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Papa John's revamps loyalty program in bid to win back diners

Key Points
  • Papa John's has revamped its loyalty program.
  • Members will now earn 1 point for every dollar spent at the chain, instead of 1 point for every $5 spent.
  • The pizza chain has continued to struggle to regain sales after its founder, John Schnatter, started a very public feud with the company.
  • Schnatter recently hired a financial advisor to consider potential alternatives for increasing shareholder value, the company said in a filing with the SEC on Friday.
Signage is displayed outside a Papa John's International pizza restaurant in Louisville, Kentucky.
Luke Sharrett | Bloomberg | Getty Images

It's been a challenging year for Papa John's. Public scandals surrounding its founder and a massive decline in same-store sales have pressured the company into making major changes to its marketing strategy and rethink how to lure customers back to its restaurants.

Papa John's latest attempt to rekindle sales is a revamp of its rewards program. On Monday the company said its loyalty members will now earn 1 point for every dollar spent at the chain, instead of 1 point for every $5 spent. These points can be earned through online, mobile, phone or in-store orders.

For every 75 points customers collect, they will earning $10 worth of "Papa Dough," which they can put toward future orders.

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Competitor Domino's has been able to drive massive sales growth with its "Piece of the Pie Rewards" loyalty program over the last few years. The platform rewards diners with a free pizza after six purchases of $10 or more from the company. Time will tell if Papa John's can generate similar sales momentum.

The pizza chain has continued to struggle to regain sales after its founder, John Schnatter, started a very public feud with the company after he was forced to step down as chairman in July after it was revealed that he had used the N-word on a conference call in May.

That incident, and another the prior year where he criticized the National Football League for not stopping player protests during the national anthem, has chased customers away.

The pizza chain's same-store sales in July took a 10.5 percent hit and that sales slump continued in the months that followed. Same-store sales in the third quarter were down 9.8 percent across all North American locations.

CEO Steve Ritchie said in early November that September sales had improved compared with those in July and August, due, in part, to its new "Voices" ad campaign, which replaced Schnatter's image with other faces from within the company.

However, the company is still projected to have negative sales growth through the second quarter of 2019.

Not to mention, Papa John's stock has plummeted 22 percent in the last 12 months, signaling that shareholders also fear the company will not be able to immediately turnaround its performance.

Schnatter recently hired a financial advisor to review the financial prospects of the company and to consider potential alternatives for increasing shareholder value, the company said in a filing with the Securities and Exchange Commission on Friday.

"Directly or through his advisors, Mr. Schnatter has had and may continue to have discussions with the Company and/or third parties to determine whether there is a basis to undertake any such transaction," the filing said.

In July, the company enacted a "poison pill" shareholder rights plan to prevent a hostile takeover. That plan prevents Schnatter from acquiring a controlling stake in the company he founded. He currently owns around 31 percent of the company. The pill, however, does not prevent Schnatter from hiring advisors to explore a proposal.

According to the filing, Schnatter does not currently have any plans or proposals prepared.

Schnatter declined to comment on the SEC filing.