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What changed in PAPA JOHNS INTERNATIONAL INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PAPA JOHNS INTERNATIONAL INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+441 added−359 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-23)

Top changes in PAPA JOHNS INTERNATIONAL INC's 2023 10-K

441 paragraphs added · 359 removed · 289 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

55 edited+22 added−13 removed39 unchanged
Biggest changeDevelopment At December 25, 2022, there were 5,706 Papa John’s restaurants operating in 48 countries and territories , as follows: Domestic Company-owned Franchised North America Total North America International (a) System-wide Beginning - December 26, 2021 600 2,739 3,339 2,311 5,650 Opened 10 76 86 292 378 Closed — (49) (49) (85) (134) Sold — (2) (2) — (2) Acquired 2 — 2 — 2 Refranchised (90) 90 — — — Suspended (a) — — — (188) (188) Ending - December 25, 2022 522 2,854 3,376 2,330 5,706 Net unit growth/(decline) (a) (78) 115 37 207 244 ______________________________ (a) As previously disclosed, the Company has suspended corporate support for all franchised restaurants located in Russia.
Biggest changeDevelopment At December 31, 2023, there were 5,906 Papa John’s restaurants operating in 50 countries and territories , as follows: Domestic Company Owned Franchised North America Total North America International Company Owned International Franchised Total International System-wide December 25, 2022 (a) 522 2,854 3,376 — 2,322 2,322 5,698 Opened 5 87 92 — 234 234 326 Closed (2) (33) (35) — (83) (83) (118) Sold — (10) (10) — (118) (118) (128) Acquired 10 — 10 118 — 118 128 Refranchised (4) 4 — (1) 1 — — December 31, 2023 531 2,902 3,433 117 2,356 2,473 5,906 Net unit growth/(decline) 9 48 57 117 34 151 208 ______________________________ (a) Restaurant figures as of December 25, 2022 have been revised from previous presentations as eight international units were re-classified as closed locations following a review of temporary restaurant closures.
Item 1. Business General Papa John’s International, Inc., a Delaware corporation (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first person notations of “we,” “us” and “our”), operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s.” Papa John’s began operations in 1984.
Item 1. Business General Papa John’s International, Inc., a Delaware corporation (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first person notations of “we,” “us” and “our”), operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa Johns.” Papa John’s began operations in 1984.
We believe a franchised model provides resiliency of earnings and presents us with an opportunity to enhance growth with less capital investment than a traditional company-operated restaurant model. We seek to attract and retain franchisees with experience in restaurant or retail operations and with the financial resources and management capabilities to open single or multiple locations.
We believe a franchised model provides resiliency of earnings and presents us with an opportunity to enhance growth with less capital investment than a traditional company-operated restaurant model. We seek to attract and retain franchisees with experience in restaurant or retail operations and with the financial resources and management capabilities to open and operate multiple locations.
Beyond basic insurance programs, Papa John’s offers wellness services to help team members manage and optimize their health. These no-cost programs include smoking cessation, diabetes and hypertension management, weight management, and mental health support through Papa John’s employee assistance program for all part-time and full-time team members and their dependents.
Beyond basic insurance programs, Papa John’s offers wellness services to help team members manage and optimize their health and well-being. These no-cost programs include smoking cessation, diabetes and hypertension management, weight management, and mental health support through Papa John’s employee assistance program for all part-time and full-time team members and their dependents.
Development agreements will be negotiated at other-than-standard terms for fees and royalties, and we may offer various development and royalty incentives. Franchise Operations. All franchisees are required to operate their Papa John’s restaurants in compliance with our policies, standards and specifications, including matters such as menu items, ingredients, and restaurant design.
In certain cases, development agreements may be negotiated at other-than-standard terms for fees and royalties, and we may offer various development and royalty incentives. Franchise Operations. All franchisees are required to operate their Papa John’s restaurants in compliance with our policies, standards and specifications, including matters such as menu items, ingredients, and restaurant design.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov. The references to these website addresses do not constitute incorporation by reference of the information contained on the websites, which should not be considered part of this document. 9 Table of Contents
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov. The references to these website addresses do not constitute incorporation by reference of the information contained on the websites, which should not be considered part of this document.
Some of our competitors have been in existence for substantially longer periods than Papa John’s, have substantially greater resources than Papa John’s and can have higher levels of restaurant penetration and stronger, more developed brand awareness in markets where we compete. Competition from delivery aggregators and other food delivery concepts also continues to increase.
Some of our competitors have been in existence for substantially longer periods than Papa John’s, have substantially greater resources than Papa John’s and can have higher levels of restaurant penetration and stronger, more developed brand 8 Table of Contents awareness in markets where we compete. Competition from delivery aggregators and other food delivery concepts also continues to increase.
To help our team members succeed in their roles and to ensure consistent operational execution, we emphasize continuous training and development opportunities, including providing innovative tools and materials for the operational training and development of team members.
To help our team members succeed in their roles and to ensure consistent operational execution, we offer continuous training and development opportunities, including providing innovative tools and materials for the operational training and development of team members.
As such, we are committed to providing competitive pay and benefits to attract and retain top talent, whether in our Domestic Company-owned stores, in our supply chain centers or in our corporate offices. We pay competitive wages to our front line team members in our Domestic Company-owned stores. Papa John’s offers a comprehensive benefits package to eligible team members.
As such, we are committed to providing competitive pay and benefits to attract and retain talent, whether in our Domestic Company-owned restaurants, in our supply chain centers or in our corporate offices. We pay competitive wages to our front line team members in our Domestic Company-owned restaurants. Papa John’s offers a comprehensive benefits package to eligible team members.
Across our restaurants, Quality Control Centers and corporate hubs, Papa Johns team members are valued for their contributions, treated equitably, encouraged to share their feedback and ideas, provided the tools needed to ensure their safety and total wellness and given ample opportunities to grow in their careers.
Across our restaurants, QC Centers and corporate hubs, Papa Johns team members are valued for their contributions, treated equitably, encouraged to share their feedback and ideas, provided the tools needed to ensure their safety and total wellness and given ample opportunities to grow in their careers.
The rate of contribution and uses of the monies collected are determined by a majority vote of the Co-op’s members. The restaurant-level and Co-op marketing efforts are supported by media, print, digital and electronic advertising materials that are produced by Papa John’s Marketing Fund, Inc. (“PJMF”), our national marketing fund.
The rate of contribution and uses of the monies collected are determined by a majority vote of the Co-op’s members. The national marketing efforts are supported by media, print, digital and electronic advertising materials that are produced by Papa John’s Marketing Fund, Inc. (“PJMF”), our national marketing fund.
State laws often limit, among other things, the duration and scope of non-competition provisions and the ability of a franchisor to terminate or refuse to renew a franchise. Some foreign 8 Table of Contents countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship.
State laws often limit, among other things, the duration and scope of non-competition provisions and the ability of a franchisor to terminate or refuse to renew a franchise. Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship.
Operations personnel complete our management training program and ongoing development programs, including multi-unit training, in which instruction is given on all aspects of our systems and operations.
Operations personnel complete our management training program and ongoing development programs, including multi-unit training, through which instruction is given on all aspects of our systems and operations.
We also make available to our team members several benefits designed to promote an inclusive workplace like paid parental leave, adoption support, and health 7 Table of Contents plans that are available to dependents, spouses, and domestic partners. We offer eligible team members a 401(k) plan, with a competitive Company matching component to encourage retirement savings.
We also make available to our team members several benefits designed to promote an inclusive workplace like paid parental leave, adoption support, and health plans that are available to dependents, spouses, and domestic partners. We offer eligible team members a 401(k) plan, with a competitive Company matching component to encourage retirement savings.
Domestic Company-owned and franchised Papa John’s restaurants within a defined market may be required to join an area advertising cooperative (“Co-op”). Each member restaurant contributes a percentage of sales to the Co-op for market-wide programs, such as television, radio, digital and print advertising, and sports sponsorships.
Domestic Company-owned and franchised Papa John’s restaurants within a defined market may, but are not required to, join an area advertising cooperative (“Co-op”). Each member restaurant contributes a percentage of sales to the Co-op for market-wide programs, such as television, radio, digital and print advertising, and sports sponsorships.
Domestic Company-owned Restaurants The Domestic Company-owned restaurant segment consists of the operations of all Domestic Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, and side items, including breadsticks, Papa Bites, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages.
Domestic Company-owned Restaurants The Domestic Company-owned restaurant segment consists of the operations of all Domestic Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, and side items, including breadsticks, Papa Bites, cheesesticks, boneless chicken wings and bone-in chicken wings, dessert items and canned or bottled beverages.
To ensure consistent food quality, each Domestic franchisee is required to purchase dough and pizza sauce from our QC Centers and to purchase all other supplies from our QC Centers or other approved suppliers. International International franchisees are defined as all franchise operations outside of the United States and Canada.
To ensure consistent food quality, each Domestic franchisee is required to purchase dough and pizza sauce from our QC Centers and to purchase all other supplies from our QC Centers or other approved suppliers. International The International segment is defined as all restaurant operations outside of the United States and Canada.
The franchise agreement is generally executed once a franchisee secures a location. Our current standard franchise agreement requires the franchisee to pay a royalty fee of 5% of sales, and the majority of our existing franchised restaurants have a 5% contractual royalty rate in effect. Incentives to franchisees offered from time to time may reduce the contractual royalty rate paid.
Our current standard franchise agreement requires the franchisee to pay a royalty fee of 5% of sales, and the majority of our existing franchised restaurants have a 5% contractual royalty rate in effect. Incentives offered from time to time to franchisees may reduce the contractual royalty rate paid.
Loans made to franchisees can bear interest at fixed or floating rates and in most cases are secured by the fixtures, equipment and signage of the restaurant and/or are guaranteed by the franchise owners. At December 25, 2022 , net loans outstanding totaled $28.1 million . S ee “Note 2.
Loans made to franchisees can bear interest at fixed or floating rates and in most cases are secured by the fixtures, equipment and signage of the restaurant and/or are guaranteed by the franchise owners. At December 31, 2023 , net loans outstanding totaled $17.5 million . S ee “Note 2.
Significant Accounting Policies” of “ Notes to Consolidated Financial Statements ” for additional information. Marketing Programs Our Domestic marketing strategy consists of both national and local components. Our national strategy includes national advertising via television, print, direct mail, digital, mobile marketing and social media channels.
Significant Accounting Policies” of “ Notes to Consolidated Financial Statements ” for additional information. 6 Table of Contents Marketing Programs Our Domestic marketing strategy consists of national advertising via television, print, direct mail, digital, mobile marketing and social media channels.
Our digital marketing activities have increased significantly over the past several years in response to increasing customer use of online and mobile technology. Local advertising programs include television, radio, print, direct mail, store-to-door flyers, digital, mobile marketing and local social media channels.
Our digital marketing activities have increased significantly over the past several years in response to increasing customer use of online and mobile technology. Local advertising, such as television, radio, print, direct mail, store-to-door flyers, digital, mobile marketing and local social media channels is optional for franchisees.
Privacy and Data Protection We are subject to privacy and data protection laws and regulations globally. The legal and regulatory landscape for privacy and data protection continues to evolve, and there has been an increase in attention given to privacy and data protection issues with the potential to impact our business.
The legal and regulatory landscape for privacy and data protection continues to evolve, and there has been an increase in attention given to privacy and data protection issues with the potential to impact our business.
Other QC Centers outside North America are operated by franchisees pursuant to license agreements or by other third parties. 4 Table of Contents All others All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all others.” These consist of operations that derive revenues from franchise contributions to our marketing funds and the sale, principally to Company-owned and franchised restaurants, of information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms, and printing and promotional items.
All others All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, are referred to as “all others.” These consist of operations that derive revenues from franchise contributions to our marketing funds and the sale, principally to Company-owned and franchised restaurants, of information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms, and printing and promotional items.
Of the total 3,376 North American restaurants open as of December 25, 2022, 522 units, or approximately 15% , were Company-owned. In 2022, the 514 Domestic Company-owned restaurants included in the full year’s comparable restaurant base generated average annual unit sales of $1.3 million.
Of the total 3,433 North American restaurants open as of December 31, 2023, 531 units, or approximately 15% , were Company-owned. In 2023, the 512 Domestic Company-owned restaurants included in the full year’s comparable restaurant base generated average annual unit sales of $1.4 million.
Our marketing and menu strategies focus on menu innovations that provide both value and variety to our customers, but importantly, do not add significant complexity to our restaurant operations or to supply chain needs. Over the past three years, we have made purposeful additions to our menu, ensuring these additions are well-timed for our growth, without sacrificing our premium quality.
Our marketing and menu strategies focus on craveable products that provide both value and variety to our customers, drive sales and importantly, do not add significant complexity to our restaurant operations or to supply chain needs. We continue to make purposeful additions to our menu, ensuring these additions are well-timed for our growth, without sacrificing our premium quality.
Our integrations with the aggregator marketplaces and our nationwide integration with a third-party delivery service provider have been key tools allowing us to continue to meet our customers in the channel of their choice. Profitably expand our footprint domestically and internationally. We continue to pursue a growth strategy by expanding our footprint, both domestically and internationally.
Our integrations with the aggregator marketplaces and our nationwide integration with a third-party delivery service provider have been key tools allowing us to continue to meet our customers in the channel of their choice.
National, state and local government regulations or initiatives, including health care legislation, “living wage,” or other current or proposed regulations, and increases in minimum wage rates affect Papa John’s as well as others within the restaurant industry. We are also subject to applicable laws in each non-US jurisdiction in which we operate.
National, state and local government regulations or initiatives, including health care legislation, “living wage,” or other current or proposed regulations, and increases in minimum wage rates affect Papa John’s as well as others within the restaurant industry.
These suspended restaurants are excluded from net unit growth calculations. Our Company-owned restaurant growth strategy is to continue to open Domestic restaurants in existing markets as appropriate, thereby increasing consumer awareness and enabling us to take advantage of operational and marketing scale efficiencies.
Our Domestic Company-owned restaurant growth strategy is to continue to open restaurants in existing markets as appropriate, thereby increasing consumer awareness, increasing market share, improving customer service and enabling us to take advantage of operational and marketing scale efficiencies.
As of December 25, 2022, there were 2,330 International restaurants, all of which are franchised. The International segment principally consists of distribution sales to franchised Papa John’s restaurants located in the UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our International franchisees.
The International segment also consists of distribution sales to Papa John’s restaurants located in the UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our International franchisees.
In international markets, we have either a development agreement or a master franchise agreement with a franchisee for the opening of a specified number of restaurants within a defined period of time and specified geographic area.
However, many state franchise laws limit our ability as a franchisor to terminate or refuse to renew a franchise. International Development and Franchise Agreements. In international markets, we have either a development agreement or a master franchise agreement with a franchisee for the opening of a specified number of restaurants within a defined period of time and specified geographic area.
North America commissary The North America commissary segment comprises 11 full-service regional dough production and distribution Quality Control Centers (“QC Centers”) in the United States, which supply pizza sauce, dough, food products, paper products, smallwares and cleaning supplies twice weekly to each traditional restaurant served.
These sales, while not included in the Company’s revenues, contribute to our royalty revenues, franchisee marketing fund contributions, and commissary revenue. 4 Table of Contents North America commissary The North America commissary segment comprises 11 full-service regional dough production and distribution centers (Quality Control Centers, or “QC Centers”) in the United States, which supply pizza sauce, dough, food products, paper products, smallwares and cleaning supplies twice weekly to each traditional restaurant served.
In addition to increasing average unit volumes, our strategy focuses on further sharpening our execution and driving BETTER customer experience for faster service while optimizing labor allocation, enhancing operational efficiencies and effectively managing margins. Leverage our technology infrastructure to drive our business operations. We utilize technology to deliver a better customer experience, improve operational efficiencies and inform our decision-making .
In addition to increasing average unit volumes, our strategy focuses on further sharpening our execution and driving BETTER customer experience for faster service while optimizing labor allocation, enhancing operational efficiencies and effectively managing margins. We continue to look for ways to incent growth and improve restaurant margins.
At December 25, 2022, there were 5,706 Papa John’s restaurants in operation, consisting of 522 Company-owned and 5,184 franchised restaurants operating in 48 countries and territories. Our Company-owned restaurants include 98 restaurants operated under three joint venture arrangements. All of our International restaurants are franchised.
At December 31, 2023, there were 5,906 Papa John’s restaurants in operation, consisting of 648 Company-owned and 5,258 franchised restaurants operating in 50 countries and territories. Our Company-owned restaurants include 98 restaurants operated under three joint venture arrangements.
We partner with large local investors to expand into new regions and markets, seeking to ensure our partners are aligned with our strategic priorities and committed to the Papa Johns brand. Nearly all of our top-25 North American franchisees now have development agreements in place.
We continue to pursue a growth strategy by expanding our footprint, both domestically and internationally. We partner with growth-oriented operators to expand into new regions and markets, seeking to ensure our partners are aligned with our strategic priorities and committed to the Papa Johns brand. The majority of our top-25 North American franchisees have development agreements in place.
Industry and Competition The United States Quick Service Restaurant pizza (“QSR Pizza”) industry is mature and highly competitive with respect to price, service, location, food quality, customer loyalty programs and product innovation.
Our QC Centers and restaurant operations undergo annual safety audits, as well as random safety checks by regional safety managers and field safety coordinators. Industry and Competition The United States Quick Service Restaurant pizza (“QSR Pizza”) industry is mature and highly competitive with respect to price, service, location, food quality, customer loyalty programs and product innovation.
With respect to the sale of franchises, we compete with many franchisors of restaurants and other business concepts. There is also active competition for management personnel, drivers and hourly team members, and attractive commercial real estate sites suitable for Papa John’s restaurants.
