Welcome to the Aug. 13 Monday Business Briefing, your weekly business intelligence digest from Insider Louisville.
Papa John’s announces assistance for North American franchisees
Pizza chain Papa John’s is temporarily lowering costs for its franchisees in North America to ease plunging sales caused by negative consumer sentiment surrounding the controversy with company founder John Schnatter.
The program, announced late Friday evening, will reduce certain royalties, food service prices and online fees through the end of this year. Papa John’s also will provide funding to invest money in new marketing and “re-imaging initiatives consistent with the company’s new brand direction,” according to a news release.
The total estimated cost of the negative publicity and mitigation actions ranges from $30 million to $50 million for the remainder of 2018, Papa John’s reported last week.
The company said that is consistent with the new 2018 outlook detailed in Papa John’s second-quarter earnings report. The company now expects same-store sales to decline 7 percent to 10 percent in 2018, down from negative 3 percent to flat same-store sales.
“People are at the heart of our business, and this program is one of many actions we are taking to prioritize our team, address the recent challenges and move Papa John’s forward,” Steve Ritchie, president and CEO of Papa John’s, said in the release. “I appreciate the open conversation that we have had with our franchisees and the support they have extended, both on this agreement and on the broader operating initiatives we are pursuing to improve performance and build a better future for our company and our stakeholders.”
Papa John’s last week reported a nearly 50 percent drop in revenue during the second quarter of 2018 and a 6.2 percent decline in revenue during that period. The company’s same-store North American sales also decreased 6.1 percent during the second quarter that ended June 30 and continued to fall steeply during the month of July, going down 10 percent compared to July 2017.
The release states that the decision to implement an assistance program was made following conversations with representatives of its Franchise Advisory Council and the Papa John’s Franchise Association, which likely were part of a listening tour that Papa John’s executive recently embarked on. Leaders with both groups applauded the move in the release.
“We believe it is time for the founder to move on. Steve is pursuing the right initiatives to reinvigorate growth and recognizes the importance of working together to move forward successfully,” Vaughn Frey, president of PJFA, said. “We appreciate the assistance being extended to our franchisees and believe the assistance program will help mitigate the impact that the founder’s inexcusable words and actions have had on franchisees.”
The turmoil started back in November 2017 when Schnatter criticized NFL players for protesting racial inequality. It further devolved in mid-July 2018 when Forbes reported that Schnatter used a racial slur and was forced to step down from Papa John’s board of directors, amid a broader fallout.
Schnatter has since started attacking the leadership at the company he founded and is fighting to regain control, creating an uncertain future. —Caitlin Bowling
V-Soft Consulting acquires a Canadian business, planning new headquarters
Louisville-based V-Soft Consulting Group has expanded its footprint with a recent acquisition, the company announced.
According to marketing director Michael Ross, V-Soft Consulting purchased the Lintex Computer Group and Lintex Global Staffing on Aug. 1 for an undisclosed amount. The deal is estimated to bring in additional revenue of $15 million to $18 million Canadian dollars, roughly $11.4 million to $13.7 million in U.S. dollars.
The company, based in Toronto, is “an established and well-known provider of IT staffing services,” Ross stated in an email. Through the acquisition, V-Soft Consulting will offer its existing client base new services including software development and advanced technology solutions, such as chatbots and robotic process automation.
The company expects to add 11 new employees in Louisville as part of the acquisition and expects to hire new employees in Toronto as well. V-Soft Consulting will retain the roughly 50 workers and consultants at Lintex currently.
To accommodate the current and future growth of the company across North America, V-Soft Consulting plans to construct a new Louisville headquarters that will give it more than triple its existing space, Ross noted in the email.
According to plans filed with Louisville Metro Planning & Design Services, V-Soft Consulting wants to build a three-story, 48,000-square-foot headquarters with 229 parking spaces at 2500 Eastpoint Parkway, roughly 14 miles east of its existing offices near Oxmoor Center.
Turning Point Brands shares up on robust earnings
Shares of Turning Point Brands, the Louisville-based maker of smokeless tobacco and smoking products like Zig-Zag, Stoker’s and Beech-Nut, closed up fractionally on Friday at $33.36, after it reported last week that second-quarter net income jumped 25 percent, to $9.3 million.
Net sales increased 12.5 percent, to a record $81.1 million, the company said, as gross profit rose 11.8 percent, to a record $35.8 million.
During the quarter that ended June 30, Turning Point Brands said it also completed the $4.8 million acquisition of Vapor Supply.
