Papa Johns’ Largest-Ever Deal Targets 1,350 New Stores in Southern China

This is an English adaptation of a FoodBud historical article originally published on January 9, 2022.

Papa Johns recently announced what it described as the largest deal in its history: a partnership with FountainVest Partners to open more than 1,350 new stores in southern China.

FountainVest had earlier acquired CFB Group, one of Papa Johns’ franchisees, which owned and operated 160 Papa Johns stores in southern China. Bloomberg reported the CFB Group transaction value at $160 million.

According to CFB Group’s official information, the group operates multiple brands. In addition to DQ and Papa Johns stores south of China’s Yellow River, its portfolio includes all China operations of Brut Eatery and Sandao Ruchuan, as well as Meet Noodles operations in Shanghai, Jiangsu, Zhejiang, and Anhui.

Papa Johns’ International Expansion Push

Papa Johns had already been pursuing international growth before this China deal. It partnered with PJ Western Group to open 250 new stores in Germany, and with Drake Food Service International to open 220 new stores across markets including Latin America, Spain, Portugal, and the United Kingdom.

As of Q3 2021, Papa Johns had 5,569 stores globally, including 3,323 in North America. The company expected 80% of future unit growth to come from markets outside North America. As of November 2021, Papa Johns had 200 stores in China.

Papa Johns chief development officer Amanda Clark said FountainVest could support rapid international growth through both capital and operating experience, as well as deeper knowledge of China’s market.

Clark described Papa Johns’ international expansion strategy as having two tracks: markets where the brand had not yet entered, and more mature markets where there was still significant room for growth. China fit the latter category. She noted that Papa Johns had 200 stores in China while some competitors had more than 1,000, saying the market opportunity was broad but the company may not previously have been on the right path. The partnership with FountainVest was intended to bring capital and local insight.

China’s Pizza Market Is Intensifying

In Q3 2021, Papa Johns’ revenue grew 8.4% to $510 million. Global system sales reached $1.2 billion, up 11.2% year on year, while North America same-store sales grew 6.9%.

CEO Rob Lynch called the FountainVest partnership a major milestone for the company’s global growth, saying it was not only Papa Johns’ largest deal but also one of the largest in quick-service restaurant history.

Lynch said China was a core growth market for Papa Johns and could support at least another 1,000 new stores. Its largest competitor in China would be Pizza Hut. In Q3 2021, 15% of Pizza Hut’s system sales came from China, making it Pizza Hut’s second-largest market after the United States.

Lynch also said China’s store model was changing. Before the pandemic, markets such as China, the Middle East, and South America could support larger restaurants built around dine-in experience. After the pandemic, the opportunity was shifting toward Delco-style stores: smaller units focused mainly on takeaway and delivery, with lower investment costs and faster expansion potential.

Pizza Hut, under Yum China, had also been expanding through a hub-and-spoke model, including smaller satellite stores designed for denser coverage. The article notes that pizza shares some operational traits with bakery, including frozen dough distribution and in-store finishing.

Domino’s was also increasing its commitment to China. In Q2 2020, Domino’s invested $40 million in Dash Brands, its China franchisee.

In early 2021, Domino’s CFO said the brand had 360 stores in China and could potentially reach 1,000. He said that over the long term, Domino’s believed China could become its second-largest market after the United States.

The article also noted market rumors that Dash Brands planned a Hong Kong listing. Bafu Holdings was operating Sbarro’s China business and seeking rapid expansion. Alongside international brands, local players such as Big Pizza and Zunbao were also growing quickly.

Note: expansion targets, IPO references, investment figures, and company guidance reflect the historical context of the original January 9, 2022 article.