Popeye's 2013 Annual Report Download - page 38

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22
Factors Affecting Comparability of Consolidated Results of Operations: 2013, 2012 and 2011
For 2013, 2012, and 2011, the following items and events affect comparability of reported operating results:
•The Company’s fiscal year ends on the last Sunday in December. The 2012 fiscal year consisted of 53 weeks.
All other fiscal years presented consisted of 52 weeks each. The 53rd week in 2012 increased sales by company-
operated restaurants by approximately $1.2 million and increased franchise revenues by approximately $1.7
million. The net impact of the 53rd week earnings per share was approximately $0.01 per diluted share.
•During 2013, 2012 and 2011, the Company opened nine, five, and two company-operated restaurants,
respectively.
•In 2012, the Company completed an acquisition of twenty-seven restaurants in Minnesota and California. The
restaurants were in the trade image of another quick service restaurant concept. Twenty-six of the acquired
restaurants were converted into the Popeyes Louisiana Kitchen image and leased to Popeyes franchisees to
operate under our standard franchise agreement. The remaining restaurant property was sold in 2013. Non-
recurring franchise fees associated with twenty-four conversions completed in 2013 were $5.5 million compared
to $0.5 million for two conversions completed in 2012. These franchise revenues, net of non-recurring
occupancy and other expenses, contributed approximately $0.12 to adjusted earnings per share in 2013.
Comparisons of Fiscal Years 2013 and 2012
Sales by Company-Operated Restaurants
Sales by company-operated restaurants were $78.7 million in 2013, a $14.7 million increase from 2012.The increase
was primarily due to new restaurant openings in 2013 and 2012 and an increase in same-store sales of 2.3% partially
offset by the $1.2 million sales impact of the 53rd week in 2012.
Franchise Royalties and Fees
Franchise royalties and fees have three basic components: (1) ongoing royalty payments that are determined based
on a percentage of franchisee sales; (2) franchise fees associated with new restaurant openings; and (3) development
fees associated with the opening of new franchised restaurants in agiven market. Royalty revenues are the largest
component of franchise revenues, constituting more than 90%.
Franchise revenues were $121.9 million in 2013, a$11.4 million increase from 2012. The increase was primarily
due to a$7.8 million increase in royalties, resulting from an increase in franchise same-store sales of 3.8% during
2013 and new franchised restaurants, and a $5.0 million increase in one-time franchise fees associated with the
conversion and franchising of California and Minnesota restaurant properties acquired in 2012 partially offset by a$1.4
million decrease in transfer fees and other franchise revenues, net.
Rent from Franchised Restaurants
Rent from franchised restaurants was $5.4 million in 2013, a $1.1 million increase from 2012.The increase was
primarily due to $1.9 million in rents from twenty-six restaurant properties converted and leased to franchisees in
Minnesota and California under percentage rent arrangements partially offset by lower rents from properties sold or
leases assigned to franchisee operators.
Company Operated Restaurant Profit
Company-operated restaurant operating profit was $14.7 million in 2013 compared to $11.1 million last year. The
$3.6 million increase in company-operated restaurant operating profit was primarily due to an increase in same-store
sales of 2.3% and new restaurant openings in 2013 and 2012. Company-operated restaurant operating profit margin
was 18.7% of sales in 2013 compared to 17.3% of sales last year. The higher restaurant operating profit margin was
primarily due to overall lower food and commodity prices, higher beverage rebates, labor efficiencies and increased
leverage on occupancy and other expenses. Company-operated restaurant operating profit margin is a supplemental
non-GAAP measure of performance. See the heading entitled “Management’s Use of Non-GAAP Financial Measures.”