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Papa John's Pizza And Economies Of Scope Essay

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PAPA JOHN’S PIZZA AND ECONOMIES OF SCOPE 1
Papa John’s Pizza and Economies of Scope
MGT407, Unit 4
Patten University
PAPA JOHN’S PIZZA AND ECONOMIES OF SCOPE 2
Papa John’s Pizza was founded in 1984 by John Schnatter, whose goal was to make high- quality pizzas and deliver them – something unusual back then. This company is typically ranked currently as the third largest national pizza chain, with franchises expanding outside of the
United States. When a business is expanding, one thing worthwhile to study is economies of scope, in order to see why and how the expansion happened in looking at daily operations and average costs to produce these fine pizzas.
An economy of scope is a proportionate saving gained by producing two or more distinct goods when the cost of doing it is less than the cost of producing each good separately. Economies of scope (it’s used in the plural) focus on the fact that the average total cost of production decreases as a result of increasing the number of different but compatible goods produced. In other words, as the company increases the number of items it offers at very little extra cost to itself, the average cost to produce each item drops, making all the items more affordable.
A study of the menu in a Papa John’s restaurant demonstrates how economies of scope work.
Mr. Schnatter (Papa John, as he calls himself in his commercials) started the business model with a few pizzas that he made in the broom closet of his father’s bar. He started with

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