Papa Johns 2003 Annual Report Download - page 7

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statements pursuant to the adoption of Financial Accounting Standards Board Interpretation No. 46 (“FIN
46”). See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Consolidation of BIBP Commodities, Inc. (“BIBP”) as a Variable Interest Entity, and “Note
3” of “Notes to Consolidated Financial Statements” for additional information concerning BIBP and the
purchasing arrangement, and the related financial statement treatment thereof.
Marketing Programs
All Company-owned and franchised Papa John’s restaurants within a co-developed market are required
to join an area advertising cooperative (“Co-op”). Each member restaurant contributes a percentage of
sales to the Co-op for market-wide programs, such as radio, television and print advertising. The rate of
contribution and uses of the monies collected are determined by a majority vote of the Co-op’s members.
The restaurant-level and Co-op marketing efforts are supported by print and electronic advertising
materials that are produced by the Papa John’s Marketing Fund, Inc., a non-profit corporation (the
“Marketing Fund”). The Marketing Fund produces and buys air time for Papa John’s national television
commercials, in addition to other brand-building activities, such as consumer research. All domestic
Company-owned and franchised Papa John’s restaurants are required to contribute a percentage of sales
to the Marketing Fund. The contribution percentage was 2.0% in 2003 and 1.25% in 2002 and 2001.
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. The local marketing efforts also
include a variety of community-oriented activities with schools, sports teams and other organizations. In
markets in which Papa John’s has a significant presence, local marketing efforts are supplemented with
radio and television advertising.
We provide both Company-owned and franchised restaurants with catalogs for the purchase of uniforms
and promotional items and pre-approved print marketing materials. We also provide direct marketing
services to Company-owned and franchised restaurants using customer information gathered by our
proprietary point-of-sale technology (see Company Operations – Point of Sale Technology).
We have developed a system by which all domestic Papa John’s restaurant customers are able to place
orders on-line via the internet. We receive a percentage fee based on on-line sales from domestic
franchisees, in addition to royalties, for this service.
In November 2003, we began offering our customers the opportunity to purchase a reloadable gift card,
(“Papa Card”) that can be purchased in any denomination between $10 and $100. The Papa Card may be
redeemed for delivery, carryout and on-line orders and is accepted at substantially all Papa John’s
traditional U.S. restaurants.
In December 2003, we hired a new Chief Marketing Officer (“CMO”). The CMO is currently evaluating
existing marketing programs and may modify or eliminate such programs, or add new programs as
deemed appropriate and necessary.
Company Operations
Restaurant Personnel. A typical Papa John’s restaurant employs a restaurant manager, one or two
assistant managers and approximately 20 to 25 hourly team members, most of whom work part-time. The
manager is responsible for the day-to-day operation of the restaurant and maintaining Company-
established operating standards. The operating standards and other resources are contained in a
comprehensive operations manual supplied to each restaurant. We seek to hire experienced restaurant