Papa John's CEO delivers

An Englishman promotes the American pizza experience around the world.

By Matthew Boyle, Fortune writer

NEW YORK (Fortune) -- It's never easy replacing a company's founder, but that was exactly the task facing Nigel Travis in April 2005 when he became CEO of Papa John's, the nation's third-largest pizza delivery chain with over 3,000 restaurants. He took the reins from longtime chief exec John Schnatter, who started the company in 1984 out of a renovated broom closet in his father's tavern.

An Englishman and the former president and COO of video rental chain Blockbuster, Travis has taken Papa John's - a perennial member of Fortune's Fastest Growing Companies roster - over the $1 billion mark in revenue, boasting same-store sales results that over the past two years have trumped rivals Pizza Hut (part of Yum! Brands (Charts)) and Domino's.

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Nigel Travis, CEO of Papa John's.

Travis recently sat down with Fortune writer Matthew Boyle to discuss his plans to ramp up online orders, what international markets are poised for growth, and why challenging the CEO is a good thing.

How will online ordering change the way you do business?

Well it's already changed the way we do business. We started online ordering in 2001, and when I came here I saw a phenomenal opportunity, so we've cranked it up ever since. In the last two years we have more than doubled it. Last year we did more than $200 million in online orders, out of $2 billion in total systemwide domestic restaurant sales.

We now have plan-ahead ordering - you can order a pizza up to 21 days in advance, like for a birthday party. Last year we did 260,000 of those orders. We also offer "same again" orders, which lets you repeat your last order. And in the next few weeks we will store customers' credit card numbers to make it more convenient. In our tests, over 50 percent of the customers who had the option to use credit card storage used it. We will also customize our e-mails to customers. We've got a long way to go.

Do customers order pizza differently online than over the phone?

We learned that they order more frequently, and they buy more - there is at least a 10 percent increase in the average order size online. The reason they buy more is simple, yet oxymoronic. The Internet speeds up everything but this is an example where it slows things down. When you call in an order over the phone, you are rushed and the store is rushed. But when you are online, you look at the whole range of the menu - like side orders of buffalo wings - and you see all the special offers.

Last week you opened your first restaurant in Egypt. What are your international expansion plans?

Less than 10 percent of our sales are outside the U.S. I'd like to see us get to 20-25 percent over the next five or six years. We've got 360 international stores now. By the end of 2008, we'd like to have over 600 stores. We have a pipeline of over 800 stores under contract [with franchisees] right now.

Take China. We've got 50 stores total in China [versus 225 for Pizza Hut], and we just bought back five locations from our franchisee in Beijing because it wasn't developing fast enough. For us to grow, we have to demonstrate that we can be successful in a different culture. In China, our locations are sit-down restaurants. They like to eat family style there, so we had to expand our menu - soups, salads, pasta, desserts and weird, fascinating drinks. Delivery is also much smaller than it is here in the U.S. Delivery is 70 percent of our business here, but in China it's about 35 percent. So we need some restaurant skills.

What other countries are exciting?

Russia - we've got nine stores there currently and we'd like 30 by the end of next year. Both Pizza Hut and Domino's (Charts) are there, but they are not huge. One thing we try to do is avoid countries where both Pizza Hut and Domino's are very big. Russia also has highest per-store sales averages of any [international] market, because of the lack of restaurant competition. In St. Petersburg, for instance, Papa John's (Charts) is the local restaurant, the local take-out place and the local bar, because we sell beer.

What's it like when you're CEO yet the founder is still around? [Schnatter is the company's chairman]

It's good and it's bad. By implication, any changes you make are changing the past, and there is an implied criticism there. So I have to be sensitive to that. But John has the historical perspective, so he knows if we're going down a direction he's seen before. The majority of the time, John and I have a good relationship. From time to time, there are differences. We're both passionate, and we have very strong personalities. So we both argue when we have to, pretty furiously, but there's nothing wrong with that. My wife is passionate and I argue with her from time to time, too.

How are your relations with franchisees?

I'm now going through a phase where I encourage people to criticize openly the things we've been doing. For example, we did an awful lot of marketing partnerships in 2005. We may have overdone it. They were not totally aligned with the brand, so we have stopped a couple of them. When nearly 80 percent of the system is franchised, you need a positive relationship with your franchisees. I ask their opinion, and I don't think that doing so is weak management - that's strong management.

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