Mass Closures Signal Deeper Struggles for Pizza Giant
Papa Johns has announced plans to close approximately 300 underperforming restaurants across North America by the end of 2027, with roughly 200 locations shuttering their doors in 2026. The closures, revealed during the company's fourth-quarter earnings call, target restaurants that fail to meet brand expectations or lack a sustainable path to profitability. Chief Financial Officer Ravi Thanawala explained that the affected locations are predominantly franchise-owned, over a decade old, and generate average unit volumes below £600,000 annually—with many operating at negative four-wall income.
The closures represent a significant portion of Papa Johns' North American footprint, which stood at approximately 3,500 locations at the end of 2025. The company has not released a specific list of affected restaurants, leaving communities uncertain about which locations will disappear.
Alongside the restaurant closures, Papa Johns has also cut approximately 7% of its 700-person corporate workforce as part of broader cost-reduction initiatives aimed at saving at least £25 million through 2027.
Brutal Quarter Exposes Consumer Spending Weakness
The fourth quarter of 2025 proved devastating for Papa Johns, with North America same-store sales plummeting 5.4% compared to the previous year. Domestic company-owned restaurants saw a 6% decline, whilst franchised locations dropped 5%, reflecting what CEO Todd Penegor described as "a weak consumer backdrop and elevated promotional environment." Total revenues for the quarter reached £498 million, down 6% year-over-year, whilst full-year 2025 revenues of £2.1 billion remained flat despite the challenging market conditions.
The company's net income fell to £9 million in the fourth quarter, down from £15 million the previous year, whilst full-year net income dropped sharply to £32 million from £84 million in 2024. These disappointing results came despite Papa Johns opening 279 new restaurants globally during 2025, including 96 in North America and 183 in international markets. The stark contrast between expansion efforts and financial performance highlights the depth of the challenges facing the pizza chain in an increasingly competitive and price-sensitive market.
Penegor's Turnaround Strategy Focuses on Menu Innovation
CEO Todd Penegor, who took the helm of Papa Johns with a mandate to engineer a turnaround, has centred his strategy on menu improvements and operational enhancements. The company recalibrated restaurant ovens to ensure better cooking consistency and has been rolling out new product offerings, including a recently launched pan pizza designed to compete more effectively in the crowded pizza market. Penegor emphasized that the company is "focused on continuing our transformation work to best position Papa Johns to win in a dynamic QSR category."
The transformation efforts extend beyond menu innovation to include significant supply chain improvements. Papa Johns expects to achieve at least £60 million in previously identified supply chain cost savings, which should deliver approximately 160 basis points of incremental restaurant-level profitability improvement across both franchise and company-owned restaurants by fiscal year 2028. The company has also implemented organizational restructuring to increase efficiency and simplify operations, though these changes have included painful workforce reductions. Despite the challenges, Penegor expressed confidence in the company's ability to generate sustainable, profitable growth, supported by what he described as a strong balance sheet enabling continued investment in transformation initiatives.
Pizza Hut Faces Similar Fate Whilst Dominos Dominates
Papa Johns isn't alone in its struggles—rival Pizza Hut announced earlier in 2026 that it would close approximately 250 locations in the first half of the year as part of parent company Yum! Brands' strategic review of the embattled brand. The Pizza Hut closures target underperforming locations amid lagging sales and declining consumer demand, mirroring the challenges facing Papa Johns. Both chains are grappling with an intensified promotional environment where consumers increasingly seek value, putting pressure on margins and profitability.
Meanwhile, Dominos Pizza has emerged as the clear winner in the fast-food pizza wars. The chain reported a 3.7% increase in same-store sales for the fourth quarter, fuelled by compelling value offerings and a new brand campaign that resonated with cost-conscious consumers.
Dominos' success stands in stark contrast to its struggling competitors, demonstrating that effective value positioning and operational excellence can still drive growth even in challenging market conditions.
International Bright Spot Offers Hope Amid Domestic Decline
Whilst Papa Johns' North American operations have struggled significantly, the company's international segment has provided a rare bright spot in an otherwise gloomy financial picture. International comparable sales increased 6% in the fourth quarter of 2025, marking the fifth consecutive quarter of positive comparable sales growth in overseas markets. International system-wide sales rose 8% to £341 million, demonstrating that the Papa Johns brand maintains appeal in markets less saturated with pizza options.
For the full year 2025, international comparable sales climbed 5%, significantly outpacing the 2% decline in North America. The company opened 183 new international restaurants during the year, far exceeding the 96 North American openings, signalling a strategic shift toward markets with greater growth potential.
This international momentum suggests that Papa Johns' fundamental business model and product offerings remain viable, but that North American market dynamics—including intense competition, promotional pressures, and changing consumer preferences—present unique challenges requiring targeted solutions beyond what has worked in other regions.