Pizza chain plans 120 stores this year
 By Chris Kenning and Alex Davis
CAIRO, Egypt — On a smog-choked boulevard not far from the Nile River, residents stroll on broken sidewalks past brightly lit storefronts amid the sounds of blaring taxi horns, Arabic music and the buzz of motor scooters delivering takeout food.
Two workers stand near a metal detector outside Cairo's first Papa John's restaurant, waving customers up stairs lined with flat-screen televisions playing Egyptian music videos. Inside, patrons munch on pizzas with names like "Arabia Always" and toppings that include tuna, calamari and smoked veal. A waiter cuts through the 9:30 p.m. dinner crowd with an order for Ahmed El Sawi, a 25-year-old chemical engineering student who has helped make the 2-month-old restaurant an early hit.
"When I first saw the ad I thought, what is Papa John's? Sounds like underwear," El Sawi said. "We eat lots of pizza, and this is very good."
Pizza Hut, part of Louisville-based Yum! Brands Inc., dominates the pizza scene in Egypt with 52 stores, including one that sits directly across from the Great Pyramids and the Sphinx. But cross-town rival Papa John's International is plunging into the market as part of its most ambitious overseas expansion to date, with 120 new stores planned outside the United States this year.
Robb Chase, the newly hired president of international operations at Papa John's, said in an interview that Pizza Hut will be a formidable competitor overseas, due to both greater numbers and deeper experience.
Chase should know perhaps better than anyone. He spent a decade working for Yum's predecessor, Tricon Restaurants International, including a stint from 1998 to 2000 as senior vice president of international franchising.
Papa John's is the third-largest pizza-delivery chain in the United States, but it has fewer than 400 units abroad. Its international operations are budgeted to lose $9 million this fiscal year, and Chase said he doesn't expect the division to turn a profit until 2010. Papa John's has 900 overseas stores in development between now and 2016.
Dallas-based Pizza Hut, by comparison, already has 5,195 overseas stores and bills itself as the world's largest casual-dining chain. Jonathan Blum, a spokesman for Yum, said he wasn't overly concerned about competition overseas from other pizza chains.
"We've just been growing faster and are much larger," he said, noting that Yum has added more than 1,100 overseas restaurants -- mostly Pizza Huts and KFCs -- annually in each of the last five years.
Still, Chase said there is "huge opportunity" for both companies, partly due to a lack of competition.
 With the weak dollar making U.S. exports more attractive, many companies are trying to follow the lead of such global fast-food giants as Yum and McDonald's, said Darren Tristano, executive vice president at Technomic Inc., a restaurant consultancy in Chicago.
Profit margins are generally higher outside the United States, Tristano said, and franchisees often assume most of the financial risk. On the down side, it can take years to establish an efficient supply chain, and companies must be savvy about local customs and cultural preferences.
To make its brand stand out in countries such as Egypt, Papa John's is leaning on its domestic motto of "Better Ingredients, Better Pizza." Chase said restaurants also will cater to local tastes and cultural preferences, and offer dine-in and delivery service.
Papa John's isn't the only pizza chain hoping to strike it big in other countries. Domino's Pizza, based in Ann Arbor, Mich., added 227 overseas stores during the 12-month period ended March 25, compared to just 43 new domestic stores. Domino's international segment has produced 53 consecutive quarters of positive sales growth at established restaurants, Chief Executive David A. Brandon said in a recent statement.
Detroit-based Little Caesars also has locations in more than 20 countries, but a spokeswoman said the privately held company doesn't disclose restaurant numbers.
The biggest growth markets at Papa John's this year are in Asia, where 50 restaurants are planned between mainland China and South Korea. Other target countries are Ireland, Mexico, India and Russia.
Because it doesn't have the marketing prowess of Yum, Papa John's may never catch up with Pizza Hut, said Robert Angelone, CEO of The Epicurus Group in New Jersey. But he said there's no reason that the two companies can't both grow overseas.
And unlike the domestic market, where the two chains have been waging a sometimes bitter marketing war, the competition overseas is not as intense. Papa John's, for example, is still building up enough volume in the Middle East to launch TV advertising.
"They can go out there and pretty much have an open field in a very wide market," Angelone said of the two companies.
Back in Cairo, there are two Papa John's stores open now and plans for another 40 within four years. Khaled Mostafa Kamal, operations manager for Vantage, the company's Egyptian franchisee, said there is "more and more demand for pizza" in his country.
Lamya Halawa, 36, also with Vantage, worked for a dairy company that saw a natural connection to pizza, which has long been popular in Egypt.
Forming Vantage to run a planned chain of pizza restaurants, she and other company leaders considered a handful of international brands. They eventually settled on Papa John's because of what they believe is quality dough and ingredients that would make it stand out.
They paid start-up costs, buying silverware, uniforms and pizza ovens from U.S. suppliers, and created their own commissary to supply food. Halawa located the restaurant in a relatively upscale area that includes glitzy shops and other chain restaurants.
And while much of the menu is similar to what might be found in an American restaurant, they chose some items to fit local tastes. That meant selling pasta, soups including lentils, and pizzas such as those named "Fisherman's Catch," with shrimp and alfredo sauce, and "Indian Splendor" with Tandoori chicken.
Mohamed Hassan, 24, sitting near a TV set eating pizza with his wife, said the Papa John's restaurant drew him partly because it was more "cozy" than others. He said chain pizza is popular, though some favor local restaurants serving European-style thin-crust pies.
So far, the store does about 140 scooter deliveries a day (motorbikes are used instead of cars because of gridlock traffic that plagues the city). The restaurant handles about 420 transactions a day, making it among the highest-grossing pizza stores in the city, Kamal said.
Halawa and Kamal said they've been surprised by how well it is doing.
"We expected less," Kamal said. "It's not a very well-known brand here. We figured we'd start slowly."
Alex Davis can be reached at (502) 582-4644. Chris Kenning can be reached at (502) 582-4697.
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