Papa John's Just Hired Over 12,000 People: CEO Lynch

but a lot more people are ordering out. To get a sense of what that means for the pizza business, we welcome Rob Lynch Robs the presidency of Papa John's Pizza. Rob, thanks so much for joining us here. Give us a sense of how your business has evolved over the past couple of months as the pandemic has really gripped the country and people have become more and more quarantined. Hi, Paul, thanks for having me. You know our business is built to help in these uncertain times. We are an off

premise delivery focused business US. We do not have very many dining rooms to speak of, UM, so this is kind of what we do. And we saw the challenges

that we're coming into North America. UM through our global business we have we operating over fifty countries, including China and South Korea some of the the countries that were impacted first and we started, you know, we were able to learn what it would look like and and you know what we realized is that if we were allowed to continue to operate, that we would have a big responsibility and a big demand for our services. And you know, in China we weren't able to operate as the government

shut down, but in South Korea we were. And and so we took that model and we applied it to UH, you know, North America, and we we focused on making sure that we had were prepared for business continuity efforts in our supply chain, making sure that we could UH staff up to eat the incremental demand, and make sure that we had the appropriate stantitization and and and procedures in place to keep our employees safe so that we

can continue to operate. And we did that and and that was a lot of the work that went on in March as we started to see UM things change and and then shortly thereafter, we implemented a new platform UH and no contact delivery, and it has made a world of difference. Has allowed our customers to feel confident that when they order food from us, that we're delivering it in a safe way, that that you know, they

can get food and everyone's doing their part. People are staying home to try to fight this pandemic, and the only way people can stay home is if they have food. And you know, the frontline workers out there and the grocery stores and our delivery drivers and inside team members are doing a doing a great job making sure that that we can get through this thing and fight this terrible pandemic. So what did you to seek pre and

post the quarantine. There was a sense of kind of how your sales changed once people really were in the lockdown mode. That's great question. You know, we got off to a really strong start UH in two thousand and twenty.

We were up about seven percent in in the first quarter until mid March when we started seeing the initial impact of COVID nineteen and people started the pantry load a little bit, and um, you know, people really the uncertainty created a dynamic where people didn't order out and so we but we got through that and and UM and then April hit. And once we got into April, and we were about two weeks into the shelter and place orders in most states and across the country, UM,

our business just took off. And you know, as we reported yesterday, we saw cops store growth. That's that's the best month in the company's history. UM. So you know, we weren't we weren't expecting that level of growth, but we've been able to UM manage it. And you know, it's amazing what happens in business when you get really busy, people get more productive, people step up to the challenge.

And our team has just risen to that challenge and through their efforts out in the steel, out in our restaurants. You know, our customer service scores for a thousand bases point over the last six weeks. UM. People really appreciate the fact and the extra care that we're taking and the extra efforts were making to bring them you know, pizza, and you know pizza. It's not just sustenance. It's actually

a little bit of a return to normalcy. You know, it's a little bit of of of that joy that they you know that they're looking for as they um stay home for for weeks on end. So it's been a really rewarding thing. Our company morale, especially the folks out in the restaurants, has never been higher. And UM, it's really been a privilege and an honor to help

outdoor and these show engine time. All right, So talk about to us about your employees, your your team members here as I'm guessing as you ramped up, you mean I talked about same store sales growth and uh in April, you need some more folks on the ground delivering the pizzas, making the pizzas delivering them. Give us a sense of how you're kind of ramping up and taking care of

those folks on the ground. Yeah, you know, it's it's it's a really unfortunate outcome of this whole situation as these UM high levels of unemployment and and the way it's impacting our communities and impacting our country. And you know, we've we've tried to do our part. We've actually hired over twelve thousand people in the last six weeks, UM to try to make sure that we have the staff in place to UM take care of our communities and Frankly,

it's it's been it's been an interesting situation. We have people who, um, you know, we're we're in other jobs that had nothing to do with food service that are now all coming in and working in our restaurants. And it's been a great dynamic, uh, them coming in and bringing their talents and their passion and and like I said, morale has never been higher. These folks are are coming in not just because they think, you know, I need

a paycheck and deliver in pizza. I mean, we try really try to reinforce and I think it's really resonated that these are essential services. These are and you know, this work is important. This work is making a difference, is allowing the folks to stay home that need to stay home. And so, um, the twelve thousand people we've hired over the last six weeks have come in. Our retention has been great, and we're we're we're looking for more.

