Papa Johns 2003 Annual Report Download - page 44

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43
Papa John’s International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Description of Business
Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first person
notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants under
the trademark “Papa John’s,” currently in 49 states, the District of Columbia, and 15 international
markets. We also operate and franchise pizza delivery and carryout restaurants under the trademark
“Perfect Pizza” in the United Kingdom. Substantially all revenues are derived from retail sales of pizza to
the general public by Company-owned restaurants, franchise royalties, sales of franchise and
development rights, and sales to franchisees of food and paper products, restaurant equipment, printing
and promotional items, risk management services, and information systems and related services used in
their operations.
2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Papa John’s and its
subsidiaries. We began consolidating BIBP Commodities, Inc. (“BIBP”), a variable interest entity as of
December 28, 2003. The results of our insurance subsidiary, RSC Insurance Services, Ltd. (“RSC”), are
consolidated one quarter in arrears. All significant intercompany balances and transactions have been
eliminated.
Fiscal Year
Our fiscal year ends on the last Sunday in December of each year. All fiscal years presented consist of 52
weeks.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could
differ from these estimates.
Revenue Recognition
Franchise fees are recognized when a franchised restaurant begins operations, at which time we have
performed our obligations related to such fees. Fees received pursuant to development agreements which
grant the right to develop franchised restaurants in future periods in specific geographic areas are
deferred and recognized on a pro rata basis as the franchised restaurants subject to the development
agreements begin operations. Both franchise and development fees are nonrefundable. Retail sales from
Company-owned restaurants and franchise royalties, which are based on a percentage of franchise
restaurants’ sales, are recognized as revenues when the products are delivered to or carried out by
customers.