The Conclusion of the Papa John's Saga

Looking ahead to the coming week in the world of fast food and restaurant finance ...

Late last week, I wrote about the latest sign that Papa John's was for sale: The retention agreements being given to top executives, including CEO Steve Ritchie, if the company were to get sold. The agreements come after multiple reports suggesting the chain is for sale and that an increasing number of private equity firms are in the running, including Arby's owner Roark Capital.

There is no point in such agreements if the company weren't for sale. The agreements, and the previous reports, suggest that such a sale could happen relatively soon. That could start to put an end to the year-long Papa John's saga, one that started with founder John Schnatter's comments on NFL player protests a year ago.

We should know more on Tuesday, when Papa John's reports its third quarter earnings.

We should also find out on Tuesday whether Wendy's will suffer the same, weak traffic as many of its competitors in the fast-food burger space. While McDonald's U.S. same-store sales bested investor expectations, traffic declined. It did at Burger King, too, which also reported a 0.7% decline in domestic same-store sales in the third quarter. But Wendy's has generally performed well in recent months.

In any event, all of this bad fast-food traffic means restaurants can be expected to keep pushing deals. One of my Twitter followers, @ismadeofmagic, forwarded a survey email suggesting Wendy's is testing out a new, $5 meal that offers a 10-piece chicken nuggets, Jr. Cheeseburger, fries and a cookie but no drink.

Industry traffic has been down for some time. Last week I explored one potential reason for the traffic challenges—inflation. Whatever the reason, a bunch of limited service chains from Starbucks and McDonald's to Dunkin', Chipotle and Shake Shack have all reported declines in customer counts.

All of this is happening despite continued strong job growth and low unemployment and rising wages. God help this business if there's an actual recession.

One bright spot so far has been casual dining. Applebee's, Texas Roadhouse, Chili's, BJ's Restaurants and Darden-owned Olive Garden have all shown some surprising strength in an era in which consumers are supposedly dining out less. Perhaps consumers are trading up from QSR or fast casual? Or maybe the performances are still masking overall weakness in the sector—after all, sales indexes are still very weak.

I debate with my colleague Peter Romeo about whether all of this means casual dining is coming back on the Restaurant Business podcast A Deeper Dive this Wednesday. And if you haven't yet, listen to last week's podcast with Domino's CEO Ritch Allison.

On Thursday, Black Box Intelligence reports its October same-store sales index on Thursday. Expect weaker numbers. October of 2017 was a strong sales month, kicking off a fairly healthy end of the year.

Next week I will be at the Restaurant Finance and Development Conference in Las Vegas. Make sure you say hello to me if you are there. And if you have any story ideas or news tips, send them to me at [email protected].