Papa John’s Story

A Parable. All of it is true and most of it happened.

There are times in life when the smallest amount of courage can produce a lifetime of benefit. This is one such story. After a difficult divorce and relocation to Louisville, KY, Creed Branson moved in with a friend while all of his belongings remained in a storage facility more than 2,000 miles away. He took a job as a siding salesman. That didn’t last long. Creed is a great manager but a poor salesman.

One day he picked up a Forbes or Inc. magazine and discovered that hometown Papa John’s was the fastest growing pizza company in the world. Creed decided he was going to work there. Why not, with 10-years experience and seeing Pizza Hut evolve from an ailing giant to world leader in pizza sales applying this knowledge to Papa John’s seemed like a perfect fit. Creed was an operations guy with a love for marketing but had also worked in franchise operations. It was 1980 and PepsiCo had just acquired the company. Revenues doubled overnight with the introduction of Pan Pizza. “It was the only silver bullet I have ever experienced,” said Creed. The next closest thing was Personal Pan Pizza, which revolutionized the pizza lunch market. Finally, while there, Creed got to be a part of one of the biggest business moves in history; the closing of the Red Roof Pizza Hut and the beginning of Pizza Hut delivery.

Being bold, Creed just walked through the door at Papa John’s corporate headquarters to land a job. The receptionist wasn’t as fond of the idea. After asking to speak to the head of human resources, she told him, “this isn’t how we do things around here!” Nevertheless, he persisted and in between answering calls, he told her how perfect he would be for Papa John’s. She finally relented and a few minutes later Carole Trask walked into the lobby. She saw his resume and confirmed his qualifications. Carole said, “I’ll pass your resume along to Dan” to which Creed responded, “Dan who?” “Dan Holland,” she proclaimed. “Tell Dan that Creed wants to work here.” Years earlier they were peers at Pizza Hut.

A few days later Dan called and extended an invitation for an interview. Arriving 15 minutes early, which, by the way is a best practice for anyone seeking a job, he was greeted by Dan. Led to a conference room with 8 people sitting around a conference table, Creed said, “if I had known there were going to be this many people I would have brought friends.” They chuckled and began asking questions. 

Dan called the next day and informed Creed’s that he was over qualified and an offer would not be extended. The moment of truth came. Accept this or press in was Creed’s decision. He really wanted to work for the fastest growing pizza company in the world. So he offered to work for a salary that was far under any area director in the company. “Hire me as a senior management designate and I’ll make a job for myself,” was Creed’s response. He proposed a training period in which he would spend two weeks in every department. “If no one wants to hire me after that, you’ve lost a little money. Where’s the risk?” “You would do that,” was Dan’s response?” Creed started the next week.

He went through operations training followed by franchising, human resources, finance, real estate, construction and marketing. About 3 months in, Dan and his VP of Ops (Lee Baugher) met with Creed to figure out what he was going to do. There were at least 3 opportunities from the departments where he trained.

“I told them I was aware of a number of needs within each of the departments and I would like to help them solve some of these issues. I gave myself the title of Director of Special Projects. However, I spent more time in the real estate area than any other because the demand for locations was lagging the infusion of capital and the growth plans.” 

After recognizing Creed’s general management skills, he was asked to take a job in Atlanta or Baltimore. Creed’s response was, “what is the worst market in the company?” St Louis, MO,” they said. Why? Western expansion is stalled because of poor revenue. When potential franchisees heard how St. Louis was bleeding cash, they wanted nothing to do with Papa John’s. John Schnatter would later ask Creed to attend and speak at a national stockholders meeting. That same year, Creed would deliver a speech at the national franchise meeting, the COO introduced Creed as, ”The catalyst who led the most dramatic turnaround in Papa John’s history.”

But we digress. The action plan started with building a strategic plan addressing all the business segments. Creed used all the experience he had in those first 3 months building relationships and he ensured everyone knew that fixing St. Louis was John’s top priority. A few months after moving to St. Louis, the senior operations group was touring all the corporate markets. Creed saw an opportunity and presented the plan to the entire leadership team. “I thought it was brilliant but they left every copy in the van we were tooling around in,” Creed said later. That didn’t stop his enthusiasm. In fact, he never felt like saying, “I’ll show you” more than any other time of his life. 

Addressing product quality while getting the right people on the team were the top two priorities. Being relentless on quality, positive changes were occurring. Very early on in Creed’s tenure, Lee and Carole (VP of Ops and VP of HR) came to St. Louis. “I’m guessing there were a few people who wanted to know if the turnaround was ever going to happen.” Creed took them to the furthest store from St. Louis (Columbia, MO) to spend some time talking shop. 

After arriving, the store manager wanted to show Lee and Carole all his local marketing plans. The manager may have had good intentions but he was driving revenue using a low price strategy. What do you get with a low price? Poor quality! In fact, there was enough bad dough in the walk-in cooler for this store for a week. Much of the dough was discarded by Creed as an example. The manager was instructed to discard all blown dough. You can’t make a good pizza with bad dough! It’s impossible. 