I mean, we need, we need more people because the business continues to thrive and and we want to continue to get through these times and help out as much as we can. Rob talked to us a little about the supply chain. Are you be able to get all the ingredients you need to keep your process going. We've heard some reports out that you know, maybe dairy there might be some sup light chain issues me to pork

things like that. You know, one of the great things about this company is UM it is a vertically integrated company. We we own and operate our own supply chain, and so we have really great relationships with our raw material supplier and our ingredients suppliers. And so once again we saw how things were transpiring in Asia and then in Europe, and so we got out in front of it. What we have great leadership in our supply chain and they went out to our suppliers and procured a lot of

inventory heading into UM the pandemic. So we we significantly increased our inventories. We had to go out and get incremental storage space to make sure we could get enough that that if we did see a disruption to our supply chain, UM we were going to be able to to persevere through those disruptions. We also went out and and worked with new suppliers to try and create redundancies in our supply chain and make sure that if something happened to our core group of suppliers, we had backups

and those two initiatives have really paid dividends. We've seen no business impact from UM ingredients UM challenges in the supply chain right now. A lot of a lot of protein suppliers are are challenged. But we have been able to, you know, make sure that we have access to all the pepperoni and sauces that we need for those are the biggest proteins in our business UM and and we've We've got plenty of it and we're operating at a

high level. Rob How do you think this is going to play once we get to the other side of this it relates to your business. Are you Are you guys thinking about how consumer behavior may be changing, either positive or negative for your business? You know, this is we We've faced UM multiple economic challenges over the last

twenty years. If you talk about the dot com bubble, you talk about the the banking and real estate bubble back in two thousand and eight, and you know, I think when those happened, people said, you know, the world is never going to be the same again, and and then the economy were cut or recovered, and I think we kind of went back to normal. This is a this is a health price. I think this is this

is going to be different. I think that until we have UH and the ability through a vaccine or you know, even better a cure um to to give people confidence in their personal safety and the safety of their families, people are going to, you know, regardless of how latent

the virus becomes. And you know, we we flattened that curve, I think people are still going to have a concern about going out into social environments and and being in close proximity to people that they don't know, and and and people that could potentially present a risk to them, and that you know, that's a sad thing. Um. You know. I hope that we can get past that, but I do think that until there's there's a way to give

them confidence, we're going to see that. And so I think the dynamic that's in place right now, that's happening right now where people are ordering almost everything um through digital channels and it's showing up at their door and and they are consuming either goods or services or food at home, I think that's gonna that's gonna permeate for

a while. I think there's gonna be a tale on this, regardless of whether or not states open back up or countries open back up and and um, you know, I hope that we can get past that because I love the fact that we've got a great entrepreneurial dynamic in the food service industry and we've got a lot of people depending on um customers coming back to their restaurants in their dining rooms, and so I hope that we

get past that as quickly as possible. But you know, as long as people are are continuing to rely on delivery and show and staying home more often, will be there to help about That's my discussion with Papa John CEO Rob Lynch, really talking about the business, how it's changed. They had just a surge in delivery activity in April, not surprisingly, but it's up the strongest month in the company's history. So they're you know, they're hiring more workers,

more delivery folks to kind of meet the demand. But really interesting to see how the changing dynamics in the food services business is benefiting certain companies, particularly the ones that really are focused on delivery, like like Papa John. So it was a great interview. Yeah, it was really to hear him talk about his business and trying to balance the growth of the business was trying to protect

the workers as well. It's hard to put into perspective data that really defies historical precedent, and that is the position that we are charged with at this point, looking at report after report that shows millions of Americans losing their jobs in record speed. This morning we got more initial jobless claims, another three point one seven million individ jules filed for claims. The question is how quickly will this recover, how much damage and for how long will

this make its mark on the economy? Joining us now Danielle D. Martino Booth, chief executive officer and director of Intelligence at Quill Intelligence, also former advisor at the Dallas Fed, a Bloomberg opinion columnist, and the author of the book fed Up at Insiders take on why the Federal Reserve is bad for America. Danielle, I would love your sense right now as we watch a demolition of more than a decade of job creation in less than two months, do you get a sense of how quickly these jobs

can be brought back on? Well, you know it's interesting, Um, we look, we look on the outside of the country in in this episode, I think to figure out what's going to happen in the future. And you know what, whether we want to dispute the data on the virus

coming out of China is one thing. But the lowness with which the supply chain is coming back online and the reticence on the part of consumers, bearing in mind China is six consumption, it's kind of I think it's a misconception that that China is this um manufacturing state. It's not a consumptions versus our two thirds consumption um. But the reticence that consumers are showing, I think should teach us something about potentially what's going to happen with

our own consumers here in the United States. That's going to determine whether or not we have a second wave, a first derivative, if you will, of of of layoffs in this country, not directly in leisure and hospitality and in restaurants and in things that were impacted singularly by COVID, but more so because of demand destruction and companies feeling that they have to cut costs um some of those high skilled workers that nobody wanted to let go up.

