Papa Johns 2014 Annual Report Download - page 57

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Domestic commissary sales increased 6.0% to $578.9 million in 2013, from $545.9 million in the prior
year. Excluding the impact of the 53rd week in 2012, the increase was 7.7%. As previously discussed, the
increase was primarily due to an increase in sales volumes, higher overall margins and increases in the
prices of commodities. Our commissaries charge a fixed dollar mark-up on the cost of cheese. Cheese
prices are based upon the block price, which increased to an average price of $1.76 per pound in 2013
from $1.69 per pound in 2012.
Other sales increased $2.1 million to $53.3 million in 2013. Excluding the impact of the 53rd week in
2012, the increase was $2.3 million, or 4.5%. The increase primarily resulted from an increase in online
fees due to higher online volumes.
International franchise restaurant sales were $460.0 million in 2013, compared to $388.4 million in 2012.
International franchise restaurant sales are not included in our consolidated statements of income;
however, our international royalty revenue is derived from these sales. Total international revenues in our
consolidated financial statements were $88.6 million for 2013 compared to $72.9 million in 2012, an
increase of $15.7 million. This increase was primarily attributable to an increase in China Company-
owned restaurant sales due to an increase in restaurants and an additional month of reported results, as
previously discussed. Additionally, royalties and commissary sales increased due to an increase in
franchised units and the 7.5% increase in comparable sales, calculated on a constant dollar basis. Our
PJUK operations represented 48% of international revenues in 2013 and 51% in 2012 and our China
Company-owned operations represented approximately 28% of international revenues in 2013 and 22%
in 2012.
Costs and Expenses. The restaurant operating margin at domestic Company-owned units was 18.5% in
2013 compared to 19.7% in 2012 (19.5% excluding the $1.0 million advertising credit from PJMF). The
decrease of 1.2% consisted of the following differences:
 Cost of sales was 1.4% higher as a percentage of sales in 2013 due to both higher commodity
costs of approximately $5.8 million, including cheese, dough and meats, as well as lower national
promotion pricing. 2012 also included various supplier incentives, as previously noted.
 Salaries and benefits were 0.3% lower as a percentage of sales in 2013, primarily due to the
benefit of higher sales volumes.
 Advertising and related costs as a percentage of sales were relatively flat year-over-year; 2012
included a $1.0 million advertising credit received from PJMF.
 Occupancy costs and other restaurant operating expenses as a percentage of sales were relatively
consistent (20.3% in 2013 and 20.4% in 2012).
Domestic commissary operating margin was 7.7% in both 2013 and 2012, with the following differences
by income statement line:
 Cost of sales was 0.6% lower as a percentage of revenues in 2013 primarily due to pricing
changes.
 Salaries and benefits and other commissary operating expenses were 0.6% higher as a percentage
of revenues in 2013. This was primarily attributable to higher distribution and other operating
costs related to bringing distribution in house for certain of our commissaries from a third party
provider and the start up dough production costs at our New Jersey commissary, as previously
discussed.
Other operating expenses as a percentage of other sales were 90.0% in 2013, compared to 88.7% in 2012.
The higher operating expenses were primarily due to the impact of the reduced cost direct mail campaigns
offered to our domestic franchised restaurants by Preferred.