“We are especially pleased with our achievements in the quarter and our progress thus far in 2018,” Larry Wexler, president and CEO of Turning Point Brands, said in the report. “Our focus brands, Stoker’s in smokeless, Zig-Zag in smoking and VaporBeast in NewGen each performed exceptionally well, as evidenced by robust increases in net sales and gross profit across all three of our segments, as compared to the year-ago quarter.” —Mickey Meece
UofL Physicians to serve Humana’s Medicare Advantage HMO members in Kentucky
Humana Medicare Advantage HMO members in Kentucky now have in-network access to health care providers from University of Louisville Physicians.
UofL Physicians and Humana announced this month that they had signed an agreement to give those members access to the practice’s medical team, which includes more than 600 primary care and specialty physicians — and many other professionals — as well as the University of Louisville Hospital and the James Graham Brown Cancer Center.
“We are pleased to partner our region’s premier health care provider practice with an organization that matches our emphasis on quality, outcomes and excellence,” Becky Lamb, UofL Physicians’ senior vice president of contracting, said in a news release. “This agreement with Humana provides greater access to multi- and sub-specialty care for the people of Kentuckiana and beyond.” —Darla Carter
Humana completes deal to sell long-term care insurance business
Humana has completed the sale of its long-term care insurance subsidiary, KMG America Corp., to HC2 Holdings’ Texas-based Continental General Insurance Co.
KMG’s subsidiary, Kanawha Insurance Co., includes Humana’s closed block of non-strategic commercial long-term care insurance policies that serves about 29,300 policyholders, according to a news release from Humana, which announced the completion Thursday.
“Completing the acquisition of Humana’s long-term care insurance business marks another significant milestone in the growth of our insurance subsidiary and significantly increases the size of our insurance investment portfolio and more than doubles our total adjusted insurance capital base from approximately $85 million to the estimated $185 million to $205 million, providing incremental value to our shareholder base,” HC2’s chief executive Philip Falcone said in a separate news release. “We believe this transaction validates our platform and positions us as the counterparty of choice for future LTC transactions.”
Humana recently noted that its second-quarter net income fell by 70 percent compared to a year earlier, primarily because the company recorded a pretax loss of $790 million related to KMG America’s sale. —Darla Carter
Prepare for traffic at the Kentucky State Fair
Louisville Metro Police Department will be on hand to help manage outbound traffic on Thursdays and Fridays and both inbound and outbound traffic on Saturdays and Sundays throughout the Kentucky State Fair.
“Our goal is to get you out as quickly and as safely as possible,” said LMPD Lt. Dale Massie, asking attendees to please obey instructions given to them by any police officer or recruit on duty. “Honking your horn will not expedite that process.”
At some point each Saturday during the fair, Gate 1 will shut down, Massie said, and LMPD encourages people to find alternative parking in lots V and W along Phillips Lane across from the fairgrounds. Parking in those lots will be free.
People who pre-purchase admission tickets and parking passes can use express lanes located at Gates 1, 3, 4 and 6 to enter the fairground more quickly on the weekends. Buying parking ahead of time also saves people $3 per vehicle if purchased before Aug. 16.
Kentucky Venues encourages people to enter the fair by following the Fair/Expo Center signs on Interstates 65 and 264. To beat some of the traffic, attendees can enter through Gate 2 or Gate 4 on Crittenden Drive or Gate 6 on Preston Highway.
Fair-goers also can download and use the Kentucky State Fair mobile application to find different ways into the state fairgrounds, as well as other general fair information.
Yum! Brand authorize another major share repurchase
Louisville-based Yum! Brands board of directors authorized the repurchase of up to $2 billion in shares of common stock through the end of 2019.
This authorization comes as the fast-food company is in the middle of an up to $1.5 billion share repurchase that the board approved in 2017. As of the end of the second quarter, another $329 million in stock may still be repurchased before the end of 2018 as part of the prior authorization, the company stated in an announcement.
Yum has focused on share repurchases since it spun off its China business in 2016. The company said at the time, that it planned to return $6.2 billion of capital to shareholders.
Gov. Matt Bevin is joining Mercedes-Benz USA and Jefferson Community & Technical College officials in Louisville at 11 a.m. Monday to announce a new apprenticeship program.
Neil Hibbert starts Monday as director of Southeast sales for Louisville Tourism. Hibbert most recently was director of sales for Discover DeKalb Convention & Visitors Bureau in Atlanta.
The University of Louisville will be part of the Phase I human trial of an investigational new drug for the treatment of relapsed and refractory T-cell leukemia and lymphoma. UofL, along with Stony Brook University and iCell Gene Therapeutics, recently received federal clearance to try this novel approach, involving CAR-engineered T-cells, and will begin taking patients before the year ends.