Edgar Filing: PAPA JOHNS INTERNATIONAL INC

a50573114.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 30, 2012

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________________ to _______________________

Commission File Number: 0-21660

PAPA JOHN’S INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

	Delaware	61-1203323
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

	2002 Papa Johns Boulevard
	Louisville, Kentucky	40299-2367
	(Address of principal executive offices)	(Zip Code)

(502) 261-7272

(Registrant's telephone number, including area code)

	Securities registered pursuant to Section 12(b) of the Act:
	(Title of Each Class)	(Name of each exchange on which registered)
	Common Stock, $.01 par value	The NASDAQ Stock Market LLC

	Securities registered pursuant to Section 12(g) of the Act:
	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o

Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

The aggregate market value of the common stock held by non-affiliates of the Registrant, computed by reference to the closing sale price on The NASDAQ Stock Market as of the last business day of the Registrant’s most recently completed second fiscal quarter, June 24, 2012, was approximately $830,924,589.

As of February 24, 2013, there were 22,467,123 shares of the Registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Part III are incorporated by reference to the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 1, 2013.

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business	1
	Item 1A.	Risk Factors	11
	Item 1B.	Unresolved Staff Comments	16
	Item 2.	Properties	16
	Item 3.	Legal Proceedings	18
	Item 4.	Mine Safety Disclosures	18

PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters
		and Issuer Purchases of Equity Securities	21
	Item 6.	Selected Financial Data	24
	Item 7.	Management’s Discussion and Analysis of
		Financial Condition and Results of Operations	25
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
	Item 8.	Financial Statements and Supplementary Data	52
	Item 9.	Changes in and Disagreements with Accountants
		on Accounting and Financial Disclosure	93
	Item 9A.	Controls and Procedures	93
	Item 9B.	Other Information	94

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	95
	Item 11.	Executive Compensation	95
	Item 12.	Security Ownership of Certain Beneficial Owners
		and Management and Related Stockholder Matters	95
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	96
	Item 14.	Principal Accounting Fees and Services	96

PART IV
	Item 15.	Exhibits, Financial Statement Schedules	96

PART I

Item 1. Business

General

Papa John’s International, Inc. (referred to as the “Company”, “Papa John’s” 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 restaurant-based delivery restaurants under the trademark “Papa John’s”. The first Company-owned Papa John’s restaurant opened in 1985 and the first franchised restaurant opened in 1986. At December 30, 2012, there were 4,163 Papa John’s restaurants in operation, consisting of 696 Company-owned and 3,467 franchised restaurants operating domestically in all 50 states and in 35 countries. Our Company-owned restaurants include 182 restaurants operated under four joint venture arrangements. We also own and operate restaurants in Beijing and North China (48 units at December 30, 2012).

Papa John’s has defined six reportable segments: domestic Company-owned restaurants, domestic commissaries (Quality Control Centers), North America franchising, international operations, variable interest entities (“VIEs”) and “all other” business units. North America is defined as the United States and Canada. Domestic is defined as the contiguous United States. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 21” of “Notes to Consolidated Financial Statements” for financial information about these segments for the fiscal years ended December 30, 2012, December 25, 2011 and December 26, 2010.

All of our periodic and current reports filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, are available, free of charge, through our website located at www.papajohns.com, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. Those documents are available through our website as soon as reasonably practicable after we electronically file them with the SEC. We also make available free of charge on our website our Corporate Governance Guidelines, Board Committee Charters, and our Code of Ethics, which applies to Papa John's directors, officers and employees. Printed copies of such documents are also available free of charge upon written request to Investor Relations, Papa John’s International, Inc., P.O. Box 99900, Louisville, KY 40269-0900. You may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. This information is also available 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.

