Papa Johns 2005 Annual Report Download - page 6

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4
Development
A total of 198 Papa John’s restaurants were opened during 2005, consisting of eight Company-owned
and 190 franchised restaurants (101 domestic and 89 international), while 102 Papa John’s restaurants
closed during 2005, consisting of one Company-owned and 101 franchised (73 domestic and 28
international). During 2005, six franchised Perfect Pizza restaurants were opened, 11 franchised
restaurants were closed and one restaurant was converted to a Papa John’s restaurant.
During 2006, we plan to open approximately 20 Company-owned restaurants domestically and expect
franchisees to open approximately 190 to 220 restaurants (90 to 105 domestically and 100 to 115
internationally). We also expect approximately 70 to 100 Papa John’s restaurants to close during 2006,
the majority of which are expected to be domestic franchise units. Domestic and international franchise
unit expansion is expected to spread throughout markets across North and South America, Asia, Europe,
and the Middle East. Our expansion in Asia will include a significant focus in China, Korea and India.
Our Company-owned expansion strategy is to continue to open domestic restaurants in existing markets,
thereby increasing consumer awareness and enabling us to take advantage of operational 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 over time. 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 two domestic joint ventures and may consider entering into more of these
arrangements in the future.
We recently began implementing a “buy and build” strategy in one large metropolitan market. Under this
strategy, the Company will purchase franchise restaurants in an under-penetrated or emerging domestic
market with the intention of building additional Company-owned restaurants to increase market
awareness. We plan to explore implementing this strategy in other markets, including the possible use of
joint venture partners.
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. 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 color scheme, and includes a
bright menu board, custom counters and a carryout 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. Most of
our international Papa John’s restaurants are between 900 and 1400 square feet, however, several have
been opened in larger spaces to include dine-in service and average 35 to 100 seats. We will utilize dine-
in service as part of our international growth strategy based on a country-by-country evaluation of
consumer preferences and trends.
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 restaurant location and
substantially all franchised restaurant locations and the surrounding market before a site is approved. Our