PIZZA HUT HAULS RIVAL TO COURT OVER ADS

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The pizza wars landed in federal court last week.

Industry leader Pizza Hut filed suit in U.S. District Court in its hometown of Dallas against its fiercest rival, fourth-ranked Papa John's International, over claims of deceptive advertising.

The suit is the latest in a series of skirmishes between the two chains that shows no signs of abating.

A spokesman for Pizza Hut, a division of Tricon Global Restaurants, said the company is not ruling out competitive ads of its own. A current 30-second TV spot for a new product called Fiesta Taco Pizza subtly jabs at Papa John's, showing a manager of "P.J.'s Pizza" looking on forlornly as his staff defects to the Pizza Hut across the street.

Pizza Hut also last week distributed a video press release showing how Pizza Hut uses fresh mushrooms while Papa John's uses canned. The video included footage of Papa John's trucks pulling out of a dingy industrial complex in upstate New York where it picks up pizza dough.

NEW ADS ON THE WAY

Coming up for Pizza Hut is a new campaign for its best-selling Pan Pizza. It is unclear whether TV ads, from BBDO Worldwide, New York, will have a competitive slant. The chain is also testing a new pizza called the Big New Yorker.

In its lawsuit, Pizza Hut is challenging Papa John's ad theme, "Better ingredients. Better pizza," and what it claims is a "deceptive implication" that Papa John's uses "fresh" tomato sauce while competitors do not. Fricks/Firestone, Atlanta, is the agency.

Pizza Hut is seeking an injunction against the ads, along with unspecified damages.

"We find their lawsuit to be frivolous and without merit," a spokeswoman for Papa John's said. "We're choosing to make our statement in our marketplace and with our customers rather than in the courts."

In response to complaints from Pizza Hut last spring, Papa John's voluntarily revised a TV spot to show sauce being poured from a can rather than tomatoes being plucked from a vine. The National Advertising Division of the Council of Better Business Bureaus last month called the change an "adequate clarification."

Pizza Hut spent $147 million on measured advertising last year, dwarfing Papa John's $16.6 million budget, according to Competitive Media Reporting. Pizza Hut has 7,200 restaurants in the U.S., while Papa John's -- the fastest-growing chain in the estimated $21 billion pizza segment -- has 1,700. Domino's Pizza is No. 2 and Little Caesars Pizza is No. 3 in the highly competitive segment of the restaurant business.

SPENDING TO DOUBLE

Papa John's is expected to double its ad spending next year, an executive with the chain said. The chain reported net income of $9.4 million for the quarter ended June 28, up 49.2% compared to the same period the prior year.

Pizza Hut, which suffered a downturn in business last year, is showing signs of improvement, observers said. For its second quarter ended June 13, Pizza Hut's same-store sales were up 9% from the same period a year ago.

"They are doing a better job in a more focused operation," said David Trossman, a restaurant analyst with B.T. Alex. Brown. "The question is, can they sustain it?"

John Correll, a pizza industry consultant, noted Pizza Hut was the first big player to take jabs at competitors, and cited a TV spot in the early 1990s poking fun at Domino's when Pizza Hut launched home delivery, a service that put Domino's on the map. "What's kind of amusing is that Pizza Hut was basically the originator of competitive derogatory advertising," he said.

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