Strategy

Our goal is to build the strongest brand loyalty in the pizza industry. The key elements of our strategy include:

High Quality Menu Offerings. Domestic Papa John’s restaurants offer a menu of high-quality pizza along with side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. Papa John’s traditional crust pizza is prepared using fresh dough (never frozen). Papa John’s pizzas are made from a proprietary blend of wheat flour, cheese made from 100% real mozzarella, fresh-packed pizza sauce made from vine-ripened tomatoes (not from concentrate) and a proprietary mix of savory spices, and a choice of high-quality meat (100% beef, pork and chicken with no fillers) and vegetable toppings. Domestically, all ingredients and toppings can be purchased from our Quality Control Center (“QC Center”) system, which delivers to individual restaurants twice weekly. To ensure consistent food quality, each domestic franchisee is required to purchase dough and tomato sauce from our QC Centers and to purchase all other supplies from our QC Centers or other approved suppliers. Internationally, the menu may be more diverse than in our domestic operations to meet local tastes and customs. QC Centers outside the U.S. may be operated by franchisees pursuant to license agreements or by other third parties. We provide significant assistance to licensed international QC Centers in sourcing approved quality suppliers.

In addition to our fresh dough traditional crust pizza, we offer a thin crust pizza, which is a par-baked product produced by a third-party vendor. Our traditional crust pizza offers a container of our special garlic sauce and a pepperoncini pepper. Each thin crust pizza is served with a packet of special seasonings and a pepperoncini pepper.

We continue to test new product offerings both domestically and internationally. The new products can become a part of the permanent menu if they meet certain established guidelines.

Efficient Operating System. We believe our operating and distribution systems, restaurant layout and designated delivery areas result in lower restaurant operating costs and improved food quality, and promote superior customer service. Our QC Center system takes advantage of volume purchasing of food and supplies, and provides consistency and efficiencies of scale in fresh dough production. This eliminates the need for each restaurant to order food from multiple vendors and commit substantial labor and other resources to dough preparation.

Commitment to Team Member Training and Development. We are committed to the development and motivation of our team members through training programs, incentive and recognition programs and opportunities for advancement. Team member training programs are conducted for corporate team members, and offered to our franchisees electronically and at training locations across the United States and internationally. We offer performance-based financial incentives to corporate and restaurant team members at various levels.

Marketing. Our marketing strategy consists of both national and local components. Our domestic national strategy includes national advertising via television, print, direct mail, digital and social media channels. Our online and digital marketing activities have increased significantly over the past several years in response to increasing consumer use of online and mobile web technology.

Our local restaurant-level marketing programs target consumers within the delivery area of each restaurant through the use of local TV, radio, print materials, targeted direct mail, store-to-door flyers, digital display advertising, email marketing, text messages and local social media. Local marketing efforts also include a variety of community-oriented activities within schools, sports venues and other organizations supported with some of the same advertising vehicles mentioned above.

In international markets, we target customers who live or work within a small radius of a Papa John’s restaurant. Certain markets can effectively use television and radio as part of their marketing strategies. The majority of the marketing efforts include using print materials such as flyers, newspaper inserts, in-store marketing materials, and to a growing extent, digital marketing such as display, search engine marketing, email, and SMS text. Local marketing efforts, such as sponsoring or participating in community events, sporting events and school programs, are also used to build customer awareness.

Strong Franchise System. We are committed to developing and maintaining a strong franchise system by attracting experienced operators, supporting them to expand and grow their business and monitoring their compliance with our high standards. We seek to attract franchisees with experience in restaurant or retail operations and with the financial resources and management capability to open single or multiple locations. We devote significant resources to provide Papa John’s franchisees with assistance in restaurant operations, management training, team member training, marketing, site selection and restaurant design.

Unit Sales and Investment Costs

We are committed to maintaining strong unit economics. In 2012, the 615 domestic Company-owned restaurants included in the full year’s comparable restaurant base generated average unit sales of $953,000 (53-week basis). North America franchise sales per unit on average are lower than Company-owned restaurants as a higher percentage of our Company-owned restaurants are located in more heavily penetrated markets.

The average cash investment for the eight domestic traditional Company-owned restaurants opened during the 2012 fiscal year, exclusive of land, was approximately $240,000 per unit, excluding tenant allowances that we received. With few exceptions, domestic restaurants do not offer a dine-in area, which reduces our restaurant capital investment.

