Papa Johns 2014 Annual Report Download - page 25

Download and view the complete annual report

Please find page 25 of the 2014 Papa Johns annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 110

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110

12
standards, could result in a disruption in our supply chain and negatively impact our brand and our
business and profitability. Our inability to manage an event such as a product recall or product related
litigation could also cause our results to suffer.
Our success depends on the differentiation of our brand and maintaining the value and quality reputation
of our brand, and any damage to consumers’ perception of our brand may negatively impact our business
and profitability.
Our results depend upon our ability to differentiate our brand and our reputation for quality. Our brand
has been highly rated in U.S. surveys, and we strive to build the value of our brand as we develop
international markets. The value of our brand and demand for our products could be damaged by
incidents that harm consumer perceptions of the Company and our brand, such as product recalls, food
safety issues, privacy breaches, or negative publicity. Any actions that persons endorsing our products
may take, whether or not associated with our products, which harm their or our reputations could also
harm our brand image and our reputation. Social media can be used to promote adverse consumer
perceptions with significantly greater speed and scope than traditional media outlets. As a result, the
value of our brand and the demand for our products could be damaged and have an adverse effect on our
financial results.
We may not be able to execute our strategy or achieve our planned growth targets, which could
negatively impact our business and our financial results.
Our growth strategy depends on the Company’s and our franchisees’ ability to open new restaurants and
to operate them on a profitable basis. We may fail to attract new qualified franchisees or existing
franchisees may close underperforming locations. Planned growth targets and the ability to operate new
and existing restaurants profitably are affected by economic, regulatory and competitive conditions and
consumer buying habits. Increased commodity or operating costs, including, but not limited to, employee
compensation and benefits or insurance costs, could slow the rate of new store openings or increase the
number of store closings. Our business is susceptible to adverse changes in local, national and global
economic conditions, which could make it difficult for us to meet our growth targets. Additionally, we or
our franchisees may face challenges securing financing, finding suitable store locations at acceptable
terms or securing required domestic or foreign government permits and approvals.
Our franchisees remain dependent on the availability of financing to remodel or renovate existing
locations, upgrade systems, or construct and open new restaurants. From time to time, the Company may
be required to provide financing to certain franchisees and prospective franchisees in order to mitigate
store closings, allow new units to open, or complete required upgrades. If we are unable or unwilling to
provide such financing, we may experience slower than expected new restaurant openings and our results
of operations may be adversely impacted. To the extent we provide financing to franchisees in domestic
and international markets, our results could be negatively impacted by the credit performance of our
franchisee loans.
If we do not meet our growth targets or the expectations of the market for net restaurant openings or our
other strategic objectives, our stock price could decline.
Our results of operations and the operating results of our franchisees may be adversely impacted by
increases in the cost of food ingredients and other commodities.
We are exposed to ongoing commodity volatility, and an increase in the cost, or sustained high levels of
the cost, of cheese or other commodities could adversely affect the profitability of our system-wide
restaurant operations, particularly if we are unable to increase the selling price of our products to offset
increased costs. Cheese, historically representing 35% to 40% of our food cost, and other commodities