Popeye's 2015 Annual Report Download - page 26

As the franchisor of the Popeyes system, we try to ensure that the quality of our Popeyes brand and branded products is
maintained by all of our franchisees, but cannot be certain that franchisees or others will not take actions that adversely affect
the value of our intellectual property or reputation.
There can be no assurance that all of the steps we have taken to protect our intellectual property in the U.S. and foreign
countries will be adequate. Further, through acquisitions of third parties, we may acquire brands and related trademarks that are
subject to the same risks as the brand and trademarks we currently own.
Our credit facility may limit our ability to expand our business, and our ability to comply with the repayment requirements,
covenants, tests and restrictions contained in the credit facility may be affected by events that are beyond our control.
The credit facility contains financial and other covenants, including covenants which require us to maintain various financial
ratios, limit our ability to incur additional indebtedness, restrict the amount of capital expenditures that may be incurred, restrict
the payment of cash dividends and limit the amount of debt which can be loaned to our franchisees or guaranteed on their behalf.
This facility also limits our ability to engage in mergers or acquisitions, sell certain assets, repurchase our stock and enter into
certain lease transactions. The credit facility includes customary events of default, including, but not limited to, the failure to
maintain the financial ratios described above, the failure to pay any interest, principal or fees when due, the failure to perform
certain covenant agreements, inaccurate or false representations or warranties, insolvency or bankruptcy, change of control, the
occurrence of certain ERISA events and judgment defaults. The restrictive covenants in our credit facility may limit our ability
to expand our business, and our ability to comply with these provisions may be impacted by events beyond our control. A failure
to comply with any of the financial and operating covenants included in the credit facility would result in an event of default,
permitting the lenders to accelerate the maturity of outstanding indebtedness. This acceleration could also result in the acceleration
of other indebtedness that we may have outstanding at that time were we to default on the terms and conditions of the credit
facility and the debt were accelerated by the facility’s lenders, such developments would have a material adverse impact on our
financial condition and our liquidity.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
We own, lease or sublease the land and buildings for our company-operated restaurants. In addition, we own, lease or sublease
land and buildings which we lease or sublease to our franchisees and third parties.
We typically lease our restaurants under triple net leases that require us to pay minimum rent, real estate taxes, maintenance
costs and insurance premiums and, in some cases, percentage rent based on sales in excess of specified amounts. Generally, our
leases have initial terms of 20 years, with options to renew for one or more additional periods, although the terms of our leases
vary depending on the facility.
The following table sets forth the locations by state of our Company-operated restaurants as of December 27, 2015:
Land and
Buildings Owned
Land and/or
Buildings Leased Total
Louisiana 5 20 25
Tennessee 2 8 10
Indiana 9 8 17
Mississippi 2 3 5
North Carolina 1 9 10
Arkansas
—11
South Carolina 1 1 2
Total 20 50 70
Within our franchise operations segment, our typical restaurant leases to franchisees are triple net to the franchisee, requiring
them to pay minimum rent (based upon prevailing market rental rates) or percentage rent based on sales in excess of specified
amounts or both minimum rent and percentage rent plus real estate taxes, maintenance costs and insurance premiums. These
leases are typically cross-defaulted with the corresponding franchise agreement for that site.
10