We used to talk about skill shortages three months ago. UM, so I think that's what it's going to come down to, is whether or not there's a sense of demand us struction that allows for this next wave of layoffs white collar workers, higher income to come through. So I'm literally combing through warre notices on a state by state basis

every day. So, Danielle, that kind of goes to kind of kind of economic forecasting here we've seen just in the last week or so, um Morgan Stanley Goldman sashes kind of suggesting of, you know, kind of we're experiencing a bottom in the economy, and there even though they're both forecasting kind of dire dire GDP numbers in the second quarter, they're both looking for a pretty solid rebound

in the third and fourth quarter. Is that something that might be a little prematurity think, you know, I really think that it is premature, And I'm not saying that they could be right. We could have this you and I think at this point you're talking about a you. You're just talking about you that you would see in

the regular alphabet as opposed to a long drawn out you. Um. We we could see that it's feasible that we've a lot of demand come back online in the third and the fourth quarter, but I think a lot of it's going to depend on people's attitude. I mean, I'm I'm in Dallas, Texas, are our stay at home has been lifted. I know that that there are people that are frequenting restaurants and going about their business and not wearing masks and uh. And then there are people like me who

are still sheltering in place by choice. So I think it's going to depend on how consumers react and whether or not their incomes are sustained. I'll be looking really closely at hours worked tomorrow as well. Danielle. There's a question about whether this time is different than previous episodes of mass job losses simply because of how big the

safety net is. Because the United States has been sending checks too American households with previous incomes below a certain amount, and given the unemployment benefits that have been boosted, and this has led some to predict that demand destruction won't be as deep as people are predicting. Basically, people will have money in their pockets to go and spend when

the social distancing restrictions are lifted. How much do you buy into that argument, Well, I think that's you know, there have been some great stories about UM owners of small businesses who have received PPP loans and gotten severe backlash from their employees because their employees are like, no, no no, no, no no, we want those unemployment we we we we we want to be on unemployment insurance. We're going to

make more money with that extra six dollars a week. UM. So there's something to be said about people wanting to stay on the sidelines because they're going to be drawing a higher income. We saw when the first round of stimulus checks went out that there was a spike in in TV sales, in in in wide screen TV scale. I mean, it's it's a fact of life that Americans like to consume. If they have the means with which

to do this, Uh, that's great. That what I'm focused on more is is whether or not they're going to be able to go up the assumption ladder, if they're going to sustain their lifestyles, or whether or not we're going to be able to bring airbnb S work force back online, and we're going to be able to bring Uber's force workforce back online again, especially Silicon Valley. To see these big employers relent, I think it's unique and we should be following that closely. Danielle de Martino Booth,

thank you so much for being with us. Danielle de Martino Booth, the chief executive officer and director of Intelligence at Quill Intelligence, former advisor at the Dallas Fed in a Bloomberg opinion columnist, really important right now to understand

the scope of job losses. We had UH deal cash Kari speaking this morning and talking about how devastating the job losses are going to be, saying, I'll take a long time for the economy to recover, saying the number tomorrow will probably be around sixteen or seventeen percent with respect to the unemployment rate, but he said, I think the real numbers probably around twenty three or twenty four percent. It's devastating, and really the question is how quickly can

you get those people back into the labor force. You know, we talk about the economic impacts, uh, you know, resonating from the global pandemic. We talked about some of the big public companies that have been certainly reporting over this past earning season, but you think about it, it's really the small and mid sized businesses that are really being impacted, UH directly, and they have less of a cushion to get a sense of how the small and midsized market,

the middle market, if you will, is performing. We really fortunately speak with Randy Swimmer. He's a founder and head of origination in capital markets at Churchill Asset Management, which is UH an affiliate of Novin. He's also the publisher of the Lead Left UM. So we're really happy to have Randy with us. So, Randy, give us a sense here.

