Papa Johns 2015 Annual Report Download - page 26

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13
alternative marketing strategies. Actions taken by persons endorsing our products that harm their
reputations could also cause harm to our brand.
Changes in privacy law could adversely affect our ability to market our products effectively.
We rely on a variety of direct marketing techniques, including email, text messages and postal mailings.
Any future restrictions in federal, state or foreign laws regarding marketing and solicitation or
international data protection laws that govern these activities could adversely affect the continuing
effectiveness of email, text messages and postal mailing techniques and could force changes in our
marketing strategies. If this occurs, we may need to develop alternative marketing strategies, which could
impact the amount and timing of our revenues.
We may not be able to execute our strategy or achieve our planned growth targets, which could
negatively impact our business and our financial results.
Our growth strategy depends on our and our franchisees’ ability to open new restaurants and to operate
them on a profitable basis. We expect substantially all of our international unit growth and much of our
domestic unit growth to be franchised units. Accordingly, our profitability increasingly depends upon
royalty revenues from franchisees. If our franchisees are not able to operate their businesses successfully
under our franchised business model, our results could suffer. Additionally, we may fail to attract new
qualified franchisees or existing franchisees may close underperforming locations. Planned growth targets
and the ability to operate new and existing restaurants profitably are affected by economic, regulatory and
competitive conditions and consumer buying habits. Increased commodity or operating costs, including,
but not limited to, employee compensation and benefits or insurance costs, could slow the rate of new
store openings or increase the number of store closings. Our business is susceptible to adverse changes in
local, national and global economic conditions, which could make it difficult for us to meet our growth
targets. Additionally, we or our franchisees may face challenges securing financing, finding suitable store
locations at acceptable terms or securing required domestic or foreign government permits and approvals.
Our franchisees remain dependent on the availability of financing to remodel or renovate existing
locations, upgrade systems and enhance technology, or construct and open new restaurants. From time to
time, the Company may provide financing to certain franchisees and prospective franchisees in order to
mitigate store closings, allow new units to open, or complete required upgrades. If we are unable or
unwilling to provide such financing, which is a function of, among other things, a franchisee’s credit
worthiness, the number of new restaurant openings may be slower than expected and our results of
operations may be adversely impacted. To the extent we provide financing to franchisees in domestic and
international markets, our results could be negatively impacted by negative performance of these
franchisee loans.
If we do not meet our growth targets or the expectations of the market for net restaurant openings or our
other strategic objectives, our stock price could decline.
We may be adversely impacted by increases in the cost of food ingredients and other costs.
We are exposed to fluctuations in commodities. An increase in the cost, or sustained high levels of the
cost of cheese or other commodities could adversely affect the profitability of our system-wide restaurant
operations, particularly if we are unable to increase the selling price of our products to offset increased
costs. Cheese, representing our largest food cost, and other commodities can be subject to significant cost
fluctuations due to weather, availability, global demand and other factors that are beyond our control.
Additionally, increases in labor, mileage, insurance and other costs, could adversely affect the
profitability of our restaurant and QC Center businesses. Most of the factors affecting costs in our system-
wide restaurant operations are beyond our control, and we may not be able to adequately mitigate these