Papa John's to add 500 stores in China over 5 yrs

SHANGHAI, April 16 Wed Apr 16, 2008 3:37am EDT

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SHANGHAI, April 16 (Reuters) - Pizza delivery chain Papa John's (PZZA.O) plans to add 500 restaurants in China in the next five years, making the country its biggest market outside the United States, the company's chief financial officer said on Wednesday.

China, now home to 100 Papa John's restaurants, is expected to account for more than 20 percent of the company's total revenue this year, David Flanery told reporters in Shanghai.

"China is a very important market for us and pizza has become an important part of culture in China," Flanery said.

This year, Papa John's plans to open 40 to 50 restaurants in China, out of as many as 190 net new outlets planned globally.

Papa John's and U.S. rivals such as Pizzahut and McDonald's Corp (MCD.N) are targeting China's increasingly affluent consumers, betting that the country's 200 billion yuan ($28 billion) a year fast-food market can offset stagnant sales at home and fuel long-term growth.

Papa John's is ramping up expansion mainly through franchises in China as it seeks to narrow its gap with Yum Brands Inc's (YUM.N) Pizza Hut in the world's fastest-growing major economy.

Pizzahut, which entered China in 1990 and had a 13 year head start over Papa John's, directly owns more than 350 restaurants in the country and is adding about 80 outlets a year.

Yum also owns more than 2,000 KFC restaurants in China, more than double the 900 McDonald's outlets.

"Initially, Papa John's management had doubts about China. Now, they are convinced that China is the fastest-growing, highest-potential pizza market in the world," said Chu Liansheng, general manager of Papa John's Shanghai.

Papa John's China stores offer dine-in services as well as delivery, while its U.S. outlets feature take-out and delivery.

The company was founded in 1984 by John Schnatter, the current chairman, who sold his car to buy restaurant equipment and began selling pizzas out of his father's tavern in Jeffersonville, Indiana. (Reporting by Samuel Shen; Editing by Edmund Klamann)

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