Papa Johns 2014 Annual Report Download - page 22

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9
regional vice presidents. Senior management and corporate staff also support the international field teams
in many areas, including but not limited to food safety, quality assurance, training, marketing and
technology.
Franchise Operations. All franchisees are required to operate their Papa John’s restaurants in compliance
with our policies, standards and specifications, including matters such as menu items, ingredients, and
restaurant design. Franchisees generally have full discretion to determine the prices to be charged to
customers, but we have the authority to set maximum price points for nationally advertised promotions.
Franchise Advisory Council. We have a Franchise Advisory Council (“FAC”) that consists of Company
and franchisee representatives of domestic restaurants. We also have a franchise advisory council in the
United Kingdom (“UK FAC”). The FAC and UK FAC and subcommittees hold regular meetings to
discuss new product and marketing ideas, operations, growth and other business issues. From time to
time, certain domestic franchisees have also formed a separate franchise association for the purpose of
communicating and addressing issues, needs and opportunities among its members.
We currently communicate with, and receive input from, our franchisees in several forms, including
through the FAC, UK FAC, annual operations conferences, system communications, national conference
calls, various regional meetings conducted with franchisees throughout the year and ongoing
communications from franchise business directors and international business directors in the field.
Monthly webcasts are also conducted by the Company to discuss current operational, marketing or other
issues affecting the franchisees’ business. We are committed to communicating with our franchisees and
receiving input from them.
Industry and Competition
The United States Quick Service Restaurant pizza industry (“QSR Pizza”) is mature and highly
competitive with respect to price, service, location, food quality and variety. There are well-established
competitors with substantially greater financial and other resources than Papa John’s. The category is
largely fragmented and competitors include international, national and regional chains, as well as a large
number of local independent pizza operators. Some of our competitors have been in existence for
substantially longer periods than Papa John’s and can have higher levels of restaurant penetration and
stronger, more developed brand awareness in markets where we compete. According to industry sources,
domestic QSR Pizza category sales, which includes dine-in, carry out and delivery, totaled approximately
$32.9 billion in 2014, or an increase of 1% from the prior year.
With respect to the sale of franchises, we compete with many franchisors of restaurants and other
business concepts. There is also active competition for management personnel and attractive commercial
real estate sites suitable for our restaurants.
Government Regulation
We, along with our franchisees, are subject to various federal, state, local and international laws affecting
the operation of our respective businesses. Each Papa John’s restaurant is subject to licensing and
regulation by a number of governmental authorities, which include zoning, health, safety, sanitation,
building and fire agencies in the state or municipality in which the restaurant is located. Difficulties in
obtaining, or the failure to obtain, required licenses or approvals could delay or prevent the opening of a
new restaurant in a particular area. Our QC Centers are licensed and subject to regulation by state and
local health and fire codes, and the operation of our trucks is subject to federal and state transportation
regulations. We are also subject to federal and state environmental regulations. In addition, our domestic
system-wide restaurant operations are subject to various federal and state laws governing such matters as
minimum wage requirements, benefits, working conditions, citizenship requirements, and overtime.