I always enjoy a good rival vs. rival brand battle, especially when it involves two great companies such as Domino's Pizza (NYSE:DPZ) and Papa John's (NASDAQ:PZZA). Domino's recently got a good jab in on its smaller competitor so it's fun to root for the underdog as Papa John's came back over the top.
Domino's is the clear leader in the pizza wars when it comes to quantity. It has more sales, more restaurants, and more deliveries. Lately though, Papa John's has been the clear leader in growth percentages. Last quarter for example, Papa John's saw revenue jump 12.9% and same-store sales climb 9.6% for North America. This compares to Domino's Pizza's rise of only 8.7% and domestic same-store sales growth of 4.9%.
Domino's strikes back
When Domino's talks about being the leader in quantity, Papa John's says it's the leader in quality. Papa John's loves to mention its leadership position in digital ordering and its various "firsts" -- first national pizza chain with online ordering, first with text ordering, first with 50% of its sales coming from digital, etc.
On June 16, Domino's became the first with voice-app ordering. You know, similar to those robotic customer service agents only presumably this one actually works. Domino's Pizza seized the moment to refer to itself as the "Technology Trailblazer," cutting into Papa John's ego.
Papa John's has been proud of its two-click ordering capability and points this out in its marketing. Domino's made Papa John's sound almost old school when its CEO stated, "There will be a day when typing on keyboards or with thumbs on mobile devices will come to a close," which seemed a slap in the face to the Papa.
Return of the Papa
Coincidental timing or not, just eight and a half hours after the press release from Domino's Pizza, Papa John's put out a press release of its own. Papa John's was rated the No. 1 restaurant among all limited-service restaurants in terms of customer satisfaction. It achieved this rating for the 13th time in the past 15 years. Impressive.
This also means of course that it beat out Domino's Pizza. Papa John's continues with its motto, "Better Ingredients. Better Pizza," which seems like a jab at Domino's Pizza and others. Papa John's also mentioned that it got the highest score for "overall quality, product quality, service quality and customer expectations."
John Schnatter, founder and CEO of Papa John's, stated, "Others want to try to own quality, but they are not willing to do or spend what it takes." Ouch. It almost sounds like a locker room ribbing. Schnatter added, "Papa John's spends a significant amount more than our competitors each year to ensure we use only the highest-quality ingredients that you won't find at any of our national competitors."
Schnatter is basically saying to Domino's Pizza, "You can't touch this." No word on whether Schnatter was seen doing the Chinese typewriter dance alongside M.C. Hammer or not.
Better ingredients for a better investment
All being said, which one is the better buy? Personally I'm an underdog type of gal so I'd have to vote with Papa John's. It has only 40% of the market cap of Domino's Pizza, but I see no reason why they can't both be on an equal playing field. Truth be told, they both have very similar products and execution strategy, but Domino's Pizza has a head start on roll out. The result seems to be more opportunity for more growth from Papa John's, which you are witnessing. Throw in the fact that Americans are evolving more toward fresher ingredients in all things food, and you could reasonably speculate that the same-store sales will continue to grow faster as well.
For Papa John's, better everything, at least according to the customers, and usually better technology should lead to more growth and bigger potential. Perhaps Fools have a closer look at Papa John's.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide, Coca-Cola, McDonald's, and PepsiCo. The Motley Fool owns shares of Papa John's International and PepsiCo and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.