TheBuzz Erika Engle

Lease dispute slices Papa John’s from Kaneohe

"Since it's a stand-alone, the leaseholder wanted to raise the lease rent substantially," said Patrick Bullard, Papa John's Hawaii spokesman.

The building on the mauka side of Kamehameha Highway previously had housed a KFC but had been vacant for a time, so franchisee P.J. Hawaii LLC initially was offered a deal to move in.

Its longevity at the location seemed grounds toward keeping it, Bullard said, but "lease rents are going up all over the place" and an agreement could not be reached.

"We do apologize to customers of Kaneohe," Bullard said. "They were faithful and wonderful."

Calls to the Kaneohe store are being forwarded to the Kailua Papa John's.

The company considered extending delivery from another location, but with gas prices rising and the need to assure delivery of a quality product, the idea didn't pencil out.

In the meantime the search continues for a new spot that makes economic sense.

"We don't want to leave any market area unserved," said Bullard, adding "we have some neat plans for growth in the next few months."

The Kaneohe store now has brown paper covering the windows blocking peeks inside -- and a commercial real estate sign outside.

Papa John's has 15 locations on Oahu, including at Aloha Stadium during events "and the neighbor islands are just around the corner," Bullard said.

The closure is good news for Pizza Hut, said Henry Katsuda, president and chief executive of TD Food Group Inc., Hawaii's Pizza Hut franchisee.

"It's definitely going to help us, because even though our store there does very well anyway, just the fact that the competition goes away, it'll have an immediate positive impact on our sales and make us even stronger there," he said.

It was the second Pizza Hut that had a Papa John's go up nearby in 1999. The first was in Mapunapuna, where it opened near the dine-in Pizza Hut, but not next door.

That Pizza Hut had not been a strong performer due to the industrial area's demographics and has since closed.

Pizza Hut has expanded by building more carryout and delivery service stores that competitors like Papa John's have built their business on, though "the delivery business is the most expensive part of our operation," Katsuda said.

Pizza Hut has two Oahu dine-in locations, including one on Liliha Street, but "most are on the neighbor islands," he said. It has more than 40 carryout and delivery stores statewide.