Papa Johns 2003 Annual Report Download - page 66

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65
20. Segment Information
We have defined four reportable segments: domestic restaurants, domestic commissaries, domestic
franchising and international operations.
The domestic restaurant segment consists of the operations of all domestic (“domestic” is defined as
contiguous United States) Company-owned restaurants and derives its revenues from retail sales of pizza
and side items, such as breadsticks, cheesesticks, chicken strips and soft drinks to the general public.
The domestic commissary segment consists of the operations of our regional dough production and
product distribution centers and derives its revenues from the sale and distribution of food and paper
products to domestic Company-owned and franchised restaurants. The domestic franchising segment
consists of our franchise sales and support activities and derives its revenues from sales of franchise and
development rights and collection of royalties from our domestic franchisees. The international
operations segment principally consists of our Company-owned restaurants and commissary operation
located in the United Kingdom and our franchise sales and support activities, which derive revenues from
sales of franchise and development rights and the collection of royalties from our international
franchisees. All other business units that do not meet the quantitative thresholds for determining
reportable segments consist of operations that derive revenues from the sale, principally to Company-
owned and franchised restaurants, of printing and promotional items, risk management services, and
information systems and related services used in restaurant operations.
Generally, we evaluate performance and allocate resources based on profit or loss from operations before
income taxes and eliminations. Certain administrative and capital costs are allocated to segments based
upon predetermined rates or actual estimated resource usage. Beginning in 2003, we increased the rate of
administrative cost allocation to domestic restaurants. We account for intercompany sales and transfers
as if the sales or transfers were to third parties and eliminate the related profit in consolidation. The
accounting policies of the segments are the same as those described in the summary of significant
accounting policies (see Note 2).