We define a “traditional” domestic Papa John’s restaurant as a delivery and carryout unit that services a defined trade area. We consider the location of a traditional restaurant to be important and therefore devote significant resources to the investigation and evaluation of potential sites. The site selection process includes a review of trade area demographics, target population density and competitive factors. A member of our development team inspects each potential domestic Company-owned restaurant location and substantially all franchised restaurant locations before a site is approved. Our restaurants are typically located in strip shopping centers or freestanding buildings that provide visibility, curb appeal and accessibility. Our restaurant design can be configured to fit a wide variety of building shapes and sizes, which increases the number of suitable locations for our restaurants. A typical domestic inline or end cap Papa John’s restaurant averages 1,100 to 1,500 square feet with visible exterior signage. A majority of restaurants in the United States have installed a lobby enhancement re-design package over the last two years. The cost of the lobby enhancement re-design package approximated $10,000 to $15,000 per restaurant.

“Non-traditional” Papa John’s restaurants generally do not provide delivery service but rather provide walk-up or carry-out service to a captive customer group within a designated facility, with continuous operations in a facility such as a food court at an airport, university or military base or an event-driven service at facilities such as sports stadiums or entertainment venues. Non-traditional units are designed to fit the unique requirements of the venue.

Most of our international Papa John’s restaurants are slightly smaller and average between 900 and 1,400 square feet; however, in order to meet certain local customer preferences, some international restaurants have been opened in larger spaces to accommodate both dine-in and restaurant-based delivery service, typically with 35 to 100 seats.

Development

A total of 368 Papa John’s restaurants were opened during 2012, consisting of 28 Company-owned (eight in North America and 20 in Beijing and North China) and 340 franchised restaurants (182 in North America and 158 international), while 88 Papa John’s restaurants closed during 2012, consisting of five Company-owned (three in North America and two in Beijing and North China) and 83 franchised restaurants (44 in North America and 39 international).

During 2013, we expect net unit growth of approximately 230 to 260 units (110 to 125 net openings for North America and 120 to 135 net openings for international). International franchised unit expansion includes an emphasis on markets in the Americas, the United Kingdom, the Middle East and Asia.

Although most of our domestic Company-owned markets are well-penetrated, our Company-owned 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 efficiencies. 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 utilize market co-development in the future, where appropriate.

Of the total 3,204 North American restaurants open as of December 30, 2012, 648 or 20% were Company-owned (including 182 units owned in joint venture arrangements with franchisees in which the Company has a majority ownership position). The Company expects the percentage of domestic Company-owned units to decline over the next several years, because future net openings will be more heavily weighted toward franchise units.

Of the 959 international restaurants open as of December 30, 2012, 48 or 5% were Company-owned (located in Beijing and North China). We plan to continue to grow our international units during the next several years, most of which will be franchised.

QC Center System and Supply Chain Management

Our domestic QC Centers, comprised of nine full-service regional production and distribution centers and one distribution-only center that is in the process of converting to a full-service center, supply pizza dough, food products, paper products, smallwares and cleaning supplies twice weekly to each restaurant throughout the contiguous United States. The primary difference between a full-service QC Center and a distribution-only center is that full-service QC Centers produce fresh pizza dough in addition to providing other food and paper products used in our restaurants. This system enables us to monitor and control product quality and consistency, while lowering food and other costs. The QC Center system capacity is continually evaluated in relation to planned restaurant growth, and facilities are developed or upgraded as operational or economic conditions warrant.

We own full-service international QC Centers in the United Kingdom, Mexico City, Mexico and Beijing, China. Other international full-service QC Centers are licensed to franchisees or non-franchisee third parties, and are generally located in the markets where our franchisees have restaurants.

We set quality standards for all products used in our restaurants and designate approved outside suppliers of food and paper products that meet our quality standards. In order to ensure product quality and consistency, all domestic Papa John’s restaurants are required to purchase tomato sauce and dough from our QC Centers. Franchisees may purchase other goods directly from our QC Centers or other approved suppliers. National purchasing agreements with most of our suppliers generally result in volume discounts to us, allowing us to sell products to our restaurants at prices we believe are below those generally available in the marketplace. Within our domestic QC Center system, products are distributed to restaurants by refrigerated trucks leased and operated by us or transported by a dedicated logistics company.

