Papa Johns 2004 Annual Report Download - page 4

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for advancement. Team member training programs are conducted for corporate team members, and
offered to our franchisees at training centers across the United States. We offer performance-based
financial incentives to restaurant team members at various levels. Our management compensation
program is designed to attract and retain highly motivated people.
Marketing. Our restaurant-level marketing programs target the delivery area of each restaurant, making
extensive use of targeted print materials in direct mail and store-to-door couponing. Local marketing
efforts also include a variety of community-oriented activities with schools, sports teams and other
organizations. Local marketing efforts are supplemented with radio and television advertising, produced
locally and on a national basis. Eight national television campaigns aired in 2004.
Franchise System. We are committed to maintaining and developing a strong franchise system by
attracting experienced operators, partnering with them to expand and grow their business and monitoring
their compliance with our high standards. We seek to attract franchisees with experience in restaurant or
retail operations and with the financial resources and management capability to open single or multiple
locations. To ensure consistent food quality, each domestic franchisee is required to purchase dough and
seasoned sauce from our QC Centers and purchase all other supplies from our QC Centers or approved
suppliers. QC Centers outside the U.S. or in remote areas may be operated by franchisees pursuant to
license agreements or other third parties. We devote significant resources to provide Papa John’s
franchisees with assistance in restaurant operations, management training, team member training,
marketing, site selection and restaurant design. We also provide significant assistance to licensed
international QC Centers in sourcing high-quality in-country or regional suppliers to the extent possible.
Unit Economics
In 2004, the 551 domestic Company-owned restaurants included in the most recent quarter’s comparable
restaurant base generated average annual sales, based on a 52-week year, of $737,000, average cash flow
(restaurant operating income plus depreciation) of $114,000 and average restaurant operating income of
$89,000. This average operating income represents 12.1% of average sales and 32.4% of the $275,000
average cash investment for these Company-owned restaurants.
The average cash investment for the six domestic Company-owned restaurants opened during the 2004
fiscal year, exclusive of land, was approximately $232,000. We expect the average cash investment for
the four Company-owned restaurants expected to open in 2005 to be approximately $250,000.
Substantially all domestic restaurants and many of our international restaurants do not offer dine-in areas,
which reduces our restaurant capital investment.
Development
A total of 173 Papa John’s restaurants were opened during 2004, consisting of six Company-owned and
167 franchised restaurants (97 domestic and 70 international), while 135 Papa John’s restaurants closed
during 2004, consisting of five Company-owned and 130 franchised (107 domestic and 23 international).
During 2004, two franchised Perfect Pizza restaurants were opened and 18 franchised restaurants were
closed.
During 2005, we plan to open approximately four Company-owned restaurants domestically and expect
franchisees to open approximately 150 to 190 restaurants (80 to 100 domestically and 70 to 90
internationally). We also expect approximately 115 to 140 restaurants (80 to 100 domestically and 35 to
40 internationally) to close during 2005. Domestic and international franchise unit expansion is expected
to spread throughout markets across North and South America, Europe, Asia and the Middle East.