There is also active competition for management personnel, drivers and hourly team members, and attractive commercial real estate sites suitable for Papa John’s restaurants.
Improve unit-level profitability and performance of our Company and franchisee restaurants . We have been intent on taking proactive steps to drive profitable growth, especially under the current challenging operating environment. This includes growing ticket and transactions through menu innovations, customer insights and strategic pricing actions.
Improve unit-level profitability and performance of our Company and franchisee restaurants . We continue to take proactive steps to drive profitable growth through targeted strategies. This includes growing ticket and transactions through menu innovations, customer insights, media efficiency, strategic pricing actions and development incentives.
Segment Overview Papa John’s has four defined reportable segments: Domestic Company-owned restaurants, North America franchising, North America commissaries (Quality Control Centers), and International operations.
See “Recent Business Matters” in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Segment Overview Papa John’s has four defined reportable segments: Domestic Company-owned restaurants, North America franchising, North America commissaries (Quality Control Centers), and International.
Franchisees are approved on the basis of the applicant’s business background, restaurant operating experience and financial resources. North America Development and Franchise Agreements. We enter into development agreements with our franchisees in North America for the op ening of a specified number of restaurants within a defined period of time and specified geographic area.
We enter into development agreements with our franchisees in North America for the op ening of a specified number of restaurants within a defined period of time and specified geographic area. A franchise agreement is generally executed once a franchisee secures a location.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 23. Segment Information ” of “Notes to Consolidated Financial Statements” for financial information about our segments.
Segment Information ” of “Notes to Consolidated Financial Statements” for financial information about our segments.
A diverse, inclusive environment is essential to attracting the talent that makes Papa Johns the world’s best pizza delivery company. As such, we welcome all entrepreneurial spirits, innovators and pizza lovers. We are building a culture that both reflects our corporate values of People First and Everyone Belongs and creates a competitive advantage in attracting and retaining talent.
Diversity, Equity and Inclusion At Papa Johns, we welcome a wide array of voices to our table. A diverse, inclusive environment is essential to attracting the talent that makes Papa Johns the world’s best pizza delivery company. As such, we welcome all entrepreneurial spirits, innovators and pizza lovers.
Our North American franchised restaurants, which included 2,472 restaurants in the full year’s comparable base for 2022, generated average annual unit sales of $1.1 million. These sales, while not included in the Company’s revenues, contribute to our royalty revenues, franchisee marketing fund contributions, and commissary revenue.
Our North American franchised restaurants, which included 2,519 restaurants in the full year’s comparable base for 2023, generated average annual unit sales of $1.2 million.
We also offer a tuition reimbursement program that provides another opportunity for our team members to advance their careers. Compensation and Benefits One of our core values is People First.
Employees working at least ten hours per week can obtain their High School Diplomas, learn English as a second language, and earn associate’s, bachelor’s and/or master’s degrees. We also offer a tuition reimbursement program that provides another opportunity for our team members to advance their careers. Compensation and Benefits One of our core values is People First.
Internationally, the pizza delivery model is not as mature as the Domestic market and presents a growth opportunity for Papa John’s. We believe demand from international consumers will continue to increase as the demand for pizza delivery and carryout continues. We continue to execute on our growth strategy and expand throughout the world.
We believe demand from international consumers will continue to increase as the demand for pizza delivery and carryout continues. We continue to execute on our growth strategy and expand throughout the world. With respect to the sale of franchises, we compete with many franchisors of restaurants and other business concepts.
Our experience in developing markets indicates that market penetration through the opening of multiple restaurants in a particular market results in increased average restaurant sales in that market over time. We have co-developed Domestic markets with some franchisees or divided markets among franchisees and will continue to use market co-development in the future, where appropriate.
Our experience in developing markets indicates that market penetration through the opening of multiple restaurants in a particular region results in increased average restaurant sales over time. We will establish a development or a master franchise agreement with a franchisee for the opening of a specified number of restaurants within a defined period of time and specified geographic area.
During 2022, we had no material environmental compliance-related capital expenditures, and no such material expenditures are anticipated in 2023. Impact of COVID-19 Please refer to “Recent Business Matters” within “Item 7.
During 2023, we had no material environmental compliance-related capital expenditures, and no such material expenditures are anticipated in 2024.
Franchise Program We continue to attract qualified and experienced franchisees, whom we consider to be a vital part of our system’s continued growth. We believe our relationship with our franchisees is fundamental to the performance of our brand and we strive to maintain a collaborative relationship with our franchisees.
Financial Statements and Supplementary Data, Notes 16. Restructuring and 25. Subsequent Events to the Financial Statements for additional details. Franchise Program We continue to attract qualified and experienced franchisees, whom we consider to be a vital part of our system’s continued growth.
In 2022, we expanded our efforts to recruit diverse talent by implementing anti-bias training for our recruiters. To meet job candidates where they live, and gain a deeper understanding of their personal, educational and professional goals, we sponsor and attend job fairs, scholarship programs and university and professional organization events.
To meet job candidates where they live, and gain a deeper understanding of their personal, educational and professional goals, we sponsor and attend job fairs, scholarship programs and university and professional organization events and offer our team members hiring and referral bonuses. Our recruiting strategy aims to diversify the candidate pool for all manager level and above positions.
As of December 25, 2022, we employed approximately 12,000 persons, of whom approximately 9,600 were team members at Company-owned restaurants, approximately 700 were management personnel at Company-owned restaurants, approximately 700 were corporate personnel and approximately 1,100 were QC Center and our print and promotions subsidiary personnel.
As of December 31, 2023, we employed approximately 13,200 persons, of whom approximately 10,600 were team members at Company-owned restaurants, approximately 700 were management personnel at Company-owned restaurants, approximately 700 were corporate personnel and approximately 1,200 were QC Center team members. Our team members are non-unionized, and most restaurant team members work part-time and are paid on an hourly basis.
Also, for the second year in a row, we received a score of 100 on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index. Creating an inclusive and diverse culture that supports and values team members is important to attracting and retaining talented, dedicated employees.
Creating an inclusive and diverse culture that supports and values team members is important to attracting and retaining talented, dedicated employees.
Approximately 85% of our Domestic sales are through digital channels, including website, apps, third party aggregators, and centralized call centers, providing a significant competitive advantage when compared with other QSR models. We are continuously investing in technology to enhance our digital capabilities for both our customers as well as our employees.
We believe that this technology leadership edge provides a competitive advantage when compared with other QSR models. We continue to invest in technology and data science to enhance our digital capabilities for both our customers as well as our employees.
We estimate the total number of persons in the Papa John’s system, including our team members, franchisees and the team members of franchisees, was approximately 115,000 as of December 25, 2022 . Diversity, Equity and Inclusion At Papa Johns, we welcome a wide array of voices to our table.
Our franchisees are independent business owners, so their employees are not our employees and therefore are not included in our employee count. We estimate the total number of persons in the Papa John’s system, including our team members, franchisees and the team members of franchisees, was approximately 107,000 as of December 31, 2023 .
Government Regulation We, along with our franchisees, are subject to various federal, state, local and international laws affecting the operation of our respective businesses, including laws and regulations related to our marketing and advertising as well as the preparation and sale of food, food safety and menu labeling.
For a discussion of the related risks, see “Item 1A—Risk Factors—Company Risks—Increase in ingredient and other operating costs, including those caused by weather, climate change and food safety, could adversely affect our results of operations,” “—Our dependence on a sole supplier or a limited number of suppliers for some ingredients and other supplies could result in disruptions to our business,” and “—Changes in purchasing practices by our Domestic franchisees, or prolonged disruptions in our QC Center operations, could harm our commissary business.” Government Regulation We, along with our franchisees, are subject to various federal, state, local and international laws affecting the operation of our respective businesses, including laws and regulations related to our marketing and advertising as well as the preparation and sale of food, food safety and menu labeling.
We’re implementing initiatives to diversify our workforce and leadership pipeline by attracting, recruiting, developing and supporting talent who represent our customers and communities, to embed policies and practices that ensure fairness, build trust and hold ourselves accountable, and to instill and reward behaviors across the organization that foster belonging and increase employee engagement.
We have implemented initiatives to diversify our workforce and leadership pipeline by recruiting, developing and supporting talent who represent our customers and communities, to embed policies and practices that ensure fairness, build trust and hold ourselves accountable, and to instill and reward behaviors across the organization that foster belonging and increase employee engagement, including required unconscious bias training for team members, and annual Diversity, Equity, and Inclusion (“DEI”) training for all team members, grant-making through the Papa John’s Foundation to national and local nonprofit partners for advancing DEI, our annual Week of Service and our eight global inclusion resource groups with leaders engaging across the organization. 7 Table of Contents Talent Attraction, Retention and Development Our ability to attract and retain hourly employees in our restaurants has become more challenging, especially as the job market has become more competitive.
The Company currently operates one International QC Center, which is in the UK.
As of December 31, 2023, there were 2,473 International restaurants, comprised of 117 Company-owned restaurants in the UK and 2,356 franchised restaurants. The Company currently operates one International QC Center in the UK.
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Our loyalty program (“Papa Rewards”) and one-to-one marketing platforms help us retain loyal customers and attract new ones. We also partner with top domestic delivery aggregators to meet customer demand for our products.
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Beginning in 2024, we will increase the fixed operating margin that our Domestic commissaries charge. At the same time, we are offering new opportunities for our franchisees to earn annual incentive-based rebates as they increase volume and open new restaurants, which will drive continued supply chain productivity for our system. See “Recent Business Matters” in Part II, Item 7.
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Aggregators have also helped navigate the labor shortage that the Company is experiencing by providing supplemental delivery drivers, especially during peak times when our delivery teams are working at full capacity.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations. Leverage our technology infrastructure to drive our business operations. We utilize technology to deliver a better customer experience, improve operational efficiencies and inform our decision-making . Approximately 85% of our Domestic sales are through digital channels, including website, apps, third party aggregators, and centralized call centers.
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Internationally, our teams 3 Table of Contents are laying the groundwork for the future by accelerating growth in our established markets, identifying attractive new markets to enter and attracting new well-capitalized franchisees to partner with. A large majority of Papa John’s restaurants are franchised.
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We remain committed to meeting customers where they want to order from us and to giving them high quality innovative products, providing great value, and delivering excellent service, regardless of the channel in which they order. Our loyalty program (“Papa Rewards”) and one-to-one marketing platforms help us retain loyal customers and drive frequency and ticket on our own ordering channels.
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Many state franchise laws limit our ability as a franchisor to terminate or refuse to renew a franchise. 5 Table of Contents International Development and Franchise Agreements.
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We have also been a leader in the use of third-party domestic delivery 3 Table of Contents aggregators since 2019. A s new national pizza chains arrive on the platform, the pizza category has continued to expand its share of the overall aggregator market because it’s a great product for home delivery .
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Our team members are non-unionized, and most restaurant team members work part-time and are paid on an hourly basis. 6 Table of Contents Our franchisees are independent business owners, so their employees are not our employees and therefore are not included in our employee count.
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The “on-demand” labor that the aggregators provide through their “delivery as a service” model allows us to increase our volume in growing day parts like lunch and late night, when the unpredictable demand can make it difficult to predict staffing needs. Profitably expand our footprint domestically and internationally.
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After being recognized by Forbes in 2021 as one of America’s Best Employers for Diversity, Papa John’s joined Forbes’ annual list of the World’s Best employers in 2022. We were honored to rank #1 amongst all pizza companies and #2 in the entire restaurant category.
Added
As part of our previously announced International Transformation initiative, we are evolving our International business structure to strengthen our operational effectiveness and better position our key markets for profitable growth. These steps include establishing International regional hubs, increasing technology investments and optimizing our UK business model. See “Recent Business Matters” in Part II, Item 7.
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We have also initiated multiple corporate initiatives over the past several years, including required unconscious bias training for team members, annual Diversity, Equity, and Inclusion training for all team members, the launch of The Papa John’s Foundation for Building Community, our Day of Service with Boys and Girls Clubs of America, and the creation of eight global inclusion resource groups with leaders engaging across the organization.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 8. Financial Statements and Supplementary Data, Notes 16. Restructuring and 25. Subsequent Events to the Financial Statements for additional details. A large majority of Papa John’s restaurants are franchised.
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Talent Attraction, Retention and Development Our ability to attract and retain hourly employees in our restaurants has become more challenging, especially as the job market has become more competitive.
Added
We recently introduced a new development incentive for our U.S. franchisees designed to accelerate unit growth in 2024 and 2025 and reward growing franchisees. Qualified openings will be eligible for a reduction in Papa John’s Marketing Fund, Inc. (“PJMF”) contributions over a multi-year period.
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Our recruiting strategy aims to diversify the candidate pool for all manager level and above positions. We offer our team members hiring and referral bonuses as well as expanded health, wellness and paid time off.
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The value of this incentive is intended to significantly improve restaurant profitability in the initial years of operations, thus improving overall unit economics, strengthening the business case for new store development. We also introduced a new marketing strategy, lowering total advertising fees paid by franchisees while improving efficiency and return on ad spend.
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In 2022, we made enhancements to the program, including expanded educational offerings and less restrictive eligibility requirements. Employees working at least ten hours per week can now obtain their High School Diplomas, learn English as a second language, and earn associate’s, bachelor’s and/or master’s degrees.
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Other QC Centers outside North America are operated by franchisees pursuant to license agreements or by other third parties.
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Our QC Centers and restaurant operations undergo annual safety audits, as well as random safety checks by regional safety managers and field safety coordinators.
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In the fourth quarter of 2023, the Company sold Preferred Marketing, our previously wholly-owned print and promotions company. Se e “Note 22. Divestitures” of “ Notes to Consolidated Financial Statements ” for additional information. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 23.
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We have also taken steps to mitigate the impact of the COVID-19 pandemic on our team members and our customers by implementing extra health and safety measures across our business, including No Contact Delivery and enhanced cleaning and sanitization measures.
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We have co-developed Domestic markets with some franchisees or divided markets among franchisees and will continue to use market co-development in the future, where 5 Table of Contents appropriate. Our Domestic Company-owned markets are comprised of strong performing restaurants and make them attractive locations either as Company-owned or franchised.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of recent business developments, including the impact the COVID-19 pandemic is having on our business and results of operations and financial condition.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

110 edited+36 added−9 removed81 unchanged
Biggest changeThese initiatives or goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of any disclosure. 19 Table of Contents In addition to the changing rules and regulations related to environmental, social and governance (“ESG”) matters imposed by governmental and self-regulatory organizations such as the SEC and the Nasdaq Stock Market LLC, a variety of third-party organizations and institutional investors evaluate the performance of companies on ESG topics, and the results of these assessments are widely publicized.
Biggest changeIn addition to the changing rules and regulations related to ESG matters imposed by governmental and self-regulatory organizations such as the SEC and the Nasdaq Stock Market LLC, a variety of third-party organizations and institutional investors evaluate the stance and performance of companies on ESG topics, and the results of these assessments are widely publicized.
We have recently experienced significant inflation in commodities prices, including food ingredients, which has significantly increased our operating expenses. Cheese, representing our largest food cost, and other commodities can be subject to significant cost fluctuations due to weather, availability, global demand and other factors that are beyond our control.
We have recently experienced significant inflation in commodities prices, including food ingredients, which has significantly increased our operating expenses. Cheese, representing our largest food cost, and other commodities and ingredients can be subject to significant cost fluctuations due to inflation, weather, availability, global demand and other factors that are beyond our control.
Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default or cross-acceleration provisions, and could increase the costs of availability of credit for us.
Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default or cross-acceleration provisions, and could increase the costs or availability of credit for us.
Disruptions of our critical business or information technology systems could harm our ability to compete and conduct our business. Our critical business and information technology systems have in the past and could in the future be damaged or interrupted by power loss, various technological failures, user errors, cyber-attacks, ransomware sabotage or acts of God.
Disruptions to our critical business or information technology systems could harm our ability to compete and conduct our business. Our critical business and information technology systems have in the past and could in the future be damaged or interrupted by power loss, various technological failures, user errors, cyber-attacks, ransomware sabotage or acts of God.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not prohibited by the Indenture or the Amended Credit Agreement could have the effect of exacerbating the risks associated with our substantial indebtedness or diminishing our ability to make payments on our indebtedness when due, which would reduce the availability of cash flow to fund acquisitions, working capital, capital expenditures, other growth opportunities and other general corporate purposes.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not prohibited by the Indenture or the Credit Agreement could have the effect of exacerbating the risks associated with our substantial indebtedness or diminishing our ability to make payments on our substantial indebtedness when due, which would reduce the availability of cash flow to fund acquisitions, working capital, capital expenditures, other growth opportunities and other general corporate purposes.
Declines in comparable sales, net store openings and related operating profits can impact our stock price. If we do not continue to grow future sales and operating results and meet our related growth targets or external expectations for net restaurant openings or our other strategic objectives in the future, our stock price could decline.
Declines in comparable sales, net restaurant openings and related operating profits can impact our stock price. If we do not continue to grow future sales and operating results and meet our related growth targets or external expectations for net restaurant openings or our other strategic objectives in the future, our stock price could decline.
We expect to fund our expenses and to pay the principal of and interest on our indebtedness from cash flow from operations. Our ability to meet our expenses and to pay principal of and interest on our indebtedness when due thus depends on our future performance, which will be affected by financial, business, economic and other factors.
We expect to fund our expenses and to pay the principal of and interest on our indebtedness from cash flow from operations. Our ability to fund our expenses and to pay principal of and interest on our indebtedness when due thus depends on our future performance, which will be affected by financial, business, economic and other factors.
We intend to continue to expand internationally, which would make the risks related to our International operations more significant over time. Our International restaurants’ results, which are completely franchised, depend heavily on the operating capabilities and financial strength of our franchisees.
