Papa Johns 2013 Annual Report Download - page 16

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8฀
subfranchise฀ a฀ portion฀ of฀ the฀ development฀ to฀ one฀ or฀ more฀ subfranchisees฀ approved฀ by฀ us.฀ Under฀ our฀
current฀ standard฀ international฀ development฀ agreement,฀ the฀ franchisee฀ is฀ required฀ to฀ pay฀ total฀ fees฀ of฀
$25,000฀ per฀ restaurant:฀ $5,000฀ at฀ the฀ time฀ of฀ signing฀ the฀ agreement฀ and฀ $20,000฀ when฀ the฀ restaurant฀
opens฀or฀on฀the฀agreed-upon฀development฀date,฀whichever฀comes฀first.฀Under฀our฀current฀standard฀master฀
franchise฀agreement,฀the฀master฀franchisee฀is฀required฀to฀pay฀total฀fees฀of฀$25,000฀per฀restaurant฀owned฀
and฀operated฀by฀the฀master฀franchisee,฀under฀the฀same฀terms฀as฀the฀standard฀development฀agreement,฀and฀
$15,000฀ for฀ each฀ subfranchised฀ restaurant฀ –฀ $5,000฀ at฀ the฀ time฀ of฀ signing฀ the฀ agreement฀ and฀ $10,000฀
when฀the฀restaurant฀opens฀or฀on฀the฀agreed-upon฀development฀date,฀whichever฀comes฀first.฀
฀
Our฀current฀standard฀international฀master฀franchise฀and฀development฀agreements฀provide฀for฀payment฀to฀
us฀of฀a฀royalty฀fee฀of฀5%฀of฀sales.฀For฀international฀markets฀with฀subfranchise฀agreements,฀the฀effective฀
subfranchise฀ royalty฀ received฀ by฀ the฀ Company฀ is฀ generally฀ 3%.฀ The฀ remaining฀ terms฀ applicable฀ to฀ the฀
operation฀ of฀ individual฀ restaurants฀ are฀ substantially฀ equivalent฀ to฀ the฀ terms฀ of฀ our฀ domestic฀ franchise฀
agreement.฀From฀time฀to฀time,฀development฀agreements฀will฀be฀negotiated฀at฀other-than-standard฀terms฀
for฀fees฀and฀royalties.฀We฀also฀offer฀various฀development฀incentives฀to฀help฀drive฀net฀unit฀growth.฀
฀
Non-traditional฀ Restaurant฀ Development.฀ We฀ had฀ approximately฀ 250฀ non-traditional฀ restaurants฀ at฀
December฀ 29,฀ 2013.฀ These฀ agreements฀ generally฀ cover฀ venues฀ or฀ areas฀ not฀ originally฀ targeted฀ for฀
traditional฀unit฀development฀and฀have฀terms฀differing฀from฀the฀standard฀agreements.฀฀
฀
Franchisee฀ Loans.฀ Selected฀ franchisees฀ have฀ borrowed฀ funds฀ from฀ us,฀ principally฀ for฀ the฀ purchase฀ of฀
restaurants฀from฀us฀or฀other฀franchisees฀or฀for฀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฀ are฀ guaranteed฀ by฀ the฀ franchise฀ owners.฀ At฀
December฀29,฀2013,฀net฀loans฀outstanding฀totaled฀$16.8฀million.฀See฀“Note฀11”฀of฀“Notes฀to฀Consolidated฀
Financial฀Statements”฀for฀additional฀information.฀
฀
Domestic฀ Franchise฀ Insurance฀ Program.฀ Our฀ franchisees฀ may฀ elect฀ 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”).฀Various฀third-party฀commercial฀
insurance฀ companies฀ provide฀ fully-insured฀ coverage฀ for฀ these฀ lines฀ of฀ business฀ to฀ franchisees฀
participating฀in฀the฀franchise฀insurance฀program฀offered฀by฀Risk฀Services.฀฀
฀
Domestic฀ Franchise฀ Training฀ and฀ Support.฀ Our฀ domestic฀ field฀ support฀ structure฀ consists฀ of฀ franchise฀
business฀ directors,฀ each฀ of฀ whom฀ is฀ responsible฀ for฀ serving฀ an฀ average฀ of฀ 130฀ franchised฀ units.฀ Our฀
franchise฀ business฀ directors฀ maintain฀ open฀ communication฀ with฀ the฀ franchise฀ community,฀ relaying฀
operating฀and฀marketing฀information฀and฀new฀initiatives฀between฀franchisees฀and฀us.฀Franchise฀business฀
directors฀report฀to฀division฀vice฀presidents,฀who฀report฀to฀the฀Senior฀Vice฀President,฀Global฀Operations฀&฀
Global฀Operations฀Support฀and฀Training.฀฀
฀
Every฀franchisee฀is฀required฀to฀have฀a฀principal฀operator฀approved฀by฀us฀who฀satisfactorily฀completes฀our฀
required฀training฀program.฀Principal฀operators฀for฀traditional฀restaurants฀are฀required฀to฀devote฀their฀full฀
business฀ time฀ and฀ efforts฀ to฀ the฀ operation฀ of฀ the฀ franchisee’s฀ traditional฀ restaurants.฀ Each฀ franchised฀
restaurant฀ manager฀ is฀ also฀ required฀ to฀ complete฀ our฀ Company-certified฀ management฀ training฀ program.฀
Ongoing฀supervision฀of฀training฀is฀monitored฀by฀the฀GOST฀team.฀Multi-unit฀franchisees฀are฀encouraged฀
to฀ appoint฀ training฀ store฀ general฀ managers฀ or฀ hire฀ a฀ full-time฀ training฀ coordinator฀ certified฀ to฀ deliver฀
Company-approved฀training฀programs.฀฀
฀
International฀Franchise฀Operations฀Support.฀We฀employ฀or฀contract฀with฀international฀business฀directors฀
who฀are฀responsible฀for฀supporting฀one฀or฀more฀franchisees.฀The฀international฀business฀directors฀report฀to฀
regional฀ vice฀ presidents.฀ Additional฀ levels฀ of฀ senior฀ management฀ and฀ corporate฀ staff฀ also฀ support฀ the฀