MOD Pizza Files Confidentially for IPO After $461 Million in 2020 System Sales

This is an English adaptation of a FoodBud historical article originally published on November 30, 2021.

In late November 2021, U.S. pizza chain MOD Pizza said it had confidentially filed an S-1 with the New York Stock Exchange, signaling plans for an IPO.

The filing came after a difficult pandemic year. In 2020, MOD Pizza’s systemwide sales fell 5% to $461 million. Net revenue had reached $393 million in 2019, up 26% from 2018, before slipping to $388 million in 2020.

Growth Slowed, Digital Became More Important

Before COVID-19, MOD Pizza had been expanding quickly. In 2019, it raised $160 million and laid out a plan to reach 1,000 stores by 2024. The pandemic slowed that pace: the brand added 64 net new stores in 2019, but only 22 in 2020.

MOD had also been investing in digital channels. In 2020, digital sales accounted for 40% of sales, and the brand had more than 2 million loyalty members.

A Busy IPO Market for Restaurant Chains

MOD’s move followed several North American restaurant listings in 2021, including Sweetgreen, Portillo’s, Krispy Kreme, Dutch Bros and First Watch.

Pizza peers were also drawing investor attention. Domino’s had a market value of $19.4 billion at the time. Of its more than 13,000 stores, 38% were in the U.S., contributing 87% of total revenue. Stores outside the U.S. operated under franchise arrangements and contributed 23% of the company’s gross profit. Domino’s had expanded to 85 global markets, with its top 10 markets accounting for 67% of store count.

China Franchise Activity Around Global Pizza Brands

In October 2021, market reports said Dash Brands, Domino’s main franchisee in China, was considering a Hong Kong listing as early as the following year. Sources said a listing could raise about $100 million, and that Dash Brands might pursue another pre-IPO financing round during the year. Domino’s had more than 400 stores in China.

The previous year, Domino’s invested $40 million in Dash Brands and signed an agreement to invest the same amount again in the first quarter of 2021 if Dash Brands met certain performance requirements.

Other pizza operators were moving in a different direction. Papa John’s China franchisee CFB Group was set to be sold to FountainVest Partners, which planned to acquire CFB for about $160 million.

Before the transaction, CFB was solely controlled by Walnut Investment Holding II Limited. After the transaction, CFB would be solely controlled by FountainVest. CFB operated about 160 Papa John’s restaurants and 920 DQ locations in China.

Founded in 1984, Papa John’s is the world’s third-largest pizza chain, behind Domino’s and Pizza Hut, but its China development had been uneven.

Papa John’s entered China in 2003 and operated through separate northern and southern structures. Beijing Papa John’s Restaurant Development Co. handled northern China under direct management from U.S. headquarters. Southern China was licensed to Shanghai Shida Catering Management Co., which established Shanghai Papa John’s Catering Management Co. to run directly operated and franchised stores in East and South China. The two businesses operated independently and even used different website domains.

The brand faced pressure from Pizza Hut, Domino’s and others as it lagged in product innovation, localization, marketing and delivery expansion.

Times Weekly reported that, according to incomplete statistics, Papa John’s franchise stores suffered broad and severe losses from 2011 to 2013, with at least 66 closures. In 2011, the brand was also involved in an arbitration dispute brought by multiple franchisees. Franchisees alleged that Shanghai Papa John’s Catering Management Co. collected franchise fees without providing corresponding brand support, and suspected that benefits were being directed to the affiliated DQ brand. The dispute exposed disorder in Papa John’s franchise system.

The open question for China’s pizza market was whether a local pizza chain could eventually produce a listed company, and which brand might be first.

Note: IPO plans, financing amounts, valuations and forward store targets in this article are historical figures from 2021.