What is the Cost to Buy a Papa John’s Franchise?
Pizza. An Italian classic that every American family can bite into and love. No matter the city you find yourself in, you can count on a delicious pizza joint right around the corner. Many pizza chains claim to have the fastest, hottest, and freshest pies, such as Domino’s or Pizza Hut, but no one can say theirs is as iconic as Papa John’s. So, what is Papa John’s, and what makes it such an elusive place?
Papa John’s is an American fast-food chain that has gone international. In 2021, there were around 5,650 Papa John’s restaurants worldwide. These numbers are the highest they’ve ever been for the pizza franchise. This chain is obviously known for its pizza, but they also serve Papa Bowls, Papa bites, Papadias (pizza quesadillas), wings, tasty sides, and desserts. Their pizza delivery services are also widely enjoyed. What makes this franchise business so great may not be just the food; it’s also the rich history. Papa John’s story starts in Jeffersonville, Indiana, when a young entrepreneur named John Schnatter founded the first restaurant in the early 1980s. This restaurant grew into a pizza chain and then a pizza franchise because of its better pizza — built with fresh and original ingredients.
As an entrepreneur yourself, you may be interested in looking to start your first big business. With all the information out there, it’s difficult to figure out what is the best choice to put your hard-earned money into. A popular venture for many is to become a franchisee for a fast-food restaurant. Why is this? Many fast-food franchises are successful and do a great job of uplifting communities and reaping profits. If this sounds interesting to you, you should consider opening a Papa John’s franchise. In this post, you will be able to find all the information needed to properly assess the pros and cons of opening a Papa John’s restaurant, the requirements for owning one, the cost of a Papa John’s franchise, its profitability, training, terms of the agreement, and the application process. In this article, we will cover the following:
Everyone knows Papa John’s as an iconic American fast-food chain serving delicious pizza available for pick up and delivery. Now headquartered in Louisville, Kentucky, their dishes are continuously reinvented to make Italian-American food all the better. Take their new and popular Papadillas. Here, they folded pizza to switch up a classic. If you find yourself at one, you can never go wrong with a pepperoni pie.
Being a Papa John’s franchisee means playing the game as a quick-service restaurant and getting connected to a fast-paced and food-centered world. The initial investment and expense in starting a Papa John’s restaurant may cost some capital, but you can expect decent returns on your leap of faith. But is this a good idea, is it the right one for you? Answering that question begins with exploring the advantages of a Papa John’s restaurant.
Cost of Starting a Papa John’s
The total costs associated with starting a Papa John’s restaurant are relatively moderate. They can be broken up into two categories: a multi-store traditional format versus a non-traditional format. The total investment is higher for a multi-store traditional format and lower for a single non-traditional format. While it’s important to consider a Papa John’s franchise cost, you must also consider what format works best for you.
For a multi-store traditional format:
- Franchisees will need to have from £500,000 (or around $602,000) available in cash; this is called liquid assets.
- Franchisees will need to invest a total of £170,000 to £350,000 (or around $205,000 to $421,000).
- Management service fees will cost a total of 5% of weekly net sales.
- A national marketing fee will cost you a total of 4% of weekly net sales
- The Initial franchise fee will be around $22,000.
For a non-traditional format (as opposed to a standard restaurant):
- Franchisees will need to have £50,000 (or around $60,000) available in cash; this is called liquid assets.
- Franchisees will need to invest a total of £80,000 to £150,000 (or around $96,000 to $181,000).
- Management service fees will cost a total of 5% of weekly net sales.
- The Initial franchise fee will be around $22,000.
Some people explain that franchising a Papa John’s will be much easier with a minimum net worth of $250,000. It is important to remember this is a net worth requirement because it will make financing options easier.
Unlike fast-food restaurant McDonald’s, Papa John’s royalty fee is higher for non-traditional restaurants. Coming in at 6% for small-town non-traditional restaurants and 5% for others.
How Profitable is Papa John’s?
Understanding how profitable a Papa John’s restaurant can be is an important factor when considering becoming a franchisee.
The unfortunate truth is that Papa John’s is underperforming its competitors. John Schnatter, the founder and ex-chairman of Papa John’s, says there are multiple reasons for this. He believes they have strayed from their original company values and have spent too much money on advertising and PR to make up for lost sales. However, some people believe John Schnatter himself is the problem. Although he is no longer formally tied to the company, his name will forever be synonymous with the brand. And with him, his scandals.
Others say traffic and customers have gone down due to lack of availability and access or because their pizza is not better than competitors. According to a poll by Sitejabber, public opinion on Papa John’s pizza varies tremendously. Papa John’s has a consumer rating of around two stars and is placed 137th out of all food delivery. Customers report positively on a few things: (1) online ordering is made easy and accessible, (2) the cheese pizza is very good, and (3) customer service was pleasant. However, customers who reported negatively said the following: (1) the pizza crust is not very good, (2) orders are frequently delivered wrong, (3) the food does not have better taste or quality than other restaurants nearby, (4) it takes too long to put out food, (5) bad delivery services, and (6) food going uncooked. Many complain that a company built by having better pizza should have better pizza. Whatever the cause may be, the result is the same. Stores are now losing money by over 40%.
