Papa Johns 2000 Annual Report Download - page 11

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Six franchised QC Centers located in Canada, Mexico, Honduras, Iceland, Saudi Arabia and Alaska were
opened in 2000, and a corporate QC Center was opened in Cambridge, Canada. Other international
franchised QC Centers are located in Puerto Rico, Costa Rica, Venezuela, and Guatemala. We expect
future international QC Centers to be licensed to franchisees; however, we may open Company-owned
QC Centers at our discretion. Perfect Pizza relocated and expanded its distribution center to
accommodate a full-service QC Center during 2000.
We set quality standards for all products used in our restaurants and designate approved outside suppliers
of food and paper products that meet our quality standards. In order to ensure product quality and
consistency, all of our restaurants are required to purchase proprietary spice mix and dough from our QC
Centers. Franchisees may purchase other goods directly from approved suppliers or our QC Centers.
National purchasing agreements with most of our suppliers generally result in volume discounts to us,
allowing us to sell products to our restaurants at prices which we believe are below those generally
available in the marketplace. Within our domestic QC Center system, products are distributed to
restaurants by refrigerated trucks leased and operated by us or transported by a dedicated logistics
company.
Effective December 27, 1999, PJ Food Service, our wholly-owned subsidiary that operates our domestic
company-owned QC Centers, entered into a purchasing arrangement with a third-party entity formed at
the direction of the Franchise Advisory Council (see Franchise Program – Franchise Advisory Council)
for the sole purpose of reducing cheese price volatility. Under this arrangement, PJ Food Service
purchases cheese at a fixed quarterly price based in part on historical average cheese prices. Gains and
losses incurred by the selling entity are passed to the commissary via adjustments to the selling price over
time. Ultimately PJ Food Service purchases cheese at a price approximating the actual average market
price, but with more predictability and less volatility than the previous purchasing method. (See "Note 12"
of "Notes to Consolidated Financial Statements.")
Marketing Programs
Our restaurant-level marketing programs target the delivery area of each restaurant, making extensive use
of distinctive print materials in direct mail and store-to-door couponing. The local marketing efforts also
include a variety of community-oriented activities with schools, sports teams and other organizations. In
markets in which we or Papa John’ s franchisees have a significant presence, local marketing efforts are
supplemented with radio and television advertising.
All Company-owned and franchised Papa John’ s restaurants within a developed market are required to
join an advertising cooperative (“Co-op”). Each member restaurant contributes a percentage of sales to
the Co-op for market wide programs, such as radio, television and print. The rate of contribution and uses
of the monies collected are determined by a majority vote of the Co-op’ s members. The restaurant-level
and Co-op marketing efforts are supported by print and electronic advertising materials that are produced
by the Papa John’ s Marketing Fund, Inc., a non-profit corporation (the “Marketing Fund”), for use by us
and our franchisees. The Marketing Fund produces Papa John’ s national television commercials.
We provide both Company-owned and franchised restaurants with catalogs for the purchase of uniforms
and promotional items and pre-approved print marketing materials. We also provide direct marketing
services to Company-owned and franchised restaurants utilizing customer information gathered by our
proprietary point-of-sale technology.