Papa Johns 2002 Annual Report Download - page 6

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United States. International expansion in 2003 is planned primarily in Central and South America,
Europe, Asia and the United Kingdom.
The ability of the Papa John’s system to open new restaurants is affected by a number of factors, many of
which are beyond our control and the control of our franchisees. These factors include, among other
things, selection and availability of suitable restaurant sites, increases in food, paper or labor costs,
negotiation of suitable lease or financing terms, constraints on permitting and construction of restaurants,
cost of equipment, increased cost of fuel and utilities, rising costs of health, liability and workers
compensation insurance, and the hiring, training and retention of management and other personnel.
International development is impacted by additional factors, including economic and political
environments, the ability to source food and other products economically, and currency regulations and
fluctuations. Accordingly, there can be no assurance that the Papa John’s system will be able to meet
planned growth targets or open restaurants in markets now targeted for expansion.
Our Company-owned expansion strategy is to continue to open restaurants in existing markets, thereby
increasing consumer awareness and enabling us to take advantage of operational, distribution and
advertising efficiencies. Our experience in developing markets indicates that market penetration through
the opening of multiple restaurants within a particular market results in increased average restaurant sales
in that market. We have co-developed markets with some franchisees or divided markets among
franchisees, and will continue to utilize market co-development in the future. We continually evaluate the
number and market areas of our Company-owned restaurants, and may purchase or sell restaurants from
time to time. We also have one joint venture and may consider entering into more of these arrangements
in the future.
Restaurant Design and Site Selection
Backlit awnings, neon window designs and other visible signage characterize the exterior of most Papa
John’s restaurants. A typical domestic Papa John’s restaurant averages 1,100 to 1,500 square feet and a
typical international Papa John’s restaurant averages 900 to 1,400 square feet. Papa John’s restaurants are
designed to facilitate a smooth flow of food orders through the restaurant. The layout includes specific
areas for order taking, pizza preparation and routing, resulting in simplified operations, lower training and
labor costs, increased efficiency and improved consistency and quality of food products. The typical
interior of a Papa John’s restaurant has a vibrant red and white color scheme with green striping, and
includes a bright menu board, custom counters and a carry-out customer area. The counters are designed
to allow customers to watch the team members slap out the dough and put sauce and toppings on pizzas.
We consider the location of a restaurant to be important and therefore devote significant resources to the
investigation and evaluation of potential sites. The site selection process includes a review of trade area
demographics, target population density, household income levels and competitive factors. A member of
our development team inspects each potential domestic Company-owned or franchised restaurant location
and the surrounding market before a site is approved. Our restaurants are typically located in strip
shopping centers or freestanding buildings that provide visibility, curb appeal and accessibility. Our
restaurant design may be configured to fit a wide variety of building shapes and sizes, which increases the
number of suitable locations for our restaurants.
During the past several years, a number of freestanding restaurants have been opened in the Papa John’s
system. We seek either existing buildings suitable for conversion, or locations suitable for the
construction of our prototype restaurant. Freestanding buildings generally provide more signage and
better visibility, accessibility and parking. We believe that these locations improve Papa John’s image
and brand awareness. At year-end, freestanding units represented approximately 25% of domestic
Company-owned restaurants, and a relatively small percentage of domestic franchised restaurants. We
expect this composition to remain fairly constant in future years.