Marketing Programs

Domestic Company-owned and franchised Papa John’s restaurants within a defined market are 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. The rate of contribution and uses of the monies collected are determined by a majority vote of the Co-op’s members. The contribution rate for Co-ops may generally not be below 2.0% without approval from Papa John’s.

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”), an unconsolidated non-profit corporation. PJMF produces and buys air time for Papa John’s national television commercials, buys digital media such as banner advertising, paid search-engine advertising, social media advertising and marketing, and SMS text and email, in addition to other brand-building activities, such as consumer research and public relations activities. Domestic Company-owned and franchised Papa John’s restaurants are required to contribute a certain minimum percentage of sales to PJMF. The contribution rate to PJMF can be increased above the required minimum contribution rate if approved by the governing board of PJMF up to certain levels, and beyond those levels if approved by a supermajority of domestic restaurants. The contribution rate averaged 3.05% in 2010 and has been 4.0% since 2011.

We provide both Company-owned and franchised restaurants with pre-approved marketing materials and catalogs for the purchase of uniforms and promotional items. We also provide direct marketing services to Company-owned and franchised restaurants using customer information gathered by our proprietary point-of-sale technology (see “Company Operations – Domestic Point-of-Sale Technology”). In addition, we provide database tools, templates and training that allow operators to set their own local email marketing, text messaging and social media.

Our proprietary digital ordering platform allows customers to order online. Our platform includes “plan ahead ordering,” Spanish-language ordering capability, and enhanced mobile web ordering for our customers, including Papa John's iPhone® and Android® applications. We also have a Papa Rewards® program, which is an online customer loyalty program designed to increase loyalty and frequency of consumer use of our online/digital ordering platform. We receive a percentage-based fee from U.S. franchisees for online sales, in addition to royalties, to defray development and operating costs associated with our digital ordering platform.

We also offer our customers the opportunity to purchase a reloadable gift card marketed as the “Papa Card.” The Papa Card is sold as either a plastic gift card purchased in our restaurants, or an online digital card purchased at our web site. Additionally, we sell Papa Cards to consumers through third-party retailers, sell bulk orders of cards to business entities and organizations, and continue to explore other Papa Card distribution opportunities. The Papa Card may be redeemed for delivery, carryout, online and mobile web orders and is accepted at all Papa John’s traditional domestic restaurants.

Company Operations

Domestic Restaurant Personnel. A typical Papa John’s Company-owned domestic restaurant employs a restaurant manager and approximately 20 to 25 hourly team members, many of whom work part-time. The manager is responsible for the day-to-day operation of the restaurant and maintaining Company-established operating standards. We seek to hire experienced restaurant managers and staff and provide comprehensive training programs in areas such as operations and managerial skills. We also employ directors of operations who are responsible for overseeing an average of seven Company-owned restaurants. Additional levels of operations senior management and corporate staff also support the field teams in many areas, including but not limited to quality assurance, food safety, training, marketing and technology. We seek to motivate and retain personnel by providing opportunities for advancement and performance-based financial incentives.

Training and Education. The Global Operations Support and Training (“GOST”) department is responsible for creating tools and materials for the training and development of both corporate and franchise team members. We believe training is very important to delivering consistent operational execution. 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.

Domestic Point-of-Sale Technology. Our proprietary PROFIT SystemTM, point-of-sale technology (“POS”), is in place in all North America traditional Papa John’s restaurants. We believe this technology facilitates fast and accurate order-taking and pricing, reduces paperwork and allows the restaurant manager to better monitor and control food and labor costs, including facilitation of managing food inventory and placing orders from the domestic QC Centers. We believe the PROFIT System also enhances restaurant-level marketing capabilities. Polling capabilities allow us to obtain restaurant operating information, providing us with timely access to sales and customer information. The PROFIT System is also closely integrated with our digital ordering solutions in all domestic traditional Papa John’s restaurants, enabling Papa John’s to offer nationwide digital ordering to our customers. We are currently in the process of developing our next generation PROFIT System.