What does this mean for their franchises, though? This means in order to have a successful and profitable franchise, you need to properly manage your workers and care for your customers. While these problems speak to the individual location, here’s how these fast-food restaurants fair on average:
- Franchise operators report earning $67,000 annually on average. It is important to note franchise operators from Pizza Hut or McDonald’s make more than this.
- Based on Papa John’s franchise disclosure document (FDD), the average revenue for franchise locations was $997,142 in 2020.
Advantages of Owning a Papa John’s
The first advantage of owning a Papa John’s franchise is the ability to be working with a globally established brand. This is beneficial to a prospective franchisee like yourself because you have thousands of others in the same situation, able to offer insight and advice to help you in your journey. The struggles of starting a new franchise become a lot easier when others can lead you through what to do. You would also have access to global resources and prospectives while making your individual location have a small business flare. That establishment also helps with name and menu recognition. Many already know what Papa John’s is and have an affinity with it. Therefore, a lot of advertising fees can be taken out of your startup costs.
The second advantage of owning a Papa John’s franchise is the provided flexible format given to you by franchisors. This allows you, as an owner, some discretion in the management of your location. This means you can amplify the connection of your Papa John’s to your community, enriching those around you and increasing your consumer base.
The third advantage of owning a Papa John’s franchise is the high likelihood of success in each property. While many other brands can have mixed results, Papa John’s franchises are shown to have below a fifteen percent failure rate. Papa John’s was also ranked third in gross sales for American pizza chains in 2018. This means the brand is one of the most profitable and reliable. The brand and menu itself rarely are problems for franchisees.
The final advantage of owning a Papa John’s franchise is the network of support Papa John’s has. Papa John’s tried and true model franchisee model allows many to reap the benefits of being a part of a winning structure and family.
Disadvantages of Owning a Papa John’s
The primary disadvantage of owning a Papa John’s franchise is being in competition with many other fast-food pizza chains. When big competitors like Pizza Hut, Domino’s, Papa Murphy’s, and Little Caesars Pizza come into play, it’s hard to stand out and be unique.
The secondary disadvantage of owning a Papa John’s franchise is that Papa John’s is not the most profitable, popular, or largest food franchise. In 2018, Domino’s, Pizza Hut, and Little Caesars Pizza sold more units than Papa John’s by a considerable margin. The gross sales of Domino’s were $12,252,100,000 versus Papa John’s $3,695,000,000 in 2018.
The tertiary disadvantage of owning a Papa John’s franchise is that sales, on average, have been falling, and national discounts are hard to make profits from. According to Restaurant Business Editor-in-Chief Jonathan Maze, the problem with Papa John’s is their franchisees. Profits are falling overall, and discounts forced onto franchises are hard to pay for.
The disadvantages of owning a Papa John’s can be summarized by its competition. Some say Papa John’s pizza franchises may not be as successful as some of its competitors and are, therefore, not a worthy venture. This decision is ultimately personal, and you, as an entrepreneur, must decide if this brand is right for you. Need help making that choice? We suggest looking at the values of Papa John’s and seeing if those most align with your own and determining if you are truly passionate about this pizza chain. Papa John’s values include equity, diversity, inclusion, integrity, teamwork, customer and team-mindedness, a sense of community, outside-of-the-box thinking, passion, and fun. Does that sound like you?
Requirements for Owning a Papa John’s
After considering the pros and cons of owning a Papa John’s, you might decide that you should begin purchasing a franchise. You will need to meet the following requirements in order to successfully open your franchise. It is important to note that Papa John’s makes becoming a franchisee simple. Their requirements are less stringent when compared to their competitors, and a lot of the following information serves as a starting point, not a firm yes or no.
The financial requirements for owning a Papa John’s are relatively moderate and can be seen in the next section of this article. The main notes to take from these requirements are to have $60,000 available in liquid assets and have a net worth of approximately $250,000. These figures will make the rest of this process occur easier. You might be asking, how much is my net worth? Your net worth can be calculated by adding up the value of your assets (valuable property or items you own) and then subtracting your liabilities (money you owe). That total is your net worth. What is considered an asset? Your house, savings, stock accounts, car, cash furniture, and more are all assets. Now, what is considered a liability? Things like taxes owed, outstanding balances, and any loans or debt you owe are considered liabilities. Remember, a minimum of $250,000 as your net worth is needed to open a Papa John’s franchise.
There are other financial requirements that you can observe below. More importantly, these are some of the things Papa John’s looks for in a franchisee.
Papa John’s holds certain values very close to their hearts. These values include diversity, inclusion, integrity, community, outside-of-the-box thinking, and fun. A lot of what Papa John’s is looking for in people when it comes to opening a Papa John’s franchise lies in these values. When pursuing a franchise, consider making yourself out to be a passionate leader. Ask yourself if you have the necessary leadership experience and motive to make you a good candidate. Being a passionate person will help too. Identify why you are making the decision to become a franchisee, why Papa John’s specifically, and why pizza. These questions are crucial to ask yourself before starting the application process. However, passion alone will not get you a franchise.
