Popeye's 2013 Annual Report Download - page 82

Popeyes Louisiana Kitchen, Inc.
Notes to Consolidated Financial Statements
For Fiscal Years 2013, 2012, and 2011 — (Continued)
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respectively, which will vary according to their demand for beverage syrup and fluctuations in the market rates for
beverage syrup.
Formula and Supply Agreements with Former Owner. The Company has a formula licensing agreement with the
estate of Alvin C. Copeland, the founder of Popeyes and the primary owner of Diversified Foods and Seasonings, Inc.
(“Diversified”). Under this agreement, the Company has the worldwide exclusive rights to the Popeyes fried chicken
recipe and certain other ingredients used in Popeyes products. The agreement provides that the Company pay the estate
of Mr. Copeland approximately $3.1 million annually until March 2029. During each of 2013, 2012, and 2011, the
Company expensed approximately $3.1 million under this agreement. The Company also has a supply agreement with
Diversified through which the Company purchases certain proprietary spices and other products made exclusively by
Diversified.
Business Process Services. Certain accounting and information technology services are provided to the Company
under an agreement with third party provider which expires April 30, 2015. At December 29, 2013,future minimum
payments under this contract are approximately $1.8 million,through 2014 and $0.6 million during 2015. During 2013,
2012 and 2011, the Company expensed $1.7 million,$1.5 million, and $1.4 million, respectively, under this agreement.
Information Technology Outsourcing. Certain information technology services are provided to the Company under
Managed Information Technology Services Agreements with certain third party providers. At December 29, 2013,
future minimum payments under these contracts are $1.6 million,$1.7 million and $0.4 million in 2014, 2015 and
2016, respectively. During 2013,2012, and 2011, the Company expensed $2.6 million,$2.4 million, and $2.1 million,
respectively, under this agreement.
Employment Agreements. As of December 29, 2013,the Company had employment agreements with six senior
executives which provide for annual base salaries ranging from $312,000 to $700,000 subject to annual adjustment by
the Board of Directors, an annual incentive bonus, fringe benefits, participation in Company-sponsored benefit plans
and such other compensation as may be approved by the Board of Directors. The terms of the agreements end in 2014,
unless earlier terminated or otherwise renewed pursuant to the terms thereof and are automatically extended for
successive one-year periods following the expiration of each term unless notice is given by the Company or the executive
not to renew. Pursuant to the terms of the agreements, if employment is terminated without cause or if written notice
not to renew employment is given by the Company,the terminated executive would in certain cases be entitled to,
among other things, one,one and one half or two times annual base salary, as applicable, and one,one and one half or
two times the bonus payable, as applicable, to the individual for the fiscal year in which such termination occurs. Under
the terms of the agreements, upon a change of control of the Company and a significant reduction in the executive’s
responsibilities or duties, the executive may terminate employment and would be entitled to receive the same severance
pay the executive would have received had the executive’s employment been terminated without cause.
Litigation. The Company is a defendant in various legal proceedings arising in the ordinary course of business,
including claims resulting from “slip and fall” accidents, employment-related claims, claims from guests or employees
alleging illness, injury or other food quality,health or operational concerns and claims related to franchise matters. The
Company has established adequate reserves to provide for the defense and settlement of such matters. The Company’s
management believes their ultimate resolution will not have a material adverse effect on the Company’s financial
condition or its results of operations.
Insurance Programs. The Company carries property, general liability,business interruption, crime, directors and
officers liability,employment practices liability,environmental and workers’ compensation insurance policies which
it believes are customary for businesses of its size and type. Pursuant to the terms of their franchise agreements, the
Company’s franchisees are also required to maintain certain types and levels of insurance coverage, including
commercial general liability insurance, workers’ compensation insurance, all risk property and automobile insurance.