Domestic Hours of Operation. Our domestic restaurants are open seven days a week, typically from 11:00 a.m. to 12:30 a.m. Monday through Thursday, 11:00 a.m. to 1:30 a.m. on Friday and Saturday and 12:00 noon to 11:30 p.m. on Sunday. Carryout hours are generally more limited for late night, for security purposes.

Franchise Program

General. We continue to attract franchisees with significant restaurant and retail experience. We consider our franchisees to be a vital part of our system’s continued growth and believe our relationship with our franchisees is good. As of December 30, 2012, there were 3,467 franchised Papa John’s restaurants operating in all 50 states and 35 countries. During 2012, 340 (182 North America and 158 international) franchised Papa John’s restaurants were opened. As of December 30, 2012, we have development agreements with our franchisees for approximately 300 additional North America restaurants, the majority of which are committed to open over the next two to three years, and agreements for approximately 1,100 additional international franchised restaurants, the majority of which are scheduled to open over the next six years. There can be no assurance that all of these restaurants will be opened or that the development schedule set forth in the development agreements will be achieved.

Approval. Franchisees are approved on the basis of the applicant’s business background, restaurant operating experience and financial resources. We seek franchisees to enter into development agreements for single or multiple restaurants. We require each franchisee to complete our training program or to hire a full-time operator who completes the training and has either an equity interest or the right to acquire an equity interest in the franchise operation. Outside the United States, we will allow an approved operator bonus plan to substitute for the equity interest.

North America Development and Franchise Agreements. We enter into development agreements with our franchisees in North America for the opening of a specified number of restaurants within a defined period of time and specified geographic area. Substantially all existing franchise agreements have an initial 10-year term with a 10-year renewal option. We have the right to terminate a franchise agreement for a variety of reasons, including a franchisee’s failure to make payments when due or failure to adhere to our policies and standards. Many state franchise laws limit the ability of a franchisor to terminate or refuse to renew a franchise.

We provide assistance to Papa John’s franchisees in selecting sites, developing restaurants and evaluating the physical specifications for typical restaurants. We provide layout and design services and recommendations for subcontractors, signage installers and telephone systems to Papa John’s franchisees. Our franchisees can purchase complete new store equipment packages through an approved third-party supplier. In addition, we sell replacement smallwares and related items to our franchisees. Each franchisee is responsible for selecting the location for its restaurants but must obtain our approval of restaurant design and location based on accessibility and visibility of the site and targeted demographic factors, including population density, income, age and traffic.

Under our standard domestic development agreement, the franchisee is required to pay, at the time of signing the agreement, a non-refundable fee of $25,000 for the first restaurant and $5,000 for any additional restaurants. The non-refundable fee is credited against the standard $25,000 franchise fee payable to us upon signing the franchise agreement for a specific location. Generally, a franchise agreement is executed when a franchisee secures a location. Our current standard development agreement requires the franchisee to pay a royalty fee of 5% of sales and the majority of our existing franchised restaurants also have a 5% royalty rate in effect.

Domestic Franchise Development Incentives. Over the past few years, we have offered various development incentive programs for domestic franchisees to increase unit openings. Such incentives included the following for 2012 traditional openings: (1) no franchise fee (standard fee is $25,000); (2) the waiver of some or all of the 5% royalty fee for a limited period of time, not to exceed 18 months; (3) a credit for the portion of the purchase of certain equipment; and (4) a credit to be applied toward a future food purchase, under certain circumstances. Our 2013 incentives will be similar to those offered in 2012. We believe the development incentive programs have accelerated unit openings and expect they will continue to do so in 2013.

Marketing Fund Incentives. In 2012, domestic franchisees could earn up to a 45 basis point royalty rebate (against our standard 5.0% royalty rate) by meeting certain sales growth targets in consideration for agreeing to set the marketing fund rate over a multi-year period. The royalty rebate incentives will continue throughout 2013.

