Papa Johns 2010 Annual Report Download - page 10

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restaurant design. We also provide significant assistance to licensed international QC Centers in sourcing
approved high-quality suppliers located in-country or approved regional suppliers to the extent possible.
International Operations. As of December 26, 2010, we had 775 Papa John's restaurants operating in 32
countries, Puerto Rico, Hawaii, and Alaska (Hawaii and Alaska units were included in our international
operations for reporting purposes through December 26, 2010. See below for our realignment beginning
in 2011). Substantially all of the Papa John's international units are franchised operations (we own and
operate 21 restaurants in Beijing/North China). During 2010 and 2009 we opened 87 and 100
international net new units (new unit openings less unit closings), respectively. We plan to continue to
grow our international franchise units during the next several years. Our total international development
pipeline as of December 26, 2010 included approximately 1,200 restaurants with approximately 40%
scheduled to open in the next three years.
Beginning in our fiscal 2011, we realigned management responsibility for Hawaii, Alaska and Canada
from international to domestic operations in order to better leverage existing infrastructure and systems.
Hawaii, Alaska and Canada consist solely of franchise operations, and the realigned reporting segment
will be referred to as North America Franchising. This realignment will initially be reflected in our
financial information beginning in the first quarter 2011 earnings release and Form 10-Q. Prior year
financial results, including segment reporting, will be reclassified at that time to be presented
consistently with the new alignment. The realignment will shift $1.3 million of operating income from
the International reporting segment to the North America Franchising reporting segment for 2010 and
2009 and approximately $1.0 million for 2008.
Unit Sales and Investment Costs
In 2010, the 578 domestic Company-owned restaurants included in the full year’s comparable restaurant
base generated average sales of $863,000. Domestic franchise sales on average are lower than Company-
owned restaurants as a higher percentage of our Company-owned restaurants are located in more heavily
penetrated markets.
The average cash investment for the five domestic Company-owned restaurants opened during the 2010
fiscal year, exclusive of land, was approximately $250,000 per unit, excluding tenant allowances that we
received. We expect the average cash investment for the eight domestic Company-owned restaurants
expected to open in 2011 to approximate $240,000 per unit. Substantially all domestic restaurants do not
offer dine-in areas, which reduces our restaurant capital investment.
Development
A total of 325 Papa John’s restaurants were opened during 2010, consisting of 13 Company-owned (five
domestic and eight international) and 312 franchised restaurants (169 domestic and 143 international),
while 148 Papa John’s restaurants closed during 2010, consisting of four Company-owned restaurants
(two domestic and two international) and 144 franchised restaurants (82 domestic and 62 international).
The 82 domestic franchise closings included the closure of 13 non-traditional event-based units, which
had a minimal net financial impact to the Company, in connection with the termination of a sponsorship
agreement. The international franchise closings included the closure of all 25 units in Saudi Arabia in
connection with a franchisee restructuring. The closing of these units also had minimal net financial
impact to the Company due to their low sales volumes. A 75-unit development agreement was signed as
part of the restructuring in Saudi Arabia, and new unit development is expected to begin in 2011.
During 2011, we expect net unit growth of approximately 190 to 220 units. We expect to open 13 to 15
Company-owned restaurants (seven to eight domestic and six to seven international) and 297 to 325