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Tastylunch (29.39)

The Great Papa John's Pizza Riots of 2008,

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8

May 10, 2008 – Comments (7) | RELATED TICKERS: PZZA

I have a serious beef with Papa John's Pizza (PZZA).

Their blatant stupidity caused mini riots all over Columbus yesterday, wasting my tax dollars and making us as a city look bad.

It all started when Papa John's foolishly decided to make fun of Lebron James

 

from 
http://www.faniq.com/blog/Papa-Johns-Gets-Blowback-For-LeBron-Crybaby-Shirts-Blog-8611

words "angering" and "ticked" inside () are mine due to CAPS profanity filter 

 
As anyone who followed the Wizards/Cavs playoff series knows, it wasn't exactly a harmonious affair. DeShawn Stevenson had a few back-and-forths with LeBron, Darius Songaila was suspended for Game 6 for "hitting" LeBron in the face, and on top of all this, LeBron started to get the reputation for being a bit of a whiner.

Anyway, as a result of LeBron's whining, Papa Johns pizza in DC apparently began selling t-shirts that had a 23 on them (LeBron's number) with the word "crybaby" emblazoned on it - and a number of people were spotted wearing the shirt at Game 6.

There's nothing wrong with that, of course. Papa Johns has a right to go after Ohio's most popular athlete ever. And it's not like they need to worry about (angering) people off in that state because it's not like Papa Johns has any stores in Cleveland or anything.

Oh wait, yes they do.

According to the food blog So Good,  there are 10 different Papa John’s pizza stores within just 12 miles of the Cleveland Cavaliers arena.

One store in Ohio said their business was booming for most of Game 6 and then suddenly the orders just died. They also got a few (ticked) off faxes about the shirt and also got threats of a boycott.

....

 

Wow how colossally stupid was that brilliant marketing strategy. It's never smart to pick sides in sporting contest if you do business in both markets. Durr... Who let that franchisee sell those shirts? Well they couldn't make it any worse or could they???  Hey this is Papa John's we are talking about here, of COURSE they can.

 

Papa John's to offer Cleveland residents 23-cent pizzas

 

Oh no they didn't (snaps fingers)

 

from
http://sports.espn.go.com/nba/playoffs2008/news/story?id=3381471

CLEVELAND -- Papa John's Pizza issued an apology to Cleveland and the Cavaliers for making T-shirts with LeBron James' number and the word "crybaby" under it.

To apologize, Papa John's will sell Cleveland residents a large, one-topping pizza for 23 cents on Thursday. The 23 is an homage to James' jersey number. The company also will donate $10,000 to the Cavaliers Youth Fund.

 

Oh yes they did! 

 

Some of you may at this point say "What's the problem here Tastylunch? Everybody likes virtually free pizza".  That my friends IS the problem. There is no way Papa John's could stock enough inventory or make pizzas fast enough to meet that kind of demand.  This is only magnified by the fact that people are feeling unusually poor right now due to subprime, high food and gas prices etc.

So how it'd go? About as bad as a reasonably intelligent person might expect. 

from http://www.columbusdispatch.com/live/content/local_news/stories/2008/05/09/PAPAJOHNS.ART_ART_05-09-08_A1_JEA5CT1.html?sid=101

Papa John's burned by pizza deal
23-cent offer to honor Cavs star melts into 'total chaos'
...  

A deal to sell pizzas for 23 cents ended up as pie in the face for Papa John's yesterday.

The offer, intended to remedy a franchisee's insult to Cleveland Cavaliers star LeBron James (No. 23), resulted in closed stores, long lines and angry customers after stores became overwhelmed by the demand. Police were called to help control the crowds at some outlets.

"It's total chaos," said Ann Marie Buswell, 33, a social worker who got her pizza at the Hudson Avenue store after waiting an hour and a half.

At noon, an hour after opening, that store locked its doors, stopped taking orders and attempted to serve only the customers waiting. A store employee tried to calm the crowds by simply handing out free pizzas.

By the end of the day, all Columbus-area stores appeared to have closed. A sign on some read: "All Columbus stores sold out."

...

The 23-cent, one-topping pizzas were meant to be offered all day at 86 stores in the Cleveland, Akron, Toledo, Youngstown and Columbus areas. (The pies normally sell for $11.99.) The chain said proceeds from the promotion would go to the Cavaliers Youth Fund and the LeBron James Family Foundation.

Columbus-area franchisees went to Pittsburgh to get more supplies after learning of the promotion a few days ago, said Charles Burris, operating partner with the Columbus Papa John's franchise.

But by early afternoon, Burris acknowledged that the stores would run out of food before the end of the day, despite doing "everything to execute as well as we can."

Demand became apparent long before stores opened at 11 a.m.

"It was nuts in the beginning," said Kandice Greeley, a driver at the Sullivant Avenue store. "When I came in at 9 a.m. the phones were ringing off the hook."

By early afternoon, a line snaked out of the door and into the West Side parking lot jammed with cars as women with strollers, kids on bikes and elderly customers stood in line. Shortly after 3 p.m., those waiting were issued numbers for the last pizzas to be sold for the day because the restaurant had run out of supplies.

