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Papa John's CEO sees a place for AI in the pizza business

Papa John's (PZZA) CEO Rob Lynch sees an opportunity to use artificial intelligence to cook up even tastier sales, especially from an impressive base of 30 million loyalty members.

"We have just scratched the surface," Lynch said on Yahoo Finance Live (video above). "We have got to be careful, where we make sure we are doing it the right way. But driving insights out of our analytics is a big opportunity for us to get better and drive more frequency."

Lynch acknowledged on an earnings call last week that Papa John's has been behind in tapping into its lucrative data to either upsell customers or get them to order more. Leveraging the new AI tools sweeping the tech industry could unlock the value inherent to Papa John's enormous dataset.

In this Monday, Aug. 29, 2016 photo, a robot places a pizza into an oven at Zume Pizza in Mountain View, Calif. The startup, which began delivery in April, is using intelligent machines to grab a slice of the multi-billion-dollar pizza delivery market. Zume is one of a growing number of food-tech firms seeking to disrupt the restaurant industry with software and robots that let them cut costs, speed production and improve worker safety. (AP Photo/Marcio Jose Sanchez)
In this Monday, Aug. 29, 2016 photo, a robot places a pizza into an oven at Zume Pizza in Mountain View, Calif. (AP Photo/Marcio Jose Sanchez) (ASSOCIATED PRESS)

To begin course correcting, Lynch said he just hired former Chipotle marketer Mark Shambura as chief marketing officer.

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"[Loyalty members] have opted in to allow us to get the data so we can better meet their needs," he said. "I think we have a big opportunity to do that. That's going to be a key differentiator for us from the rest of the restaurant industry."

Even without fully harnessing its data, Papa John's has had a strong run under Lynch — who joined the company in turmoil in August 2019 after the ousting of founder John Schnatter.

Lynch has rebooted menu innovation, as seen recently in the release of a Doritos-flavored pizza sandwich. The company also benefited from the COVID-19 pandemic delivery boom.

North American same-store sales rose 30% on a three-year average for the year ended 2022. By the same measure, international same-store sales increased 20%.

Papa John's stock is up 83% since Lynch took over as CEO in 2019, outperforming the S&P 500's 45% gain. Domino's Pizza shares (DPZ), meanwhile, have gained only 36%.

But investors are going to want Lynch to reignite sales growth, and using technology is one way to do it.

First quarter same-store sales were unchanged year over year while international sales declined 6% as the pandemic eating boom continued to cool and the economy slowed.

"Papa John's recent performance and tone on growth [was] more favorable than that of its largest delivery pizza peer [Domino's], which we think highlights certain differences/advantages that Papa John's is able to leverage in the current environment (third-party, product innovation, etc.)," Jefferies analyst Alexander Slagle wrote in a client note.

Slagle added, however, that Papa John's is "likely not immune [to the current environment], which could yield some downside vs. more optimistic expectations."

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com

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