Papa Johns 2004 Annual Report Download - page 61

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15. Related Party Transactions
Certain of our officers and directors own equity interests in entities that operate and/or have rights to
develop franchised restaurants. During 2003, in connection with the Company’s recruitment of directors
deemed independent under new Securities and Exchange Commission and NASDAQ rules, one director
retired from our Board and three resigned. One of the directors who resigned in 2003 was paid $144,000
annually in 2004, 2003 and 2002 under a consulting agreement. This director also received $112,500 in
2003 for his years of service under a director severance program. We paid $60,000 to each of the two
additional non-management directors who retired or resigned from the Board during 2003 for their years
of service under a director severance program. The remaining director who resigned continues to serve as
an executive officer of the Company. We have an employment agreement with another director, who
continues to serve on the Board, under which $40,000 was paid in 2004 and $75,000 was paid annually
in 2003 and 2002.
As more fully described in Note 2, the Papa John’s Marketing Fund, Inc. (the “Marketing Fund”), a non-
profit corporation, is responsible for developing and conducting marketing and advertising for the Papa
John’s system. The Company had a loan outstanding of $1.2 million at December 28, 2003 to the
Marketing Fund (none in 2004 or 2002) recorded in Notes receivable – affiliates in the accompanying
consolidated balance sheets. Additionally, during 2004 and 2003, we made contributions of $400,000 and
$1.0 million, respectively, to the Marketing Fund, which are included in other general expenses in the
accompanying consolidated statements of income, to assist the system with costs incurred for national
advertising.
During 2003, Papa Card, Inc. was formed, which is a non-profit corporation affiliated with the Marketing
Fund. Papa Card, Inc. is responsible for developing and marketing to our customers a gift card (“Papa
Card”), and for maintaining the systems and other support infrastructure for the Papa Card program. We
advanced certain start-up costs and working capital to Papa Card, Inc. and had outstanding net
receivables of $800,000 (net of an allowance of $525,000) and $972,000 at December 26, 2004 and
December 28, 2003, respectively, which are included in accounts receivable – affiliates in the
accompanying consolidated balance sheets.
Following is a summary of full-year transactions and year-end balances with franchisees owned by
related parties and outstanding amounts due from the Marketing Fund and Papa Card, Inc. (in thousands):
2004 2003 2002
Revenues from affiliates:
Commissary sales 58,416$ 68,964$ 86,959$
Other sales 5,420 9,140 9,473
Franchise royalties 8,213 9,892 12,200
Franchise and development fees - 60 123
Total 72,049$ 88,056$ 108,755$
Other income from affiliates 270$ 285$ 264$
Accounts receivable-affiliates 2,712$ 2,395$ 2,276$
Notes receivable-affiliates -$ 1,200$ 335$
The above table excludes 2004 and 2003 transactions and balances related to former non-management
directors for the time period subsequent to their retirement or resignation from our Board.