I know you guys spend a lot of time working with kind of middle market types of companies, and i'd love to get a sense of kind of we're you know, we're six seven, eight weeks into this pandemic, the economic impact, the job lost, the loss of demand. What are you seeing in your portfolio of companies? Yeah, I'm Paula and Lisa. Thanks for having me back. It's been a wild sixty days. Uh. You're absolutely right, and we'd love to roll the clock back,

but look, all we can do is move forward. UM. What we're seeing generally is that I think that the portfolio companies and there's no better way actually of judging the impact on these companies. Been looking at not only our portfolio companies, but those across the middle market and direct lenders who who serviced those businesses, and you can kind of divide them into three groups. The first group

is sort of the front line businesses. Those are the travel and retail, leisure, restaurants and so forth that have been most directly hit and those, as we've seen UM are are pretty much shut for business in many cases. UM. You can just walk through your neighborhoods and see that the restaurants are uh, you know, deliver only or pick up only, and so their businesses way down. The next would be services businesses that supplied those frontline businesses and

their impacted perhaps less so UM. And then we have businesses that seem to be you know, uh, fairly intact. They tend to be in the service sector areas UM that that we focus on more defensive businesses in UM I, for example, keeping the back offices going while we're all working at home UM and those businesses seem to be doing pretty well. And that's pretty much the kinds of companies that we've been financing over the last ten years,

ten twelve years, so UM. But in general, UH, it's it's pretty significant, and you've seen that reflected in UH the unemployment numbers that's just come out. Randy. We've had a lot of conversations about the dry powder that's been raised, or some of the UH funds that have been raised over the past few years to invest in small and midsized companies. We've talked also about some excessive risk taking.

But I'm wondering at this point what would it take for private debt managers to unleash that dry capital into a market that's desperate for it, especially as we see that about fifty of US small businesses surveyed by the Human Resource Management Society think that they're going to be

out of business in six months if the shutdowns continue. Right, So you've identified clearly the need, and now the question for those of us who are on the front line of financing is what are what can we expect in terms of the next three to six months in terms of performance of those businesses. Now, there's some of those UH for example, that we know, like restaurants and fitness

centers that have been completely shoved down. It seems like we are starting nationwide UH to see signs of those ins of businesses state by states opening up with definite limitations UH. And so it's not all opening up at once and you're not seeing all the customers flooding back. There's going to be social distancing. It's going to be

a slow open rather than a quick one. Um. And so what's what finance folks like ourselves are looking at is try to get some conviction around where revenues it could be, because if you're going to extend credit to these businesses, you want to have a fair sense of when they are going to be opened up, when they're going to start generating revenues, when they're going to generate cash flows, and what level are we going to be seeing. For example, the restaurant business, is that going to be

back up to where it was? We don't think. So that's not a business sector that we we financed. But I think for those who do you know, are we going to seet of what we had in January? Is so those numbers are very hard to tell. The other thing that's going on is even the sectors like health care, which you know we do a lot of some of the physician focused practices, and you probably have seen this in your daily lives. You can't just walk into your

doctor's officer an appointment. You have to do. There's telemedicine, you can do a lot by phone. So what's the impact of those businesses. They're clearly going to be coming back, just as Jim's are gonna be coming back some restaurants. But to answer your question, there are going to be some businesses that, um, it's gonna be very hard to

get conviction over how they're going to be doing. But once that starts to happen, and once we start to see America going back to work and we get since that these companies are coming back, then you can model uh performance on those companies and actually figure out whether or not they're going to pay your mom's back too short. Randy Swimmer, thank you so much for being with us.

We'll have to have you back to discuss this as time goes on and we get a clear sense of some of those future revenue of flows as you were talking about. Randy Swimmer, founder and a head of origination and capital markets at Churchill Asset Management and affiliate of New Vine, also so publisher of the Lead Left. If you don't receive it, you should. It is a great compilation of all things having to do with the middle market lending space. Uh the absolute authority when it comes

to that. Well, the discussion here is it relates to the pandemic seems to be switching over or migrating and revolving over to when the US economy can open up, how should we open up? And a lot of that is predicated upon the virus itself and as our second wave, and and so on and so forth, and those are relying upon a lot of models from healthcare, from scientists. The real sense, though, is a lot of uncertainty. Barry rid Holts Bloomberg opinion columnists and host of Masters in

