Papa John’s Main Franchise in Russia Expands to Germany and Poland | Franchise News
PJ Western, a Russian-based master franchisee for Papa John’s, is booming. The company has acquired the exclusive operating and franchise rights from Papa John’s in Poland and Germany and seeks to capitalize on these agreements.
There are 207 stores in the PJ Western system, CEO Christopher Wynne said. The majority are in Russia, apart from seven in Germany, seven in Poland and a handful in Kazakhstan, Kyrgyzstan and Belarus. About 50% of the system is sub-franchised, a ratio Wynne hopes to maintain as the company enters its new phase of expansion.
Wynne, originally from Colorado, had no plans to go into the Russian pizza business. He studied economics at Northwestern and earned a master’s degree in international affairs from George Washington University before heading to Moscow at the age of 25 for a “two to three year adventure”. He worked there as a banker and met Papa John’s main franchisee for Russia while negotiating a lease. He bought a controlling stake in the master franchisee in 2007, when the company only had four stores.
PJ Western is considering expansion in terms of its pulp production facilities, which serve as regional supply hubs. The company has ten such facilities in Russia and Warsaw, Poland, and plans to open another in West Germany. More tactically, the company is considering several small acquisitions in Germany and Poland. The company made such a transaction in 2019 when it acquired a small pizza chain Uno and renamed its stores to Papa John’s.
With no acquisitions, National Director for Poland Grzegorz Ziarek said he plans to open up to 10 new locations in Poland this year, a pace he hopes to maintain for the foreseeable future. According to an investor presentation, the company wants to open six more locations in Germany in 2021.
According to Ziarek, the company finds new franchisees through a combination of social media advertising, professional media and attending conventions, such as the Warsaw Franchise Fair. He responds to many requests and the company meets with all interested parties. Pizza “is a tough business,” he added. Before signing a deal, he takes potential franchisees to a store to “taste the flour in the air” and learn what it takes to be successful.
PJ Western plans to fund part of its expansion through a regulatory crowdfunding campaign on the Wefunder platform. The company aims to raise between $ 1 million and $ 5 million for a valuation of $ 48.9 million.
Regulatory crowdfunding is a way to sell securities to an unaccredited public without registering those securities with the Securities and Exchange Commission. The sale is facilitated by a regulatory crowdfunding portal registered with the SEC, in this case Wefunder. PJ Western is both one of the largest retail companies to attempt a regulatory crowdfunding campaign and one of the only franchisees to do so. It’s more common to see independent restaurants, small chains, and newbie franchisors raising funds through regulatory crowdfunding.
Wynne sees the campaign as an “arbitrage opportunity”. Private equity, the typical investor for a company the size of PJ Western, often assigns a lower valuation to companies than public markets. Regulatory crowdfunding allows PJ Western to raise funds at a public stock market valuation without the regulatory and administrative burden of a true public offering.
As with any fundraising activity, success is not guaranteed. Like Kickstarter campaigns, if the company does not meet its minimum goal, all money will be returned to investors. PJ Western has yet to release his minimum investment, but Wynne said if he didn’t raise at least $ 1 million, he would return the money. It’s not worth adding dozens, if not hundreds, of small investors if you aren’t raising a lot of money.
“Poles love pizza,” said Ziarek, who worked for eight years at Domino’s Poland before joining PJ Western, and the market is competitive. The largest chain, Da Grasso, originates from Poland and has more than 150 branches. The aforementioned American brands Pizza Hut and Domino’s each have a strong presence, and there is an ecosystem teeming with local stores and small chains. The German pizza market is equally competitive.
Despite the greater focus on Poland and Germany, the aforementioned investor presentation indicates that over 60% of the company’s medium-term unit growth will come from Russia. The company’s brand presence in the country and its strong supply chains mean that most of the fruit on hand is in Russia, at least for now.
According to Amanda Clark, Director of Development at Papa John’s International, Papa John’s operates in 50 countries and its international operations are fully franchised. Other companies that have signed nationwide exclusivity agreements with Papa John’s include Drake’s Food Service International, responsible for Spain, Portugal, Chile, Costa Rica, Panama and Guatemala, and du Levant, responsible for Papa John’s sites in the United Arab Emirates.