We intend to continue to expand internationally, which would make the risks related to our International operations more significant over time. Our International restaurants’ results, which are almost completely franchised, depend heavily on the operating capabilities and financial strength of our franchisees.
Our substantial level of indebtedness could have important consequences, including the following: • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, growth opportunities, acquisitions and other general corporate purposes; • increase our vulnerability to and limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate, regulatory and economic conditions; • expose us to the risk of increased interest rates as borrowings under our Amended Credit Agreement will be subject to variable rates of interest; 17 Table of Contents • increase our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity and access to capital markets; • place us at a competitive disadvantage compared to our competitors that have less debt; and • limit our ability to borrow additional funds.
Our substantial level of indebtedness could have important consequences, including the following: • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, growth opportunities, acquisitions and other general corporate purposes; 19 Table of Contents • increase our vulnerability to and limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate, regulatory and economic conditions; • expose us to the risk of increased interest rates as borrowings under our Credit Agreement will be subject to variable rates of interest; • increase our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity and access to capital markets; • place us at a competitive disadvantage compared to our competitors that have less debt; and • limit our ability to borrow additional funds.
While we believe this geographic diversity is likely to lessen the impact of individual climate change related events on our financial results, our restaurants and operations may nonetheless be vulnerable to the adverse effects of climate change, which are predicted to increase the frequency and severity of weather events and other natural cycles such as wildfires and droughts.
While we believe our geographic diversity is likely to lessen the impact of individual climate-change related events on our financial results, our restaurants and operations may nonetheless be vulnerable to the adverse effects of climate change, which are predicted to increase the frequency and severity of weather events and other natural cycles such as wildfires, floods and droughts.
From time to time, we are involved in a number of lawsuits, claims, investigations, and proceedings consisting of securities, antitrust, intellectual property, employment, consumer, personal injury, corporate governance, commercial and other matters arising in the ordinary course of business. We have been subject to claims in cases containing collective and class action allegations.
From time to time, we are involved in a number of lawsuits, claims, investigations, and proceedings consisting of securities, antitrust, intellectual property, employment, consumer, data privacy, personal injury, corporate governance, commercial and other matters arising in the ordinary course of business. We have been subject to claims in cases containing collective and class action allegations.
Regardless of whether any claims against us are valid, or whether we are ultimately held liable, such litigation may be expensive to defend and may divert resources away from our operations and negatively impact earnings. Further, we may not be able to obtain adequate insurance to protect us from these types of litigation matters or extraordinary business losses.
Regardless of whether any claims against us are valid, or whether we are ultimately held liable, such litigation may be expensive to defend and may divert resources away from our operations and negatively impact results of operations. Further, we may not be able to obtain adequate insurance to protect us from these types of litigation matters or extraordinary business losses.
As we navigate this environment, we may need to offer support for certain franchisees in the form of royalty relief, loans or other support, close unprofitable restaurants or markets, and/or consider other alternatives such as acquiring or purchasing franchise restaurants, QC Centers or operations to operate them until they can be refranchised.
As we navigate this environment, we may need to offer support for certain franchisees in the form of royalty relief, loans or other support, close unprofitable restaurants or markets, and/or consider other alternatives such as acquiring or purchasing franchised restaurants, QC Centers or operations to operate them until they can be refranchised.
If we are unable or unwilling to provide such financing, which is a function of, among other things, prevailing interest rates and a franchisee’s creditworthiness, the number of new restaurant openings may be slower or the rate of closures may be higher than expected and our results of operations may be adversely impacted.
If we are unable or unwilling to provide such financing, which is a function of, among other things, prevailing interest rates and a franchisee’s creditworthiness, the number of new restaurant openings may be lower or the rate of closures may be higher than expected and our results of operations may be adversely impacted.
Our franchisees remain dependent on the availability of financing to remodel or renovate existing locations, upgrade systems and enhance technology, or construct and open new restaurants. From time to time, the Company may provide financing to certain franchisees and prospective franchisees in order to mitigate store closings, allow new units to open, or complete required upgrades.
Our franchisees remain dependent on the availability of financing to remodel or renovate existing locations, upgrade systems and enhance technology, or construct and open new restaurants. From time to time, the Company may provide financing to certain franchisees and prospective franchisees in order to mitigate restaurant closings, allow new units to open, or complete required upgrades.
Increased regulatory scrutiny of food matters, online advertising, product marketing claims, and increased litigation and enforcement actions may increase compliance and legal costs and create other obligations that could adversely affect our business, financial condition or operating results. Governments may also impose requirements and restrictions that impact our business.
Increased regulatory scrutiny of food matters, online advertising, product marketing claims, mandatory fees, and increased litigation and enforcement actions may increase compliance and legal costs and create other obligations that could adversely affect our business, financial condition or operating results. Governments may also impose requirements and restrictions that impact our business.
In particular, the Company and our franchisees have experienced occasional interruptions of our digital ordering solutions, which make online ordering unavailable or slow to respond, negatively impacting sales and the experience of our customers. If our digital ordering solutions do not perform with adequate speed and security, our customers may be less inclined to return to our digital ordering solutions.
In particular, the Company and our franchisees have experienced occasional interruptions of our digital ordering solutions, which make online ordering unavailable or slow to respond, negatively impacting sales and the experience of our customers. If our digital ordering solutions do not perform with adequate speed and security, our customers may be less inclined to use our digital ordering solutions.
Such events have the potential to disrupt our and our franchisees’ operations, cause store closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations. Increasingly complex laws and regulations could adversely affect our business.
Such events have the potential to disrupt our and our franchisees’ operations, cause restaurant closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations. Increasingly complex laws and regulations could adversely affect our business.
We are exposed to fluctuations in prices of commodities. An increase in the cost or sustained high levels of the cost of cheese or other commodities could adversely affect the profitability of our system-wide restaurant operations, particularly if we are unable to increase the selling price of our products to offset increased costs.
We are exposed to fluctuations in prices of commodities and ingredients. An increase in the cost or sustained high levels of the cost of cheese or other commodities and ingredients could adversely affect the profitability of our system-wide restaurant operations, particularly if we are unable to increase the selling price of our products to offset increased costs.
The Indenture and the Amended Credit Agreement allow us to incur additional indebtedness, including secured debt. Such additional indebtedness may be substantial.
The Indenture and the Credit Agreement allow us to incur additional indebtedness, including secured debt. Such additional indebtedness may be substantial.
Higher inflation, and a related increase in costs, including rising interest rates, as well currency restrictions and changes in foreign exchange rates, have impacted our franchisees and their ability to pay royalties, open new restaurants or operate existing restaurants profitably.
Higher inflation, and a related increase in costs, including elevated interest rates, as well as currency restrictions and changes in foreign exchange rates, have impacted our franchisees and their ability to pay royalties, open new restaurants or operate existing restaurants profitably.
Changes in privacy or data protection laws could adversely affect our ability to market our products effectively . We rely on a variety of direct marketing techniques, including email, text messages, social media and postal mailings.
Changes in privacy or data protection laws could adversely affect our ability to market our products effectively . We rely on a variety of direct marketing techniques, including email, text messages, push notifications, social media and postal mailings.
In addition, our Amended Credit Agreement requires us to maintain compliance with specified leverage ratios under certain circumstances.
In addition, our Credit Agreement requires us to maintain compliance with specified leverage ratios under certain circumstances.
An economic downturn or recession, including deterioration in the economic conditions in the U.S. or international markets where we compete, or a slowing or stalled recovery therefrom, may have a material adverse effect on our business, financial condition or results of operations, including a reduction in the demand for our products, longer payment cycles, slower adoption of new technologies and increased price competition.
An economic downturn or recession, including deterioration in the economic conditions in the U.S. or international markets where we or our franchisees operate, or a slowing or stalled recovery therefrom, may have a material adverse effect on our business, financial condition or results of operations, including a reduction in the demand for our products, longer payment cycles, slower adoption of new technologies and increased price competition.
Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine or other potential conflicts. The global economy has been negatively impacted by the military conflict in Ukraine.
Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine, and other actual and potential conflicts. The global economy has been negatively impacted by the military conflict in Ukraine.
The potential adverse effects of COVID-19 or from other potential epidemics or outbreaks could also include, but may not be limited to, our ability to meet consumer demand through the continued availability of our workforce and our franchisees’ workforce; other changes in labor markets affecting us, our franchisees and suppliers; supply chain disruptions and increases in operating costs; adverse impacts from new laws and regulations affecting our business; increased cyber risks and reliance on technology infrastructure to support our business and operations, including through remote-work protocols; fluctuations in foreign currency markets; credit risks of our customers and counterparties; and impairment of 11 Table of Contents long-lived assets, the carrying value of goodwill or other indefinite-lived intangible assets.
The potential adverse effects of potential epidemics or outbreaks could also include, but may not be limited to, our ability to meet consumer demand through the continued availability of our workforce and our franchisees’ workforce; other changes in labor markets affecting us, our franchisees and suppliers, supply chain disruptions and increases in operating costs; adverse impacts from new laws and regulations affecting our business, increased cyber risks and reliance on technology infrastructure to support our business and operations, including through remote-work protocols, fluctuations in foreign currency markets, credit risks of our customers and counterparties, and impairment of long-lived assets, the carrying value of goodwill or other indefinite-lived intangible assets.
If this occurs, we may need to develop alternative marketing strategies, which may not be as effective and could impact the amount and timing of our revenues. Higher labor costs, increased competition for qualified team members and ensuring adequate staffing in our restaurants and QC Centers increase the cost of doing business.
If this occurs, we may need to develop alternative marketing strategies, which may not be as effective and could impact the amount and timing of our revenues. 15 Table of Contents Higher labor costs, increased competition for qualified team members and ensuring adequate staffing in our restaurants and QC Centers increase the cost of doing business.
A decrease in sales, or increased commodity or operating costs, including, but not limited to, employee compensation and benefits or insurance costs, could slow the rate of new store openings or increase the number of store closings.
A decrease in sales, or increased commodity or operating costs, including, but not limited to, employee compensation and benefits or insurance costs, could slow the rate of new restaurant openings or increase the number of restaurant closings.
Despite our best efforts relating to ESG policies, initiatives and reporting, media reports and social media campaigns can create a negative opinion or perception of the company’s efforts. Such media reports and negative publicity could impact customer or investor perception of our Company or industry and can have a material adverse effect on our financial results.
Despite our best efforts relating to ESG policies, initiatives and reporting, media reports and social media campaigns can create a negative opinion or perception of the company’s efforts. 14 Table of Contents Such media reports and negative publicity could impact customer or investor perception of our Company or industry and can have a material adverse effect on our financial results.
Our failure to adequately invest in new technology and adapt to technological developments and industry trends, particularly our digital ordering capabilities, could result in a loss of customers and related market share. Notwithstanding adequate investment in new technology, our marketing and technology initiatives may not be successful in improving our comparable sales results.
Our 16 Table of Contents failure to adequately invest in new technology and adapt to technological developments and industry trends, particularly our digital ordering capabilities, could result in a loss of customers and related market share. Notwithstanding adequate investment in new technology, our marketing and technology initiatives may not be successful in improving our comparable sales results.
You should carefully consider the following risk factors together with all other information included in this Form 10-K and our other publicly filed documents. Industry and Macroeconomic Risks Economic conditions in the U.S. and international markets could adversely affect our business and financial results.
You should carefully consider the following risk factors together with all other information included in this Form 10-K and our other publicly filed documents. 10 Table of Contents Industry and Macroeconomic Risks Economic conditions in the U.S. and international markets could adversely affect our business and financial results.
Climate change may have an adverse impact on our business. We operate in 48 countries globally and recognize that there are inherent climate-related risks wherever business is conducted.
Climate change may have an adverse impact on our business. We operate in 50 countries globally and recognize that there are inherent climate-related risks wherever business is conducted.
Risks Related to our Indebtedness We have incurred substantial debt obligations, which could adversely affect our financial condition, and we may be able to incur substantially more indebtedness, including secured debt, and take other actions that could further exacerbate the risks associated with our substantial indebtedness or affect our ability to satisfy our obligations under our indebtedness.
Risks Related to our Indebtedness We have incurred substantial debt obligations, which could adversely affect our financial condition, and we may incur more indebtedness, including secured debt, and take other actions that could further exacerbate the risks associated with our substantial indebtedness or affect our ability to satisfy our obligations under our indebtedness.
Credit risk is due to the possible failure of the counterparty to perform under the terms of the derivative contract. 18 Table of Contents General Risks Natural disasters, hostilities, social unrest, severe weather and other catastrophic events may disrupt our operations or supply chain.
Credit risk is due to the possible failure of the counterparty to perform under the terms of the derivative contract. General Risks Natural disasters, hostilities, social unrest, severe weather and other catastrophic events may disrupt our operations or supply chain.
The occurrence of a natural disaster, hostilities, cyber-attack, social unrest, terrorist activity, outbreak of epidemic, pandemic or other contagious disease, power outages, severe weather (such as tornados, hurricanes, blizzards, ice storms, floods, heat waves, etc.) or other catastrophic events may disrupt our operations or supply chain and result in the closure of our restaurants (Company-owned or franchised), our corporate offices, any of our QC Centers or the facilities of our suppliers, and can adversely affect consumer spending, consumer confidence levels and supply availability and costs, any of which could materially adversely affect our results of operations.
The occurrence of a natural disaster, hostilities, cyber-attack, social unrest, terrorist activity, outbreak of an epidemic, a pandemic or other widespread health crisis, power outages, severe weather (such as tornados, hurricanes, blizzards, ice storms, floods, heat waves, etc.) or other catastrophic events may disrupt our operations or supply chain and result in the closure of our restaurants (Company-owned or franchised), our corporate offices, any of our QC Centers or the facilities of our suppliers, and can adversely affect consumer spending, consumer confidence levels and supply availability and costs, any of which could materially adversely affect our results of operations.
Our business is susceptible to adverse changes in local, national and global economic conditions, which could make it difficult for us to meet our growth targets. Additionally, we or our franchisees may face challenges securing financing, finding suitable store locations at acceptable terms or securing required Domestic or foreign government permits and approvals.
Our business is susceptible to adverse changes in local, national and global economic conditions, which could make it difficult for us to meet our growth targets. Additionally, we or our franchisees may face challenges securing financing, or securing financing on favorable terms, finding suitable restaurant locations at acceptable terms or securing required Domestic or foreign government permits and approvals.
Consumer perceptions of our brand are affected by a variety of factors, such as the nutritional content and preparation of our food, the quality of the ingredients we use, our marketing and advertising, our corporate culture, our policies and systems related to diversity, equity and inclusion, our business practices, our engagement in local communities and the manner in which we source the commodities we use.
Consumer perceptions of our brand are affected by a variety of factors, such as the nutritional content and preparation of our food, the quality of the ingredients we use, our marketing and advertising, our corporate culture, our policies and systems related to DEI, our business practices, our engagement in local communities and the manner in which we source the commodities we use.
Third-party business processes we utilize include information technology, gift card authorization and processing, other payment processing, benefits, and other accounting and business services. We conduct third-party due diligence and seek to obtain contractual assurance that our vendors will maintain adequate controls, such as adequate security against data breaches.
Third-party business processes we utilize include information technology, gift card authorization and processing, other payment processing, benefits, and other accounting and business services. We conduct third-party due diligence and seek to obtain contractual assurance that our vendors will maintain adequate controls, such as adequate security against cybersecurity incidents.
We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors. In addition, subject to restrictions in the agreements governing our existing and future indebtedness, we may be able to incur substantially more indebtedness in the future, resulting in higher leverage.
We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors. In addition, subject to restrictions in the agreements governing our existing and any future indebtedness, we may incur additional indebtedness in the future, resulting in higher leverage.
Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Further, statements about our ESG-related initiatives and goals, including any changes to such initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
We and our franchisees have experienced, and could continue to experience, a shortage of labor for restaurant positions due to job market trends and conditions, which could decrease the pool of available qualified talent for key functions.
We and our franchisees have experienced, and could continue to experience, a shortage of labor for restaurant positions due to job market trends and conditions, which shortage has increased our and our franchisees’ labor expenses and could decrease the pool of available qualified talent for key functions.
The Company is unable to predict the duration or the extent of the macroeconomic deterioration in the United Kingdom or the extent to which franchised restaurants will be impacted.
The Company is unable to predict the duration or the extent of the macroeconomic deterioration in the United Kingdom or the extent to which our corporate and franchised restaurants will be impacted.
The emergence or growth of new competitors, in the pizza category or in the food service industry generally, may make it difficult for us to maintain or increase our market share and could negatively impact our sales and our system-wide restaurant operations.
The emergence or growth of these competitors, in the pizza category or in the food service industry generally, may make it difficult for us to maintain or increase our market share and could negatively impact our sales, profit margins, royalties, and our system-wide restaurant operations.
A failure of one of our Domestic or International suppliers to meet our quality standards, or meet Domestic or International food industry standards, could result in a disruption in our supply chain and negatively impact our brand and our results. 12 Table of Contents Failure to preserve the value and relevance of our brand could have a negative impact on our financial results.
A failure of one of our Domestic or International suppliers to meet our quality standards, or comply with Domestic or International food industry standards, could result in a disruption in our supply chain and negatively impact our brand and our results. Failure to preserve the value and relevance of our brand could have a negative impact on our financial results.
There also has been increased stakeholder focus, including by US and foreign governmental authorities, investors, media and nongovernmental organizations, on environmental sustainability matters, such as climate change, the reduction of greenhouse gases and water consumption.
There also has been increased stakeholder focus, including by US and foreign governmental authorities, investors, media and non-governmental organizations, on environmental sustainability matters, such as climate change, the reduction of 21 Table of Contents greenhouse gases and water consumption.
