Sun Sentinel Palm Beach Edition
Dough rises for pizza biz despite restaurant slump
In a year when U.S. restaurant chains have bemoaned sluggish traffic, competition from supermarket food and even the chilling effect of the presidential election, one area has continued to thrive — pizza.
Shares of Domino’s are up 45 percent this year. And Papa John’s International is up more than 60 percent. Compare that with a 3.4 percent gain for the Standard & Poor’s 500 Restaurants Index.
The reasons are pizza is cheap, fast and increasingly easy to get — thanks to user-friendly mobile-ordering apps and technology that lets diners order from Facebook, Twitter and Apple TV. That’s helped insulate pizza chains from a shift away from eating out.
“Restaurants that have succeeded this year have been the ones that have addressed convenience,” said Stephen Anderson, an analyst at Maxim Group. “The pizza chains have done a good job at this.”
The U.S. restaurant industry has been mired in a slump. Some have blamed negativity around the election, and now uncertainty about the president-elect’s planned policies on issues such as immigration and minimum wage.
Domino’s same-store sales gained 13 percent in the U.S. last quarter, while Papa John’s sales climbed 5.5 percent by that measure in North America.
Fast-food and fast-casual rivals have tried to follow suit, but getting a later start on technology has put them behind.
McDonald’s, the world’s biggest restaurant company, said this month that it’s testing delivery service at about 200 Florida locations. It also still doesn’t have a nationwide loyalty program, which pizza chains have used to keep customers coming back.
Wendy’s said it’s working on mobile ordering. And while Panera Bread offers so-called Rapid PickUp, where customers can order ahead and quickly grab food off a dedicated shelf, the technology is still a far cry from the likes of Domino’s.
Pizza companies also have aggressively advertised cheap deals to lure budget-conscious diners. Domino’s has a two-for$5.99-each menu, while Papa John’s is promoting two large pizzas for $8 each.
“There’s been a lot of competition,” said Ivan Feinseth, an analyst at Tigress Financial Partners. The pizza chains have “promoted the value pricing well, and they have incorporated technology to make the buying process really convenient and fun.”
Papa John’s is riding the same ease-of-service wave. More than half of its orders are placed online. Couch potatoes can even get pizzas and special offers — like 25 percent off a purchase — while watching movies on Apple TV.
Pizza Hut, more of a sit-down restaurant chain, has lagged Domino’s and Papa John’s. Its same-store sales dropped 1 percent last quarter.
The challenge for casual-dining chains like Pizza Hut is that they weren’t designed to deliver, David Gibbs, Yum’s chief financial officer, said. “They were built at a time before delivery was introduced.”