Papa Johns 2014 Annual Report Download - page 32

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Note: Company-owned Papa John’s restaurants include restaurants owned by majority-owned
subsidiaries. There were 200 such restaurants at December 28, 2014 (25 in Colorado, 30 in Maryland, 35
in Minnesota, 84 in Texas, and 26 in Virginia).
Most Papa John’s Company-owned restaurants are located in leased space. The initial term of most
domestic restaurant leases is generally five years with most leases providing for one or more options to
renew for at least one additional term. Generally, the leases are triple net leases, which require us to pay
all or a portion of the cost of insurance, taxes and utilities. Additionally, we lease our Company-owned
restaurant sites in Beijing and North China. At December 28, 2014, we leased and subleased to
franchisees in the United Kingdom 204 of the 282 franchised Papa John’s restaurant sites. The initial
lease terms on the franchised sites in the United Kingdom are generally 10 to 15 years. The initial lease
terms of the franchisee subleases are generally five to ten years. In connection with the 2006 sale of our
former Perfect Pizza operations in the United Kingdom, we remain contingently liable for payment under
25 lease arrangements, primarily associated with Perfect Pizza restaurant sites.
Seven of our ten domestic QC Centers are located in leased space, including the following locations:
Raleigh, NC; Denver, CO; Phoenix, AZ; Des Moines, IA; Portland, OR; Pittsburgh, PA; and Cranbury,
NJ. Our remaining three locations are in buildings we own, located in: Orlando, FL; Dallas, TX; and
Louisville, KY. Additionally, our corporate headquarters and our printing operations are located in
Louisville, KY in buildings owned by us. Internationally, we own a full-service QC Center in the United
Kingdom and lease office space near London. We also lease our QC Centers and office space in Beijing,
China and Mexico City, Mexico.
Item 3. Legal Proceedings
The Company is involved in a number of lawsuits, claims, investigations and proceedings, including
those specifically identified below, consisting of intellectual property, employment, consumer,
commercial and other matters arising in the ordinary course of business. In accordance with Accounting
Standards Codification (“ASC”) 450, “Contingencies,” the Company has made accruals with respect to
these matters, where appropriate, which are reflected in the Company’s financial statements. We review
these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations,
settlements, rulings, advice of legal counsel and other information and events pertaining to a particular
case.
Perrin v. Papa John’s International, Inc. and Papa John’s USA, Inc. is a conditionally certified collective
action filed in August 2009 in the United States District Court, Eastern District of Missouri, alleging that
delivery drivers were not reimbursed for mileage and expenses in accordance with the Fair Labor
Standards Act. Approximately 3,900 drivers out of a potential class size of 28,800 have opted into the
action. In late December 2013, the District Court granted a motion for class certification in five additional
states, which added approximately 15,000 plaintiffs to the case. The trial is scheduled for August 2015.
We intend to vigorously defend against all claims in this lawsuit. However, given the inherent
uncertainties of litigation, the outcome of this case cannot be predicted and the amount of any potential
loss cannot be reasonably estimated. A negative outcome in this case could have a material adverse effect
on the Company.
Item 4. Mine Safety Disclosures
None.