Papa Johns has reported financial results for the year ended 25 December 2022, with turnover of £95m, down from £102m in 2021.
The pizza chain further reported a loss after tax of £2.9m in 2022, down from a profit of £6.7m the year before.
An operating loss of £4.2m – down from operating profit of £7.7m the prior year – was reflective of the introduction of a new intellectual property agreement between Papa John’s (GB) Limited and Papa John’s International, Inc, which resulted in an intercompany royalty charge of £4.6m.
Profitability was also impacted by a franchise portfolio restructure and general store sales performance when compared to 2021.
According to the report, the home delivery pizza sector as part of the wider QSR market declined in 2022 as the societal and consumer behaviour changes brought about by the pandemic began to return to pre-pandemic norms.
Papa Johns continued to open stores during the year and finished 2022 with 531 stores in the UK, compared to 507in 2021, all operated by franchisees. It closed 10 stores during the year due to store underperformance.
Like-for-like (lfl) system sales across the UK & Ireland declined by 21.8%, attributed to the adverse impact of changes in the VAT rate on hot food.
The differential in VAT was especially pronounced in Q2 and Q3 2022, during which the Vat rate of 20% compared unfavourably to 5% VAT during the equivalent period in 2021.
Royalty revenue has decreased 14% year-on-year due to the lfl drop in store sales.
Q1 2022 saw a 10.2% lfl decline in store transactions and a 15.1% decline in store sales, reflecting a tough comparative to lockdown restrictions in Q1 2021.
Q2 saw VAT on hot food shift to 20%, alongside a rise in pressure on household income and a severe decline in consumer confidence. Papa Johns introduced a delivery fee to support franchisee profitability in April 2022.
Q3 saw store sales decline of 28.1%, attributed to a tough comparative the prior year due to the Men’s UEFA European Championship, as well as record high temperatures in July and August 2022.
Q4 benefited from targeted value promotions across October and November, with the Men’s FIFA World Cup further enhancing the pre-Christmas trading period.
During the period, Papa Johns added a range of menu items, including pepperoni stuffed crust, chicken fajita pizza, and a vegan pizza, the latter building on the success of its Vegan curious campaign in 2021.
It also launched limited edition items such as hemp sticks to tie into the January health trend, black ghost chilli chicken wings in collaboration with The Batman movie and with Call of Duty, items in collaboration with Marmite and Branston Pickle, lighter Papadias in collaboration with Weight Watchers, and three pizza products in partnership with rugby unions.
2022 also saw the launch of a new website that has increased online conversions by 30% and the development of a new app, with continued investment in technology.