However, prolonged disruption in the supply of products from or to our QC Centers due to weather, climate change, natural disasters, COVID-19, crop disease, food safety incidents, regulatory compliance, labor dispute or interruption of service by carriers could increase costs, limit the availability of 16 Table of Contents ingredients critical to our restaurant operations and have a significant impact on results.
Prolonged disruption in the supply of products from or to our QC Centers due to weather, climate change, natural disasters, public health crises, crop disease, food safety incidents, regulatory compliance, labor dispute or interruption of service by carriers could increase costs, limit the availability of 18 Table of Contents ingredients critical to our restaurant operations and have a significant impact on results.
Failure to use social media effectively could lead to a decline in brand value and revenue. Other risks associated with the use of social media include improper disclosure of proprietary information, negative comments about our brand, exposure of personally identifiable information, fraud, hoaxes or malicious dissemination of false information.
Failure to use social media effectively could negatively impact brand value and revenue. Other risks associated with the use of social media include improper disclosure of proprietary information, negative comments about our brand, exposure of personally identifiable information, fraud, hoaxes or malicious dissemination of false information.
Our current insurance may not be adequate and we may experience claims in excess of our reserves. Our insurance programs for workers’ compensation, owned and non-owned automobiles, general liability, property, and health insurance coverage provided to our employees are funded by the Company up to certain retention levels under our retention programs. Retention limits generally range up to $0.5 million.
Our current insurance may not be adequate and we may experience claims in excess of our reserves. Our insurance programs for workers’ compensation, owned and non-owned automobiles, general liability, property, cyber insurance, and health insurance coverage provided to our employees are funded by the Company up to certain retention levels under our retention programs.
During 2022, our business in the United Kingdom was subject to adverse macroeconomic conditions, including high inflation, rising interest rates, an energy crisis, slowing economic growth, volatile exchange rates, and an increased VAT tax rate, which resulted in negative comparable sales and a challenging operating environment for our franchisees. These challenges also impacted the financial condition of our UK franchisees.
During 2022 and 2023, our business in the United Kingdom was subject to adverse macroeconomic conditions, including inflation, elevated interest rates, the energy crisis, slowing economic growth, and volatile exchange rates, which resulted in negative comparable sales and a challenging operating environment for our franchisees. These challenges also impacted the financial condition of our UK franchisees.
Our success increasingly relies on the financial success and cooperation of our franchisees, yet we have limited influence over their operations. Our franchisees manage their businesses independently, and therefore are responsible for the day-to-day operation of their restaurants and compliance with applicable laws.
Our franchise business model presents a number of risks. Our success increasingly relies on the financial success and cooperation of our franchisees, yet we have limited influence over their operations. Our franchisees manage their businesses independently, and therefore are responsible for the day-to-day operation of their restaurants and compliance with applicable laws.
As techniques used in cyber-attacks evolve, we may not be able to timely detect threats or anticipate and implement adequate security measures. The integrity and protection of the customer, employee, franchisee and Company data are critical to us.
As techniques used in cyber-attacks evolve, including but not limited to the potential use of artificial intelligence in such attacks, we may not be able to timely detect threats or anticipate and implement adequate security measures. The integrity and protection of the customer, employee, franchisee and Company data are critical to us.
Also, if sales trends worsen for franchisees, especially in emerging markets and/or high-cost markets, their financial results may deteriorate, which in the past has resulted in, and could in the future result in, among other things, required financial support from us, higher numbers of restaurant closures (which could cause us to miss our net unit development targets), reduced numbers of restaurant openings, franchisee bankruptcies or restructuring activities, delayed or reduced payments to us, or increased franchisee assistance, which reduces our revenues. 13 Table of Contents Our success also increasingly depends on the willingness and ability of our franchisees to remain aligned with us on operating, promotional and marketing plans.
Also, if sales trends worsen for franchisees, especially in emerging markets and/or high-cost markets, their financial results may deteriorate, which in the past has resulted in, and could in the future result in, among other things, required financial support from us, higher numbers of restaurant closures (which could cause us to miss our net unit development targets), reduced numbers of restaurant openings, franchisee bankruptcies or restructuring activities, delayed or reduced payments to us, or increased franchisee assistance, which reduces our revenues.
Our outstanding debt as of December 25, 2022 was $605.0 million, which was comprised of $400.0 million outstanding under our 3.875% senior notes due 2029 (the “Notes”) and $205.0 million under our revolving credit facility (the “PJI Revolving Facility”) that forms part of our amended and restated credit agreement (the “Amended Credit Agreement”).
Our outstanding debt as of December 31, 2023 was $764.0 million, which was comprised of $400.0 million outstanding under our 3.875% senior notes due 2029 (the “Notes”) and $364.0 million under our revolving credit facility (the “PJI Revolving Facility”) that forms part of our amended and restated credit agreement (the “Credit Agreement”).
We expect some of these conditions to continue in 2023. As we navigate this challenging economic environment, we are investing in capabilities to improve our operations and are working to re-position the franchise base to further strengthen our business in the United Kingdom.
We expect some of these conditions to continue in 2024. As we navigate this challenging economic environment, we are investing in capabilities to improve our operations and working to re-position the franchise base to further strengthen our business in the United Kingdom by exiting poorly performing franchisees and permanently closing certain restaurants.
Changes in consumer preferences and trends could negatively affect us (for example, changes in consumer perceptions of certain ingredients that could cause consumers to avoid pizza or some of its ingredients in favor of foods that are or are perceived as healthier, lower-calorie, or lower in carbohydrates or otherwise based on their ingredients or nutritional content).
Changes in consumer preferences and trends could negatively affect us (for example, changes in consumer perceptions of certain ingredients that could cause consumers to avoid pizza or some of its ingredients in favor of foods that are or are perceived as healthier, lower-calorie, amenable to certain diets or lower in carbohydrates or otherwise based on their ingredients or nutritional content) or reduced consumption of pizza as a result of new weight loss drugs, such as GLP inhibitors and others.
Accordingly, the enactment of additional state or local minimum wage increases above federal wage rates or regulations related to exempt employees has increased and could continue to increase labor costs for our Domestic system-wide 14 Table of Contents operations. A significant increase in the federal minimum wage requirement could adversely impact our financial condition and results of operations.
Accordingly, the enactment of additional state or local minimum wage increases above federal wage rates or regulations related to exempt employees has increased and could continue to increase labor costs for our Domestic system-wide operations.
Additionally, our ability to achieve the anticipated benefits of our corporate reorganization are subject to assumptions and uncertainties. If we do not realize the anticipated benefits from these measures, or if we incur costs greater than anticipated, our financial condition and operating results may be adversely affected.
Additionally, if we do not realize the anticipated benefits from these measures, or if we incur costs greater than anticipated, our financial condition and operating results may be adversely affected.
If our efforts to re-position the franchise base are unsuccessful, we might need to find new operators for certain unprofitable restaurants and/or close them, which could adversely impact the Company’s financial condition and results of operation in the region.
If our efforts to re-position the franchise base or improve the profitability of our Company-owned restaurants are unsuccessful, we might need to find new operators for certain unprofitable restaurants and/or close unprofitable locations in the future, which would trigger certain lease and/or loan impairments, and could adversely impact the Company’s financial condition and results of operations in the region.
We have franchised restaurants located in China and South Korea.
We have franchised restaurants located in China, South Korea, Israel and the Middle East.
We had approximately $395.0 million of remaining availability under the PJI Revolving Facility as of December 25, 2022.
We had approximately $236.0 million of remaining availability under the PJI Revolving Facility as of December 31, 2023.
These insurance programs may not be adequate to protect us, and it may be difficult or impossible to obtain additional coverage or maintain current coverage at a reasonable cost. We also have experienced claims volatility and high costs for our insurance programs.
Retention limits generally range up to $0.5 million with even higher retention limits for certain types of coverage. These insurance programs may not be adequate to protect us, and it may be difficult or impossible to obtain additional coverage or maintain current coverage at a reasonable cost. We also have experienced claims volatility and high costs for our insurance programs.
As a result, our sales can be directly and negatively impacted by actions of our competitors, the emergence or growth of new competitors, consumer sentiment or other factors outside our control. One of our competitive strengths is our “BETTER INGREDIENTS. BETTER PIZZA. ® ” brand promise.
As a result, our sales can be directly and negatively impacted by actions of our competitors, the emergence or growth of new competitors, consumer sentiment or other factors outside our control.
In many cases, particularly collective and class action cases, we may not be able to estimate the amount of potential losses and/or our estimates may prove to be insufficient.
We evaluate all of the claims and proceedings involving us to assess the expected outcome, and where possible, we estimate the amount of potential losses to us. In many cases, particularly collective and class action cases, we may not be able to estimate the amount of potential losses and/or our estimates may prove to be insufficient.
These plans could also impact the existing location of our QC Center in Louisville. As a result, we have incurred and will incur certain non-recurring corporate reorganization costs, and these expenses have impacted and could adversely impact our results of operations during the relevant period, reduce our cash position and/or result in an impairment risk related to these assets.
We have incurred and expect to continue to incur certain non-recurring corporate reorganization costs, including the ongoing restructuring of our international business, and these expenses have impacted and could adversely impact our results of operations during the relevant period, reduce our cash position and/or result in an impairment risk related to these assets.
To the extent we provide financing to franchisees, our results could be negatively impacted by negative performance of these franchisee loans. Our dependence on a sole supplier or a limited number of suppliers for some ingredients and other supplies could result in disruptions to our business. Domestic restaurants purchase substantially all food and related products from our QC Centers.
To the extent we provide financing to franchisees, our results could be negatively impacted by negative performance of these franchisee loans, including franchisees defaulting on payment terms or being unable to repay loans. Our dependence on a sole supplier or a limited number of suppliers for some ingredients and other supplies could result in disruptions to our business.
In addition, turnover in our Atlanta, Louisville and Milton Keynes, UK, corporate office support teams could distract our employees, decrease employee morale, harm our reputation, and negatively impact the overall performance of our corporate support teams. As a result of these or other similar risks, our business, results of operations and financial condition may be adversely affected.
As a result of any corporate reorganization, we could face turnover in our corporate offices and international support teams that could distract our employees, decrease employee morale, harm our reputation, and negatively impact the overall performance of our corporate support teams. These or other similar risks, may adversely affect our business, results of operations and financial condition.
In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites, and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other persons.
Social media platforms, including blogs, chat platforms, social media websites, and other forms of internet-based communications allow individuals access to a broad audience of consumers and other persons.
If we fail to comply with these laws or regulations, it could damage our brand and subject the Company to reputational damage, significant litigation, monetary damages, regulatory enforcement actions or fines in various jurisdictions. For example, a failure to comply with the GDPR could result in fines up to the greater of €20 million or 4% of annual global revenues.
If we fail to comply with these laws or regulations, it could damage our brand and subject the Company to reputational damage, significant litigation, monetary damages, regulatory enforcement actions or fines in various jurisdictions.
The Company is unable to predict how long the current environment will last or if it will resume corporate support to impacted franchised restaurants. 10 Table of Contents In addition, our international business is subject to the risks of other geopolitical tensions and conflicts, including, for example, the ongoing military conflict between Russia and Ukraine described above, and changes in China-Taiwan and United States-China relations.
The Company is unable to predict how long the current environment will last or the long-term impact to these franchised locations. In addition, our international business is subject to the risks of other geopolitical tensions and conflicts, including, for example, the ongoing conflicts described above and changes in China-Taiwan and United States-China relations.
However, given the evolving health, economic, social, and governmental environments, the specific impact that COVID-19 could have on these risks remains uncertain. To the extent that COVID-19 continues to adversely affect the U.S. and global economy, our business, financial conditions or results of operations, it may also heighten other risks described in this section.
To the extent that COVID-19 continues to adversely affect the U.S. and global economy, our business, financial conditions or results of operations, it may also heighten other risks described in this section.
Planned growth targets and the ability to operate new and existing restaurants profitably are affected by economic, regulatory and competitive conditions and consumer buying habits.
Additionally, we may fail to attract new qualified franchisees or existing franchisees may close underperforming locations. Planned growth targets and the ability to operate new and existing restaurants profitably are affected by economic, regulatory and competitive conditions and consumer buying habits.
The Company has no company-owned restaurants in Russia or Ukraine and has suspended corporate support for its master franchisee in Russia, which operates and supplies all 188 franchised Papa John’s restaurants there.
The Company has no company-owned restaurants in Russia or Ukraine and has suspended corporate support for its master franchisee in Russia, which operates and supplies all 188 franchised Papa John’s restaurants there. The Company is unable to predict how long the current environment will last or if it will resume corporate support to impacted franchised restaurants.
It remains difficult to predict the full impact of the COVID-19 pandemic on the broader economy and how consumer behavior may change, and whether such change is temporary or permanent.
Certain parts of our operations may continue to be impacted by the continuing effects of COVID-19, including resurgences and variants of the virus. It remains difficult to predict the full impact of the COVID-19 pandemic on the broader economy and how consumer behavior may change, and whether such change is temporary or permanent.
Accordingly, changes in currency exchange rates will cause our revenues, investment income and operating results to fluctuate. We have not historically hedged our exposure to foreign currency fluctuations. Our International revenues and earnings may be adversely impacted as the U.S. dollar rises against foreign currencies because the local currency will translate into fewer U.S. dollars.
We have not historically hedged our exposure to foreign currency fluctuations. Our International revenues and earnings may be adversely impacted as the U.S. dollar rises against foreign currencies because the local currency will translate into fewer U.S. dollars. Additionally, the value of certain assets or loans denominated in local currencies may deteriorate.
Constantly changing information security threats, particularly persistent cyber security threats, pose risks to the security of our systems and networks, and the confidentiality, availability and integrity of our data and the availability and integrity of our critical business functions.
Constantly changing information security threats, particularly persistent cybersecurity threats, pose risks to the security of our systems and networks, and the confidentiality, availability and integrity of our data and the availability and integrity of our critical business functions. This could include the theft of our intellectual property, trade secrets or sensitive financial information.
For example, some local government agencies have implemented ordinances that restrict the sale of certain food and drink products, or the type of packaging and utensils that may be used.
For example, some state and local governments have implemented laws and ordinances that restrict the sale of certain food and drink products, the type of packaging and utensils that may be used, or the manner in which mandatory fees are disclosed to consumers.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected. Our franchise business model presents a number of risks.
If our ESG-related data, processes and reporting fail to meet investor, customer, consumer, employee or other stakeholders’ evolving expectations and standards, are incomplete or inaccurate, or certain groups or customers disagree with our ESG initiatives or goals, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, brand, appeal to investors, employee retention, business, financial performance and growth could be adversely affected.
We operate globally and changes in tax laws could adversely affect our results. We have international operations and generate substantial revenues and profits in foreign jurisdictions.
This could result in a decrease in our reported asset value and reduction in our net income. 23 Table of Contents We operate globally and changes in tax laws could adversely affect our results. We operate globally and changes in tax laws could adversely affect our results. We have international operations and generate substantial revenues and profits in foreign jurisdictions.
We depend on the Papa John’s brand name and rely on a combination of trademarks, service marks, copyrights, and similar intellectual property rights to protect and promote our brand. We believe the success of our business depends on our continued ability to exclusively use our existing marks to increase brand awareness and further develop our brand, both domestically and abroad.
We believe the success of our business depends on our continued ability to exclusively use our existing marks to increase brand awareness and further develop our brand, both domestically and abroad.
We may be required to expend additional funds to effectively improve consumer sentiment and sales, and we may also be required to engage in additional activities to retain customers or attract new 15 Table of Contents customers to the brand. Such marketing expenses and promotional activities, which could include discounting our products, could adversely impact our results.
We may be required to expend additional funds to effectively improve consumer sentiment and sales, and we may also be required to engage in additional activities to retain customers or attract new customers to the brand.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThere were 98 such restaurants at December 25, 2022 (60 in Maryland, 26 in Virginia, and 12 in G eorgia). 22 Table of Contents International Restaurants: Franchised Azerbaijan 13 Bahrain 21 Bolivia 5 Cambodia 7 Cayman Islands 2 Chile 148 China 262 Colombia 56 Costa Rica 51 Cyprus 8 Dominican Republic 19 Ecuador 29 Egypt 74 El Salvador 36 Germany 15 Guam 3 Guatemala 33 Honduras 6 Iraq 1 Ireland 80 Israel 25 Kazakhstan 7 Kuwait 35 Kyrgyzstan 3 Mexico 57 Morocco 7 Netherlands 32 Nicaragua 4 Oman 21 Pakistan 18 Panama 32 Peru 51 Philippines 15 Poland 7 Portugal 3 Puerto Rico 26 Qatar 50 Saudi Arabia 20 South Korea 241 Spain 88 Trinidad 9 Tunisia 11 Turkey 62 United Arab Emirates 82 United Kingdom 532 Venezuela 23 Total International Papa John’s Restaurants 2,330 23 Table of Contents Most Papa John’s Company-owned restaurants are located in leased space.
