Papa Johns 2014 Annual Report Download - page 42

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29
The costs related to implementing FOCUS decreased income before income taxes by approximately $3.7
million in 2014, or a $0.06 negative impact on diluted earnings per share, as compared to 2013. FOCUS
had the following impact on our consolidated statement of income for the fiscal year ended December 28,
2014 (in thousands):
Year Ended
Dec. 28,
2014
Franchise royalties (a) (405)$
Other sales (b) 20,143
Other operating expenses (c) (20,629)
Depreciation and amortization (d) (2,834)
Net decrease in income before income taxes (3,725)$
Diluted earnings per common share (0.06)$
(a) Incentive program tied to franchisee rollout of FOCUS.
(b) Represents revenues for equipment installed at domestic franchised restaurants.
(c) Includes cost of sales associated with equipment installed at franchised restaurants and other costs
to support the rollout of the program.
(d) Includes depreciation expense for both the capitalized software and for equipment installed at
Company-owned restaurants which are being depreciated over five to seven years.
As part of the rollout, we have partnered with a third party to offer a financing option for this system to
our franchisees. The arrangement with the third party requires us to offer a guarantee for the loans. The
term of these loans will be five years or less and will require us to perform under the guarantee when a
franchisee has a late payment in excess of 60 days. The guarantee is limited to the greater of 10% of all
loans or 100% of all loans that have higher risk profiles. Higher risk profiles are determined based on pre-
established criteria including length of time in business, credit rating, and other factors. We have the
ability to decline funding on higher risk loans.