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Papa John’s franchisees average $705K in annual sales?

According to this 10-Q filed with the SEC by Papa John’s, average franchised store sales are 705k annually.

Papa John’s franchisees did increase sales 3.9% last quarter (Jan-March) compared to the same quarter last year.

Average weekly sales of franchised units: $13,563 ($705,276 annually)
Average weekly sales of company-owned: $15,075 ($783,900 annually)
* Why are the company owned stores outperforming franchisees by 11.15%?

The 10-Q speaks of one franchisee who sold his 19 restaurants with total annual revenues approximating $12.0 million ($631,578 per store) to a 3rd party. The restaurant sales were lower than the average by 11% or $70K, enough to obtain a loan writeoff from Papa John’s.

This isn’t good:

Domestic commissary sales increased 6.7% to $100.9 million for the first quarter of 2005, from $94.5 million in the comparable period, primarily due to higher cheese prices that were partially offset by lower volumes resulting from decreased restaurant transactions.

and this:

the first quarter 2004 operating margin was negatively impacted by the increased sales of lower margin promotional products

and this:

One group of 4 franchisees owning 33 franchises generated a $25,000 loss on $5.2 million of revenue, $4.6 million in operating expenses and other expenses (including G&A, depreciation and interest) totaling $600,000. Papa John’s also provided them with a large loan.

I do love their garlic dipping sauce for the crust that is included with each pizza!

Update 6-18-2005: Thanks to “Accountant” who in the comments pointed out my miscalculations. The post has been updated, including the title.

Update 6-19-2005: Thanks to “Ken King” who in the comments pointed out another miscalculation on my part. The post has been updated.

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8 comments
David
David

Papa John's has been an inceredible company to watch grow in my eyes because I know in the community I live in they have definately taken the throne from Pizza Hut for the cheap pizza you can depend on. Dominoz has begun pushing really hard with there newer pizza recipe, but at this time Papa John's is king.

Franchise Pundit
Franchise Pundit

Thanks Ken. I don't know where my head was on this post. :) Post has been updated.

Ken King | King Marketing
Ken King | King Marketing

A few more nits to pick - the intro paragraph still refers to the miscalculated revenue figures. Also, 19 locations with a total of $12 million in revenue would work out to about $632,000 per restaurant, well below the average. Finally, the 33 franchises mentioned at the end of the article are averaging only $606,000 per restaurant with annual revenues of $20 million. However, these franchise groups appear in the 10-Q specifically because they were distressed: in both situations the franchisor wrote off loan receivables and therefore had to describe the situation - I don't think they would have highlighted these restaurants by choice. I wouldn't lean too heavily on those specific examples for valuation of a prospective franchise - with 2001 domestic franchises in operation, they represent less than 3% of the total. More to the point, though: I agree with you about wanting to see more detail about why company-owned locations are out-performing franchises.

Franchise Pundit
Franchise Pundit

Accountant - You are correct. What a stupid error on my part. Thanks for pointing it out. I'll update the post to reflect.

Accountant
Accountant

Um, isn't 13,563 X 52 about $705,276 per year? And maybe $13,563 X 12 = $162,756 per quarter, no? An error of this magnitude could be considered "material" to this story.

NatoshiaRachellSmith
NatoshiaRachellSmith

The other stores are slower, but i think martinsburg wv and chambersburg pa are top sales stores in our district