Papa Johns 2009 Annual Report Download - page 23

16
Changes in purchasing practices by our domestic franchisees could harm our commissary business.
Although our domestic franchisees currently purchase substantially all food products from our QC
Centers, they are only required to purchase tomato sauce and dough from our QC Centers. Any changes
in purchasing practices by domestic franchisees, such as seeking alternative suppliers of food products,
including cheese, could adversely affect the financial results of our QC Centers, including the
recoverability of the BIBP cheese purchasing entity deficit, which approximated $20.0 million at
December 27, 2009.
We may be required to resort to litigation to protect our intellectual property rights, which could
negatively affect our results of operations.
We depend on our Papa John’s brand name and we rely on a combination of trademarks, copyrights,
service marks and similar intellectual property rights to protect our brand. We believe that the success of
our business depends on our continued ability to use our existing trademarks and service marks to
increase brand awareness and further develop our brand, both domestically and abroad. We may not be
able to adequately protect our intellectual property rights and we may be required to resort to litigation to
enforce such rights. Litigation could result in high costs and diversion of resources, which could
negatively affect our results of operations, regardless of the outcome.
Our business and brand may be harmed should the services of our Founder, John Schnatter, as Chief
Executive Officer, Chairman and brand spokesman terminate for any reason.
John H. Schnatter, our Founder, Chairman and Chief Executive Officer (CEO), does not serve under an
employment agreement and we do not maintain key man life insurance on Mr. Schnatter. We also depend
on Mr. Schnatter’s image and his services as spokesman in our advertising and promotion materials.
While we have entered into a license agreement with Mr. Schnatter related to the use of certain
intellectual property, our business and brand may be harmed if Mr. Schnatter’s services as CEO,
Chairman and brand spokesman were not available for any reason.
Our international operations are subject to increased risks and other factors that may make it more
difficult to achieve or maintain profitability or meet planned growth rates.
Our international operations could be negatively impacted by significant changes in international
economic, political and health conditions in the countries in which the Company or its franchisees
operate. In addition, our international operations are subject to additional factors, including compliance
with foreign laws, currency regulations and fluctuations, differing business and social cultures and
consumer preferences, diverse government regulations and structures, availability and cost of land and
construction, ability to source high-quality ingredients and other commodities in a cost-effective manner,
and differing interpretation of the obligations established in franchise agreements with international
franchisees. Accordingly, there can be no assurance that our international operations will achieve or
maintain profitability or meet planned growth rates.
Disruptions of our critical business or information technology systems could harm our ability to conduct
normal business.
Domestically and internationally, we are dependent on our technology systems operating correctly. Our
systems could be damaged or interrupted by power loss, telecommunication failures, acts of God,
computer viruses, physical or electronic break-ins or similar attacks. We may not have or be able to
obtain adequate insurance for these events, which could damage our business and reputation and be