Papa John’s(PZZA) - 2025 Q4 - Annual Report

Restaurant Operations - As of December 28, 2025, there were 6,083 Papa John's restaurants operating in 50 countries and territories, with a net unit growth of 53 restaurants from the previous year[27]. - The International segment included 2,560 restaurants, with 2,547 being franchised and 13 Company-owned in the UK[24]. - Approximately 9,400 persons were employed by Papa John's, with around 7,000 working at Company-owned restaurants[42]. Financial Performance - The Domestic Company-owned restaurants generated average annual unit sales of $1.3 million, while North American franchised restaurants generated average annual unit sales of $1.1 million[21][22]. - As of December 28, 2025, net loans outstanding to franchisees totaled $6.6 million, primarily for restaurant purchases and development[37]. - Franchise agreements generally require a royalty fee of 5% of gross revenue, with the majority of existing franchised restaurants adhering to this rate[31][34]. Marketing and Strategy - The Domestic marketing strategy includes national advertising and local marketing efforts, supported by a national marketing fund[38][40]. - The company has initiated the International Transformation Plan in 2023, aiming for completion by late 2025, followed by the Enterprise Transformation Plan[18]. - Future growth strategies may include new product innovations and market expansion efforts, particularly in international markets[53]. Operational Challenges - The company is dependent on a sole supplier for mozzarella cheese domestically and substantially all cheese internationally, which poses risks to operations[55]. - Inflationary pressures are affecting profitability through increased costs of food ingredients and delivery services, leading to potential downward pressure on unit sales and royalty fees from franchisees[291]. - Increased labor costs and supply chain disruptions are significant risks that could impact profitability and operational efficiency[293]. Competitive Landscape - The United States Quick Service Restaurant pizza industry is highly competitive, with numerous large national chains and many smaller regional chains, impacting Papa John's market position[53]. - The company anticipates continued growth in international markets, where the pizza delivery model is less mature compared to the domestic market[53]. - Future performance projections include potential impacts from economic conditions, consumer preferences, and competitive pricing strategies[292]. Employee Engagement - The company emphasizes a culture of inclusivity and employee engagement, with various programs to support team member development and well-being[44][48]. Quality Control - The North America commissary segment operates 11 Quality Control Centers in the U.S. and one in Canada, ensuring product quality and consistency while lowering costs[23]. - Papa John's operates 11 Quality Control (QC) Centers in the U.S. that produce dough and distribute key ingredients, ensuring consistent food quality across company-owned and franchised restaurants[55]. Regulatory Environment - The company is subject to various federal, state, and local regulations that could affect restaurant operations and expansion plans[56]. - The company has implemented expense control measures to offset rising costs and maintain profitability[291].