Papa Johns 2014 Annual Report Download - page 51

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38
Advertising and related costs as a percentage of revenues were 0.3% lower as a percentage of
sales in 2014, primarily due to the benefit of higher sales.
Occupancy costs and other restaurant operating costs, on a combined basis, were 0.3% higher as a
percentage of revenues in 2014 primarily due to higher restaurant driver insurance claims costs of
approximately $3.5 million.
Domestic commissary operating margin was 7.1% and 7.7% in 2014 and 2013, respectively, with the
following differences by income statement category:
Cost of sales was 0.8% higher as a percentage of revenues in 2014 primarily due to higher cheese
costs, which have a fixed-dollar markup. As cheese prices are higher, food cost as a percentage of
sales is higher.
Salaries and benefits and other commissary operating expenses were 0.2% lower as a percentage
of sales due to the benefit of higher sales. The costs were $6.3 million higher in 2014 primarily
due to higher sales volumes, higher workers’ compensation and automobile insurance claims
costs of $2.6 million and higher costs associated with various ongoing commissary initiatives.
Other operating expenses as a percentage of other sales were 95.8% in 2014, compared to 90.0% in 2013.
The higher operating expenses were primarily due to the low margin associated with sales of FOCUS
systems to franchisees, higher infrastructure costs to support our online operations and the impact of an
increased number of reduced cost direct mail campaigns offered to our domestic franchised restaurants by
Preferred.
International restaurant and commissary expenses were 83.0% in 2014 compared to 84.9% in 2013, as a
percentage of total restaurant and commissary sales. The decrease of 1.9% is primarily due to lower
operating expenses for the United Kingdom primarily due to the benefit of higher sales.
General and administrative (“G&A”) expenses were $140.6 million, or 8.8% of revenues for 2014, as
compared to $134.2 million, or 9.3% of revenues for 2013. The decrease as a percentage of sales was
primarily the result of leverage from higher sales. The increase of $6.3 million was primarily due to the
following:
Unallocated corporate G&A expenses increased primarily due to higher legal and management
incentive compensation costs, partially offset by lower travel costs.
Domestic Company-owned restaurant supervisor expenses increased, including higher bonuses
from higher profits.
International G&A costs were higher due to increased infrastructure, marketing and other support
costs.