Papa Johns 2008 Annual Report Download - page 95

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88
16. Lease Commitments and Contingencies
We lease office, retail and commissary space under operating leases, which have an average term of five
years and provide for at least one renewal. Certain leases further provide that the lease payments may be
increased annually based on the fixed rate terms or adjustable terms such as the Consumer Price Index.
PJUK, our subsidiary located in the United Kingdom, leases certain retail space, which is primarily
subleased to our franchisees. We also lease the trailers used by our distribution subsidiary, PJFS, for an
average period of eight years. Total rent expense was $24.5 million in 2008, $22.4 million in 2007 and
$18.5 million in 2006, net of sublease payments received.
Future gross lease costs, future expected sublease payments and net lease costs as of December 28, 2008,
are as follows (in thousands):
Future
Expected
Gross Lease Sublease Net Lease
Year Costs Payments Costs
2009 25,427$ 2,331$ 23,096$
2010 22,844 2,496 20,348
2011 19,517 2,337 17,180
2012 15,049 2,108 12,941
2013 10,658 1,881 8,777
Thereafter 24,677 7,422 17,255
Total 118,172$ 18,575$ 99,597$
We subleased 77 sites in 2008, 87 sites in 2007 and 101 sites in 2006 to our Papa John’s and former
Perfect Pizza franchisees located in the United Kingdom and received payments of $3.0 million, $3.4
million and $4.0 million, respectively, which are netted with international operating expenses.
In addition, as a condition of the sale of the Perfect Pizza operations in March 2006, we remain
contingently liable for payment under approximately 70 lease arrangements, primarily associated with
Perfect Pizza restaurant sites. The leases have varying terms, the latest of which expires in 2017. As of
December 28, 2008, the potential amount of undiscounted payments we could be required to make in the
event of non-payment by the new owner of Perfect Pizza and associated franchisees was $6.6 million. We
believe our cross-default provisions with the Perfect Pizza franchisor significantly reduce the risk that we
will be required to make payments under these leases. Accordingly, we have not recorded any liability
with respect to such leases at December 28, 2008 and December 30, 2007.
We are subject to claims and legal actions in the ordinary course of business. We believe that all such
claims and actions currently pending against us are either adequately covered by insurance or would not
have a material adverse effect on us if decided in a manner unfavorable to us.