Papa Johns 2000 Annual Report Download - page 61

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We paid $695,000 in 2000, $1.3 million in 1999 and $966,000 in 1998 for charter aircraft services provided
by entities owned by certain directors and officers, including the Chief Executive Officer (CEO) of Papa
John’ s.
12. Related Party Transactions (continued)
We advanced $183,000 in 2000, 1999 and 1998, in premiums for split-dollar life insurance coverage on the
CEO for the purpose of funding estate tax obligations. Papa John’ s and the officer share the cost of the
premiums. The premiums advanced by us will be repaid out of the cash value or proceeds of the policies.
The Marketing Fund made payments to an advertising agency, who in turn, made payments to an
advertising agency who made payments to the CEO, for the use of his image and services in the
production and use of certain electronic and print advertisements. In 2000, 1999 and 1998, the CEO
earned $169,000, $189,000 and $24,000, respectively, for these services.
The Company and two directors are parties to consulting agreements under which $203,000 in 2000,
$120,000 in 1999 and $90,000 in 1998 were paid to the directors.
During 2000, we acquired one restaurant from Superior Pizza, LLC in exchange for forgiveness of a
$270,000 note payable to us. Prior to the acquisition, we were a 49% owner of Superior Pizza, LLC. This
transaction was accounted for by the purchase method of accounting, whereby operating results
subsequent to the acquisition date are included in our consolidated financial statements.
During the fourth quarter of 1999, we sold five restaurants to Capital Pizza, Inc., for total consideration of
$1.6 million ($1.4 million in cash and $200,000 as a note receivable) and acquired one restaurant from
Capital Pizza, Inc. for total consideration of $190,000, in which we forgave a note payable to us. Capital
Pizza, Inc. is owned by certain of our officers, including our former Vice Chairman and President who
resigned in December 2000. This transaction was accounted for by the purchase method of accounting.
During 1999, we were reimbursed a total of $626,000 by a franchise owned by the CEO and his wife, for
advances made by the Company toward construction, design and equipment costs of a new prototype
restaurant in Louisville, Kentucky. The advances were made during the design and construction phase of
the project in consideration of the franchisee's willingness to permit the Company to test certain
experimental and prototypical construction, design and equipment ideas in the restaurant. Construction of
the restaurant was completed in February 1999. Following the final completion of the project and a
replication of the facility in a second location in 1999, the franchisee repaid the actual costs that would
have been incurred to construct the restaurant had final design and construction plans been available at the
beginning of the project. The Company absorbed the remaining $245,000 in development costs associated
with the project.
Papa John’ s Franchise Advisory Council has initiated a program that allows the cost of cheese to Papa
John’ s restaurants to be established on a quarterly basis. An independent franchisee-owned corporation,
BIBP Commodities, Inc. (“BIBP”), was established effective December 27, 1999, through which the
program is administered. BIBP purchases cheese at the market price and sells it to our distribution
subsidiary, PJ Food Service, Inc. ("PJFS"), at a fixed quarterly price based in part upon historical average
market prices. PJFS in turn sells cheese to Papa John’ s restaurants (Company-owned and franchised) at
a set quarterly price. Gains or losses incurred by BIBP, due to differences in the actual market price of
cheese purchased and the established quarterly sales price, are a factor used to determine the price for