U.S. chain Papa John’s International Inc. plans to grab a bigger slice of the extremely competitive Canadian pizza market, announcing yesterday it will open 57 new locations across the country beginning this year.
The company, which bills itself as the world’s third-largest pizza company, currently operates 14 locations in Western Canada and says Canada is a target for international growth. The restaurants will be built under development agreements with franchise groups in different parts of the country.
“Canada is a key focus area for our international expansion,” chief financial officer David Flanery said in a release. “And these multiunit franchise operators will help us further establish a strong foothold in that country.”
Papa John’s is beefing up in Canada as domestic pizza companies are already aggressively expanding into each others’ territories.
Last year, Pizza Pizza Ltd. announced it is expanding from its base in Central Canada to Alberta, while Panago Pizza Inc. has been moving east from its base in British Columbia, opening its first restaurant in Toronto last spring and announcing plans to open 150 locations in southern Ontario.
Boston Pizza, based in Richmond, B.C., has also been expanding eastward from its Western base.
Food service consultant Douglas Fisher said the “quick service” market for takeout and delivery pizza - which is Papa John’s typical model - is an especially saturated sector in Canada.
“I think it’s a really price-sensitive market and it’s really tough to penetrate it,” he said.
“And we’ve got Pizza Pizza, which is certainly a strong driver in the market in Ontario for sure.”
Pizza Pizza operates 616 locations across Canada, most of them in Ontario.
Mr. Fisher said ingredient prices are typically higher in Canada than the United States, and the pizza sector in particular is currently being hit with by a double whammy of rising flour prices and rising cheese prices.
Based in Louisville, Ky., Papa John’s operates 3,200 locations worldwide, including 450 restaurants outside the United States.
The company’s development agreements call for 20 restaurants to be built in Atlantic Canada by franchisee PJ Atlantic Franchising Ltd., and 10 to be built in Saskatchewan by MJ Taylor Holding Co.
As well, Bajco LLC will build 15 restaurants in western Ontario, while PDR Associates Inc. will build 12 units in eastern Ontario.
Each franchise group has committed to having at least one restaurant opened in 2008, the company said in a release yesterday.
Mr. Fisher said it is important to see how quickly the chain builds its new Canadian locations. He said he has seen many companies announce aggressive expansions into Canada only to build a fraction of the locations originally promised.
That’s because many U.S. chains typically have higher operating profits than Canadian locations, and are disappointed they cannot match those margins when they expand northward.
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