Popeye's 2015 Annual Report Download - page 35

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• During 2015, 2014, and 2013, the Company opened five, thirteen, and nine company-operated restaurants, respectively.
• Franchise royalties and fees were negatively impacted by changes in foreign exchange rates by $1.4 million, $0.4 million
and $0.2 million in 2015, 2014 and 2013 respectively. These amounts are derived by translating current year results at
prior year average exchange rates.
• In 2014, the Company recognized $0.9 million in lease termination fees and $1.0 million in net gain on the sale of assets
associated with the sale of real estate to franchisees. In 2015 and 2013, net gain on the sale of assets associated with
the sale of real estate to franchisees was $0.2 million and $0.1 million, respectively.
• The Company realized $0.5 million and $2.0 million in executive transition expenses during 2015 and 2014, 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. 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 2015 and 2014
Sales by Company-Operated Restaurants
Sales by company-operated restaurants were $109.5 million in 2015, a $12.3 million increase from 2014. The increase was
primarily due to new restaurant openings in 2015 and 2014, partially offset by negative same store sales.
Company-operated restaurant same-store sales decreased 0.4%, compared to a 5.7% increase in 2014. The Company expects
that in the near-term, same-store sales in its new Company-operated markets of both Indianapolis and Charlotte will be negatively
impacted as new restaurants are developed in those emerging markets and rollover high first year sales volumes. The negative
same-store sales in the Indianapolis and Charlotte markets were partially off-set by a same-store sales increase of over 6% in
our heritage markets, New Orleans and Memphis.
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 $144.0 million in 2015, a $12.7 million increase from 2014. The increase was primarily due to a
$15.0 million increase in royalties resulting from an increase in franchise same-store sales of 6.1% during 2015 and new franchised
restaurants, offset in part by the negative impacts of weakening foreign currencies against the US dollar of approximately $1.4
million and a $0.9 million decrease in renewal and transfer fees.
Rent from Franchised Restaurants
Rent from franchised restaurants was $5.5 million in 2015, a $1.6 million decrease from 2014. The decrease was primarily
due to $0.9 million in lease termination fees from properties sold to franchisee operators in 2014, $0.6 million in lower rental
revenue from nine properties sold or leases assigned to franchisee operators in 2014 and 2015, and $0.1 million in lower percentage
rents.
Company-Operated Restaurant Operating Profit
Company-operated restaurant operating profit was $21.9 million in 2015 compared to $18.4 million in 2014. The $3.5
million increase in company-operated restaurant operating profit was primarily due to an increase in sales of $12.4 million from
net openings in 2015 and 2014. Company-operated restaurant operating profit margin was 20.0% of sales in 2015 compared
to 18.9% of sales in 2014. The higher restaurant operating profit margin was primarily due to improved labor controls and
management of food, beverages and packaging, partially offset by higher occupancy expenses. Higher poultry and grocery basket
costs were offset by targeted pricing increases. 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.”
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