Biggest changeThere were 98 such restaurants at December 31, 2023 (59 in Maryland, 26 in Virginia, and 13 in G eorgia). 27 Table of Contents International Restaurants: Company Franchised Total Azerbaijan — 15 15 Bahrain — 23 23 Bolivia — 5 5 Cambodia — 7 7 Chile — 154 154 China — 317 317 Colombia — 60 60 Costa Rica — 56 56 Cyprus — 10 10 Dominican Republic — 21 21 Ecuador — 31 31 Egypt — 78 78 El Salvador — 41 41 Germany — 14 14 Guam — 2 2 Guatemala — 35 35 Honduras — 15 15 Iraq — 1 1 Ireland — 80 80 Israel — 29 29 Jordan — 7 7 Kazakhstan — 11 11 Kenya — 1 1 Kuwait — 35 35 Kyrgyzstan — 3 3 Mexico — 50 50 Morocco — 7 7 Netherlands — 17 17 Nicaragua — 4 4 Oman — 28 28 Pakistan — 28 28 Panama — 34 34 Peru — 60 60 Philippines — 15 15 Poland — 11 11 Portugal — 3 3 Puerto Rico — 26 26 Qatar — 55 55 Saudi Arabia — 24 24 South Korea — 254 254 Spain — 90 90 Trinidad — 9 9 Tunisia — 14 14 Turkey — 55 55 United Arab Emirates — 92 92 United Kingdom 117 407 524 Uzbekistan — 3 3 Venezuela — 19 19 Total International Papa John’s Restaurants 117 2,356 2,473 Most Papa John’s Company-owned restaurants are located in leased space.
As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are also contingently liable for payment of approximately 53 Domestic leases. Our corporate office in Atlanta, Georgia, is located in a leased space.
As a 28 Table of Contents result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are also contingently liable for payment of approximately 48 Domestic leases. Our corporate office in Atlanta, Georgia, is located in a leased space.
Item 2. Properties As of December 25, 2022, there were 5,706 Papa John’s restaurants worldwide. The following tables provide the locations of our restaurants.
Item 2. Properties As of December 31, 2023, there were 5,906 Papa John’s restaurants worldwide. The following tables provide the locations of our restaurants.
We define “North America” as the United States and Canada and “Domestic” as the contiguous United States. 21 Table of Contents North America Restaurants: Company (a) Franchised Total Alabama 3 88 91 Alaska — 10 10 Arizona — 67 67 Arkansas — 28 28 California — 175 175 Colorado — 47 47 Connecticut — 5 5 Delaware — 17 17 District of Columbia — 10 10 Florida 41 259 300 Georgia 90 98 188 Hawaii — 17 17 Idaho — 14 14 Illinois 8 72 80 Indiana 44 92 136 Iowa — 24 24 Kansas 16 19 35 Kentucky 42 64 106 Louisiana — 60 60 Maine — 3 3 Maryland 60 42 102 Massachusetts — 7 7 Michigan — 32 32 Minnesota — 35 35 Mississippi — 34 34 Missouri 41 27 68 Montana — 9 9 Nebraska — 13 13 Nevada — 25 25 New Hampshire — 3 3 New Jersey — 54 54 New Mexico — 17 17 New York — 85 85 North Carolina 104 80 184 North Dakota — 10 10 Ohio — 161 161 Oklahoma — 36 36 Oregon — 14 14 Pennsylvania — 84 84 Rhode Island — 2 2 South Carolina 9 77 86 South Dakota — 10 10 Tennessee 38 80 118 Texas — 302 302 Utah — 32 32 Virginia 26 119 145 Washington — 43 43 West Virginia — 23 23 Wisconsin — 25 25 Wyoming — 8 8 Total U.S.
We define “North America” as the United States and Canada and “Domestic” as the contiguous United States. 26 Table of Contents North America Restaurants: Company (a) Franchised Total Alabama 3 89 92 Alaska — 10 10 Arizona — 67 67 Arkansas — 28 28 California — 165 165 Colorado — 48 48 Connecticut — 5 5 Delaware — 17 17 District of Columbia — 9 9 Florida 41 260 301 Georgia 91 104 195 Hawaii — 19 19 Idaho — 13 13 Illinois 8 73 81 Indiana 46 95 141 Iowa — 25 25 Kansas 16 21 37 Kentucky 37 68 105 Louisiana — 59 59 Maine — 4 4 Maryland 59 42 101 Massachusetts — 7 7 Michigan — 31 31 Minnesota — 37 37 Mississippi — 33 33 Missouri 41 27 68 Montana — 9 9 Nebraska — 13 13 Nevada — 24 24 New Hampshire — 3 3 New Jersey — 57 57 New Mexico — 17 17 New York — 86 86 North Carolina 104 81 185 North Dakota — 10 10 Ohio — 165 165 Oklahoma — 36 36 Oregon — 14 14 Pennsylvania — 88 88 Rhode Island — 2 2 South Carolina 9 77 86 South Dakota — 11 11 Tennessee 39 79 118 Texas — 310 310 Utah — 32 32 Virginia 26 119 145 Washington — 49 49 West Virginia — 24 24 Wisconsin 11 17 28 Wyoming — 10 10 Total U.S.
The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. The initial lease terms of the franchisee subleases are generally five to ten years. See “Note 3. Leases” of “Notes to Consolidated Financial Statements” for additional information. Item 3. Legal Proceedings The information contained in “Note 19.
The initial lease terms on the franchised sites in the UK are generally 15 years. The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. The initial lease terms of the franchisee subleases are generally five to ten years. See “Note 3.
Nine of our 12 North America QC Centers are located in leased spaces, with the remaining three QC Centers located in buildings we own. Our corporate office and our printing operations located in Louisville, KY are in buildings owned by us.
Nine of our 12 North America QC Centers are located in leased spaces, with the remaining three QC Centers located in buildings we own. Our corporate office located in Louisville, Kentucky is in a building owned by us. We also maintain a Company-owned office and a full-service QC Center outside of London, UK, where our International operations are managed.
Papa John’s Restaurants 522 2,658 3,180 Canada — 196 196 Total North America Papa John’s Restaurants 522 2,854 3,376 ______________________________ (a) Company-owned Papa John’s restaurants include re staurants owned by majority-owned subsidiaries.
Papa John’s Restaurants 531 2,689 3,220 Canada — 213 213 Total North America Papa John’s Restaurants 531 2,902 3,433 ______________________________ (a) Company-owned Papa John’s restaurants include re staurants owned by majority-owned subsidiaries.
Litigation, Commitments and Contingencies” of “Notes to Consolidated Financial Statements” is incorporated by reference herein.
Leases” of “Notes to Consolidated Financial Statements” for additional information. Item 3. Legal Proceedings The information contained in “Note 19. Litigation, Commitments and Contingencies” of “Notes to Consolidated Financial Statements” is incorporated by reference herein.
Removed
We also maintain a Company-owned office and a full-service QC Center outside of London, UK, where our International operations are managed. At December 25, 2022, we leased and subleased approximately 442 Papa John’s restaurant sites to franchisees in the UK. The initial lease terms on the franchised sites in the UK are generally 15 years.
Added
As of the fourth quarter of 2023, we leased the building of our previously-owned printing operations located in Louisville to a third-party. S ee “Note 22. Divestitures” of “ Notes to Consolidated Financial Statements ” for additional information. At December 31, 2023, we leased and subleased approximately 322 Papa John’s restaurant sites to franchisees in the UK.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 24 Item 4. Mine Safety Disclosures 24 Information About Our Executive Officers 24 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Intentionally Omitted 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A.
Biggest changeItem 3. Legal Proceedings 29 Item 4. Mine Safety Disclosures 30 Information About Our Executive Officers 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 6. [Reserved] 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 46 Item 8. Financial Statements and Supplementary Data 47
Quantitative and Qualitative Disclosures About Market Risk 52 Item 8. Financial Statements and Supplementary Data 54

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

6 edited+6 added−7 removed1 unchanged
Biggest changeGugino spent 18 years at Patterson Companies Inc., including four years as Executive Vice President and Chief Financial Officer. Amanda Clark was appointed Chief International and Development Officer in May 2022 after previously serving as Chief Development Officer since joining Papa Johns in February 2020. Ms.
Biggest changeAmanda Clark was appointed Chief Operating Officer, International in September 2023 after previously serving as Chief International and Development Officer since May 2022 and Chief Development Officer since joining Papa Johns in February 2020. Ms. Clark joined Papa Johns from Taco Bell where she served as Executive Vice President of Restaurant Experience from February 2019 to February 2020.
Oyler previously served as Senior Vice President, Chief Legal Officer from May 2018 to October 2018 and Senior Vice President, General Counsel from May 2014 to May 2018. Additionally, Ms. Oyler served as Senior Vice President, Legal Affairs from November 2012 to May 2014 and as Vice President and Senior Counsel since joining the Company’s legal department in 1999.
Oyler was appointed Corporate Secretary in July 2020 and Chief Legal & Risk Officer in October 2018. Ms. Oyler previously served as Senior Vice President, Chief Legal Officer from May 2018 to October 2018 and Senior Vice President, General Counsel from May 2014 to May 2018. Additionally, Ms.
Item 4. Mine Safety Disclosures None. Information About Our Executive Officers Set forth below are the current executive officers of Papa John’s: Name Age (a) Position First Elected Executive Officer Robert M. Lynch 46 President and Chief Executive Officer 2019 Ann B. Gugino 50 Chief Financial Officer 2020 Amanda Clark 43 Chief International and Development Officer 2020 Caroline M.
Item 4. Mine Safety Disclosures None. 29 Table of Contents Information About Our Executive Officers Set forth below are the current executive officers of Papa John’s: Name Age 1 Position First Elected Executive Officer Robert M.
Lynch has more than 20 years combined experience in the QSR and consumer packaged goods industries, and also held senior roles at HJ Heinz Company and Procter & Gamble. Ann B. Gugino was appointed to Chief Financial Officer in October 2020. Ms.
Lynch has more than 20 years combined experience in the QSR and consumer packaged goods industries, and also held senior roles at HJ Heinz Company and Procter & Gamble. Ravi Thanawala was appointed Chief Financial Officer in July 2023. He joined Papa Johns from Nike, Inc., where he most recently served as Chief Financial Officer of Nike North America.
Prior to joining Taco Bell, she worked at Procter and Gamble for nearly 12 years on some of P&G’s biggest brands, such as Olay, Pampers and Oral-B. Caroline M. Oyler was appointed Corporate Secretary in July 2020 and Chief Legal & Risk Officer in October 2018. Ms.
She also served as Senior Vice President, North America Development from May 2017 to February 2019. In addition, Ms. Clark served as general manager for Taco Bell Canada. Prior to joining Taco Bell, she worked at Procter and Gamble for nearly 12 years on some of P&G’s biggest brands, such as Olay, Pampers and Oral-B. Caroline M.
She also served as interim head of Human Resources from December 2008 to September 2009. Prior to joining Papa Johns, Ms. Oyler practiced law with the firm Wyatt, Tarrant and Combs LLP. C. Max Wetzel was appointed Executive Vice President, Chief Operating Officer in May 2022. Mr.
Oyler served as Senior Vice President, Legal Affairs from November 2012 to May 2014 and as Vice President and Senior Counsel since joining the Company’s legal department in 1999. She also served as interim head of Human Resources from December 2008 to September 2009. Prior to joining Papa Johns, Ms.
Removed
Oyler 57 Chief Legal and Risk Officer and Corporate Secretary 2018 C. Max Wetzel (b) 46 Executive Vice President, Chief Operations Officer 2019 (a) Ages are as of January 1, 2023 (b) On February 6, 2023, Mr.
Added
Lynch 47 President and Chief Executive Officer 2019 Ravi Thanawala 39 Chief Financial Officer 2023 Amanda Clark 2 44 Chief International Officer 2020 Caroline M. Oyler 58 Chief Legal and Risk Officer and Corporate Secretary 2018 Robert M. Lynch was appointed as President and Chief Executive Officer in August 2019. Mr.
Removed
Wetzel notified the Company of his intention to resign from his position with the Company, effective March 17, 2023, to assume a chief executive officer position with another company. Robert M. Lynch was appointed as President and Chief Executive Officer in August 2019. Mr.
Added
During his seven years at Nike, Inc., Mr. Thanawala also served as the Global VP and CFO of the Converse brand, which included working within a franchise model that comprised most of the brand’s international business.
Removed
Gugino joined Papa John’s from Target Corporation where she served as Senior Vice President, Financing Planning and Analysis since 2018, providing overall strategy, guidance, and direction in the development and execution of Target’s planning, analysis and capital investment portfolios. Prior to Target, Ms.
Added
In addition, he was the Global VP of Retail Excellence, overseeing the brand’s performance across its business channels of franchises, licenses, direct to consumer and wholesale during a time of digital transformation for the business. Prior to Nike, Inc., Mr. Thanawala spent eight years at ANN INC. with progressively increasing responsibilities in finance and operations.
Removed
Clark joined Papa Johns from Taco Bell where she served as Executive Vice President of Restaurant Experience from February 2019 to February 2020. She also served as 24 Table of Contents Senior Vice President, North America Development from May 2017 to February 2019. In addition, Ms. Clark served as general manager for Taco Bell Canada.
Added
He served in the finance leadership role for LOFT; led ANN INC’s Asia operations, global logistics and international trade based in Hong Kong; and eventually became CFO of the ANN INC. business, a subsidiary of Ascena Retail Group, Inc.
Removed
Wetzel previously served as Executive Vice President, Chief Commercial Officer from October 2021 to May 2022 and as Chief Commercial and Marketing Officer from November 2019 to October 2021. Mr. Wetzel joined Papa Johns from PPG Architectural Coatings where he served as Vice President Consumer Brands and Business Transformation – U.S. and Canada from July 2018. Also at PPG, Mr.
Added
Oyler practiced law with the firm Wyatt, Tarrant and Combs LLP.
Removed
Wetzel served as Vice President Home Centers and Global Strategic Marketing from June 2016 through July 2018 and as General Manager Home Centers and Chief Marketing Officer U.S. & Canada starting in November 2014. Prior to PPG, Mr. Wetzel worked at H.J.
Added
There are no family relationships between any of the directors or executive officers of the Company. 1 Ages are as of January 1, 2024 2 On January 23, 2024, Amanda Clark notified the Company of her intention to resign from her position with the Company, effective March 1, 2024. 30 Table of Contents PART II
Removed
Heinz Company for 10 years in a variety of domestic and global roles, leading consumer-driven businesses, developing brand marketing strategies and delivering profitable growth. There are no family relationships between any of the directors or executive officers of the Company. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+2 added−2 removed4 unchanged
Biggest changeThe following table summarizes our repurchase activity by fiscal period during the fourth quarter ended December 25, 2022 (in thousands, except per share amounts): Fiscal Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 9/26/2022 - 10/23/2022 — $ — — $ 329,800 10/24/2022 - 11/20/2022 88 82.51 88 322,559 11/21/2022 - 12/25/2022 273 83.34 273 299,800 Total 361 $ 83.14 361 $ 299,800 Subsequent to year-end, we acquired an additional 319,307 shares at an aggregate cost of $27.6 million.
Biggest changeThe following table summarizes our repurchase activity by fiscal period during the fourth quarter ended December 31, 2023 (in thousands, except per share amounts): Fiscal Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs 9/25/2023 - 10/22/2023 — $ — — $ 90,160 10/23/2023 - 11/19/2023 — — — 90,160 11/20/2023 - 12/31/2023 — — — 90,160 Total — $ — — $ 90,160 We did not repurchase any shares subsequent to year-end.
The graph assumes the value of hypothetical investments in the Company’s common stock and in each index was $100 on December 31, 2017, and that all dividends were reinvested on the day of issuance. The returns shown are based on historical results and are not intended to suggest future performance.
The graph assumes the value of hypothetical investments in the Company’s common stock and in each index was $100 on December 30, 2018, and that all dividends were reinvested on the day of issuance. The returns shown are based on historical results and are not intended to suggest future performance.
The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is incorporated herein by reference to Part III, Item 12 of this Form 10-K. 26 Table of Contents Stock Performance Graph The following performance graph compares the cumulative shareholder return of the Company’s common stock for the five-year period between December 31, 2017 and December 25, 2022 to (i) the Nasdaq U.S.
The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is incorporated herein by reference to Part III, Item 12 of this Form 10-K. 31 Table of Contents Stock Performance Graph The following performance graph compares the cumulative shareholder return of the Company’s common stock for the five-year period between December 30, 2018 and December 31, 2023 to (i) the Nasdaq U.S.
Approximately $272.2 million remained available under the Company’s share repurchase program as of February 16, 2023. The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program.
Approximately $90.2 million remained available under the Company’s share repurchase program as of February 22, 2024. The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The Nasdaq Global Select Market tier of The Nasdaq Stock Market under the symbol “PZZA.” As of February 16, 2023, there were 1,321 record holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on The Nasdaq Global Select Market tier of The Nasdaq Stock Market under the symbol “PZZA.” As of February 22, 2024, there were 1,326 record holders of our common stock.
However, there are significantly more beneficial owners of our common stock than there are record holders. On January 26, 2023, our Board of Directors declared a first quarter 2023 dividend of $0.42 per common share. The dividend was paid on February 17, 2023 to stockholders of record as of the close of business on February 6, 2023.
However, there are significantly more beneficial owners of our common stock than there are record holders. On January 30, 2024, our Board of Directors declared a first quarter 2024 dividend of $0.46 per common share. The dividend was paid on February 23, 2024 to stockholders of record as of the close of business on February 12, 2024.
Comparison of Cumulative 5-Year Total Shareholder Return Stock Price Plus Reinvested Dividends Papa Johns International, Inc. NASDAQ U.S. Benchmark TR Index NASDAQ Stocks (SIC 5800-5899 U.S. Companies) Eating and Drinking Dec. 30, 2018 Dec. 29, 2019 Dec. 27, 2020 Dec. 26, 2021 Dec. 25, 2022 Papa John’s International, Inc. $73.35 $119.07 $163.58 $250.26 $161.12 NASDAQ U.S.
Comparison of Cumulative 5-Year Total Shareholder Return Stock Price Plus Reinvested Dividends Papa Johns International, Inc. NASDAQ U.S. Benchmark TR Index NASDAQ Stocks (SIC 5800-5899 U.S. Companies) Eating and Drinking Dec. 29, 2019 Dec. 27, 2020 Dec. 26, 2021 Dec. 25, 2022 Dec. 31, 2023 Papa John’s International, Inc. $162.33 $223.01 $341.19 $219.66 $203.98 NASDAQ U.S.
