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Sun 15 Jul 2012 01:11 PM

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Papa don't preach

“Papa John” Schnatter — the founder of the pizza delivery giant that bears his name — explains how he set up a $1bn brand from scratch, and why people prefer not to take the healthy option

Papa don't preach

“Papa’s in the house,” a crowd of men and women chant repeatedly, as they stand parallel to one another, creating a narrow passageway for their idol. It’s hard not to raise a smile at this outpouring of American corporate culture in
conservative Dubai. But then Papa John himself — real-name John Schnatter — is no ordinary businessman.

As the big boss arrives at the front door of one of his many pizza outlets in Dubai, hands grip cameras. This is the moment his staff have all been waiting for.

It is safe to say that Schnatter, founder of the Papa John’s empire, probably felt like he was back home in Indiana, and not in sun-scorched Dubai. The firm that he set up is now America’s third-largest pizza delivery chain, sitting just behind Pizza Hut and Domino’s.

“When I was fifteen, I was washing dishes at a local pizza pub… I hated washing dishes… then I got promoted from dishwasher to making pizzas and I fell in love with it from the get go,” he says.

Back in Indiana, Schnatter constantly felt like there was a missing ingredient in national pizza chains, and so he decided to open up his own restaurant in order to fill the void. In fact, at the young age of 22, he knocked down a broom closet at his father’s bar, bought used restaurant equipment worth $1,600, and in no time, baked his dream to reality by delivering pizzas out of the back of the pub.

In 1984, the first Papa John’s restaurant opened its doors to the small town of Jeffersonville. Now, the company has nearly 4,000 shops worldwide. In fact, more than 25 years later, Schnatter has restaurants in 50 states and around 29 countries.

Last year, the Nasdaq-listed firm’s revenues topped $1.2bn, an eight percent rise on 2010, while net profits came in at $55.7 m, up seventeen percent. During a particularly tough time for the US economy, Papa John’s opened an additional 237 outlets. Those results compare to $1.7bn in revenues for Domino’s over the same period.

But the growth story wasn’t as smooth a ride as one might assume, Schnatter says.

“I had no idea we would ever go international. We started around twelve years ago and we were not very good at it,” he recalls. “When you come from a small town in the States, you do not know how to do it, it is intimidating. So, for the first four or five years, we kind of let each country do its own thing, and we were a total failure.”

“Five or six years ago, I started going around the planet and started picking up best practices of franchisees that were successful…what we found was, if the franchisee did it the Papa John’s way, they were successful,  but the people that were doing their own thing weren’t. So, I made a commitment that the Papa John’s way was how we were going to do it worldwide,” he continues.

With that model in mind, Papa John’s expanded to its first Middle Eastern country in 2000, when it opened in Saudi Arabia. At present, the restaurant has 84 stores in the GCC, 21 of which are located in Dubai.

“The UAE is a great market, we love this market. I wish I had more like it,” he says, adding: “We have a great franchisee that buys into the quality differentiation and buys into the fact that at the end of the day, you cannot fool people…”

In fact, the UAE market makes up 40 percent of Papa John’s offering in the Gulf. By 2014, revenues in the country are expected to top AED100m ($27.2m).

In Schnatter’s words, he will do whatever it takes to expand the franchise in the region. “I think we are going to be around15 to 25 percent growth this year, and in the next two years,” he says.

Aside from the region, he also spots growth opportunities globally: “We are doing well in the Asia Pacific region…the United Kingdom has got great growth this year, over ten percent, and Russia has been a great market for us, so it is kind of systematic around the world, I feel lucky.”

Regardless of his success and the speedy growth that Papa John’s has undertaken over the years, the fact remains that Schnatter is facing some pretty stiff competition in the global market.

So how has Schnatter made his particular pizza stand out from the crowd?

“The reason our product tastes better is because we use better stuff. We found that the ingredients which cost more usually taste better, and there is a reason for that. So, we pay up, and as a result, we have had a lot of success,” he says. “The customers like the pizza. At the end of the day, it is all about the food. If you do not get the food right, there is nothing else to really hang your hat on.”

His customers love what is being baked, but there is a pretty hefty cloud on the horizon, especially due to today’s growing health-conscious world. Some competitors, such as US firm Naked Pizza (branded as NKD in the Gulf) have seen immense success simply by branding themselves as the healthiest option on the market. But Schnatter disagrees with the assessment that pizza is just junk food.

“I eat pizza two, three, four times a week,” he points out. “It is great food because it covers all the food groups. You do not want to sit and eat two pizzas, but if you eat two or three slices, two or three times a week, it is very good for you.”

“I eat it. I eat the heck out of it,” he adds, with gusto.

Even so, those claims don’t wash that well with current obesity numbers released recently by a BMC Public Health report. That research lists Qatar, the United Arab Emirates, Kuwait and Bahrain as all ranking amongst the world’s top ten fattest nations.

According to published research, the average person in Kuwait, the second fattest country in the world behind the United States, weighs in at approximately 77.5 kg, 15.5kg heavier than the global average.

Qatar was ranked third globally with the average adult consuming just over 3,000 calories per day, followed by the UAE in fifth place (3,017 calories) and Bahrain in tenth position (2,889 calories).

The world’s adult population — especially in the developed world and emerging markets such as the Gulf — is getting increasingly fatter. According to the research, the global population is estimated to weigh a combined 287 million tonnes, 17 million tonnes of which is due to people being overweight.

Given these numbers, Schnatter’s pizza does not seem to cater to a health-conscious lifestyle. But he says his offering is more about giving people what they want.

“We had the ability to do a wholewheat crust. We have looked at the cheese and other ingredients, so we are experimenting with it and we have tested it,” he says. “People say they want [a health-conscious pizza], but then they do not eat it. They always go back to the original product.”

“We will keep looking at it, because as the world becomes more health conscious, we would have to pay attention to [the concept],” he continues.

Back in the restaurant with the chants and claps, a beaming - and surprisingly svelte - Schnatter heads off to the kitchen to make his very own pizza from scratch. Everyone crowds around to watch the master at play.

“We have a goal to be the number-one pizza company in the world,” says Schnatter, as he liberally sprinkles grated cheese over his creation.  “We have the resources and we have the passion. I am 50 years old…and I am going to see this through. It is a big deal for me, this is my life’s work.”

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