Papa Johns 2014 Annual Report Download - page 17

4
Although most of our domestic Company-owned markets are well-penetrated, our Company-owned
growth strategy is to continue to open domestic restaurants in existing markets as appropriate, thereby
increasing consumer awareness and enabling us to take advantage of operational and marketing
efficiencies. Our experience in developing markets indicates that market penetration through the opening
of multiple restaurants in a particular market results in increased average restaurant sales in that market
over time. We have co-developed domestic markets with some franchisees or divided markets among
franchisees and will continue to utilize market co-development in the future, where appropriate.
Of the total 3,340 North American restaurants open as of December 28, 2014, 686 or 21% were
Company-owned (including 200 units owned in joint venture arrangements with franchisees in which the
Company has a majority ownership position). The Company expects the percentage of domestic
Company-owned units to decline over the next several years because future net openings will be more
heavily weighted toward franchise units. However, from time to time the Company evaluates the purchase
or sale of units in significant markets, which could change the percentage of Company-owned units.
Of the 1,323 international restaurants open as of December 28, 2014, 49 or 4% were Company-owned (all
of which are located in Beijing and North China). We plan to continue to grow our international units
during the next several years, substantially all of which will be franchised.
QC Center System and Supply Chain Management
Our domestic QC Centers, comprised of ten full-service regional production and distribution centers,
supply pizza dough, food products, paper products, smallwares and cleaning supplies twice weekly to
each restaurant throughout the contiguous United States. This system enables us to monitor and control
product quality and consistency, while lowering food and other costs. We evaluate the QC Center system
capacity in relation to planned restaurant growth, and facilities are developed or upgraded as operational
or economic conditions warrant.
We own full-service international QC Centers in the United Kingdom, Mexico City, Mexico and Beijing,
China. Other international QC Centers are licensed to franchisees or non-franchisee third parties and are
generally located in the markets where our franchisees have restaurants.
We set quality standards for all products used in our restaurants and designate approved outside suppliers
of food and paper products that meet our quality standards. In order to ensure product quality and
consistency, all Papa John’s restaurants are required to purchase tomato sauce and dough from QC
Centers. Franchisees may purchase other goods directly from our QC Centers or other approved suppliers.
National purchasing agreements with most of our suppliers generally result in volume discounts to us,
allowing us to sell products to our restaurants at prices we believe are below those generally available to
restaurants in the marketplace. Within our domestic QC Center system, products are distributed to
restaurants by refrigerated trucks leased and primarily operated by us or transported by a dedicated
logistics company.
Marketing Programs
Our local restaurant-level marketing programs target consumers within the delivery area of each
restaurant through the use of local television, radio, print materials, targeted direct mail, store-to-door
flyers, digital display advertising, email marketing, text messages and local social media. Local marketing
efforts also include a variety of community-oriented activities within schools, sports venues and other
organizations supported with some of the same advertising vehicles mentioned above.
Domestic Company-owned and franchised Papa John’s restaurants within a defined market are required
to join an area advertising cooperative (“Co-op”). Each member restaurant contributes a percentage of