Papa Johns 2003 Annual Report Download - page 9

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Polling capabilities allow us to obtain restaurant operating information, thereby improving the speed,
accuracy and efficiency of restaurant-level reporting. During the next year, we will introduce the next
generation of the PROFIT System to the domestic and international Papa John’s system. We believe this
updated version will improve operational efficiencies at the restaurant level and improve our data
collection process.
Reporting. Management at Company-owned restaurants evaluates daily reports of sales, cash deposits
and operating costs. Physical inventories of all food and beverage items are taken nightly.
Hours of Operations. Our domestic restaurants are open seven days a week, typically from 11:00 a.m. to
12:30 a.m. Monday through Thursday, 11:00 a.m. to 1:30 a.m. on Friday and Saturday and 12:00 noon to
11:30 p.m. on Sunday.
Franchise Program
General. We continue to attract franchisees with significant restaurant and retail experience. We consider
our franchisees to be a vital part of our system’s continued growth and believe our relationship with our
franchisees is good. As of December 28, 2003, there were 2,220 franchised Papa John’s restaurants
operating in 49 states, the District of Columbia, and 15 international markets, and 135 franchised Perfect
Pizza restaurants operating in the United Kingdom. As of December 28, 2003, we have development
agreements with our domestic franchisees for approximately 329 additional franchised restaurants
committed to open through 2010 and agreements for 596 additional international franchised restaurants
to open through 2012. There can be no assurance that all of these restaurants will be opened or that the
development schedule set forth in the development agreements will be achieved. There are no formal
development agreements for franchised Perfect Pizza restaurants and we plan to open very few, if any,
Perfect Pizza units in the future. Our plan is to attract new franchisees, and to work with existing
franchisees, to open new Papa John’s restaurants in the United Kingdom and evaluate converting existing
Perfect Pizza restaurants to the Papa John’s brand over time. During 2003, 93 (56 domestic and 37
international) franchised Papa John’s restaurants were opened, and two Perfect Pizza franchised
restaurants were opened. Our franchisees have converted 49 Perfect Pizza restaurants to Papa John’s
restaurants since 2000.
Approval. Franchisees are approved on the basis of the applicant’s business background, restaurant
operating experience and financial resources. We seek franchisees to enter into development agreements
for single or multiple restaurants. We require the franchisee to either complete our training program or to
hire a full-time operator who completes the training and has either an equity interest or the right to
acquire an equity interest in the franchise operation.
Development and Franchise Agreements. We enter into development agreements with our domestic
franchisees for the opening of a specified number of restaurants within a defined period of time and
specified geographic area. Under our current standard development agreement, the franchisee is required
to pay, at the time of signing the agreement, a non-refundable fee of $20,000 for the first restaurant and
$5,000 for any additional restaurants. The non-refundable fee is credited against the standard $20,000
franchise fee payable to us upon signing the franchise agreement for a specific location. The fee is
expected to increase to $25,000 in 2004. Generally, a franchise agreement is executed when a franchisee
secures a location.
Our current standard domestic franchise agreement provides for a term of ten years (with one ten-year
renewal option) and payment to us of a royalty fee of 4% of sales. The current agreement, as well as
substantially all existing franchise agreements, permits us to increase the royalty fee up to 5% of sales.