Papa Johns 2011 Annual Report Download - page 15

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10
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. Franchisees generally have full
discretion to determine the prices to be charged to customers.
Franchise Advisory Council. We have a Franchise Advisory Council (“FAC”) that consists of Company
and franchisee representatives of domestic restaurants. We also have an FAC in the United Kingdom. The
FAC and subcommittees hold regular meetings to discuss new product and marketing ideas, operations,
growth and other relevant issues. Certain domestic franchisees have also formed a separate franchise
association for the purpose of communicating and addressing issues, needs and opportunities among its
members.
We currently communicate with, and receive input from, our franchisees in several forms, including
through the FAC, annual operations conferences, system communications, national conference calls and
various regional meetings conducted with franchisees throughout the year. Monthly webcasts 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 domestic franchisees permitting us to
electronically debit the franchisees’ bank accounts for substantially all required payments, including
royalties, Marketing Fund contributions, risk management services, online ordering fees 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 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. The category is
largely fragmented and 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
stronger, more developed brand awareness in markets where we compete. According to industry sources,
QSR Pizza category sales, which includes dine-in, carry-out and delivery, had sales of approximately
$32.4 billion in 2011, or an increase of 0.76% from the prior year.
With respect to the sale of franchises, we compete with many franchisors of restaurants and other
business concepts. In general, there is also active competition for management personnel and attractive
commercial real estate sites suitable for our restaurants.