Papa Johns 2001 Annual Report Download - page 44

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40
Papa John’s International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Description of Business
Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first person
notations of “we,” “us” and “our”) operates and franchises pizza delivery and carry-out restaurants under
the trademark “Papa John’s,” currently in 47 states, the District of Columbia, and nine international
markets. We also operate and franchise pizza delivery and carry-out restaurants under the trademark
“Perfect Pizza” in the United Kingdom. Substantially all revenues are derived from retail sales of pizza to
the general public by Company-owned restaurants, franchise royalties, sales of franchise and development
rights, and sales to franchisees of food and paper products, restaurant equipment, printing and
promotional items, risk management services, and information systems and related services used in their
operations.
2. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Papa John’s and its
subsidiaries. All significant intercompany balances and transactions have been eliminated.
Fiscal Year
Our fiscal year ends on the last Sunday in December of each year. The 2001 and 1999 fiscal years
consisted of 52 weeks and the 2000 fiscal year consisted of 53 weeks.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ from
these estimates.
Revenue Recognition
Franchise fees are recognized when a franchised restaurant begins operations, at which time we have
performed our obligations related to such fees. Fees received pursuant to development agreements which
grant the right to develop franchised restaurants in future periods in specific geographic areas are deferred
and recognized on a pro rata basis as the franchised restaurants subject to the development agreements
begin operations. Both franchise and development fees are nonrefundable. Franchise royalties, which are
based on a percentage of franchise restaurants’ sales, are recognized as earned.
Domestic production and distribution revenues are comprised of food, equipment and supplies sales to
franchised restaurants located in the United States and are recognized as revenue upon shipment of the
related products to the franchisees.
International revenues are comprised of restaurant sales, royalties and fees received from foreign
franchisees and the sale and distribution of food to foreign franchisees, and are recognized consistently
with the policies applied for revenues generated in the United States.
2. Significant Accounting Policies (continued)