Peyton Manning Sells Stake in 31 Papa John’s Franchise Locations

Papa John's

Two days before the NFL and Papa John’s (PZZA) agreed to part ways, Peyton Manning chose to do the same with his stake in 31 Papa John’s franchise locations. Manning, who acquired the Denver area stores when he signed with the Broncos in ’12, will remain a company spokesperson and ambassador. The league has since announced Pizza Hut (YUM) will become the Official Pizza of the NFL, signing a 4-year deal (PZZA had 3 left on theirs) with an annual value exceeding the amount PZZA was schedule to pay. Papa John’s will retain an affiliation with the league through its 22 team sponsorship deals.

Howie Long-Short: It’s unclear just how much equity Manning had in each location, as his stake was tied up in a joint venture with Papa John’s International. What is clear, are the costs (and requirements) associated with opening a PZZA location. Franchisees must have a minimum net worth of $250,000 (for one store), with at least $75,000 in liquid assets. The franchise fee is just $25,000, but there is a 5% royalty fee on monthly net sales. Franchisees are also expected to invest 8% of monthly sales back into marketing and advertising their location. In all, the investment required to open a 1,200-1,400 SF location is estimated at $300,000. As of 2016, the company’s sales to investment ratio was $879,794.

Fan Marino: Mike and the Mad Dog set the bar for modern sports talk radio (and created radio row, if you ask Mike), hosting afternoon drive on WFAN (NYC) for more than 20 years. The pair broke up in 2008, though Mike remained on the station until late 2017. While Mike became a caricature of himself late in his career, he delivered one of his most epic monologues following Super Bowl 50. It’s an all-time favorite among the Mongos (his fanatical fan base, proud Mongo here). You MUST listen (Skip to 11:15, make sure you listen through at least 11:50).

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Churchill Downs Sells Big Fish Gaming for $990 Million

Churchill Downs Inc. (CHDN) has agreed to sell its mobile gaming subsidiary, Big Fish Games, to Aristocrat Technologies for $990 million (ROI of 14%); with the transaction scheduled to close in Q1 ‘18. The sale will enable the company to refocus its efforts on growing the Kentucky Derby, expanding its casino segment, TwinsSpires.com (and other forms of real money gaming) and maximizing thoroughbred racing operations. CHDN held the gaming company for just over 3 years, having acquired Big Fish in 2014 for $885 million. While Big FishGames operated on slimmer margins than the balance of CHDN assets, it still comprised 37% of company revenue and 20% of profits; shareholders must be concerned about how the company plans to replace that business.

Howie Long-Short: Aristocrat Technologies is a subsidiary of Aristocrat Leisure Limited (OTC: ARLUF), a publicly traded gaming company that operates in more than 90 countries. The acquisition makes Aristocrat the 2nd largest social casino publisher globally (far behind Playtika). In Q2 ’17, Playtika controlled 26.1% of the total market (expected to grow to $19 billion by ’22); with ARLUF and CHDN combining for just12.2% combined.

Fan Marino: Yum Brands (YUM) has pulled out as the title sponsor of the Kentucky Derby. The Louisville based Brown-Forman Corp. (BF.B) will take over as the event’s highest profile sponsor in 2018; using the exposure to promote its Woodford Reserve bourbon. Terms of the deal were not disclosed, but it’s estimated that YUM paid $1 million/year under the terms of the agreement signed in 2006. The mint julep is the traditional beverage of the Kentucky Derby. If you’ve never had one, here is a recipe (using Woodford Reserve, of course).

Churchill Downs selling mobile gaming company for almost $1B

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Papa John’s Blames NFL for “Polarizing Customer”, Pizza Hut Says NFL Has No Impact on Business

Papa John’s Pizza slashed full-year revenue and profit forecasts and blamed same store sales missing analyst estimates, on the company’s association with the NFL. PZZA CEO John Schnatter believes the political controversy that has engulfed the league this season has had a negative effect on ratings (down 7.5% from ‘16). Schnatter was quoted saying “NFL leadership has hurt Papa John’s shareholders. The controversy is polarizing the customer, polarizing the country.” PZZA shares are down 8% since the announcement. The company has pulled all advertising associated with the NFL.