At least three police officers arrived at the store to maintain order.

Jennifer Gunn, a West Side homemaker, stood in line with her 3-year-old niece, Makenzi, who also planned to buy a pizza but was not allowed to by the store. Gunn had hoped to walk away with two pizzas to feed her family of eight.

"It's hard to feed your family with food prices going up," she said. But Gunn, who orders from Papa John's at least once a month, said she'll never return.

In suburban Cleveland, people stood wrapped in blankets outside a store in Westlake, and the line was two blocks long in University Heights.

"I did it for the principle of it. The principle of it is he's not a crybaby and Papa John's should not have gotten into it," Jennie Moore, 54, of University Heights, said as she waited for a pepperoni pizza.

H. Rao Unnava, a professor of marketing at Ohio State University, said Papa John's made a bad situation worse by not fully considering how to implement the promotion.

"This kind of pricing is bound to cause demand that was so high that no store, operationally making pizzas that take at least 10 minutes each, could ever meet. An apology would have been sufficient, and they went overboard."

Burris said managers planned to meet last night to discuss a promotion for customers who missed out.

Meanwhile, Columbus police were patrolling some of the Papa John's late last night to make sure no one vandalized them. A special-duty officer was at the Hudson location and watched as would-be customers kept driving up, hoping for a cheap pizza.

....

Holeee Cow talk about crisis mismanagement. That people is exactly how not to get new business. Believe it or not the Columbus stores volunteered for this pandemonium. What's amazing to me is how much the media is under reporting the chaos. It was like a mini  South Central in '92 near some of these Papa Johns. Windows getting smashed out, people getting trampled, fights in the parking lots.

I'm shorting these jokers on principle come Monday but there are plenty of good reasons to anyway.

Papa John's is in food service, they trade at unattractive multiple (27.41 P/e) and their sales are virtually flat yoy, the cost of their inventory is going up significantly due to food inflation squeezing their margins, customers already perceive them as the "expensive" pizza, They deliver food so high gas prices is a double whammy for them, they will be affected by the new higher minimum wage rates as well and apparently they have idiots for franchisees.

CAPS players you are hereby invited  to follow me and Anomalee to the PZZA Shortin' Party! 


p.s. favorite headline and blog related to this

CLEVELANDERS NOW CAN AFFORD PIZZA

 

 

 

7 Comments – Post Your Own

#1) On May 10, 2008 at 10:12 PM, abitare (51.35) wrote:

funny, sad, funny, sad... I do like the garlic butter and 23 cent pizzas, not to bad?

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#2) On May 10, 2008 at 10:37 PM, LordZ wrote:

NExt I hear they are going to outsource their pizza production by sneaking into a little ceasars and buying all the 5 dollar pizzas they can get their hands on...

Imagine if they started telling people after they got the pizza that their bill is now 23 dollars a pie instead of 23 cents...

 

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#3) On May 10, 2008 at 10:43 PM, eskatonic (29.30) wrote:

23 cent pizzas*

 

*in restricted locations, offer applies to first 100 pizzas per location.  limit 2 per order.  void where prohibited by law. blah blah blah legalesse blah blah blah

 

gee that was hard. 

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#4) On May 11, 2008 at 12:04 AM, AnomaLee (28.72) wrote:

See my pitch on PZZA...

I go to school and work in Cleveland so I saw all this first hand. They had the story on nearly every radio and local TV station... What did you think was going to happen?

Employees called in sick, the lines were ridiculous, and there were mobs of disappointed people storming outside after they ran out of pizza at the Papa Johns in my area on Thursday....

I was going to join in the hype, but there were too many people for me when I drove past. I happily thumbed the stock down days before the story broke, but this just added to my reason to be negative on the company.

 

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#5) On May 11, 2008 at 12:27 AM, Tastylunch (29.39) wrote:

-Anomalee

FYI, I gave you credit at the end of my original Post and hyperlinked to your original pitch so readers could rec you ( I already did). Here it is agian for those who don't want to read through my tome up there 

 http://caps.fool.com/Pitch/PZZA/2378951/im-already-pessimistic-on-food.aspx

My pitch didn't make the 4:00 pm cutoff. Stupid work distracted me :-(  I've been meaning to redthumb these guys for weeks anyway myself but was trying to get caught up on pitch writing and never got around to it . :-(  .

Seriously Papa John's management is beyond dumb for not anticipating this madness. Any one with an elementary school education could have figured what was going to happen. They weren't even smart enough to put disclaimers up in their stores or in their promos like eskatonic mentioned.

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#6) On May 12, 2008 at 12:39 AM, Tastylunch (29.39) wrote:

Oh and probably should add that, as always do your own dd.

The above post by me is not any sort of official reccommendation to the short PZZA althoughthat's what I intend to do if the price action look favorable to me tomorrow.

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#7) On May 12, 2008 at 10:30 AM, madcowmonkey (< 20) wrote:

23 cent pizzas. That is ludicrous. Maybe a $23 special for 3 pizzas. 

I like the headline. I am sure there were a bunch of people walking around going. Hmmmm. I wasn't the only one that wasn't able to eat last week. 

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