The next day the group toured stores in St. Louis and held an all management meeting. Lee, Carole and Creed did some training and Carole and Lee did a Q&A. They were happy to help and were later dropped at the airport.

The second day after visiting Columbia, MO and before the store was open, Creed headed to Columbia to close the loop on the bad dough. The old dough was still in the walk-in cooler! What? The manager was terminated immediately. This inaction required an immediate response.

Word got around that poor quality was not acceptable.

In time, all the area directors were demoted or terminated. Most of the store managers too. Time was of the essence. “The area guys were working against me while reporting back to what was technically my supervisor. This was counterproductive and had to end.” If it didn’t fit into the strategic plan, it was eliminated. Written reports requiring a day to prepare were eliminated. 

The principle here is focus. All sideways energy had to be eliminated.

Collaboration became the next area of focus. The principle: the greater the level of participation and involvement the greater the commitment to the change.

“During this time, I had been teaching the team through Covey’s, The Seven Habits of Highly Effective People. Coincidentally, John asked all the key leaders in the company to attend workshops in Utah and Idaho at the Covey Institute. I drank this stuff up like hundred-year-old scotch. I read Principle Centered Leadership and everything else Covey and his team published. At the same time, I was studying Total Quality Management, Deming’s work. I got the idea to begin using a concept, which I thought I invented, called Total Quality Leadership. I also brought all the team members together regularly to hear from them to understand their problems. I invited one team member from every department from every store to build a mission statement.”

This is what the team came up with: 

“Team St Louis will constantly strive to be the Total Quality Leader in the Papa John’s system. We will exercise integrity and honesty in every endeavor. And, we will always stay focused on the basics of our business, i.e., product quality, customer service and the cleanliness of our restaurants.” 

“The next thing I did was to start paying team members $20 if they could recite the mission statement word for word. Oh, I got some criticism for that but Team St Louis was imbibing the mission and I had people lining up when I did a store visit.”

As an aside: in 2020, after quoting the Team St Louis mission statement, a business client asked Creed, “Is this a vision statement, values statement or a mission statement?” After considering the question, the response was, “yes.” It was all 3. Total Quality Leadership is a vision; TQL is an ideal, a picture of the perfect leader. Integrity and honesty are values. And, staying focused on the basics of our business was the mission. This is a great example of unconscious competency. 25 years after developing that mission, Creed realized why St. Louis was so successful: “We captured the hearts and minds of our team members by speaking to their vision (TQL), their values (honesty and integrity) and the mission (the basics of the business).

After looking back on what happened, the team actually imbibed their Vision, Values and Mission statement. The mind works in mysterious ways.

You become what you think about. So something happened to this group of people to organize them as a team.

Marketing was a problem. Pizza prices were low and the tagline was, “Delivering the Perfect Pizza.” Do you see the in-congruency? How can you have great quality and great service with low prices? Let me explain:

• Every retail operation has a set of metrics that a store manager can control
• In the case of a pizza delivery store; those metrics are food cost, labor cost and delivery costs. In Papa John’s these three are called FLM
• If retail prices are low and the company standard (as a percentage of revenue) is the same in all stores. Lower price:
  • Leads to less time to make a pizza (fewer pizza makers, people answering the telephone, etc) 
  • Means less food goes on a pizza and 
  • More pizzas delivered by fewer drivers resulting in longer delivery times and cold pizza (when a driver leaves with more than one pizza, this is referred to as a double or triple or worse and quadruple, etc)

So, people get what they pay for: Low priced pizza!

Papa John’s was attempting to capture the quality position in the pizza market but pricing was set up for the low price position. You can’t have both. Customers will see right through it. The previous manager of St. Louis was a former Taco Bell guy. Taco Bell does price really well or at least they used to. The biggest problem with price is restaurants manage their food and labor costs based on a percentage of revenue. To make more pies you need more people to make them, which leads to increased payroll costs. Low prices also present a food cost problem. If you have low price and you are managing a food cost metric (percentage of revenue), store managers are going to cheat the customers by putting less food on the pizza. Poor service and poor quality were the result of low prices. After all, who wants to be questioned about higher food costs every week?

Menu price was addressed to fix this problem. The higher the price means more toppings on the pizza (or at least to the specifications), more people to make more pizzas and more delivery drivers delivering single and fewer doubles and triples.

The side benefit to all of this is lower turnover because of less stress.

The more you can reduce the stress of the team the more they like their jobs. In two years St. Louis had the lowest food costs, the lowest labor costs and the lowest delivery costs in the company. This led to the lowest turnover and arguably the best product quality in the company!

“One of the lessons learned from the marketing guys at Pizza Hut was that in order to get people to change their pizza provider (or anything else for that matter) you must ask them to change when they are open to change. We decided the best time to do this is in the fall.” People are putting away their short sleeve shirts and shorts in favor of sweaters, hats, coats and gloves. Habits are changing. Kids are going back to school. Change is in the air. If we could supply our customers with the best pizza delivered in 30 minutes we would truly own the quality position. 

