Why Papa John's Failed in India? | Papa John's Pizza Case Study
🔍Insights
Papa John’s, one of the world’s largest pizza delivery chains, entered the Indian market in 2006 with high hopes and global brand recognition. However, despite its international success, the brand struggled to connect with Indian consumers and eventually exited the market in 2017. This case study explores the reasons behind Papa John’s failure in India, including its challenges with localization, competition, and operational strategy, and what lessons other global food brands can learn from its experience.
The Startup Story of Papa Johns
Papa Johns Entry In India
Papa Johns Expansion in India
Why Papa John's Failed in India?
Future Plans - Reentering India
Papa John's India Case Study
The Startup Story of Papa Johns
Papa John's was founded in 1984 by John Schnatter. After his venture became a success, the company went public in 1993. The growth of Papa John's was so phenomenal that within a year that it had 500 stores, and by the year 1997, it had a total of 1500 stores. Papa John's operates over 5,500 locations across 49 countries and territories, making it the third-largest pizza delivery company in the world, which is inclusive of both restaurants and company-owned stores. The restaurant chain has opened its franchises in many countries across the globe, including Russia, Spain, Colombia, the United Kingdom, Mexico, etc.
Papa Johns Entry In India
Papa John’s took its first step in India in 2006. They were run by Om Pizza and Eats. This firm was owned by the nephew of the steel baron Lakshmi Mittal, Atulya Mittal. Their main intention was to seize the pizza market in India and attract the customers of the already established pizza giants in India, like Domino's and Pizza Hut. Papa John’s first opened four outlets in India.
They had very clear reasons for choosing India to expand their business. One of the main reasons was the immense efficiency of the consumer food market as far as national productivity, innovation, and R&D were concerned.
The pizza segment was contributing a major part of India's gross fast food market. Along with this, the scope for tourism and the presence of a mix and diverse culture opened up a wide range of opportunities in front of the company as far as experimentation and innovation in their products are concerned.
They were also sure about the much-needed glocalisation that has to be done to suit the Indian taste and culture. They also decided to promote their brands in different ways, including advertisements in all kinds of media. They also ensured that the pricing of their products aligned with the capacity of the local people.
Simran Shahid
Papa Johns Expansion in India
In June 2006, Papa Johns Pizza opened its first outlet in India in Noida. Aiming to take advantage of the rising middle class in India, it planned to open various outlets in all the prominent places in India. These places include Delhi, Haryana, Punjab, Himachal Pradesh, Rajasthan, Uttar Pradesh, and Uttarakhand. The outlets were opened by Om Pizza Eats India, the master franchise for Papa John's.
Om Pizza had been operating more than 15 Papa John’s outlets across India and had a revenue of INR 25 crores and expected an annual cash loss of INR 10 crores. However, in December 2013, the controlling stakes in the major franchise were bought by Avan Projects for INR 25 crores.
Along with Avan Projects and Global Franchise Architects, Papa John’s announced a merger with the existing Pizza Corner stores in South India. This happened during the first quarter of 2015.
This merger helped Papa John's expand the number of stores in India by more than 40 stores. But it had its downsides. Now they had outlets in major south Indian cities like Bangalore, Chennai, and Hyderabad. By the end of 2015, they were operating in 11 cities in India. They were Mysore, Bengaluru, Hyderabad, Chennai, Vellore, Maddur, Pune, Hosur, Mumbai, Mandya, Tirupati. Do note here that by this time itself, the first outlet at Noida was already closed.
Apoorva Bajj
Why Papa John's Failed in India?
There are several factors responsible for the failure of Papa John's Pizza India. The challenges faced by Papa John's that eventually resulted in the fall and closure of the Pizza company in India are mentioned below.
Unprepared for Competition
In India, Papa John’s had to face a lot of unprecedented challenges. Not all the challenges can be included in this category of unexpected; some of the problems were due to the lack of planning and vision of the firm.
The first one was its inability to compete with the giants in the industry, like Pizza Hut and Domino's. Not only that, but the other two really took advantage of the shortcomings of Papa John’s, which made things harder for the company.
Although they trained their employees efficiently to use technology and build the name of the brand, they were unable to reach the lighter end of the tunnel. They lost all of their customers to the giants - Domino's and Pizza Hut.
As mentioned earlier, the net profitability of Papa John's was way behind that of Domino’s and Pizza Hut. Reports say that their net margin was only 4.6% of their total sales, while Domino's Pizza and Pizza Hut had a net margin of 8.2% and 7.9%, respectively. This was the data of 2014, and it was during this dangerous juncture that Papa John's came to terms with Pizza Corner for the merger.
They did not consider the risk factors involved with such a merger and nor did they calculate the risk that is associated with a probable failure. When they took so much on themselves, the management was unable to operate efficiently in their newly opened stores.