Funding for the share repurchase program was provided through our operating cash flows and our $600.0 million PJI Revolving Facility.
Stockholders’ Deficit” of “Notes to Consolidated Financial Statements” for additional details. Funding for the share repurchase program was provided through our operating cash flows and cash provided from borrowings under our $600.0 million revolving credit facility (the “PJI Revolving Facility”).
Removed
This share repurchase program operated alongside our previous $75.0 million share repurchase authorization, which began on November 4, 2020 and expired on December 26, 2021. In fiscal 2022, approximately 1,343,000 shares with an aggregate cost of $125.0 million and an average price of $93.07 per share were repurchased under our share repurchase program.
Added
In fiscal 2023, approximately 2,523,000 shares with an aggregate cost of $209.6 million and an average price of $83.10 per share were repurchased under our share repurchase program. This includes the repurchase of approximately 2.2 million shares from certain funds affiliated with, or managed by, Starboard Value LP; refer to “Note 6.
Removed
Benchmark, TR Index $93.73 $124.34 $149.05 $188.05 $152.08 NASDAQ Stocks - Eating and Drinking $108.91 $144.93 $169.49 $190.64 $168.88
Added
Benchmark, TR Index $132.65 $159.01 $200.62 $162.25 $205.01 NASDAQ Stocks - Eating and Drinking $133.61 $156.46 $176.01 $156.06 $163.78

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

92 edited+83 added−36 removed36 unchanged
Biggest changeYear Ended (In thousands, except per share amounts) December 25, 2022 December 26, 2021 Operating income $ 109,030 $ 168,241 Refranchising and impairment losses (a) 26,702 — Legal settlements (b) 15,000 — Costs associated with the termination of significant franchisees (c) 5,223 — Strategic corporate reorganization costs (d) — 13,094 Other costs (e) 1,507 — Adjusted operating income $ 157,462 $ 181,335 Net income attributable to common shareholders $ 67,362 $ 4,073 Refranchising and impairment losses (a) 26,702 — Legal settlements (b) 15,000 — Costs associated with the termination of significant franchisees (c) 5,223 — Strategic corporate reorganization costs (d) — 13,094 Other costs (e) 1,507 — Repurchase and conversion of Series B Preferred Stock (f) — 109,852 Tax effect of adjustments (g) (10,897) (2,946) Adjusted net income attributable to common shareholders (h) $ 104,897 $ 124,073 Diluted earnings per common share $ 1.89 $ 0.12 Refranchising and impairment losses (a) 0.75 — Legal settlements (b) 0.42 — Costs associated with the termination of significant franchisees (c) 0.15 — Strategic corporate reorganization costs (d) — 0.37 Other costs (e) 0.04 — Repurchase and conversion of Series B Preferred Stock (f) — 3.10 Tax effect of adjustments (g) (0.31) (0.08) Adjusted diluted earnings per common share (h) $ 2.94 $ 3.51 ______________________________ 39 Table of Contents (a) Refranchising and impairments losses consisted of the following pre-tax adjustments: Year Ended (In thousands) December 25, 2022 Refranchising impairment loss (1) $ 8,412 Ukraine-related charge (2) 17,385 UK lease impairment (3) 905 Total adjustment $ 26,702 (1) Represents a one-time, non-cash charge of $8.4 million ($0.24 loss per diluted share) recorded in the first quarter of 2022 associated with the refranchising of the Company’s controlling interest in a 90-restaurant joint venture, recorded as Refranchising and impairment loss; (2) Represents a one-time non-cash charge of $17.4 million ($0.49 loss per diluted share) recorded in the first quarter of 2022 related to the reserve of certain loans and impairment of reacquired franchised rights related to the conflict in Ukraine and subsequent international government actions and sanctions, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million; (3) An impairment charge of $0.9 million on the right-of-use assets on leases recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the UK, which was recorded in Refranchising and impairment loss.
Biggest change(d) Refranchising and impairment losses consisted of the following pre-tax adjustments: (1) Represents a one-time, non-cash charge of $8.4 million ($0.24 loss per diluted share) recorded in the first quarter of 2022 associated with the 2022 refranchising, recorded as Refranchising and impairment loss; (2) Represents a one-time non-cash charge of $17.4 million ($0.49 loss per diluted share) recorded in the first quarter of 2022 related to the reserve of certain loans and impairment of reacquired franchised rights related to the conflict in Ukraine and subsequent international government actions and sanctions, which were recorded as Refranchising and impairment loss of $2.8 million and General and administrative expenses of $14.6 million; (3) An impairment charge of $0.9 million on the right-of-use assets on leases recorded in the third quarter of 2022 associated with the termination of a significant franchisee in the UK, which was recorded in Refranchising and impairment loss.
The Company establishes an allowance for credit losses on franchisee notes receivables based on management’s estimate of the lifetime expected loss on the notes. The allowance for credit losses on notes receivable is judgmental and subjective based on management’s evaluation of historical collection experience, external market data and other factors, including those related to current market conditions and events.
The Company establishes an allowance for credit losses on franchisee notes receivables based on management’s estimate of the lifetime expected loss on the notes. The allowance for credit losses on notes receivable is judgmental and subjective based on management’s evaluation of historical collection experience and external market data and other factors, including those related to current market conditions and events.
The Amended Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates.
The Credit Agreement contains customary affirmative and negative covenants that, among other things, require customary reporting obligations, and restrict, subject to certain exceptions, the incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates.
We believe North America, International and global restaurant and comparable sales growth and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales.
We believe North America, International and global restaurant and comparable sales growth (decline) and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales.
Our insurance reserves primarily relate to auto liability and workers’ compensation claims and include the gross up of claims above our retention levels, with a corresponding receivable recorded in Prepaid and other current assets and Other assets on the Consolidated Balance Sheets.
Our insurance reserves primarily relate to auto liability and workers’ compensation claims and include the gross up of claims above our retention levels, with a corresponding receivable recorded in Prepaid expenses and other current assets and Other assets on the Consolidated Balance Sheets.
Inflationary pressures affect our profitability both directly, in our company-owned restaurants and delivery mechanisms and through gross margins experienced by sales of food and supply items via our Quality Control Centers, as well as indirectly, through higher food ingredient and paper and supply costs, rising fees from delivery aggregators driven by higher wage demands and increases in the cost of gasoline that, once reflected in upward price adjustments on their fees, can exert downward pressure on unit sales, reducing royalty fees we realize from our Domestic and International franchisees.
Inflationary pressures affect our profitability both directly, in our company-owned restaurants and delivery mechanisms and through gross margins experienced by sales of food and supply items via our QC Centers, as well as indirectly, through higher food ingredient and paper and supply costs, rising fees from delivery aggregators driven by higher wage demands and increases in the cost of gasoline that, once reflected in upward price adjustments on their fees, can exert downward pressure on unit sales, reducing royalty fees we realize from our Domestic and International franchisees.
Divestitures” of “Notes to Consolidated Financial Statements for further information. Suspension of Franchisee Support in Russia. The Company has no Company-owned restaurants in Russia or Ukraine. At the end of fiscal year 2021, 188 franchised restaurants were located in Russia, all of which were operated and supplied through a master franchisee.
Divestitures” of “Notes to Consolidated Financial Statements” for further information. Suspension of Franchisee Support in Russia. The Company has no Company-owned restaurants in Russia or Ukraine. At the end of fiscal year 2021, 188 franchised restaurants were located in Russia, all of which were operated and supplied through a master franchisee.
Therefore, the Company considers the fair value of the underlying collateral rights (e.g., underlying franchisee business, property and equipment) and any guarantees when assessing the allowance for credit losses (which may require third-party valuations of fair value). Notes receivable balances are charged off against the allowance after recovery efforts have ceased.
Therefore, the 36 Table of Contents Company considers the fair value of the underlying collateral rights (e.g., underlying franchisee business, property and equipment) and any guarantees when assessing the allowance for credit losses (which may require third-party valuations of fair value). Notes receivable balances are charged off against the allowance after recovery efforts have ceased.
The Amended Credit Agreement provides for a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million (the “PJI Revolving Facility”), of which up to $40.0 million is available as swingline loans and up to $80.0 million is available as letters of credit. The PJI Revolving Facility will mature on September 14, 2026.
The Credit Agreement provides for the PJI Revolving Facility, a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million, of which up to $40.0 million is available as swingline loans and up to $80.0 million is available as letters of credit. The PJI Revolving Facility will mature on September 14, 2026.
Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.
Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales 37 Table of Contents trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.
Discussion of 2020 items and year-to-year comparisons between the years ended December 26, 2021 and December 27, 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2021.
Discussion of 2021 items and year-to-year comparisons between the years ended December 25, 2022 and December 26, 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2022.
The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business: Permitted Ratio Actual Ratio for the Year Ended December 25, 2022 Leverage ratio Not to exceed 5.25 to 1.0 2.6 to 1.0 Interest coverage ratio Not less than 2.00 to 1.0 4.1 to 1.0 Our leverage ratio is defined as outstanding debt divided by Consolidated EBITDA (as defined in our credit agreement), for the most recent four fiscal quarters.
The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business: Permitted Ratio Actual Ratio for the Year Ended December 31, 2023 Leverage ratio Not to exceed 5.25 to 1.0 3.2 to 1.0 Interest coverage ratio Not less than 2.00 to 1.0 3.3 to 1.0 Our leverage ratio is defined as outstanding debt divided by Consolidated EBITDA (as defined in the Credit Agreement), for the most recent four fiscal quarters.
Sun Holdings, Inc. (“Sun Holdings”), a leading multi-brand franchisee operator and one of Papa John’s largest Domestic franchise partners, assumed control of the 90 Papa John’s restaurants in Texas that operated under the joint venture.
(“Sun Holdings”), a leading multi-brand franchisee operator and one of Papa John’s largest Domestic franchise partners, assumed control of the 90 Papa John’s restaurants in Texas that operated under the joint venture.
The declaration and payment of any future dividends will be at the discretion of our Board of Directors. Free Cash Flow Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less purchases of property and equipment and dividends paid to preferred stockholders.
The declaration and payment of any future dividends will be at the discretion of our Board of Directors. Free Cash Flow Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Consolidated Statements of Cash Flows) less the purchases of property and equipment.
Recent Business Matters In 2022, the Company focused on executing strategic priorities and building a foundation for long-term success, while navigating a challenging macroeconomic environment. Our progress and significant transactions during the year are described below. Growth Strategy .
Recent Business Matters In 2023, the Company focused on executing strategic priorities and building a foundation for long-term success, while navigating a dynamic macroeconomic environment. Our progress and significant transactions during the year are described below. Growth Strategy .
Debt” of “Notes to Consolidated Financial Statements” for further information on our obligations and the timing of expected payments. • Operating and Finance Leases : Refer to “Note 3 Leases” of “Notes to Consolidated Financial Statements” for further information on our obligations and the timing of expected payments.
Debt” of “Notes to Consolidated Financial Statements” for further information on our obligations and the timing of expected payments. 50 Table of Contents • Operating and Finance Leases : Refer to “Note 3 Leases” of “Notes to Consolidated Financial Statements” for further information on our obligations and the timing of expected payments.
We estimate that a one percent change in the effective income tax rate would impact the 2022 income tax expense by $0.8 million . See “Note 17. Income Taxes” of “Notes to Consolidated Financial Statements” for additional information.
We estimate that a one percent change in the effective income tax rate would impact the 2023 income tax expense by $1.0 million . See “Note 17. Income Taxes” of “Notes to Consolidated Financial Statements” for additional information.
Our interest coverage ratio is defined as the sum of Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in compliance with all financial covenants as of December 25, 2022.
Our interest coverage ratio is defined as the sum of Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in compliance with all financial covenants as of December 31, 2023.
Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook,” “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided 44 Table of Contents by the federal securities laws.
Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws.
Additionally, approximately 48% to 52% of our North America revenues in each of the last two fiscal years were derived from sales to franchisees of various items including food and paper products from our Domestic Quality Control Centers (“QC Centers”), operation of our International QC Center in the UK, contributions received by Papa John’s Marketing Fund, Inc.
Additionally, approximately 50% of our North America revenues in each of the last two fiscal years were derived from sales to franchisees of various items including food and paper products from our Domestic Quality Control Centers (“QC Centers”), operation of our International QC Center in the United Kingdom, contributions received by Papa John’s Marketing Fund, Inc.
Divestitures” of “Notes to Consolidated Financial Statements” for additional information on the 2022 refranchising and the charge related to the conflict in Ukraine. 35 Table of Contents Operating Income by Segment Operating income is summarized in the following table on a reporting segment basis. Adjusted operating income, a non-GAAP measure, is presented below.
See “Note 22. Divestitures” of “Notes to Consolidated Financial Statements” for additional information on the 2022 refranchising and the charge related to the conflict in Ukraine. Operating Income by Segment Operating income is summarized in the following table on a reporting segment basis. Adjusted operating income, a non-GAAP measure, is presented below.
The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to: • the ability of the Company to manage challenging macroeconomic conditions in the United States and internationally, including the United Kingdom; • the ability of the Company to manage staffing and labor shortages at Company and/or franchised restaurants and our quality control centers; • increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation or climate change; • the potential for delayed new store openings, both domestically and internationally; • the increased risk of phishing, ransomware and other cyber-attacks; • risks to the global economy and our business related to the conflict in Ukraine and other international conflicts; • increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to boost consumer sentiment and sales trends, and the risk that such initiatives will not be effective; • risks related to social media, including publicity adversely and rapidly impacting our brand and reputation; • aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors; • changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment; • the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry; • the effectiveness of our technology investments and changes in unit-level operations; • the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, store level employees or suitable sites; • increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property; • disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control, including the coronavirus pandemic; • increased risks associated with our International operations, including economic and political conditions and risks associated with the withdrawal of the UK from the European Union, instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets and new store growth; • the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business including compliance with the European Union General Data Protection Regulation; • the Company’s ability to continue to pay dividends to stockholders based upon profitability, cash flows and capital adequacy if restaurant sales and operating results decline; • continuing risks related to the outbreak of COVID-19 and other health crises; • disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and security breaches, including theft of confidential Company, employee and customer information, including payment cards; and • changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles. 45 Table of Contents These and other risk factors are discussed in detail in “Part I.
The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to: • the ability of the Company to manage challenging macroeconomic conditions in the United States and internationally, including the United Kingdom; • the ability of the Company to manage staffing and labor shortages at Company and/or franchised restaurants and our Quality Control Centers; • increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation or climate change; 51 Table of Contents • the potential for delayed new restaurant openings, both domestically and internationally; • the increased risk of phishing, ransomware and other cyber-attacks; • risks to the global economy and our business related to the conflicts in Ukraine and the Middle East and other international conflicts; • increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to boost consumer sentiment and sales trends, and the risk that such initiatives will not be effective; • risks related to a possible economic slowdown that could, among other things, reduce consumer spending or demand and result in changing consumer practices; • risks related to social media, including publicity adversely and rapidly impacting our brand and reputation; • aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors; • changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment; • the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry; • the effectiveness of our technology investments and changes in unit-level operations; • the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, restaurant level employees or suitable sites; • increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property; • disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control; • increased risks associated with our International operations, including economic and political conditions and risks associated with the withdrawal of the UK from the European Union, instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets and new restaurant growth; • the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business including compliance with the European Union General Data Protection Regulation; • risks related to our indebtedness and borrowing costs, including prolonged higher interest rates, and the current state of the credit markets; • the Company’s ability to continue to pay dividends to stockholders based upon profitability, cash flows and capital adequacy if restaurant sales and operating results decline; • our ability to effectively operate and improve the performance of International Company-owned restaurants; • disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and cybersecurity incidents, including theft of confidential Company, employee and customer information, including payment cards; and • changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles.
GAAP measure. 40 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our credit facility. Our principal uses of cash are operating expenses, capital expenditures, and returning value to our shareholders in the form of cash dividends and share repurchases.
GAAP measure. 47 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under the PJI Revolving Facility. Our principal uses of cash are operating expenses, capital expenditures, and returning value to our shareholders in the form of cash dividends and share repurchases.
(g) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rate of 22.5% for both years ended December 25, 2022 and December 26, 2021. (h) Amounts shown exclude the impact of allocation of undistributed earnings to participating securities. In addition, we present free cash flow in this report, which is a non-GAAP measure.
(g) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rate of 22.6% and 22.5% for the years ended December 31, 2023 and December 25, 2022, respectively. (h) Amounts shown exclude the impact of allocation of undistributed earnings to participating securities. In addition, we present free cash flow in this report, which is a non-GAAP measure.
Approximately $272.2 million remained available under the Company’s share repurchase program as of February 16, 2023. The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program.
Approximately $90.2 million remained available under the Company’s share repurchase program as of February 22, 2024. The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program.
This section of this Annual Report on Form 10-K generally discusses fiscal 2022 and 2021 items and year-to-year comparisons between the years ended December 25, 2022 and December 26, 2021.
This section of this Annual Report on Form 10-K generally discusses fiscal 2023 and 2022 items and year-to-year comparisons between the years ended December 31, 2023 and December 25, 2022.
We record the liability for losses based upon undiscounted estimates of the liability for claims incurred and for events that have occurred but have not been reported using certain third-party actuarial projections and our historical claims loss experience. As of December 25, 2022, our insurance reserves were $67.3 million compared to $88.1 million at December 26, 2021.
We record the liability for losses based upon undiscounted estimates of the liability for claims incurred and for events that have occurred but have not been reported using certain third-party actuarial projections and our historical claims loss experience. As of December 31, 2023, our insurance reserves were $56.8 million compared to $67.3 million at December 25, 2022.
Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize and were $32.1 million and $28.6 million as of December 25, 2022 and December 26, 2021, respectively.
Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize and were $37.6 million and $32.1 million as of December 31, 2023 and December 25, 2022, respectively.
The PJMF Revolving Facility matures on September 30, 2023, but is subject to annual amendments. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of the one-month LIBOR plu s 1.60%. There was no debt outstanding under the PJMF Revolving Facility as of December 25, 2022 or December 26, 2021.
The PJMF Revolving Facility matures on September 30, 2024, but is subject to annual amendments. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of the one-month SOFR plu s 1.975% . There was no debt outstanding under the PJMF Revolving Facility as of December 31, 2023 or December 25, 2022.
With our insurance programs, we are party to surety bonds with off-balance sheet risk for a total of $26.3 million as of December 25, 2022. The surety bond arrangements expire within one year but have automatic renewal clauses. See “Note 12. Debt” and “Note 19.
With our insurance programs, we are party to surety bonds with off-balance sheet risk for a total of $20.7 million as of December 31, 2023. The surety bond arrangements expire within one year but have automatic renewal clauses. See “Note 12. Debt” and “Note 19.
The 2022 amount was comprised of an $8.4 million loss on our 2022 refranchising, an impairment loss of $2.8 million for reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and lease impairment charges of $0.9 million related to the termination of a significant franchisee in the UK. See “Note 22.
The 2022 activity was 42 Table of Contents comprised of an $8.4 million loss on our 2022 refranchising, an impairment loss of $2.8 million for reacquired franchise rights due to the financial and operational impact of the conflict in Ukraine and lease impairment charges of $0.9 million related to the termination of a significant franchisee in the UK.
Concurrently with the issuance of the Notes, the Company entered into an amended and restated credit agreement (the “Amended Credit Agreement”) replacing the previous credit agreement (“Previous Credit Agreement”).
Concurrently with the issuance of the Notes, the Company entered into an amended and restated credit agreement (the “Credit Agreement”) replacing the Company’s previous credit agreement.
There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise. Dividends The Company paid aggregate dividends to common stockholders of $54.8 million ($1.54 per share) for the year ended December 25, 2022.
There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise. Dividends The Company paid aggregate cash dividends to common stockholders of $58.5 million ($1.76 per share) and $54.8 million ($1.54 per share) for the years ended December 31, 2023 and December 25, 2022, respectively.
PJMF, our national marketing fund, has a $20.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S. Bank National Association, as lender. The PJMF Revolving Facility is secured by substantially all assets of PJMF.
PJMF, our national marketing fund, has a $30.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 with U.S. Bank National Association, as lender.
As of December 25, 2022, the estimate maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was approximately $9.2 million. We have certain other commercial commitments where payment is contingent upon the occurrence of certain events.
As of December 31, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was approximately $7.3 million. We have certain other commercial commitments where payment is contingent upon the occurrence of certain events.
Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, the continuing impact of the coronavirus pandemic, commodity and labor costs, currency fluctuations, profit margins, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, labor shortages and price increases, inflation, royalty relief, franchisee support, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, adoption of new accounting standards, and other financial and operational measures.
Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, restaurant acquisitions, restaurant closures, labor shortages, labor cost increases, inflation, royalty relief, franchisee support and incentives, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, changes to our national marketing fund, changes to our commissary model, dividends, effective tax rates, regulatory changes and impacts, investments and repositioning of the UK market, International restructuring, International consumer demand, adoption of new accounting standards, and other financial and operational measures.
Depreciation and amortization expense was $52.0 million, or 2.5% of revenues in 2022, as compared to $48.8 million, or 2.4% of revenues for the prior year, primarily due and increase in capital expenditures for our technology platforms and new restaurants.
Depreciation and Amortization Depreciation and amortization expense was $64.1 million, or 3.0% of revenues in 2023, as compared to $52.0 million, or 2.5% of revenues for the prior year, primarily due to an increase in capital expenditures for our technology platforms and new restaurants.
We believe our digital innovations, like our website, digital app, third-party aggregator partnerships and Papa Call call centers are a differentiator for our customers and provide attractive channels that promote customer retention and help us grow our customer base. In 2022, approximately 85% of our Domestic transactions came through these digital channels.
We believe our digital innovations, like our website, digital app, third-party aggregator partnerships and Papa Call call centers are a differentiator for our customers and provide attractive channels that promote customer retention and help us grow our customer base.
Litigation, Commitments and Contingencies” of “Notes to Consolidated Financial Statements” for additional information related to contractual and other commitments. Impact of Inflation We experienced price increases in food items and other commodities, labor and benefits, and fuel and other energy costs during 2022 and expect further inflationary pressure during 2023.
Litigation, Commitments and Contingencies” of “Notes to Consolidated Financial Statements” for additional information related to contractual and other commitments. Impact of Inflation We experienced price increases in food items and other commodities, labor and benefits, and fuel and other energy costs during 2022, which began to gradually ease throughout 2023 and which we expect to continue to moderate during 2024.
The determination as to whether a deferred tax asset will be realized is based on the evaluation of historical profitability, future market growth, future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.
The determination as to whether a deferred tax asset will be realized is based on the evaluation of historical profitability, future market growth, future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The Company assesses deferred taxes and the adequacy or need for a valuation allowance on a quarterly basis.
We estimate that our capital expenditures during 2023 will be approximately $80 million to $90 million. This estimate includes development of Company-owned restaurants and technology enhancements. We intend to fund our capital expenditures with cash generated by operations and borrowings under our senior secured revolving credit facility, as necessary.
We estimate that our capital expenditures during 2024 will be approximately $75.0 million to $85.0 million. This estimate includes development of Company-owned restaurants and technology enhancements. We intend to fund our capital expenditures with cash generated by operations and borrowings under the PJI Revolving Facility, as necessary.
Presentation of Financial Results Critical Accounting Policies and Estimates The results of operations are based on our Consolidated Financial Statements, which were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).
Presentation of Financial Results Critical Accounting Policies and Estimates The results of operations are based on our Consolidated Financial Statements, which were prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The preparation of Consolidated Financial Statements requires management to make estimates and judgments that affect the amounts reported in the Consolidated Financial Statements.
All fiscal years presented in the accompanying Consolidated Financial Statements consist of 52 weeks. 32 Table of Contents Results of Operations Revenues The following table sets forth the various components of Revenues from the Consolidated Statements of Operations.
All fiscal years presented in the accompanying Consolidated Financial Statements consist of 52 weeks except for the 2023 fiscal year, which consists of 53 weeks. 39 Table of Contents Results of Operations Revenues The following table sets forth the various components of Revenues from the Consolidated Statements of Operations.
Costs and Expenses The following table sets forth the various components of Costs and expenses from the Consolidated Statements of Operations, expressed as a percentage of the associated revenue component.
Divestitures” of “Notes to Consolidated Financial Statements” for additional information. Costs and Expenses The following table sets forth the various components of Costs and expenses from the Consolidated Statements of Operations, expressed as a percentage of the associated revenue component.
The increase in total costs and expenses, as a percentage of revenues, was primarily due to the following: Domestic Company-owned restaurant expenses were $585.3 million, or 82.6% of related revenues in 2022, compared to expenses of $621.9 million, or 79.9% of related revenues for the prior year.
This decrease in total costs and expenses, as a percentage of revenues, was primarily due to the following: 41 Table of Contents Domestic Company-owned restaurant expenses were $587.9 million, or 80.9% of related revenues in 2023, compared to expenses of $585.3 million, or 82.6% of related revenues for the prior year.
North America franchise restaurant sales, excluding the impact of the 2022 refranchising, increased 2.3% to $2.99 billion for the year ended December 25, 2022 compared to the prior year. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales.
North America franchise restaurant sales, excluding the impact of the 2022 refranchising, increased 3.4% to $3.09 billion ($3.03 billion on a 52-week basis) for the year ended December 31, 2023 compared to the prior year. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales.
Significant Accounting Policies” of “Notes to Consolidated Financial Statements.” A number of our significant accounting policies are critical due to the fact that they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
A number of our significant accounting policies involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.
On January 26, 2023, our Board of Directors declared a first quarter 2023 dividend of $0.42 per common share, representing a $14.6 million aggregate dividend that was paid on February 17, 2023 to stockholders of record as of the close of business on February 6, 2023.
On January 30, 2024, our Board of Directors declared a first quarter 2024 dividend of $0.46 per common share, representing a $15.1 million aggregate dividend that was paid on February 23, 2024 to stockholders of record as of the close of business on February 12, 2024.
We evaluate these issues and adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures.
Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues and adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures.
(Dollars in thousands) Year Ended December 25, 2022 % of Related Revenues December 26, 2021 % of Related Revenues Increase (Decrease) in % of Revenues Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses $ 585,307 82.6 % $ 621,871 79.9 % 2.7 % North America commissary expenses 811,446 93.3 % 703,622 92.4 % 0.9 % International expenses 76,001 58.5 % 87,286 57.9 % 0.6 % Other expenses 238,810 93.0 % 226,320 91.0 % 2.0 % General and administrative expenses 217,412 10.3 % 212,265 10.3 % — % Depreciation and amortization 52,032 2.5 % 48,816 2.4 % 0.1 % Total costs and expenses 1,981,008 94.2 % 1,900,180 91.9 % 2.3 % Refranchising and impairment loss (12,065) (0.6) % — — % (0.6) % Operating income $ 109,030 5.2 % $ 168,241 8.1 % (2.9) % Total costs and expenses were approximately $1.98 billion, or 94.2% of total revenues in 2022, as compared to $1.90 billion, or 91.9% of total revenues for the prior year.
(Dollars in thousands) Year Ended December 31, 2023 % of Related Revenues December 25, 2022 % of Related Revenues Increase (Decrease) in % of Revenues Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses $ 587,889 80.9 % $ 585,307 82.6 % (1.7) % North America commissary expenses 787,554 92.4 % 811,446 93.3 % (0.9) % International expenses 103,198 65.7 % 76,001 58.5 % 7.2 % Other expenses 235,483 92.3 % 238,810 93.0 % (0.7) % General and administrative expenses 210,357 9.8 % 217,412 10.3 % (0.5) % Depreciation and amortization 64,090 3.0 % 52,032 2.5 % 0.5 % Total costs and expenses 1,988,571 93.1 % 1,981,008 94.2 % (1.1) % Refranchising and impairment loss — — % (12,065) (0.6) % 0.6 % Operating income $ 147,142 6.9 % $ 109,030 5.2 % 1.7 % Total costs and expenses were approximately $1.99 billion, or 93.1% of total revenues in 2023, as compared to $1.98 billion, or 94.2% of total revenues for the prior year.
The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Amended Credit Agreement. See “Note 12. Debt” of “Notes to Consolidated Financial Statements” for additional information.
The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Credit Agreement. See “Note 12.
All assets related to the franchised operations in Russia have been fully reserved or impaired, so there are no additional Russia related charges for reserves, write-offs, or impairments of amounts recorded on the Consolidated Balance Sheet. Coronavirus Pandemic and Related Market Impact. The restaurant industry has faced and managed staffing challenges since long before the pandemic.
All assets related to the franchised operations in Russia have been fully reserved or impaired, so there are no additional Russia related charges for reserves, write-offs, or impairments of amounts recorded on the Consolidated Balance Sheets.
The following table summarizes our repurchase activity for the years ended December 25, 2022 and December 26, 2021: (In thousands, except average price per share) Year Ended Total Number of Shares Purchased Average Price Paid per Share Aggregate Cost of Shares Purchased Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs December 25, 2022 1,343 $ 93.07 $ 125,000 $ 299,800 December 26, 2021 594 $ 121.96 $ 72,499 $ 424,800 Subsequent to year-end, we acquired an additional 319,307 shares at an aggregate cost of $27.6 million.
The following table summarizes our repurchase activity for the years ended December 31, 2023 and December 25, 2022: (In thousands, except average price per share) Year Ended Total Number of Shares Purchased Average Price Paid per Share Aggregate Cost of Shares Purchased Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs December 31, 2023 2,523 $ 83.10 $ 209,640 $ 90,160 December 25, 2022 1,343 $ 93.07 $ 125,000 $ 299,800 We did not repurchase any shares subsequent to December 31, 2023.
Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights.
At December 31, 2023, there were 5,906 Papa John’s restaurants in operation, consisting of 648 Company-owned and 5,258 franchised restaurants. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights.
Cash Flows The table below summarizes our cash flows for each of the last two fiscal years (in thousands): 2022 2021 Total cash provided by (used in): Operating activities $ 117,808 $ 184,675 Investing activities (62,793) (63,512) Financing activities (76,240) (180,526) Change in cash and cash equivalents, excluding the effect of exchange rate changes on cash and cash equivalents $ (21,225) $ (59,363) Operating Activities Total cash provided by operating activities was $117.8 million for the year ended December 25, 2022 compared to $184.7 million for the prior year.
Cash Flows The table below summarizes our cash flows for each of the last two fiscal years (in thousands): 2023 2022 Total cash provided by (used in): Operating activities $ 193,055 $ 117,808 Investing activities (75,123) (62,793) Financing activities (124,076) (76,240) Effect of exchange rate changes on cash and cash equivalents (642) (2,012) Change in cash and cash equivalents $ (6,786) $ (23,237) Operating Activities Total cash provided by operating activities was $193.1 million for the year ended December 31, 2023 compared to $117.8 million for the prior year.
Significant changes in assumptions and/or conditions in our critical accounting policies could materially impact the operating results. 29 Table of Contents Insurance Reserves Our insurance programs for workers’ compensation, owned and non-owned automobiles, general liability and property insurance coverage are funded by the Company up to certain retention levels. Retention limits range up to $0.5 million.
Significant Accounting Policies” of “Notes to Consolidated Financial Statements.” 35 Table of Contents We believe that our most critical accounting estimates are: Insurance Reserves Our insurance programs for workers’ compensation, owned and non-owned automobiles, general liability and property insurance coverage are funded by the Company up to certain retention levels. Retention limits range up to $0.5 million.
GAAP measure. Operating income was $109.0 million for the year ended December 25, 2022 compared to $168.2 million for the prior year, a decrease of $59.2 million. Adjusted operating income was $157.5 million for the year ended December 25, 2022 compared to $181.3 million for the prior year, a decrease of $23.9 million, or 13.2%.
GAAP measure. Operating income was $147.1 million for the year ended December 31, 2023 compared to $109.0 million for the prior year, an increase of $38.1 million. Adjusted operating income was $157.0 million for the year ended December 31, 2023 compared to $157.5 million for the prior year, a decrease of $0.5 million, or 0.3%.
Excluding the impact of the 2022 refranchising, North America franchising increased $4.3 million, due to an increase in comparable sales of 1.2% and higher equivalent units of 1.4%. • North America commissaries increased $2.7 million for the year ended December 25, 2022.
Excluding the impact of the additional week and the 2022 refranchising, the segment would have increased $2 million primarily due to an increase in comparable sales of 0.1%, higher equivalent units of 2.5% and fewer royalty waivers in 2023. • North America commissaries increased $0.8 million for the year ended December 31, 2023.
In 2022, cash used for financing activities includes outflows of $125.0 million in share repurchases and $54.8 million of common dividends paid, offset by net borrowings of $115.0 million from the credit facility.
In 2023, cash used for financing activities includes outflows of $210.3 million in share repurchases and $58.5 million of dividends paid to common shareholders, partially offset by net borrowings of $159.0 million from the PJI Revolving Facility.
Excluding the impact of 2022 refranchising, North America franchise royalties and fees increased $4.2 million, or 3.1% for the year ended December 25, 2022, primarily due to an increase in comparable sales of 1.2% and equivalent units of 1.4%.
Excluding the 2022 refranchising and the additional week, North America franchise royalties and fees would have increased approximately $3 million, or 2.0% for the year ended December 31, 2023 primarily due to positive comparable sales of 0.1%, equivalent unit growth of 2.5% and fewer royalty waivers in 2023.
Diluted Earnings Per Share Diluted earnings per common share was $1.89 for the year ended December 25, 2022 compared to $0.12 for the year ended December 26, 2021, representing an increase of $1.77.
Noncontrolling Interests” of “Notes to Consolidated Financial Statements,” for information. Diluted Earnings Per Share Diluted earnings per common share was $2.48 for the year ended December 31, 2023 compared to $1.89 for the year ended December 25, 2022, representing an increase of $0.59.
Share Repurchases As part of our long-term growth and capital allocation strategy, we are committed to investing in share repurchases to provide ongoing value and enhanced returns to our shareholders. On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock.
On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock.
Franchisee notes receivable was $42.6 million with an allowance for credit losses of $14.5 million as of December 25, 2022 compared to $49.4 million with an allowance for credit losses of $1.5 million as of December 26, 2021.
Franchisee notes receivable was $33.6 million with an allowance for credit losses of $16.1 million as of December 31, 2023 compared to $42.6 million with an allowance for credit losses of $14.5 million as of December 25, 2022. See “Note 10. Allowance for Credit Losses” of “Notes to Consolidated Financial Statements” for further information.
Allowance for Credit Losses” of “Notes to Consolidated Financial Statements”) and refranchising and impairment losses of $12.1 million (discussed above in “Results of Operations”).
These favorable changes were partially offset by the provision for allowance for credit losses of $20.5 million (See “Note 10. Allowance for Credit Losses” of “Notes to Consolidated Financial Statements”) and refranchising and impairment losses of $12.1 million (discussed above in “Results of Operations”) that were incurred during the prior year.
