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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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
How much are the delivery drivers paid?
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.
Accountant -
You are correct. What a stupid error on my part. Thanks for pointing it out. I’ll update the post to reflect.
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.
Thanks Ken. I don’t know where my head was on this post.
Post has been updated.