Papa Johns 2010 Annual Report Download - page 72

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65
Papa John’s International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Description of Business
Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first person
notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants under
the trademark “Papa John’s,” currently in all 50 states, the District of Columbia, Puerto Rico and 32
countries. Substantially all revenues are derived from retail sales of pizza and other food and beverage
products to the general public by Company-owned restaurants, franchise royalties, sales of franchise and
development rights, and sales to franchisees of food and paper products, printing and promotional items,
risk management services, and information systems and related services used in their operations.
2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Papa John’s and its
subsidiaries. Our financial results include BIBP Commodities, Inc. (“BIBP”), a variable interest entity
(“VIE”) for which we are the primary beneficiary. The results of our Company-owned operations in
Mexico and China are consolidated one month in arrears. The results of our inactive captive insurance
subsidiary, RSC Insurance Services, Ltd. (“RSC”), are consolidated one quarter in arrears. All significant
intercompany balances and transactions have been eliminated.
Fiscal Year
Our fiscal year ends on the last Sunday in December of each year. All fiscal years presented consist of 52
weeks.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Significant items that
are subject to such estimates and assumptions include allowance for doubtful accounts and notes
receivable, long-lived and intangible assets, insurance reserves and income tax reserves. Although
management bases its estimates on historical experience and assumptions that are believed to be
reasonable under the circumstances, actual results could significantly differ from these estimates.
Revenue Recognition
Franchise fees are recognized when a franchised restaurant begins operations, at which time we have
performed our obligations related to such fees. Fees received pursuant to development agreements that
grant the right to develop franchised restaurants in future periods in specific geographic areas are
deferred and recognized on a pro rata basis as the franchised restaurants subject to the development
agreements begin operations. Both franchise and development fees are nonrefundable. Retail sales from
Company-owned restaurants and franchise royalties, which are based on a percentage of franchise
restaurant sales, are recognized as revenues when the products are delivered to or carried out by
customers.