Domestic Franchise Support Initiatives. From time to time, we offer additional discretionary support initiatives to our domestic franchisees, including:

·	Food cost relief by lowering the commissary margin on certain commodities sold by PJ Food Service, Inc. (“PJFS”) to the franchise system and by providing incentive rebate opportunities;
·	Targeted royalty relief and local marketing support to assist certain identified franchisees or markets; and
·	Restaurant opening incentives.

In 2013, we plan to continue domestic franchise support initiatives. We believe the support programs have mitigated potential unit closures and strengthened our brand.

International Development and Franchise Agreements. We opened our first franchised restaurant outside the United States in 1998. We define “international” as all markets outside the United States and Canada. 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. Under a master franchise agreement, the franchisee has the right to subfranchise a portion of the development to one or more subfranchisees approved by us. Under our current standard international development agreement, the franchisee is required to pay total fees of $25,000 per restaurant: $5,000 at the time of signing the agreement and $20,000 when the restaurant opens or on the agreed-upon development date, whichever comes first. Under our current standard master franchise agreement, the master franchisee is required to pay total fees of $25,000 per restaurant owned and operated by the master franchisee, under the same terms as the development agreement, and $15,000 for each subfranchised restaurant – $5,000 at the time of signing the agreement and $10,000 when the restaurant opens or on the agreed-upon development date, whichever comes first.

Our current standard international master franchise and development agreement provides for payment to us of a royalty fee of 5% of sales, with no provision for increase during the initial term. The remaining terms applicable to the operation of individual restaurants are substantially equivalent to the terms of our domestic franchise agreement. From time to time, development agreements will be negotiated at other-than-standard terms for fees and royalties. We also offer various development incentives to help drive net unit growth.

Non-traditional Restaurant Development. We had approximately 200 non-traditional restaurants at December 30, 2012. These agreements generally cover venues or areas not originally targeted for traditional unit development and have terms differing from the standard agreement.

Franchisee Loans. Selected franchisees have borrowed funds from us, principally for the purchase of restaurants from us or other franchisees or for use in the construction and development of new restaurants. Loans made to franchisees typically 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 franchisees’ owners. At December 30, 2012, net loans outstanding totaled $17.1 million. See “Note 11” of “Notes to Consolidated Financial Statements” for additional information.

Domestic Franchise Insurance Program. Our franchisees may elect to purchase various insurance policies, such as health insurance, non-owned automobile and workers’ compensation, through our wholly-owned insurance agency, Risk Services Corp. (“Risk Services”). Various third-party commercial insurance companies provide fully-insured coverage for these lines of business to franchisees participating in the franchise insurance program offered by Risk Services.

Domestic Franchise Training and Support. Our domestic field support structure consists of franchise business directors, each of whom is responsible for serving an average of approximately 130 franchised units. Our franchise business directors maintain open communication with the franchise community, relaying operating and marketing information and new initiatives between franchisees and us. Franchise business directors report to one of three regional division vice presidents, who report to the Senior Vice President, North and Latin American Operations and Global OST.

Every franchisee is required to have a principal operator approved by us who satisfactorily completes our required training program. Principal operators for traditional restaurants are required to devote their full business time and efforts to the operation of the franchisee’s traditional restaurants. Each franchised restaurant manager is also required to complete our Company-certified management training program. Ongoing supervision of training is monitored by the GOST team. Multi-unit franchisees are encouraged to appoint training store general managers or hire a full-time training coordinator certified to deliver Company-approved training programs.

International Franchise Operations Support. We employ international business directors who are responsible for supporting one or more franchisees. The international business directors report to one of three regional vice presidents or report directly to the respective Senior Vice President. Additional levels of senior management and corporate staff also support the international field teams in many areas, including but not limited to food safety, quality assurance, training, marketing and technology.

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. Franchisees generally have full discretion to determine the prices to be charged to customers, but we have the authority to set maximum price points for nationally advertised promotions.

