Popeye's 2015 Annual Report Download - page 19

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International Development Agreements. Our international franchise development agreements are similar to our domestic
franchise development agreements, though the development time frames can be longer and with development fees of up to
$15,000 for each restaurant developed. Depending on the market, limited sub-franchising rights may also be granted.
International Franchise Agreements. The terms of our international franchise agreements are substantially similar to those
included in our domestic franchise agreements, except that these agreements may be modified to reflect the multi-national nature
of the transaction and to comply with the requirements of applicable local laws. Our current international franchise agreements
generally provide for payment of a franchise fee of up to $30,000 per location. In addition, the effective royalty rates may differ
from those included in domestic franchise agreements, and may be lower due to the greater number of restaurants required to
be developed by our international franchisees.
All of our franchise agreements require that our franchisees operate restaurants in accordance with our defined operating
procedures, adhere to the menu established by us, and meet applicable quality, service, health and cleanliness standards. We
may terminate the franchise rights of any franchisee who does not comply with these standards and requirements.
Site Selection
For new domestic restaurants, we assist our franchisees in evaluating sites consistent with the overall market plan for each
development area. Domestically, we primarily emphasize freestanding sites with drive-thrus and in limited situations where
there is a compelling need in dense areas we may pursue other venues such as “end-cap, in-line” strip-mall sites with ample
parking and easy access from high traffic roads.
Each international market has its own factors that lead to venue and site determination. In international markets, we use
different venues including freestanding, in-line, food court and other nontraditional venues. Market development strategies are
a collaborative process between Popeyes and our franchisees located in that market so we can leverage local knowledge.
Suppliers and Purchasing Cooperative
Suppliers. Our franchisees are required to purchase all ingredients, products, materials, supplies and other items necessary
in the operation of their businesses solely from suppliers who have been approved by us. These suppliers are required to meet
or exceed strict quality control standards, and they must possess adequate capacity to supply our restaurant system reliably.
Purchasing Cooperative. Supplies are generally provided to our domestic franchised and Company-operated restaurants
pursuant to supply agreements negotiated by Supply Management Services, Inc. (“SMS”), a not-for-profit purchasing
cooperative. We and our Popeyes franchisees hold membership interests in SMS in proportion to the number of restaurants
owned. As of December 27, 2015, we held two of seven seats on the SMS board of directors and our voting interests were
approximately 3%. Our Popeyes franchise agreements require that each domestic franchisee join SMS.
Supply Agreements. The principal raw material for a Popeyes restaurant operation is fresh chicken. Company-operated and
franchised restaurants purchase their chicken from suppliers who service the Popeyes system. In order to ensure favorable pricing
and to secure an adequate supply of fresh chicken, SMS has entered into supply agreements with several chicken suppliers.
These contracts, which pertain to the vast majority of our system-wide purchases, are “cost-plus” contracts with prices based
partially upon the cost of feed grains plus certain agreed upon non-feed and processing costs.
We have entered into long-term beverage supply arrangements with certain major beverage vendors. These contracts are
customary in the QSR industry. Pursuant to the terms of these arrangements, marketing rebates are provided to the owner/
operator of Popeyes restaurants based upon the volume of beverage purchases.
We also have a long-term agreement with an exclusive supplier of certain proprietary products for the Popeyes system. This
supplier sells these products to our approved distributors, who in turn sell them to our franchised and company-operated Popeyes
restaurants.
Marketing and Advertising
Each Popeyes restaurant, company-operated or franchised, contributes to an advertising cooperative that supports (1) branding
and marketing initiatives, including the development of marketing materials that are used throughout our restaurant system and
(2) national and local marketing programs. We act as the agent for the fund and coordinate its activities. We and our Popeyes
franchisees made contributions to the advertising fund of approximately $123.5 million in 2015, $110.2 million in 2014, and
$94.2 million in 2013.
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