Another thing Creed asked for was a computer program the IT guys were working on that measured how long it took to make a pizza and deliver it out the door. “We were relentless on delivery times. I gave the team all they needed; more labor, more customer awareness, better training and high standards. I also went to the COO and asked to change the bonus program. It would be self funding and we would have to hit our budgeted profit for it to pay out. It worked. We were behind all our targets at mid year but beat every target by year’s end. We were gaining momentum.”

About 18 months in, John )yes, Papa John) decided to come to the market to do a rally. This was one of John’s favorite activities. Creed picked him and a few others up from his private plane and headed toward the rally where 200 or so team members would be in attendance. Creed told him how Team St. Louis had developed a mission statement. John said, “you know the problem with mission statements don’t you?” John continued, “the problem with mission statements is they get written, placed on a plaque and hung up in the stores but nobody lives them out.” Creed said, “Would you give me $50 for every person who could quote the mission?” John’s response, “You’re setting me up aren’t you?” Creed said, “Well, we’ll see.” Before introducing John, Creed asked everyone who could recite the mission to raise their hand. The vast majority of the 200 people in the room raised their hand. He chose one young woman in the crowd and she nailed it! Yep, he gave her $20. And, there were dozens of people reciting the mission to themselves.

After brainstorming with the marketing department, Team St. Louis had the wild idea of hiring a spokesperson to tell St Louis about the brand. Charlie Spoohour was hired. The cost was under $30,000.00 not including the TV and print media costs. If you aren’t from the area you probably don’t know the name. Charlie turned the St Louis University basketball team around and was loved by St Louisians! He was always in the news going to baseball games and was regularly seen about town. Thin pizza was also added as a new product. St Louis is a thin pizza market because of the local chain, Imo’s. 

John later became Papa John and he became the spokesperson for the company. An advertising agency convinced him by telling him that no other founder of a restaurant chain since Dave Thomas (Wendy’s).

“And we prepared by hiring additional staff for the increase in sales. The sales came. We handled it with a few hiccups but Team St Louis owned the quality position! John’s brother, Chuck asked me for a white paper on how we turned the market around. The COO and VP of Ops asked me the same question and I sent them their original copy of the Strategic Plan they left in the van those many months prior. I couldn’t resist.’

Team St Louis also established a set of rhythms and routines that, “kept us focused on the basics of the business.” Today, we would call that a Management Operating System. The team met regularly. Performance was checked daily, weekly and monthly. Out the door times, labor hours and a few other metrics were reviewed everyday. 

“As we did store visits we would fix problems or praise immediately. We began using the mission as the strategic anchor for our improvement requirements. We would ask managers, ‘is this how a Total Quality Leader behaves?’ Or, ‘does this meet your standards for our customers?’ When a manager didn’t improve, we would ask, ’is this a training problem or a performance problem?’ We pulled when things were good and pushed when things were bad.”

The overarching goal was to be #1 in 7 key performance indicators:

1. Food Cost
2. Labor Cost
3. Mileage Cost 
4. Team member turnover
5. Sales Growth: measured by a percentage of growth year over year
6. PSA: Per store average sales
7. Out the door times

In just over two years Team St. Louis was number one in all but one category; PSA. St Louis was one of the newest markets and St Louisans grew up on Imo’s. In time, Team St. Louis could have owned that KPI as well. 

After the results achieved by Team St. Louis, Creed was asked to become the Vice President of Operations in the west region. Shortly after, his wife died and his world was turned upside down. He left Papa John’s. “I took her death out on anyone who was around me. Looking back, I should have taken a leave of absence and got my head on straight. I’m remarried now to my lovely wife Karen.”

In summary, the turnaround of the St Louis market wasn’t a silver bullet. It was a series of steps addressing the entire business: real estate, personnel, training and development, marketing but most of all it was a passionate drive to prove something. We took all the theory and made it very practical. But make no mistake, Creed was the catalyst. He didn’t do it alone and there are many who helped St Louis make a mark in Papa John’s history.

One such guy is Chris Scott. He did his master’s work on Total Quality Management. It is perhaps the only reason Creed hired him. He was a good area manager but they butted heads more than a few times. A few years ago a mutual friend told Creed that Chris had died. Anyway, Chris had some pain in his abdomen. He went to the doctor and a few months later died of colon cancer. He wasn’t 50 years old yet, which is when the doctors tell you to start having a colonoscopy. 

“I was honored and blessed by this work in St. Louis. We made a lot of mistakes but we kept pushing forward. Once the team was empowered all I had to do was check the metrics daily, meet with everyone weekly and reestablish goals monthly. I was working about 25 hours per week but the results came. This was a valuable lesson. Sometimes we just need to get out of the way and let people love their job. So, what else do you learn from this story?”