Papa Johns 2007 Annual Report Download - page 19

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Franchise Advisory Council. We have a Franchise Advisory Council that consists of Company and
franchisee representatives of domestic restaurants. The Franchise Advisory Council and subcommittees
hold regular meetings to discuss new marketing ideas, operations, growth and other relevant issues such
as the previously discussed franchise agreement that was negotiated during 2007. The Company is aware
that certain franchisees have formed an operators’ exchange group for the purpose of communicating and
addressing issues, needs and opportunities among its members and the Company.
We currently communicate with, and receive input from, our franchisees in several forms, including
through the Company’s Franchise Advisory Council, annual operations conferences, newsletters, national
conference calls and various regional meetings conducted with franchisees throughout the year and
participation in an operators’ exchange best practices forum. Monthly web conferences are also
conducted by the Company to discuss current operational, marketing or other issues affecting the
franchisees’ business. We are committed to communicating with our franchisees and receiving input
from them.
Reporting and Business Processes. We collect sales and other operating information from domestic Papa
John’s franchisees daily. We have agreements with substantially all Papa John’s domestic franchisees
permitting us to debit electronically the franchisees’ bank accounts for substantially all required
payments, including the payment of royalties, Marketing Fund contributions, risk management services,
and purchases from our print and promotions operations and QC Centers. This system significantly
reduces the resources needed to process receivables, improves cash flow and mitigates the amount of
past-due accounts related to these items. Domestic franchisees are required to purchase and install the
Papa John’s PROFIT System in their traditional restaurants (see “Company Operations – Point of Sale
Technology”).
Comprehensive Restaurant Measurement Program. As part of our effort to deliver on our brand promise
of “Better Ingredients. Better Pizza.”, we have implemented a comprehensive measurement program for
all domestic and international restaurants. The measurement program focuses on the quality of the pizza
and the customer service experience.
Industry and Competition
The United States Quick Service Restaurant pizza industry (“QSR Pizza”) is mature and highly
competitive with respect to price, service, location, food quality and variety. There are well-established
competitors with substantially greater financial and other resources than Papa John’s. Competitors
include international, national and regional chains, as well as a large number of local independent pizza
operators. Some of our competitors have been in existence for substantially longer periods than Papa
John’s and can have higher levels of restaurant penetration and a stronger, more developed brand
awareness in markets where we have restaurants. Based on independent third-party information, the QSR
Pizza category, which includes dine-in, carry-out and delivery, had sales of approximately $33.9 billion
in 2007, of which Papa John’s share was reported at 5.6%, an increase from 5.4% reported for 2006.
Within the QSR Pizza category, we believe our primary competitors are the national pizza chains,
including Pizza Hut, Domino’s and Little Caesars, as well as several regional chains and “take and bake”
concepts. A change in pricing or other marketing strategies of one or more of our competitors could have
an adverse impact on our sales and earnings. Additionally, a continued increased emphasis on drive-
through, carryout and curbside pickup availability by casual dining and other restaurants, as well as
improved quality of fresh and frozen supermarket offerings, could also have an adverse impact on our
sales and earnings.