Marco’s proprietary blend of three fresh cheeses and a secret sauce recipe. Deep Pan Pizza can be combined with any of Marco’s toppings, with Pepperoni the favorite among customers so far.

Despite the challenging economic and financial landscape, high product quality and the successful introduction of new menu items such as Deep Pan Pizza have helped Marco’s achieve same-store sales growth for nine consecutive quarters. The company’s same-store sales were up by more than 4 percent system-wide through the third quarter, and by more than 6 percent among company-managed stores.

Marco’s Pizza, headquartered in Toledo, Ohio, was founded in 1978 by Pasquale “Pat” Giammarco. Over the past 30 years, the franchise has grown from its roots as a beloved Ohio brand to operate more than 170 stores in 14 states.

RedBrick Pizza signs development deal for 42 cafes in San Diego area

RedBrick Pizza Worldwide, Inc. has announced the signing of a new development agreement with master developer Johnny Lee, which grants the investor exclusive rights to develop up to 42 RedBrick Cafes in the San Diego area.

"We are excited to be associated with someone with the enthusiasm and experience of Johnny Lee," said RedBrick Pizza Worldwide, Inc. President Jim Minidis. "Lee's background in business finance will serve him well as a master developer.”

Lee expects to open his first franchise in the city of Carlsbad by the end of the year and then expand to La Jolla and the Gaslamp District in San Diego.

RedBrick Pizza, with headquarters in Southern California, is a leading fast-casual pizza franchise with RedBrick Cafes in operation in 10 states and Canada.

Uno Chicago Grill to Debut New Concept

Boston-based Uno Chicago Grill is set to debut a new concept this week at the Dallas/Ft. Worth International Airport. Uno Due Go is an express-style spin off that will offer sandwiches, salads, appetizers and desserts in addition to pizza. Designed to operate efficiently in non-traditional locations, Uno Chicago Grill has said that it hopes to eventually open 200 Uno Due Go stores nationally

RedBrick Pizza signs development deal for 31 cafes in Northwest Florida, Alabama

RedBrick Pizza Worldwide, Inc. has announced it has signed a new development Aagreement with master developer Triple JM, LLC, which grants the company exclusive rights to develop up to 31 RedBrick Cafes in Northwest Florida and southern Alabama.

"We are excited to further RedBrick's reach into the Gulf Coast cities of Northwest Florida and the southern region of Alabama," RedBrick Pizza Worldwide, Inc. President Jim Minidis said.  RedBrick Cafes have enjoyed tremendous success in the Orlando, Florida area since 2005.

"RedBrick Pizza's healthy, simple and straightforward menu is what I wanted," said Triple JM, LLC's Jim Sickler, a retired Army officer and helicopter pilot who was looking to invest in the fast-casual restaurant business with his family. "RedBrick Pizza's President Jim Minidis has done a tremendous job of assembling people who are very smart -- lawyers, architects, consultants -- the support team is right there," explained Sickler.

Sickler expects to open franchises in Destin, Ft. Walton Beach, Pensacola and Tallahassee -- to name a few cities in Florida -- before expanding to Montgomery and Mobile in Alabama.

"We have demonstrated our system is innovative, geared for growth, and our business model can be adapted to audiences around the world," said Minidis. "Our fire-roasted gourmet pizza is lower in carbohydrates and fat and has about one-third the sodium of ordinary pizza which makes it appealing to those looking for a healthier alternative," he added.

 RedBrick Pizza, with headquarters in Southern California, is a fast-casual pizza franchise with RedBrick Cafes in operation in 10 states and Canada.

Domino's Looking to Ramp Up Online Sales

"Cyber Monday" (Dec. 1 this year) is one of the busiest days of the year for online retailers, and Domino's Pizza is looking to get a slice of the action by offering gift cards at dominos.com.

According to a recent survey by Deloitte, 59 percent of consumers plan to spend less on gifts than last year. Gift cards are expected to be at the top of most lists, at 66 percent, for the fifth straight year, with a shift towards practical items like gas and food.

"This holiday season, gift-giving is more about items people really need, rather than novelties," said Jenny Fouracre, spokesperson for Domino's Pizza.   "Domino's gift cards make for an ideal gift that's easy to give and is full of value for the recipient.”