Business on Bloomberg. Rady is also the chairman and chief investment officer Ridholts Wealth Management. He joins us on the phone here, Barry, So, Barry, thanks so much for joining us. But as we think about this reopening, we're really kind of flying blind army because we've never experienced this before. To say the very least, the closest thing we had was the pandemic um just about a century ago, the so called Spanish flu, and the technology, the medical technology

that existed then was so different than today. They had a lockdown and you could see in the history books the cities and states that followed the lockdown suffered a much less substantial second wave. And so we're gonna run another rerun experiment that was done a century ago to see which states um really get hit by a second wave, which states flattened the curve, and which don't it. It's

unfortunately going to be a experiment with real life consequences. Barry, you recently wrote a column about how models can never get things quite right. And when I talked to economists, we've spoken with a number of thinkers and investors who basically say, we're flying blind. We don't know what to expect. And yet by X, y and z, how can people be investing with any conviction right now based on the level of unknowables right now out there. So that's a

deeply philosophical question. And I'll try and you can count on me, Perry any time, all right, I'll let me let me walk out on you a bit. So we use models constantly. You use models all the time. And the underlying premise of all these mathematical depictions of the world are simply that, hey, the future is likely to look very similar to the past, and as long as there aren't any radical changes going forward, we can rely on our models. Uh, some models, And I use the

example of Netflix. Hey, when when Netflix uses its model to say, based on your viewing habits against what's the rest of our hundred and sixty seven million subscribers, like we're going to predict you're gonna like this. If that model goes wrong, well who cares? You wasted ninety minutes. But in other circumstances, when things that have never happened before happened, the models just effectively lose their mind and you end up with things like negative oil prices or hey,

tomorrow is the BLS BLS um Employment Situation Report. There has never been a period in history where thirty million people filed first time unemployment claims in a month. So whatever comes out of that BLS model I suspect is going to be not exactly precisely depicting reality, because that's the sort of input that breaks models. Alright, So barry the models. Okay, limited applicability here in this these unprecedented times.

So our investors just simply supposed to just kind of look past this quarter's earnings, look past the second quarter GDP number, look past the unemployment data, and just kind of focus on put a multiple amount. There are lots of variables, the biggest being how soon do we have a treatment and beyond that, how soon do we have a vaccine if you live with a high risk person,

an older person, someone with immunosuppression, or any other co morbidities. Um, And there is a treatment that comes out, and we're starting to see lots and lots of promising research. Well, as soon as that comes out, this is pretty much behind us, or or the process of putting this behind us really ramps really ramps up. And there was just a piece in the Washington Post yesterday about the antibodies found in Lama blood seemed to be smaller than human

antibodies and effectively stopping the virus. So who knows what what will finally be the magic bullet Once that happens, we could start looking at two and philosophically, to to go back to Lisa's question, the uncertainty issue is always a misnomer because the future is always uncertain, and during normal times we do a nice job of lying to ourselves that we think we have some visibility, we think we know, um, what the future holds. Go back and look at any of the corporate guides from any year

over the past one. They are always wrong. They are always incrementally readjusting as they get closer and closer to that date. It's just when a period like this happens, we find it harder to liar to ourselves and we have to admit we have no idea what the future looks like. All right, Barry Barry rit Holds, founder of rit Holt's Wealth Management. We've moved from the philosophical, let's go to the practical, and when we see right now is clearly a profound shift or perhaps an acceleration in

the trend away from old business, the old economy. It's the new economy, which is much more reliant to online activity. I'm just wondering how you're advising your clients to invest around that, given the fact that that's being priced in in spades right now. So we don't think that these sort of external events should cause people to fully um rejigger their portfolio. You should have a financial plan. It should assume a certain amount of risk and a certain target,

and you want to stay with that. If you look at the changes in valuation between the US and and overseas, all right, if you've been very overexposed to overseas and you want to throw all that back, you can do that. If you've been under exposed to the growth sector, to technology, you can make a change in that direction. I don't see any sort of inflation on the horizon, but a

number of people have been making that claim. And just as a little bit of an insurance policy, if you want to buy the Treasury inflation protected securities, the tip spawns uh that that certainly could make sense to a portfolio. I think we're more likely to see deflation than inflation. But hey, you know you don't complain every year when your house doesn't burn down and you already paid for fire insurance. So those are the sort of things a

little trimming you could do around your portfolio. But think back to events like September eleventh or the eighty seven crash. Those aren't the sort of things that weren't a wholesale um redo of a portfolio. They should just make you think, hey, am I properly positioned for when we get past this externality And and a lot of people are discovering that they weren't properly positioned heading into it, and this is as good a time as any to Readjust Hey Verry,

thanks so much for joining us as always. Barry ridd Holts, Bloomberg Opinion columnists and host of Masters in Business on Bloomberg Radio. Also founder, chairman and chief investment Officer Rid Holts Wealth Management, joining us on the phone. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter at

Lisa abram woits one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.