Howie Long Short: Not all NFL sponsors feel the way Schnatter does. Kohl’s (KSS) is said to be working with the league on a holiday ad campaign, Buffalo Wild Wings (BWLD) recently went on the record stating that they do not anticipate any decline in key sales figures because of their relationship with the NFL and Pizza Hut (YUM) CEO Greg Creed said the company isn’t seeing any impact on their business. PZZA blaming poor sales on the NFL, is like the NFL blaming declining television ratings on hurricane coverage; perhaps it’s had a slight impact, but to place the sole blame there belies the fundamental issues with the business. The stock is down more than 26% this year.

Fan Marino: I always wonder why people in New York and New Jersey order from Domino’s (DPZ), Pizza Hut (YUM) or Pappa John’s (PZZA), when there are so many better local options. In NYC for a few days and not sure where to find the best slice? Barstool founder Dave Portnoy has a “pizza review” series to help you out. Here is a link to an episode he did with Bryce Harper.

Papa John’s Blames the NFL for Hurting Pizza Sales

Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

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NFL SPONSORS EXPRESS CONCERNS WITH DECLINING RATINGS AND POLITICAL UNREST

Several NFL sponsors have contacted the league’s front office to express their concerns with declining TV ratings and the political unrest that has engulfed the league, for the first 7 weeks of the season. Long-time sponsor Papa John’s (PZZA) has told the league that in-game sales have fallen, since President Trump’s first comments on NFL player protests, back on September 22nd. USAA, another official league sponsor, has confirmed that it too has been in contact with the league office about the issues. Despite 45’s call for the league to suspend players that fail to stand for the national anthem, the NFL has taken the position that it will allow its players to freely express their beliefs as they see fit.

Howie Long-Short: According to a new Harris Poll, PZZA has surpassed Pizza Hut (YUM) as the most popular pizza chain brand; but that popularity isn’t correlating with revenue growth. While YUM is up 17% this year, PZZA is down 21% YTD. Analysts expect PZZA to report Q3 revenues have grown 1.5% (to $428.73 million) YOY; with Pizza Hut (YUM) expected to report 10.5% growth (to $626.42 million) over the same period. Unfortunately for PZZA shareholders, popularity doesn’t guarantee success.

Fan Marino: League sponsors are contractually bound, so there is no immediate threat of revenue loss for the NFL. Any existing concerns are related to a potentially negative financial impact on future negotiations. The current collective bargaining agreement runs through the 2020 season, so the league isn’t going to be able to force players to stand before that. To be clear, there are some billionaire owners who defend the player’s right to protest. 49ers Owner Jed York was quoted as saying “Our country is more important than a slight economic impact.” At least one of these guys has his priorities in line.

NFL concedes that national anthem protests are hurting business

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CHURCHILL DOWNS ADDS EUROPEAN ROAD TO KENTUCKY DERBY; LOOKING TO STIMULATE INTERNATIONAL INTEREST

Churchill Downs (CHDN) is making changes to its “Road to the Kentucky Derby” Championship Series; adding a path to the race for European horses, as it looks to stimulate international interest in the 2018 race presented by Yum! Brands (YUM). The “European Road to the Kentucky Derby” will consist of 7 races, with the horse accruing the most points winning an invitation to the race. Last year, CHDN introduced a path for dirt racing horses based in Japan, to participate in the fastest 2 minutes in sports.

Howie Long-Short: Horse racing is one of 4 sports that can be legally gambled on in Japan and as of 2016, that includes on foreign races. In 2015, the country waged $22.5 billion on the ponies and CHDN wants some of that juice. Expanding the Japanese series is only going to get that audience more invested in May’s run to roses.

Fan Marino: Don’t expect a horse that races on foreign soil to win America’s greatest race. It’s been 46 years since Canonero II (Venezuela) won the Kentucky Derby.

Churchill Downs Adds European Path to Derby