Compatible and relative experience in business or property management will make you a more attractive candidate. When applying for a pizza franchise, it’s important to build a history for yourself. What previous experiences tell a franchisor you have what it takes? Consider the following examples as talking points to prove you are worthy:
- Have you ever managed clients, customers, coworkers, or projects?
- Do you have any experience working with non-profits?
- Have you ever volunteered? If so, where and for how long?
- What is your level of education?
- What have you done previously for work?
- Have you ever had an internship?
- Have you ever participated in training or trained others?
You should have prepared answers to these questions in order to seem more of an experienced candidate.
Papa John’s looks for how in touch you are with your community. Are you local? There is a social trend to favor small businesses. Papa John’s is looking for people who can help make each pizza restaurant feel special, unique, and relevant to real estate. They want each Papa John’s location to feel like a small town non-traditional restaurant. Ask yourself how you can tailor your franchise, how you can help your community, and how it can help you.
The final thing that Papa John’s looks for in a franchisee is if they are a previous business or franchise owner. Touching back to the experience requirement, owning a business or franchise gives you a track record that brands can look at and determine if you would be a worthwhile venture.
Training for Papa John’s
If you are new to the franchise-owning game, Papa John’s franchisor should provide ample training for the basics of restaurant operation. This includes key leadership skills, menu and discount details, how to open and close, how to disseminate responsibilities and roles, and more. If you have previous experience running a business or franchise, this should be a refresher for you. If not, then this can serve as a cushy starting point. Papa John’s management team is a good resource for upcoming franchisees.
There is an additional training program required for all new Papa John’s team members. This training regimen is called new team member orientation (NTO) training. In new team member orientation training, employees will receive knowledge concerning at least three of the seven operation stations Papa John’s has to offer. Examples of said operation stations include order taking, delivery, and more. This training takes about six weeks to conduct, covering around fifty hours of content. This training is crucial is becoming a skilled and effective team member.
The format of the aforementioned training is usually conducted in person, on the job. As with most job experience, the bulk of the work will occur on shift, and knowledge will be obtained as situations arise.
Papa John’s does offer a Papa John’s University where in-person and, usually, in-classroom training is done to advance employee capabilities and productivity. This is not always necessary for every franchise to consider.
Term of Agreement and Renewal for a Papa John’s
Beginning with the franchise relationship, Papa John’s must outline in their terms of agreement what you are to the company. This includes your position in the company, your base salary, normal hours of work, benefits, duties, vacations, termination, and injury and illness-related topics. This document will contain all you need to know about where you stand. It’s important to assess your self-worth and experience before signing a term of agreement. Typically, this document and information will remain confidential.
Your franchise agreement should also dictate the development agreement, a statement that outlines the where, when, and how of opening a franchise. There is an accompanying fee for developing each location. Some report it is around $5,000 (disclosed in Papa John’s FDD). This agreement should allocate how many locations will be opened.
Finally, employee-based topics are given to you with discretion and should not be finitely described in this document. Again, Papa John’s prioritizes the local touch each store can have and, thus, allows you some leeway in determining key aspects of its operation.
Renewal is another process you should consider when opening a Papa John’s franchise. This means considering how long you want to be a franchisee, if you want to grow your locations and customer base, and how you will cover the renewal charges for your franchise. The length of an initial franchise term is around ten years and can be continuously renewed if all requirements are met.
Process of Starting a Papa John’s
So, are you interested in opening a Papa John’s? In order to make an informed decision, you must balance the pros and cons of opening a location. Are you interested in Papa John’s? What about it calls to you? Are you truly passionate about the brand? Then, consider if you meet the requirements. Do you have an adequate amount of liquid assets? Do you meet the minimum net worth requirement? Determine if you have enough knowledge and experience to open a location. Do you know where you will open one? Or, will you open many? If you have a positive answer to all those questions, let’s continue.
In order to actually begin the process of opening a Papa John’s franchise, you will have to take that first step by filling out a franchise application on their website.
In this application, you will need to provide the following:
- Your contact information. This includes your name, address, state of residence, email address, and phone number.
- Next, you will need to explain if you have or are in a business or partnership. This includes any individual, partnership, limited liability company (LLC), corporation, or other entity that works with and sells pizza.
- You will need to describe where you would like your franchise location to be. This includes the state and city it will reside in.
- Then, you will need to determine if you are interested in a non-traditional venue. Non-traditional venues are located in airports, malls, convenience stores, or college campuses.
- You will have to provide your net worth. Include the net worth of your partner if you are engaged in one.
- After that, they will ask if you currently own a multi-unit franchisee. If not, put no in the drop-down box.
- You will then need to explain your quick-service restaurant (QSR) experience, business experience, and management experience. If you do not have any, please enter that.
After those steps, your application should be finished, and you will be ready to hit ‘submit application.’ This does not mean the work is done. If you are approved, you may enter an interviewing process, followed by rounds of legal agreements, amendment processes, construction, finding employees, and finally, you may open your location. Although this process is long and winding, Papa John’s representatives are there to walk you through this journey and get you where you need to be.
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