Papa John's Russian Roulette

They eat fish eggs and pancakes at dinner parties. Hot dogs, elbow macaroni, and garden salad for breakfast. They consider fried, spiced fat a delicacy. But will Russians go for the exotic toppings that Papa John's (NASDAQ:PZZA) is offering at the opening of their first restaurant in the heart of Moscow?

Papa John's is betting they will. The pizza purveyor will debut selections specially made-to-order that include: "Western Omelet pizza with eggs, cheese, bacon, ham, green peppers and onions" and "To Russia with Love... pizza consisting of mashed potatoes, bacon, onions and garlic butter sauce."

Mmm, mmm, weird.

Papa John's is charging in where Pizza Hut (owned by Yum! Brands (NYSE:YUM)) has struggled over the past few years. Pizza Hut pulled up stakes and fled the country in 1999, as Russia reeled from the effects of the August 1998 financial crisis. Pizza Hunt returned with some trepidation only in late 2000 -- after postponing a planned return in March of that year -- but now seems committed for the long haul. At last report, Yum! Brands was planning to exponentially increase the numbers of both its Russian KFC and Pizza Hut outlets -- in Moscow alone, the number of franchises should jump from 10 to 120 over the next six years.

At least Papa John's will have company if the Russian economy goes south again. And, in any case, the company is taking a necessary calculated risk. The U.S. pizza market looks well nigh saturated these days, making the great abroad the place to grow.

According to Papa John's fourth-quarter earnings announcement, domestic sales increased a mere 0.7% over the comparable 2002 quarter. Its international sales increased at more than six times that rate. (The pizza maker was also featured on Tom Gardner's Watch List in Hidden Gems.)

Papa John's is taking a gamble in Moscow, but if you can stomach the risks and the menu choices, you might find this company's stock tasty at a mere 16 times trailing earnings -- not quite half the S&P's ratio of 28.

Rich Smith 's day job is advising companies on doing business in Russia. He owns no shares of any company mentioned in this article, although he has owned Papa John's in the past. The Fool has a disclosure policy .