(In thousands) Year Ended December 25, 2022 Year Ended December 26, 2021 Reported (a) Adjustments Adjusted Reported (a) Adjustments Adjusted Reported Increase (Decrease) Adjusted Increase (Decrease) Domestic Company-owned restaurants $ 15,966 $ 8,412 $ 24,378 $ 49,628 $ — $ 49,628 $ (33,662) $ (25,250) North America franchising 127,882 — 127,882 120,949 — 120,949 6,933 6,933 North America commissaries 42,531 — 42,531 39,873 — 39,873 2,658 2,658 International 17,891 9,644 27,535 34,896 — 34,896 (17,005) (7,361) All others 10,084 — 10,084 17,704 — 17,704 (7,620) (7,620) Unallocated corporate expenses (104,419) 30,376 (74,043) (94,114) 13,094 (81,020) (10,305) 6,977 Elimination of intersegment (profits) (905) — (905) (695) — (695) (210) (210) Total $ 109,030 $ 48,432 $ 157,462 $ 168,241 $ 13,094 $ 181,335 $ (59,211) $ (23,873) ______________________________ (a) See “Non-GAAP Measures” below for a detail of the adjustments in each year and for a reconciliation to the most comparable U.S.
(In thousands) Year Ended December 31, 2023 Year Ended December 25, 2022 Reported (a) Adjustments Adjusted Reported (a) Adjustments Adjusted Reported Increase (Decrease) Adjusted Increase (Decrease) Domestic Company-owned restaurants $ 33,470 $ — $ 33,470 $ 15,966 $ 8,412 $ 24,378 $ 17,504 $ 9,092 North America franchising 133,800 — 133,800 127,882 — 127,882 5,918 5,918 North America commissaries 43,316 — 43,316 42,531 — 42,531 785 785 International 11,766 7,289 19,055 17,891 9,644 27,535 (6,125) (8,480) All others 10,116 — 10,116 10,084 — 10,084 32 32 Unallocated corporate expenses (85,353) 2,594 (82,759) (104,419) 30,376 (74,043) 19,066 (8,716) Elimination of intersegment loss/(profit) 27 — 27 (905) — (905) 932 932 Total $ 147,142 $ 9,883 $ 157,025 $ 109,030 $ 48,432 $ 157,462 $ 38,112 $ (437) ______________________________ (a) See “Non-GAAP Measures” below for a detail of the adjustments in each year and for a reconciliation to the most comparable U.S.
Year Ended Amounts below exclude the impact of foreign currency December 25, 2022 December 26, 2021 Comparable sales growth (decline): Domestic Company-owned restaurants (1.0) % 11.3 % North America franchised restaurants 1.2 % 12.0 % North America restaurants 0.7 % 11.8 % International restaurants (5.3) % 13.0 % Total comparable sales growth (decline) (0.8) % 12.1 % System-wide restaurant sales growth: Domestic Company-owned restaurants 1.3 % 11.1 % North America franchised restaurants 2.5 % 13.0 % North America restaurants 2.3 % 12.6 % International restaurants (a) 4.8 % 24.4 % Total global system-wide restaurant sales growth (a) 2.9 % 15.4 % ______________________________ (a) The twelve months ended December 25, 2022 excludes the impact of franchisee suspended restaurants. 31 Table of Contents Restaurant Progression Year Ended December 25, 2022 December 26, 2021 North America Company-owned: Beginning of period 600 588 Opened 10 11 Acquired 2 — Refranchised (90) 1 End of period 522 600 North America franchised: Beginning of period 2,739 2,701 Opened 76 74 Closed (49) (35) Refranchised 90 — Sold (2) (1) End of period 2,854 2,739 International franchised: Beginning of period 2,311 2,111 Opened 292 304 Closed (85) (104) Suspended (a) (188) — End of period 2,330 2,311 Total restaurants – end of period 5,706 5,650 Full year net store growth (b) 244 250 ______________________________ (a) As previously disclosed, the Company has suspended corporate support for all franchised restaurants located in Russia.
(c) The year ended December 25, 2022 excludes the impact of franchisee suspended restaurants. 38 Table of Contents Restaurant Progression Year Ended December 31, 2023 December 25, 2022 North America Company-owned: Beginning of period 522 600 Opened 5 10 Closed (2) — Acquired 10 2 Refranchised (4) (90) End of period 531 522 North America franchised: Beginning of period 2,854 2,739 Opened 87 76 Closed (33) (49) Sold (10) (2) Refranchised 4 90 End of period 2,902 2,854 International Company-owned Beginning of period — — Acquired 118 — Refranchised (1) — End of period 117 — International franchised: Beginning of period 2,322 2,311 Opened 234 292 Closed (b) (83) (93) Sold (118) — Refranchised 1 — Suspended (a) — (188) End of period (b) 2,356 2,322 Total restaurants – end of period 5,906 5,698 Full year net restaurant growth (a) 208 236 ______________________________ (a) As previously disclosed, the Company has suspended corporate support for all franchised restaurants located in Russia.
North America commissary expenses were $811.4 million, or 93.3% of related revenues in 2022, compared to $703.6 million, or 92.4% of related revenues, for the prior year. The expenses, as a percentage of revenues, increased 0.9% primarily due to rising commodity prices driven by inflation, principally in cheese, soy oil, proteins and wheat, and higher delivery costs.
The expenses, as a percentage of revenues, decreased 1.7% in 2023 primarily due to a reduction in food costs attributable to lower commodities prices. North America commissary expenses were $787.6 million, or 92.4% of related revenues in 2023, compared to $811.4 million, or 93.3% of related revenues, for the prior year.
Item 1A. — Risk Factors” of this Annual Report on Form 10-K, and they may be updated from time to time in our future reports filed with the Securities and Exchange Commission. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.
These and other risk factors are discussed in detail in “Part I. Item 1A. — Risk Factors” of this Annual Report on Form 10-K, and they may be updated from time to time in our future reports filed with the Securities and Exchange Commission.
These suspended restaurants are excluded from net unit growth calculations. Fiscal Year Our fiscal year ends on the last Sunday in December of each year.
These suspended restaurants are excluded from net unit growth calculations. (b) 2022 full year restaurant activity has been adjusted from previous presentations, as eight International franchised locations were reclassified as closed locations following a review of temporary restaurant closures. Fiscal Year Our fiscal year ends on the last Sunday in December of each year.
Other expenses were $238.8 million, or 93.0% of related revenues in 2022, as compared to $226.3 million, or 91.0% of related revenues for the prior year.
International expenses increased in 2023 as a result of the UK franchisee acquisitions, partially offset by declining commodity prices at our International commissary. Other expenses were $235.5 million, or 92.3% of related revenues in 2023, as compared to $238.8 million, or 93.0% of related revenues for the prior year.
Adjusted diluted earnings per common share, a non-GAAP measure, was $2.94 for the year ended December 25, 2022 compared to $3.51 for the year ended December 26, 2021, representing a decrease of $0.57. See “Non-GAAP Measures” for additional information. 38 Table of Contents Non-GAAP Measures In addition to the results provided in accordance with U.S.
Adjusted diluted earnings per common share, a non-GAAP measure, was $2.71 for the year ended December 31, 2023 compared to $2.94 for the year ended December 25, 2022, representing a decrease of $0.23. See “Non-GAAP Measures” for additional information. These changes were driven by the same factors impacting operating income and adjusted operating income as discussed above.
(Dollars in thousands) December 25, 2022 December 26, 2021 Increase (Decrease) Revenues: Domestic Company-owned restaurant sales $ 708,389 $ 778,323 (9.0) % North America franchise royalties and fees 137,399 129,310 6.3 % North America commissary revenues 869,634 761,305 14.2 % International revenues 129,903 150,771 (13.8) % Other revenues 256,778 248,712 3.2 % Total revenues $ 2,102,103 $ 2,068,421 1.6 % For the year ended December 25, 2022, the discussion of changes in revenues below for Domestic Company-owned restaurants and North America franchised restaurants include an explanation of the impact of refranchising 90 restaurants during the second quarter of 2022 (the “2022 refranchising”).
(Dollars in thousands) December 31, 2023 December 25, 2022 Increase (Decrease) Revenues: Domestic Company-owned restaurant sales $ 726,362 $ 708,389 2.5 % North America franchise royalties and fees 144,550 137,399 5.2 % North America commissary revenues 852,361 869,634 (2.0) % International revenues 157,187 129,903 21.0 % Other revenues 255,253 256,778 (0.6) % Total revenues $ 2,135,713 $ 2,102,103 1.6 % The comparability of results between 2023 and 2022 is impacted by the acquisition of 118 formerly franchised restaurants in the UK in the second and third quarters of 2023 (the “UK franchisee acquisitions”) and the refranchising of 90 restaurants during the second quarter of 2022 (the “2022 refranchising”).
Excluding the impact of the 2022 refranchising in the second quarter, Domestic Company-owned restaurants decreased $21.3 million, primarily due to higher commodity and labor costs, partially offset by lower bonuses and higher revenues related to strategic pricing actions. • North America franchising increased $6.9 million for the year ended December 25, 2022.
Excluding the impact of the additional week and the 2022 refranchising, Domestic Company-owned restaurants would have increased approximately $8 million primarily due to comparable sales growth of 3.4%, partially offset by higher benefits and utility expenses. • North America franchising increased $5.9 million for the year ended December 31, 2023.
Equivalent units also increased 3.7% for the year ended December 25, 2022, excluding the 2022 refranchising, and the related increase was partially offset by a comparable sales decline of 1.0%. North America franchise royalties and fees increased $8.1 million, or 6.3% for the year ended December 25, 2022 compared to the prior year.
North America franchise royalties and fees increased $7.2 million, or 5.2% for the year ended December 31, 2023 compared to the prior year. The benefit of the 53rd week of operations in 2023 was approximately $3 million. The 2023 increase resulting from the 2022 refranchising was $1.4 million.
International expenses were $76.0 million, or 58.5% of related revenues, for 2022 compared to $87.3 million, or 57.9% of related revenues for the prior year. International expenses were flat as a percentage of revenues as lower labor costs and lower food costs from negative comparable sales were offset by higher distribution costs as a percentage of revenues.
The expenses, as a percentage of revenues, decreased 0.9% primarily due to lower commodities prices, principally related to poultry, cheese and wheat costs. International expenses were $103.2 million, or 65.7% of related revenues, for 2023 compared to $76.0 million, or 58.5% of related revenues for the prior year.
Domestic Company-owned restaurant sales decreased $69.9 million, or 9.0% for the year ended December 25, 2022 compared to the prior year. Excluding the impact of the 2022 refranchising, Domestic Company-owned restaurant sales increased $8.7 million, or 1.3% for the year ended December 25, 2022, primarily due to innovations and strategic pricing actions to help offset food and labor inflation.
Excluding the impact of the 2022 refranchising and the additional week in 2023, Domestic Company-owned restaurant sales would have increased $31 million, or 4.6%, primarily due to increased comparable sales of 3.4% and equivalent unit growth of 1.0% for the year ended December 31, 2023.
The decrease in adjusted operating income in 2022 compared to 2021 was primarily due to the following: • Domestic Company-owned restaurants decreased $25.3 million for the year ended December 25, 2022.
The 53rd week contributed approximately $8 million to operating income in 2023. The changes in adjusted operating income compared to the prior year were primarily due to the following: • Domestic Company-owned restaurants increased $9.1 million for the year ended December 31, 2023. The 53rd week of operations contributed approximately $4 million to operating income in 2023.
(Dollars in thousands) Year Ended December 25, 2022 December 26, 2021 Income before income taxes $ 83,769 $ 150,948 Income tax expense $ 14,420 $ 25,993 Effective tax rate 17.2 % 17.2 % See “Note 17.
(Dollars in thousands) Year Ended December 31, 2023 December 25, 2022 Income before income taxes $ 103,673 $ 83,769 Income tax expense $ 20,874 $ 14,420 Effective tax rate 20.1 % 17.2 % See “Note 17. Income Taxes” of “Notes to Consolidated Financial Statements,” for additional information. Net Income Attributable to Noncontrolling Interests - see “Note 9.
In 2021, outflows include $340.0 million in repayments of the term loan, $188.6 million in payment of cash consideration for the repurchase and conversion of all of the Company’s Series B Preferred Stock outstanding, and dividends to common and preferred shareholders of $40.4 million, offset by inflows of $400.0 million in proceeds from the issuance of senior notes and net borrowings from the credit facility of $80.0 million. 41 Table of Contents Debt On September 14, 2021, the Company issued $400.0 million of 3.875% senior notes (the “Notes”) which will mature on September 15, 2029.
In 2022, outflows included $125.0 million in share repurchases as well as dividends paid to common shareholders of $54.8 million, partially offset by $115.0 million in net borrowings from the PJI Revolving Facility. 48 Table of Contents Debt On September 14, 2021, the Company issued $400.0 million of 3.875% senior notes (the “Notes”) which will mature on September 15, 2029.
Remaining availability under the PJI Revolving Facility was $395.0 million as of December 25, 2022.
Our outstanding debt as of December 31, 2023 was $764.0 million, which was comprised of $400.0 million outstanding under the Notes and $364.0 million outstanding under the PJI Revolving Facility. Remaining availability under the PJI Revolving Facility was $236.0 million as of December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−2 removed2 unchanged
Biggest changeBy using a derivative instrument to hedge exposures to changes in interest rates, we expose ourselves to credit risk due to the possible failure of the counterparty to perform under the terms of the derivative contract. We do not enter into contracts for trading purposes and do not use leveraged instruments. See “Note 12.
Biggest changeOur swaps are entered into with financial institutions that participate in the PJI Revolving Facility. By using a derivative instrument to hedge exposures to changes in interest rates, we expose ourselves to credit risk due to the possible failure of the counterparty to perform under the terms of the derivative contract.
Our International operations principally consist of distribution sales to franchised Papa John’s restaurants located in the UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our International franchisees.
Our International operations principally consist of distribution sales to franchised Papa John’s restaurants located in the UK, operation of Company-owned restaurants in the UK, and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our International franchisees.
Foreign currency exchange rate fluctuations had an unfavorable impact of $2.0 million on our operating income in 2022 compared to a favorable impact of $1.4 million in 2021 and an unfavorable impact of $1.0 million in 2020.
Foreign currency exchange rate fluctuations had an unfavorable impact of $0.9 million on our operating income in 2023 compared to an unfavorable impact of $2.0 million in 2022 and a favorable impact of $1.4 million in 2021.
Approximately 6.2% of our 2022 revenues, 7.3% of our 2021 revenues and 6.8% of our 2020 revenues were derived from these International operations. We have not historically hedged our exposure to foreign currency fluctuations.
Approximately 7.4% of our 2023 revenues, 6.2% of our 2022 revenues and 7.3% of our 2021 revenues were derived from these International operations. We have not historically hedged our exposure to foreign currency fluctuations.
Foreign currency exchange rate fluctuations had an unfavorable impact of approximately $13.3 million on our total revenues in 2022, compared to a favorable impact of approximately $8.1 million in 2021 and an unfavorable impact of approximately $0.6 million in 2020.
Foreign currency exchange rate fluctuations had a favorable impact of approximately $1.7 million on our total revenues in 2023, compared to an unfavorable impact of approximately $13.3 million in 2022 and a favorable impact of approximately $8.1 million in 2021.
A 10% adverse change in the foreign currency rates for our International markets would result in an additional negative impact on annual revenue and operating income of approximately $13.6 million and $1.5 million, respectively, based on annual revenue and operating income for the year ended December 25, 2022.
A 10% adverse change in the foreign currency rates for our International markets would result in a negative impact on annual revenue and operating income of approximately $14.1 million and $1.9 million, respectively, based on annual revenue and operating income for the year ended December 31, 2023.
Debt” of “Notes to Consolidated Financial Statements” for additional information on our debt obligations and derivative instruments. Foreign Currency Exchange Rate Risk We are exposed to foreign currency exchange rate fluctuations from our operations outside of the United States, which can adversely impact our revenues, net income and cash flows.
Foreign Currency Exchange Rate Risk We are exposed to foreign currency exchange rate fluctuations from our operations outside of the United States, which can adversely impact our revenues, net income and cash flows.
We have pricing agreements with some of our vendors, including forward pricing agreements for a portion of our cheese purchases for our Domestic Company-owned restaurants, which are accounted for as normal purchases; however, we still remain exposed to on-going commodity volatility. The following table presents the actual average block price for cheese by quarter in 2022, 2021 and 2020.
We have pricing agreements with some of our vendors, including forward pricing agreements for a portion of our cheese purchases for our Domestic Company-owned restaurants, which are accounted for as normal purchases; however, we still remain exposed to ongoing commodity volatility, and increases in commodity prices or food costs, including as a result of inflation, could negatively impact our business, financial condition or results of operations.
Removed
The interest rate swaps were eligible for hedge accounting for part of the period. Our swaps are entered into with financial institutions that participate in the PJI Revolving Facility.
Added
We do not enter into contracts for trading 52 Table of Contents purposes and do not use leveraged instruments. See “Note 12. Debt” of “Notes to Consolidated Financial Statements” for additional information on our debt obligations and derivative instruments.
Removed
Also presented is the projected 2023 average block price by quarter (based on the February 16, 2023 Chicago Mercantile Exchange cheese futures prices): 2023 2022 2021 2020 Projected Market Block Price Block Price Block Price Quarter 1 $ 1.951 $ 1.966 $ 1.676 $ 1.857 Quarter 2 1.934 2.296 1.680 1.679 Quarter 3 2.066 1.938 1.676 2.262 Quarter 4 2.062 2.066 1.786 2.235 Full Year $ 2.003 $ 2.067 $ 1.705 $ 2.008 46 Table of Contents
Added
We have not historically entered into other financial instruments that would be accounted for as hedging instruments to manage this risk. 53 Table of Contents

Other PZZA 10-K year-over-year comparisons