Popeye's 2014 Annual Report Download - page 81

Popeyes Louisiana Kitchen, Inc.
Notes to Consolidated Financial Statements
For Fiscal Years 2014, 2013, and 2012 — (Continued)
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Employment Agreements. As of December 28, 2014, the Company had employment agreements with five senior executives
which provide for annual base salaries ranging from $321,000 to $725,000 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 2015, 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, privacy & network 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.
The Company has established reserves with respect to the programs described above based on the estimated total losses the
Company will experience. At December 28, 2014, the Company’s insurance reserves of approximately $0.1 million were
collateralized by letters of credit and/or cash deposits of $0.1 million.
Environmental Matters. The Company is subject to various federal, state and local laws regulating the discharge of pollutants
into the environment. The Company believes that it conducts its operations in substantial compliance with applicable environmental
laws and regulations. Certain of the Company’s current and formerly owned and/or leased properties are known or suspected to
have been used by prior owners or operators as retail gas stations, and a few of these properties may have been used for other
environmentally sensitive purposes. Certain of these properties previously contained underground storage tanks (“USTs”), and
some of these properties may currently contain abandoned USTs. It is possible that petroleum products and other contaminants
may have been released at these properties into the soil or groundwater. Under applicable federal and state environmental laws,
the Company, as the current or former owner or operator of these sites, may be jointly and severally liable for the costs of investigation
and remediation of any such contamination, as well as any other environmental conditions at its properties that are unrelated to
USTs. The Company has obtained insurance coverage that it believes is reasonable to manage any potential risks related to
environmental remediation liabilities.
Foreign Operations. The Company’s international operations are limited to franchising activities. During 2014, 2013, and
2012, such operations represented approximately 11.5%, 10.9%, and 11.2%, of total franchise revenues, respectively; and
approximately 6.4%, 6.4%, and 6.9%, of total revenues, respectively. At December 28, 2014, approximately $1.4 million of the
Company’s accounts receivable were related to its international franchise operations.
Significant Franchisee. During 2014, 2013, and 2012, one domestic franchisee accounted for approximately 7.2%, 7.8%, and
8.3%, respectively of the Company’s royalty revenues.
Geographic Concentrations. Of the Company’s domestic company-operated and franchised restaurants, the majority are
located in the southern, southwestern and the Atlantic Coast of the United States. The Company’s international franchisees operate
in South Korea, Indonesia, Canada, Turkey and various countries throughout Central America, Asia and Europe.