Papa Johns 2000 Annual Report Download - page 16

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the franchise community, relaying operating and marketing information and new ideas between us and
franchisees.
Franchise Operations. All franchisees are required to operate their Papa John’ s restaurants in
compliance with our policies, standards and specifications, including matters such as menu items,
ingredients, materials, supplies, services, fixtures, furnishings, decor and signs. Each franchisee has full
discretion to determine the prices to be charged to its customers.
Franchise Advisory Council. We have a Franchise Advisory Council that consists of Company and
franchisee representatives. The Advisory Council holds quarterly meetings to discuss new marketing
ideas, operations, growth and other relevant issues.
Reporting. We collect weekly and monthly sales and other operating information from Papa John’ s
franchisees. We have agreements with most Papa John’ s domestic franchisees permitting us to
electronically debit the franchisees’ bank accounts for the payment of royalties, Marketing Fund
contributions and QC Center purchases from Papa John’ s. This system significantly reduces the
resources needed to process receivables, improves cash flow and virtually eliminates past-due accounts
related to these items. Franchisees generally are required to purchase and install the Papa John’ s
PROFIT System in their restaurants (see Company Operations — Point of Sale Technology).
Competition
The restaurant industry is intensely competitive with respect to price, service, location and food quality,
and there are many well-established competitors with substantially greater financial and other resources
than Papa John’ s. Competitors include a large number of international, national and regional restaurant
chains, as well as local pizza operators. Some of our competitors have been in existence for a substantially
longer period than us and may be better established in the markets where our restaurants are, or may be,
located. Within the pizza segment of the restaurant industry, we believe our primary competitors are the
international pizza chains, including Pizza Hut, Domino’ s and Little Caesars, and several regional chains.
A change in the pricing or other marketing strategies of one or more of our competitors could have an
adverse impact on our sales and earnings.
The restaurant business is often affected by changes in consumer tastes, national, regional or local
economic conditions, demographic trends, traffic patterns and the type, number and location of competing
restaurants. In addition, factors such as inflation, increased cheese and other commodity costs, fuel costs,
labor and benefits costs and the lack of experienced management and hourly team members may
adversely affect the restaurant industry in general and our restaurants in particular.
With respect to the sale of franchises, we compete with many franchisors of restaurants and other
business concepts. In general, there is also active competition for management personnel and attractive
commercial real estate sites suitable for our restaurants.
Government Regulation
We, along with our franchisees, are subject to various federal, state and local laws affecting the operation
of our respective businesses. Each Papa John’ s restaurant is subject to licensing and regulation by a
number of governmental authorities, which include health, safety, sanitation, building and fire agencies in
the state or municipality in which the restaurant is located. Difficulties in obtaining, or the failure to obtain,