Lack of First Mover’s Advantage
During this time, Domino’s was expanding its outlets in India like wildfire. The company had only 364 stores in 2010. It rose to a whopping 1127 stores by the time it was 2017. As far as Papa John’s was concerned, it had only 66 stores across 11 cities in India, while Domino’s had launched its outlets in more than 265 cities.
They were also quick enough to become the first food service company that launch online and mobile ordering across India in a successful manner. The phenomenal growth of Domino’s crippled the expansion of Papa Johns. They were unable to compete with the extremely fast delivery and sophisticated technology of Domino’s.
One of the biggest setbacks that Papa Johns Pizza had to face was that they never got to have the first mover’s advantage. They were always the ones to watch Domino’s faring heights helplessly. This enabled Domino’s to sell its pizzas at a very low profit margin. They were able to bear the cost because of the wider presence they had across the nation. This further adversely affected Papa John's Pizza.
Overdependence on Technology
While most of the firms, especially in the fast-food market, prefer people who are warm and cordial to others, Papa John’s looks for employees who are technically sound.
It forgot the fact that the staffing in the stores plays a very important role in establishing any outlet. This, along with the absence of good training and the lack of a sound employer-employee relationship, put Papa John’s in a very dark spot. One must say that they were dependent more on technology than on developing their human resources.
Unwise Choices
It is always important to watch the indicators such as exchange rate, interest rate, stock exchange, imports, exports, and similar details that inform us about the world economy. By inferring the nature of these indicators, every business firm should be able to improve and work on its EBITDA. However, Papa John's was more interested in building its brand rather than strengthening its foundation.
They did not pay enough attention to the existing stores while they were busy opening up newer outlets in South India. When things were going south, instead of looking for ways to improve their business, they went on a merger with Pizza Corner, which demanded a huge investment. The inability to choose the right choice among the available choices further paved the way to the exit of Papa John’s from the Indian market.
Customer Dissatisfaction
There is a very common phrase that never gets old in the business world – the customer is king. It can be observed that many times Papa John's Pizza forgot this mantra. While they had planned the glocalisation of the menu, it did not materialise well when implemented.
In India, pork consumption is not that popular. Papa John’s India should have identified this cultural nuance and excluded or kept a low profile for their pork dishes. There are already existing examples where many international companies in the food business adapt their menu depending upon the country, if not the regional states. However, Papa John’s did not look into it, and their dishes were not accepted as dearly as they accepted Domino’s and Pizza Hut dishes.
It is understood that it does not mean that the whole of India does not eat pork, the numbers were very less and this led to a situation where there was absolutely no demand for the pork varieties.
This again would not have been a problem had they been able to effectively popularise their other dishes. But they were very behind in the market while Domino's and Pizza Hut had an extremely localised menu that aligned with the likes of pizza lovers. This led to a rapid decline in sales.
Ananya Mukherjee
Future Plans - Reenetering India
Papa John’s is set to reenter the Indian market in 2025 after exiting in 2017 due to underperforming stores. Although its return was initially planned for last year, the launch was delayed. Now, the company aims to open over 650 outlets in India over the next decade. Papa John’s is taking a careful approach, ensuring its franchise partners have the right menu, technology, and restaurant setup to succeed in India’s complex market with diverse consumer preferences.
Conclusion
It can be concluded that the inability of Papa John’s to analyse the existing market and the nuances of the local market made them highly incompetent. While Papa John's India saw a diverse population as an opportunity to expand their outlets, they did not foresee the challenges that are associated with it. Being in the business world, they should have been more careful about the correct signs that we see around and should have acted accordingly.
The untimely merger also came as a blow to the third-largest pizza delivery chain in the United States of America. Had they researched more about the demographic distribution of the Indian population and the challenges and advantages of the Indian fast food market, they would have had better luck in this country.
The case of Papa John’s is an example for all the entrepreneurs out there to have a clear understanding of the existing market and a clearer vision for their business in the future before getting into it.
FAQs
Who founded Papa Johns?
Papa Johns was founded by John Schnatter in 1984.
Is Papa Johns available in India?
Papa John's entered India in 2011 and shut down its operations in 2017.
Why Papa John's failed in India?
Some of the reasons why Papa John's closed in India are:
- Papa John's was Unprepared for Competition
- It lacked First Mover’s Advantage
- They were over-dependent on Technology
- Customer Dissatisfaction with the types of Papa John's Pizza
Who were the biggest competitors of Papa John's in India?
Dominos and Pizza Hut were the biggest competitors of Papa Johns, which were already successful in capturing the Indian market before Papa Johns.
What happened to Papa John's pizza?
​Papa John's entered India in 2006 but exited in 2017 due to challenges such as poor localization, operational inefficiencies, and stiff competition from established players like Domino's and Pizza Hut. The company failed to adapt its menu to Indian tastes and struggled with delivery logistics and customer service, leading to underperformance.
Is Papa John's in India?
Papa John's is planning to reenter India in 2025 after closing in 2017.
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