Papa Johns 2003 Annual Report Download - page 4

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Commitment to Team Member Training and Development. We are committed to the development and
motivation of our team members through training programs, incentive compensation and opportunities
for advancement. Team member training programs are conducted for corporate team members, and
offered to our franchisees at training centers across the United States. We offer performance-based
financial incentives to restaurant team members at various levels. Our management compensation
program is designed to attract and retain highly motivated people.
Marketing. Our restaurant-level marketing programs target the delivery area of each restaurant, making
extensive use of targeted print materials in direct mail and store-to-door couponing. Local marketing
efforts also include a variety of community-oriented activities with schools, sports teams and other
organizations. Local marketing efforts are supplemented with radio and television advertising, produced
locally and on a national basis. Six national television campaigns aired in 2003.
Franchise System. We are committed to developing a strong franchise system by attracting experienced
operators, partnering with them to expand and grow their business and monitoring their compliance with
our high standards. We seek to attract franchisees with experience in restaurant or retail operations and
with the financial resources and management capability to open single or multiple locations. To ensure
consistent food quality, each domestic franchisee is required to purchase dough and spice mix from our
QC Centers and purchase all other supplies from our QC Centers or approved suppliers. QC Centers
outside the U.S. or in remote areas may be operated by franchisees pursuant to license agreements or
other third parties. We devote significant resources to provide Papa John’s franchisees with assistance in
restaurant operations, management training, team member training, marketing, site selection and
restaurant design. We also provide significant assistance to licensed international QC Centers in sourcing
high-quality in-country or regional suppliers to the extent possible.
Unit Economics
In 2003, the 548 domestic Company-owned restaurants included in the most recent quarter’s comparable
restaurant base generated average annual sales, based on a 52-week year, of $733,000, average cash flow
(operating income plus depreciation) of $129,000 and average restaurant operating income of $103,000.
This average operating income represents 14.1% of average sales and 37.9% of the $272,000 average
cash investment for these Company-owned restaurants.
During 2002 and 2003, we implemented several restaurant initiatives, including certain system-wide
quality initiatives. The cost of these initiatives reduced restaurant profitability during 2003 (see Company
Operations - Restaurant Initiatives).
The average cash investment for the ten domestic Company-owned restaurants opened during the 2003
fiscal year, exclusive of land, was approximately $248,000. We expect the average cash investment for
the six Company-owned restaurants expected to open in 2004 to be approximately $260,000.
Substantially all domestic restaurants and many of our international restaurants do not offer dine-in areas,
which reduces our restaurant capital investment.
Development
A total of 103 Papa John’s restaurants were opened during 2003, consisting of ten Company-owned and
93 franchised restaurants, while 105 Papa John’s restaurants closed during 2003, consisting of 28
Company-owned and 77 franchised. During 2003, two franchised Perfect Pizza restaurants were opened
and 11 franchised restaurants were closed. A cumulative total of 60 (11 Company-owned and 49
franchised) Perfect Pizza restaurants have been converted to Papa John’s restaurants. We will continue to