Papa Johns 2000 Annual Report Download - page 15

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Our current standard international master franchise and development agreements provide for payment to
us of a royalty fee of 5% of sales (including sales by subfranchised restaurants), with no provision for
increase. The remaining terms applicable to the operation of individual restaurants are substantially
equivalent to the terms of our standard domestic franchise agreement.
We franchise restaurants in the United Kingdom under Perfect Pizza franchise agreements, which were in
effect at the time of our acquisition. These franchise agreements differ from our standard international
franchise agreements in many respects, although with few material differences. A principal difference is
the term of the agreement, which is five years. The franchisee fee is £8,000 (approximately $11,900 at an
exchange rate of 1.49), and the royalty rate of 5% is the same as our standard international agreements.
The Perfect Pizza system has been developed principally through franchising of individual restaurants to
single location franchisees. Thus, the system has no equivalent to our development agreements or master
franchise agreements.
We have entered into a limited number of development and franchise agreements for non-traditional
restaurant units. These agreements generally cover venues or areas not originally targeted for
development and have terms differing from the standard agreement. These agreements have not had a
significant impact on our revenues or earnings.
Franchise Restaurant Development. We provide assistance to Papa John’ s franchisees in selecting sites,
developing restaurants and evaluating the physical specifications for typical restaurants. Each franchisee
is responsible for selecting the location for its restaurants but must obtain our approval of restaurant design
and location based on accessibility and visibility of the site and targeted demographic factors, including
population, density, income, age and traffic. We provide design plans, fixtures and equipment for most
franchisee locations at competitive prices.
Franchisee Loan Program. We have a program under which selected franchisees can borrow funds
principally for use in the construction and development of their restaurants. Loans made under the
program typically bear interest at fixed or floating rates (ranging from 7.0% to 12.0% at December 31,
2000), and are secured by the fixtures, equipment and signage (and where applicable, the land) of the
restaurant and the ownership interests in the franchisee. In limited cases, we have obtained a purchase
option with respect to the financed restaurants. At December 31, 2000, loans outstanding under the
franchise loan program totaled $16.7 million, net of the estimated allowance for doubtful collection of
certain notes, with commitments to lend up to an additional $6.0 million. The loans outstanding include a
loan of $3.4 million to the Marketing Fund (see Marketing Programs). We do not expect to significantly
expand the franchisee loan program beyond current commitment levels. See "Notes 4 and 7" of "Notes to
Consolidated Financial Statements” for additional information.
Franchise Training and Support. Every franchisee is required to have a principal operator approved by
us who satisfactorily completes our required training program and who devotes his or her full business time
and efforts to the operation of the franchisee's restaurants. Each franchised restaurant manager is also
required to complete our Company-certified management training program. We provide an on-site training
crew three days before and three days after the opening of a franchisee's first two restaurants. Ongoing
supervision of training is monitored by the corporate franchise training team. Multi-unit franchisees are
encouraged to hire a full-time training coordinator certified to deliver Company approved programs in
order to train new team members and management candidates for their restaurants. Our franchise
consultants, reporting to the Vice President of Franchise Operations, maintain open communication with