Papa Johns 2009 Annual Report Download - page 17

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10
Franchise Restaurant Development. We provide assistance to Papa John’s franchisees in selecting sites,
developing restaurants and evaluating the physical specifications for typical restaurants. Each franchisee
is responsible for selecting the location for its restaurants but must obtain our approval of restaurant
design and location based on accessibility and visibility of the site and targeted demographic factors,
including population density, income, age and traffic. Our domestic and international franchisees may
purchase complete new store equipment packages through an approved third-party supplier.
Franchisee Loans. Selected franchisees have borrowed funds from our subsidiary, Capital Delivery, Ltd.,
principally for the purchase of restaurants from us or other franchisees or for use in the construction and
development of new restaurants. Loans made to franchisees typically bear interest at fixed or floating
rates and in most cases are secured by the fixtures, equipment and signage of the restaurant and/or
guarantees from the franchisee’s owners. At December 27, 2009, net loans outstanding totaled $8.6
million, which were composed of loans to franchisees and a loan in connection with the 2006 sale of our
former Perfect Pizza operations. See “Note 9” of “Notes to Consolidated Financial Statements” for
additional information.
We have a commitment to lend up to $40.0 million to BIBP, a franchisee-owned corporation with an
outstanding balance of $24.6 million at December 27, 2009. See “Notes 3 and 9” of “Notes to
Consolidated Financial Statements” for additional information.
Franchise Insurance Program. Our franchisees have the opportunity to purchase various insurance
policies, such as health insurance, non-owned automobile and workers’ compensation, through our
wholly-owned insurance agency, Risk Services Corp. (“Risk Services”). A third-party commercial
insurance company provides fully-insured coverage to franchisees participating in the franchise insurance
program offered by Risk Services. As of December 27, 2009, approximately 49% of domestic franchised
restaurants had obtained insurance coverage through Risk Services. See “Note 10” of “Notes to
Consolidated Financial Statements” for additional information concerning our wholly-owned captive
insurance company, which provided insurance to our franchisees from 2000 through 2004.
Franchise Training and Support. Our domestic field support structure consists of Franchise Business
Directors (“FBDs”), each of whom is responsible for serving an average of approximately 100 franchised
units. Our FBDs maintain open communication with the franchise community, relaying operating and
marketing information and new initiatives between franchisees and us.
Every franchisee is required to have a principal operator approved by us who satisfactorily completes our
required training program and who devotes his or her full business time and efforts to the operation of the
franchisee’s restaurants. Each franchised restaurant manager is also required to complete our Company-
certified management training program. Domestically, we provide an on-site training team three days
before and three days after the opening of a franchisee’s first two restaurants. Internationally, we provide
on-site training personnel five days before and five days after the opening of a franchisee’s first two
stores. Ongoing supervision of training is monitored by the operations services and training team. Multi-
unit franchisees are encouraged to appoint training store general managers or hire a full-time training
coordinator certified to deliver Company-approved programs in order to train new team members and
management candidates for their restaurants. Internationally, training is monitored by our international
operations support team, as well as regional vice presidents and international business managers assigned
to specific franchisee territories.
Franchise Operations. All franchisees are required to operate their Papa John’s restaurants in compliance
with our policies, standards and specifications, including matters such as menu items, ingredients,
materials, supplies, services, fixtures, furnishings, decor and signs. Each franchisee has full discretion to
determine the prices to be charged to its customers.