How Much Papa John's Franchise Owners Really Make Per Year
Papa John's may still be one of the most well-known pizza chains in the United States, but it's certainly seen better days. The company's founder, John Schnatter, is responsible for having built Papa John's into a cheesy empire, but Schnatter has also harmed the company in numerous ways.
Schnatter is longer the big papa calling the shots at Papa John's, but his mistakes have taken a toll on the company's franchisees. In the 1990s, Papa John's was doubling in size nearly every year and opening a location was pretty cheap as far as franchise standards go — around $100,000 (via Encyclopedia.com).
The good times have come to an end, however, and opening a Papa John's — and the profits that come with it — just aren't what they used to be.
Papa John's franchisees make less than other fast food operators
A dark cloud has fallen over the once great Papa John's pizza empire, and the company just isn't making the sort of profits that it used to. Given that Papa John's was growing so fast and so profitable two decades ago, today's earnings are rather disappointing. A report from Franchise.com estimates that Papa John's franchise operators are making around $67,000 a year. This number is debatable, but we'll address that in a minute.
According to The Street, an annual salary of $67,000 is still considerably above the median wage for U.S. citizens. That said, it's quite a bit lower than what other fast food franchise operators are making. Franchise operators from McDonald's to Taco Bell and Five Guys all make considerably more. In pizza terms, that's a pretty dinky slice compared to what other fast food franchise owners are making.
Papa John's franchise owners have seen their profits dip
Regarding that $67,000 annual salary that a Papa John's franchisee can expect to make? Well, it might actually be worse — a lot worse. In February 2019, Restaurant Business reported that because Papa John's sales plummeted so badly following a very bad 2018 that domestic operators were only making around $40,000 — before taxes. Both Domino's and Pizza Hut operators make considerably more.
These low earnings are due to two primary factors that are more or less, congruent with each other. Sales have dwindled as much as 30 percent in some areas, and Papa John's franchise operators simply can't compete with the $5 and $6 deals offered up by competitors Little Ceasar's, Pizza Hut, and Domino's. Long story short? The pizza business can be brutal.
Papa John's had to provide franchise owners with financial relief
The fast food business is tough, and companies will often help out franchise owners with things like marketing. It's never a good sign, though, when franchise owners have to call on corporate for help in the form of financial relief. The 2018 fallout from John Schnatter's downfall was so bad for Papa John's that corporate had to reduce its monthly royalty fees for franchise owners, as well as cut down on the cost of food materials.
According to Forbes, owners were having to reduce employee hours because of dwindling sales, so financial relief was handed down to soften growing franchise grievances. The real kicker here is that Papa John's pledged $500 per store to help franchise owners wipe clean any image of John Schnatter.
The cost of opening a Papa John's
There is some good news for any investors out there who are thinking about buying into a Papa John's franchise. While the profits may be less than some fast food franchises, the cost to open a unit is also considerably lower.
Opening a Papa John's only costs around $300,000. That's a lot less than the cost of opening a Taco Bell or McDonald's, which unlike Papa John's, have large eat-in dining areas. For comparison, you might have to shell out over $2 million if you want your own McDonald's. Papa John's also has a much lower net worth requirement, and only asks that franchise owners have a net worth of $250,000 with $75,000 of that in liquid assets (via Business Insider). There's also the $25,000 start-up fee, but again, this is a lot lower than most other franchises, with Chick-fil-A's $10,000 start-up fee being the exception.
Regarding that $25,000 start-up fee — in July 2018, Papa John's did waive this fee, and reduced royalty fees for the first four years of operation, but whether this offer is still in effect isn't known.
All things considered, owning a Papa John's franchise may not be the worst way to enter into becoming a fast food business owner. It's certainly not as lucrative as it once was, but as of November 2019, sales do seem to be somewhat recovering (via Yahoo Finance).