Popeye's 2014 Annual Report Download - page 37

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19
Factors Affecting Comparability of Consolidated Results of Operations: 2014, 2013, and 2012
For 2014, 2013, and 2012, 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 2014, 2013, and 2012, the Company opened thirteen, nine, and five company-operated restaurants, respectively.
• In 2014, the Company recognized $0.9 million in lease termination fees and $0.8 million in net gain on the sale of assets
associated with the sale of real estate to franchisees. In 2013 and 2012, net gain on the sale of assets associated with the
sale of real estate to franchisees was $0.1 million and $0.9 million, 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 2014 and 2013
Sales by Company-Operated Restaurants
Sales by company-operated restaurants were $97.2 million in 2014, a $18.5 million increase from 2013. The increase was
primarily due to new restaurant openings in 2014 and 2013 and an increase in same-store sales of 5.7%.
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 a given market. Royalty revenues are the largest component of franchise royalties
and fees, constituting more than 90%.
Franchise revenues were $131.3 million in 2014, a $9.4 million increase from 2013. The increase was primarily due to a $13.0
million increase in royalties resulting from an increase in franchise same-store sales of 6.2% during 2014 and new franchised
restaurants, $1.9 million increase in transfer fees and other franchise revenues, net, partially offset by a $5.5 million decrease from
2013 one-time franchise fees associated with the conversion and franchising of California and Minnesota restaurant properties
acquired in 2012.
Rent from Franchised Restaurants
Rent from franchised restaurants was $7.1 million in 2014, a $1.7 million increase from 2013. The increase was primarily due
to $0.9 million in lease termination fees from properties sold to franchisee operators and $0.7 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 Operating Profit
Company-operated restaurant operating profit was $18.4 million in 2014 compared to $14.7 million last year. The $3.7 million
increase in company-operated restaurant operating profit was primarily due to an increase in same-store sales of 5.7% and new
restaurant openings in 2014 and 2013. Company-operated restaurant operating profit margin was 18.9% of sales in 2014 compared
to 18.7% of sales last year. The higher restaurant operating profit margin was primarily due to overall lower food and commodity
prices and labor efficiencies partially offset by lower beverage rebates and an increase in rent, insurance, taxes and other occupancy
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.”