Ravi Thanawala: Thanks for the question. And fundamentally, we’re taking the mindset that the consumer decides, we are going to make sure that we are at the right places at the right time, at the right price points. And while the aggregator business has continued to accelerate, we see that as a consumer pattern. That pizza is taking more share in the aggregators and we’ve continued to perform well because we’ve executed well in that space. So while I don’t know what the ideal mix is, I think we should be watching consumer behaviors to see like how many, how much our consumers migrating to that. What I would say is what is unique to the organic channels is we have a strong royalty business, we have a large base with a high active rate.
When I look at my experience at other digital first companies, we have a really solid active rate in terms of members and we get to offer value to our most loyal consumers in a different way. So our objective long term is not to have our organic business decline and only our growth coming out of aggregators. We believe that there is going to be opportunity for us to continue to focus in through delivering great service and offering great value to our loyalty that has unique value that you can only get on our organic delivery and carry out channels.
Alexander Slagle: Great. Thanks.
Operator: Thank you. One moment for our next question. And our next question comes to the line of Dennis Geiger from UBS. Your question please.
Dennis Geiger: Thank you, Ravi. Wondering if you could talk a little bit more on the new build cost topic. Is there anything you can share on sort of how much lower your targeting? Maybe how much lower those costs can be? Or even if you look at it from a return or payback period, is there something you’re targeting there that you guys are able to share between lower build costs as well as incentives? Where you’re at x and you’re trying to get those paybacks to y and that’s kind of the magic number for the US franchisees. Anything there to, to share? Thank you.
Ravi Thanawala: Thanks for the question, Dennis. While we don’t share what the build out cost is, I did reference earlier that Joe Sieve and myself are consistently in corporate real estate committees and we’re looking at both franchisee deals as well as corporate restaurant opportunities. And what I can say is that really solid pipeline of corporate restaurants that are generating solid IRRs that we as Papa John’s would continue to invest our capital in, specifically in terms of like what we’re doing to drive down cost, we’re looking at a few big areas, but we’re looking at the biggest blocks of expense, which is truly like in general contracting. And second is around equipment. And we’re running through a really deliberate process to ensure that we are getting great regional rates on our equipments and GC costs.
We’re providing more optionality for our franchisees based on volume of the store to make sure that we are building out the store appropriate to the volume that it’s going to do and the location. So while we don’t share specifics, what I’ll tell you is we’re doing the right strategic and tactical efforts to drive down cost. And as a franchisor, we’re continuing to develop. And we’re developing because the IRRs are healthy on the deals we’re signing.
Dennis Geiger: Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Todd Brooks from The Benchmark Company. Your question, please.
Todd Brooks: Hey, thanks for taking my question. Wondering, Ravi, you talked about lower attach of beverages and sides. Can you comment what average check what the decline was during the first quarter just so we can get a sense of what that headwind is manifesting itself as? And just following up on a couple of the third party delivery questions, I know the company’s long talk to new entrants growing the category, but when you look at Uber Eats specifically, is Papa John’s growing their share on that channel given new entrants recently? Thanks.
Ravi Thanawala: Thanks for the question. So first, when it comes to average ticket, we just want to make sure we remind mind you and everyone that like ticket was actually up slightly for the, for the slightly up to flat for the quarter. Driven by pizza sales being up sized beverages and delivery fee coming down. We still believe that we can unlock some real value by having the right balance of focus on driving attachment, but also leaning into our core product proposition itself. Specific to Uber Eats, we have been tracking where we had been performing given that the competitive space has gotten more competitors on it. And as we previously stated that we believe that there is enough volume for the large chains to be on there. And we’ve been continuing to feel good that we are on track in our business on that channel relative to what our expectations were.
Rob Lynch: And Todd, I actually want to clarify that our ticket was down about half a percent for Q1. And again, that was all specifically related to sides, beverages and the delivery fee.
Todd Brooks: Thanks, Ravi.
Operator: Thanks. Thank you. One moment for our next question. And our next question comes from the line of Peter Saleh from BTIG. Your question please.
