FDD Talk 2013: Average Gross Sales, Cash Expenses, and Pre-Tax Cash Flows of Certain Papa John’s Restaurants (2013 FDD)
Highlights of Papa John’s Item 19 Financial Performance Representations (2013 FDD)
- Presented below are average restaurant-level sales revenues of domestic franchised and company-owned Papa John’s restaurants for the company’s fiscal year ended December 30, 2012, along with average restaurant-level cash expenses for company-owned Papa John’s restaurants only.
- The following revenue and cash flow data is drawn from Papa John’s financial books and records, which are kept on a basis consistent with Generally Accepted Accounting Principles (“GAAP”) in the United States.
- All information is based on actual historical costs and results. Thus, there are no material assumptions associated with the data, other than the principles of GAAP.
- A number of factors may affect the comparability of the expense (or cash outflow) data, which is drawn solely from company-operated restaurants, to franchised restaurants and the data’s effectiveness as a guide or template for potential operating results of a franchised restaurant. The most significant of these factors are discussed in the following notes.
Full Year Only
- At the close of Papa John’s fiscal year, there were 3,131 total domestic (United States) Papa John’s restaurants, 648 of which were company-owned, including restaurants owned by franchisees in which Papa John’s has a majority interest (a total of 182 restaurants).
- However, the following data is drawn only from standard (or “traditional”) restaurants that were open the entire year of 2012 because including the results from non-traditional restaurants and restaurants that were open only part of the year would skew the annual revenue and expense data.
- Therefore, the total number of restaurants included in the following data is 2,830, comprising 2,248 franchised restaurants and 582 company-owned restaurants.
Core Business Revenues
- The revenue figures for both franchised and company-owned restaurants include only sales of food and beverages arising in the ordinary course of retail operations. Non-recurring items, such as proceeds from the sale of used furniture or equipment, are not included.
- The cash flow data does not include depreciation expense or any other non-cash items.
- Company-owned restaurants do not pay a royalty. The expenses incurred by a franchised restaurant will include Papa John’s standard royalty.
Economies of Scale
- Because Papa John’s operates more than 500 company-owned restaurants, it was able to achieve certain economies of scale and operational efficiencies that may not be available to a franchisee operating one restaurant or a limited number of restaurants, as is the case for a typical franchisee.
Restaurant and Market Maturity
- Sales of a particular restaurant may be affected by how long the restaurant has been in operation and how successfully the surrounding market has been penetrated. The following company-owned restaurant data represents averages for all of Papa John’s domestic restaurants, some of which are long-established in their location and some of which are relatively new. Most of the company-owned restaurants are in highly developed and highly penetrated markets.
- Papa John’s company-owned restaurants are typically clustered in and around major metropolitan areas, such as Atlanta, St. Louis, and Nashville. Many franchised restaurants are operated in less densely populated areas, with more limited access to advertising media.
Table 1 – Average Restaurant Revenues
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