(Adds LOS ANGELES to dateline, details; updates stock activity)
LOS ANGELES, Nov 20 - Papa John's International Inc PZZA.O announced a relief package for its domestic franchisees on Thursday in response to weak consumer spending and said it would suspend its proposed royalty rate increase.
The Louisville, Kentucky-based pizza delivery company had signaled earlier this month that it would take such steps to help its franchisees stay healthy as the U.S. economy worsens and job losses mount.
For the first half of 2009, Papa John’s said it was suspending the 0.25 percent royalty rate increase scheduled for January. It will also provide royalty relief and local marketing support for struggling franchisees or markets.
In some cases, Papa John’s will provide loans to help strong franchisees acquire troubled franchise groups.
The company said it would modify the cheese pricing to help its franchisee-owned cheese purchasing company, BIBP Commodities Inc.
It is also increasing national marketing support for the fourth quarter of this year and all of 2009.
The program is expected to result in $3 million in costs to operating income during the fourth quarter and a hit of $8 million to $10 million during 2009, excluding items, the company said.
“The ultimate impact for 2009 will depend upon the actual number of franchisees who choose to accept the proposed support program and company discretion with respect to support for struggling franchisees or markets,” the company said in a statement.
Papa John’s shares fell 3.1 percent to $14.26 on Nasdaq. (Reporting by Lisa Baertlein in Los Angeles and Ajay Kamalakaran in Bangalore; Editing by Lisa Von Ahn)