Papa Johns 2007 Annual Report Download - page 21

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Item 1A. Risk Factors
This Form 10-K contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended (the “Act”), including information within Management’s
Discussion and Analysis of Financial Condition and Results of Operations. The following cautionary
statements are being made pursuant to the provisions of the Act and with the intention of obtaining the
benefits of the “safe harbor” provisions of the Act. Although we believe that our expectations are based
on reasonable assumptions, actual results may differ materially from those in the forward-looking
statements as a result of various factors, including but not limited to, the following:
1. The ability of the Papa John’s system to continue to open new restaurants is affected by a number of
factors, many of which are beyond our control. These factors include, among other things, the
uncertainties associated with litigation, selection and availability of suitable restaurant locations,
increases in the cost of or sustained high levels of cost of food ingredients and other commodities,
paper, utilities, fuel, employee compensation and benefits, insurance and similar costs, negotiation of
suitable lease or financing terms, constraints on permitting and construction of restaurants, higher
than anticipated construction costs, and the hiring, training and retention of management and other
personnel. Accordingly, there can be no assurance that, system-wide, Papa John’s will be able to
meet planned growth targets, open restaurants in markets now targeted for expansion or continue to
operate in existing markets profitably.
2. The restaurant industry is intensely competitive with respect to price, service, location and food
quality, and there are many well-established competitors with substantially greater financial and
other resources than the Papa John’s system. Some of these competitors have been in existence for a
substantially longer period than Papa John’s and may be better established in the markets where
restaurants operated by us or our franchisees are, or may be, located. Experience has shown that a
change in the pricing or other marketing or promotional strategies, including new product and
concept developments, of one or more of our major competitors can have an adverse impact on our
sales and earnings and our system-wide restaurant operations.
3. An increase in the cost of or sustained high levels of the cost of cheese or other commodities could
adversely affect the profitability of our system-wide restaurant operations. Cheese costs, historically
representing 35% to 40% of our food cost, and other commodities are subject to fluctuations,
weather, availability, demand and other factors that are beyond our control. Additionally, sustained
increases in fuel and utility costs could adversely affect the profitability of our restaurant and QC
Center businesses.
4. Changes in consumer taste (for example, changes in dietary preferences that could cause consumers
to avoid pizza in favor of foods that are perceived as more healthful), demographic trends, traffic
patterns and the type, number and location of competing restaurants could adversely affect our
restaurant business.
5. Health- or disease-related disruptions or consumer concerns about commodities supplies or our food
products could negatively impact the availability and/or cost of commodities and adversely impact
restaurant operations and our financial results.
6. System-wide restaurant operations are subject to federal and state laws governing such matters as
wage benefits, working conditions, citizenship requirements and overtime. A significant number of
hourly personnel employed by our franchisees and us are paid at rates related to the federal and state
minimum wage requirements. Accordingly, further increases in the federal minimum wage or the
enactment of additional state or local minimum wage increases above federal wage rates will