Pizza Chains Square Off Over Ads
Pizza Chains Square Off Over Ads
Oct. 24, 1999
DALLAS (AP) _ Two of the biggest names in pizza are preparing to fight in federal court this week over claims about who makes the better pizza.
Dallas-based Pizza Hut is suing over upstart Papa John's' slogan _ ``Better Ingredients, Better Pizza'' _ saying the motto is deceptive and implies that Pizza Hut uses second-rate ingredients.
Louisville, Ky.-based Papa John's International Inc. subsequently countersued, then came back for seconds, filing another lawsuit over a Pizza Hut ad that featured Papa John's chairman in an unsavory light.
After jury selection Monday, testimony is scheduled to begin Tuesday in Dallas in the first lawsuit.
Pizza Hut spokesman Jay Allison said he couldn't comment about the litigation _ Magistrate Judge William F. Sanderson Jr. slapped a gag order on all parties last week _ other than to direct inquiries to past statements.
For instance, Pizza Hut has accused Papa John's of duping customers into thinking they were getting fresh tomato sauce on their pizza, ``when in fact they use cooked and concentrated tomato sauce, stored in cans for up to 18 months.''
``All I can tell you is our advertising is truthful and accurate, and we're confident we'll prevail at trial,'' answered Karen Sherman, a spokeswoman for Papa John's.
The outcome is unlikely to give either side a bigger slice of the $25 billion pizza business, say analysts. Pizza Hut is the industry leader, followed by Domino's, Little Caesar's and Papa John's. Pizza Hut, a division of Louisville-based Tricon Global Restaurants Inc., sells about four times as many pizzas, though Papa John's is growing much faster.
Pizza Hut is seeking $12.5 million in damages, but that may be of secondary concern if Papa John is forced to drop a pithy slogan that customers seem to remember. It claims to have spent more than $200 million plastering the slogan on everything from store signs to stationery.
Some believe Pizza Hut made a strategic blunder by taking the dispute to court.
``The company with bigger market share doesn't want to highlight a competitor or make it seem like a big company going after a small one,'' said John Ivankoe of Schroder & Co. ``This is more an issue of egos than financial or economic importance.''
Bruised egos and bad blood go back a long way between these two companies.
Two brothers, Frank and Dan Carney, borrowed $600 from their mother in 1958 to open a pizza joint in Wichita, Kan., and Pizza Hut was born. They eventually sold out to PepsiCo Inc., which spun off its restaurant businesses into Tricon Global.
In 1985, John Schnatter knocked out a broom closet and installed a pizza oven in his father's tavern in Jeffersonville, Ind. Soon they were selling more pizza than booze. Schnatter and his wife opened other outlets and called them Papa John's.
The rivalry became personal in 1997 when Frank Carney, now a Papa John's franchisee, made commercials poking fun at the chain he helped found but left in 1980. ``Sorry guys,'' he said, ``I found a better pizza.''
Pizza Hut fought back on several fronts, including spying on the competition.
In an operation called Stoppa the Papa, Pizza Hut executives directed employees to shed their uniforms on Thursday evenings and stake out Papa John's outlets, counting deliveries and reporting on the appearance of Papa John's employees. A senior executive wrote that Pizza Hut would ``declare war on these guys!''
Pizza Hut also took its complaint about the ``Better Ingredients, Better Pizza'' motto to the National Advertising Division of the Better Business Bureau, but the organization's lawyers ruled the slogan was acceptable as long as it was limited to thin- and regular-crust pizza. The setback led Pizza Hut to file the lawsuit in Dallas.
Pizza Hut also responded with its own ad which borrowed from a Papa John's commercial featuring Schnatter. Papa John's said the ad took Schnatter's comments out of context to make it seem that Papa John's uses old dough, and it filed a lawsuit in Louisville. No trial date has been set.
Trademark lawyers say the legal case boils down to whether Papa John's slogan is a specific claim of product superiority that must be supported or is just common boasting, known as puffery in the advertising trade. Papa John's says it's no different from Pizza Hut slogans, including ``The Best Pizza Under One Roof.''
Few expect the pizza fight to spark other lawsuits over marketing claims.
``There is a Big Boy franchisee in Michigan, Elias Brothers, who advertise that dinner is better at Elias because 'We use better stuff,' and nobody is suing them,'' said Walter Kirchberger, an analyst with Paine Webber.