Landlords Hope to Profit from Papa John’s Problems

Landlords hope to reap benefits from the major marketing missteps taken by the Papa John’s pizza chain as the company faces the prospect of closing 250 restaurants across the country.

Throughout the U.S. commercial real estate market, including South Jersey retail space, landlords are concerned the chain’s highly publicized missteps by its former chief executive, who received swift criticism after using a racial slur on a recent conference call, could dissuade shoppers and they may hope the chain shuts stores, an industry spokesperson said recently.

“There’s a need for that size of space in the market and there’s not that much of it,” the spokesperson explained. “They (landlords) may be able to get higher rents from other tenants.”

This report on U.S. and South Jersey commercial properties from the CoStar Group research organization is being made through South Jersey commercial real estate broker Wolf Commercial Real Estate, a South Jersey commercial real estate brokerage firm.

Papa John’s, the country’s third-largest pizza chain in the national and South Jersey commercial real estate markets, has suffered public blows the past year. Founder and former Chairman and Chief Executive John Schnatter — who still owns about 30 percent of the company — this summer used a racial slur to describe African Americans on a conference call. Last fall, he blamed NFL leadership for allowing players to kneel during the National Anthem and complained the controversy was hurting the chain’s sales. At the time, Papa John’s was an NFL sponsor. It has since been replaced by Pizza Hut.

In a recent earnings call, Papa John’s Chief Executive Steve Ritchie said the chain was struggling and may be forced to close some locations.

“We’re going to evaluate all the options as they’re presented to us, if there is some sort of increase in closures that exist here because of the declines in the sales,” he said.

A Papa John’s spokeswoman declined to comment.

If the chain does close stores in its holdings of national and South Jersey commercial real estate properties, a new commercial real estate report offers clues as to which businesses might replace them. The report said non-retail and non-restaurant space in shopping centers increased to 23.1 percent this year from 19.2 percent in 2012. Forty-four percent of shoppers say they prefer to visit shopping centers that have a wide variety of non-retail tenants.

“The growing focus on experience has led to a rising share in non-retail tenants, including food and beverage, salons, movie theaters, fitness centers and medical clinics,” the report said.

Most Papa John’s stores among its various U.S. and South Jersey commercial real estate listings are in shopping and strip centers, and industry observers believe two popular concepts — Mediterranean or taco restaurants — could backfill the space and drive traffic.

For more information about South Jersey office space, South Jersey retail space and South Jersey industrial space or other South Jersey commercial properties, please call 856-857-6301 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading South Jersey commercial real estate broker that specializes in South Jersey office space, South Jersey retail space and South Jersey industrial space.

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