Nationally ostracized Papa John’s has become such a commercial real estate pariah that it seems landlords wouldn’t mind losing the pizza chain as the company faces the prospect of closing 250 restaurants across the country.
Landlords across the U.S. commercial real estate market, including Philly retail space, 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 Philadelphia commercial properties from the CoStar Group research organization is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Papa John’s, the country’s third-largest pizza chain in the national and Philadelphia 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 It has since been replaced by Pizza Hut.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 Philadelphia 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 Philadelphia 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.
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