Pizza Wars: Papa John's Expands Online Ordering

Upping the e-commerce stakes in the competitive fast-food business, pizza chain Papa John's (Nasdaq: PZZA) said Tuesday it is making online ordering available at all its free-standing restaurants across the United States.

The Louisville, Kentucky-based restaurant said it is the first pizza chain in the U.S. to offer online ordering throughout its entire domestic restaurant system, and also the first to operate its online ordering system in-house. According to Papa John's, its primary rival Domino's Pizza offers online ordering in about 15 percent of its outlets.

Yankee Group analyst Rob Lancaster said online ordering is "a logical next step" for Papa John's. "The issue they all need to worry about is timing," he told the E-Commerce Times. Setting up an e-commerce system is an expensive prospect, at least in the beginning, the analyst said, and fast-food companies need to ensure that their consumers will use it.

Papa John's said its research shows customers like the system because they can see the restaurant's entire menu and review it at their own pace, allowing them to feel "in control of their ordering process." About 75 percent of online orders are from repeat customers, the company said.

Raking in the Dough

Though Papa John's did not disclose how much money it spends on its e-tail efforts, spokesperson Karen Sherman said the company expects the e-commerce option will prove fruitful.

"It is in the process of paying for itself," Sherman told the E-Commerce Times. "It is something that is a viable opportunity for the company."

John Black, vice president of information services at Papa John's, said the online business performed in line with expectations last year and is on track to meet projections for 2002. "We are very pleased with our progress to date," he said.

Targeting Customer Habits

The e-commerce system, which Sherman said was developed in collaboration with Food.com, AT&T and other outside partners, also collects and analyzes customer purchasing habits. With that data, the company plans to offer targeted specials and promotional campaigns.

Sherman said Papa John's system covers all of its outlets except those in malls, stadiums and other public buildings.

Small Slice

Domino's is also pursuing the e-commerce angle, although on a smaller scale. "We think there's a place for online ordering because there is a segment of the population that prefers to order that way," Domino's spokeswoman Holly Ryan told the E-Commerce Times, "but it's a relatively small segment."

The decision about how and whether to offer online ordering is left up to Domino's franchisees, said Ryan. Ryan also said that Domino's stores have individual agreements with outside vendors such as QuickOrder and Food.com. "It's not a systemwide agreement," she said.

About 1,000 of Domino's more than 7,000 outlets offer online ordering, Ryan estimated.

Papa John's operates 2,729 company-owned and franchised restaurants in 47 states and nine international markets.