Peter Saleh: Yeah, great. Thanks for taking the question. I did want to come back to the conversation around tech management or mix management. Ravi, are you seeing that check management just through your organic channels? Are you seeing it in third party as well? And can you comment on the behavior of, I guess, traditional customers versus rewards customers or loyalty customers in that context of the tech management? Thanks.
Ravi Thanawala: Thanks for the question, Peter. So there’s a couple of factors. One, we believe in this notion like the consumer decides. So what we’re seeing is that the consumer is mixing into their channels differently and into their day parts differently as well. So as we see check management coming to life, we’re seeing that the organic carry out business was effectively flat in Q1 versus the organic delivery business, that was down. Naturally when you mix moves more towards carry out versus organic delivery, you see a slight decline in the attachment rate just because the mindset and the occasion for the consumer is slightly different. I think more broadly, consumers are coming to Papa John’s right now while they’re doing check management, they’re buying the things that we are famous for and that is for our core offerings of pizza and our specialty pizzas.
So we are seeing that the consumer is spending more year over year in pizza and they’re pulling back insides and beverages. We think that we’re going to continue to test offers that continue to improve that mix, but ultimately we’re seeing that consumers are using the channels of how often they’re using the channels of aggregators delivery carry out slightly different. And second, that we’re seeing that the consumer vote for the things that we’re most famous for. Specific to loyalty versus non loyalty, we continue to see that our loyalty consumers are the core of our business and it is a highly active and engaged group. Well, I don’t have any specifics at my fingertips in terms of differential behavior there, but what I will say is with our loyalty consumers, we have the ability to touch them much more frequently through emails and through app pushes that allow us to nudge behavior a little bit differently.
Peter Saleh: Thank you very much.
Ravi Thanawala: Thanks, Peter.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Jim Sanderson from Northcoast Research. Your question, please.
Jim Sanderson: Hey, thanks for the question. I wanted to go back to the international segment. I think you mentioned expecting that the back half of the year could be accretive and that you were also reviewing potential closures. Can you just, just provide a little bit more detail about what that entails? And that’s in the context of McDonald’s recently announcing that they did buy out a franchisee in the Middle East. Just wondering if that’s on the table in other marketplaces or in…
Ravi Thanawala: Thanks for the question, Jim, and I just want to make sure I clarify for the group we were specifically talking to the UK turning accretive in the second half of the year. We believe the fundamental of our business model is to be a franchisor. And that is the core of what we do is we provide great unit economics, we provide great brand and product innovation. As we think about like the success in the UK, I think there’s some real natural learnings that we can continue to apply to other markets. We got highly consumer centric in terms of what was the consumer telling us they needed from a value and a product innovation schedule standpoint. We made sure we were positioning our franchisees to deliver fantastic service.
And as we started to change hands between franchisees and continue to get our stores into season, more seasoned operators in, we saw a meaningful sales list. And third, as we went back and remapped our trade zones, our DMAs, we saw opportunities where we should be making strategic closures because it makes the overall market more profitable, it improves unit economics, it allows us to have really cohesive trade zones. So we’re partnering back with our franchisees across the world to take a similar playbook of being highly consumer centric, making sure product innovation is coming through, and pushing us as an organization to making sure we’re laser focused on the trade zones, the DMAs and cities we want to win in.
Jim Sanderson: Okay, and just a quick follow up in the UK specifically, do you think your service levels are improving?
Ravi Thanawala: Yes, when we look at delivery time, when we look at out the door times, we are seeing improvements.
Jim Sanderson: All right. Thank you.
Operator: Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Ravi Thanawala for any further remarks.
Ravi Thanawala: Thank you. I’d like to sincerely thank all of you for your time this morning and your continued interest in Papa John’s. I hope that you’ve taken away from our conversation today that we’re facing a challenging macro consumer environment where customers are really being thoughtful about check management and their wallet. But we have a plan of action and remain confident our Back to Better 2.0 strategy is going to set us up for long term growth and success. We look forward to keeping you update on our progress and connecting again for our second quarter results in August. Thank you.
Operator: Thank you, ladies and gentlemen, for your participation in today’s conference.+