Franchise Advisory Council. We have a Franchise Advisory Council (“FAC”) that consists of Company and franchisee representatives of domestic restaurants. We also have a franchise advisory council in the United Kingdom (“UK FAC”). The FAC and UK FAC and subcommittees hold regular meetings to discuss new product and marketing ideas, operations, growth and other relevant issues. Certain domestic franchisees have also formed a separate franchise association for the purpose of communicating and addressing issues, needs and opportunities among its members.

We currently communicate with, and receive input from, our franchisees in several forms, including through the FAC, UK FAC, annual operations conferences, system communications, national conference calls and various regional meetings conducted with franchisees throughout the year. Monthly webcasts are also conducted by the Company to discuss current operational, marketing or other issues affecting the franchisees’ business. We are committed to communicating with our franchisees and receiving input from them.

Industry and Competition

The United States Quick Service Restaurant pizza industry (“QSR Pizza”) is mature and highly competitive with respect to price, service, location, food quality and variety. There are well-established competitors with substantially greater financial and other resources than Papa John’s. The category is largely fragmented and competitors include international, national and regional chains, as well as a large number of local independent pizza operators. Some of our competitors have been in existence for substantially longer periods than Papa John’s and can have higher levels of restaurant penetration and stronger, more developed brand awareness in markets where we compete. According to industry sources, domestic QSR Pizza category sales, which includes dine-in, carry-out and delivery, had sales of approximately $32.6 billion in 2012, or an increase of 0.5% from the prior year.

With respect to the sale of franchises, we compete with many franchisors of restaurants and other business concepts. In general, there is also active competition for management personnel and attractive commercial real estate sites suitable for our restaurants.

Government Regulation

We, along with our franchisees, are subject to various federal, state and local laws affecting the operation of our respective businesses. Each Papa John’s restaurant is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, building and fire agencies in the state or municipality in which the restaurant is located. Difficulties in obtaining, or the failure to obtain, required licenses or approvals can delay or prevent the opening of a new restaurant in a particular area. Our full-service QC Centers are licensed and subject to regulation by state and local health and fire codes, and the operation of our trucks is subject to Department of Transportation regulations. We are also subject to federal and state environmental regulations.

We are subject to Federal Trade Commission (“FTC”) regulation and various state laws regulating the offer and sale of franchises. The laws of several states also regulate substantive aspects of the franchisor-franchisee relationship. The FTC requires us to furnish to prospective franchisees a franchise disclosure document containing prescribed information. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for federal regulation of the U.S. franchisor-franchisee relationship in certain respects if such bills were enacted. The 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. National, state and local government regulations or initiatives, including health care legislation, “living wage,” menu labeling, or other current or proposed regulations and increases in minimum wage rates affect Papa John’s as well as others within the restaurant industry. As we expand internationally, we are subject to applicable laws in each jurisdiction where franchised units are established.

Trademarks, Copyrights and Domain Names

Our rights in our principal trademarks and service marks are a significant part of our business. We own the federal registration of the trademark “Papa John’s.” We have also registered “Pizza Papa John’s and design” (our logo), “Better Ingredients. Better Pizza.”, “Pizza Papa John’s Better Ingredients. Better Pizza. and design” and “Papa Rewards” as trademarks and service marks. We also own federal registrations for several ancillary marks, principally advertising slogans. We have also applied to register our primary trademark, “Pizza Papa John’s and design,” in more than 100 foreign countries and the European Community. We are aware of the use by other persons in certain geographical areas of names and marks that are the same as or similar to our marks. It is our policy to pursue registration of our marks whenever possible and to vigorously oppose any infringement of our marks.

We hold copyrights in certain packaging, training and promotional materials used in our business. In addition, we have registered and maintain Internet domain names, including “Papajohns.com.”

Employees

As of December 30, 2012, we employed approximately 18,800 persons, of whom approximately 16,400 were restaurant team members, approximately 900 were restaurant management personnel, approximately 600 were corporate personnel and approximately 900 were QC Center and Preferred Marketing Solutions, Inc. (“Preferred,” our wholly-owned print and promotions subsidiary) personnel. Most restaurant team members work part-time and are paid on an hourly basis. None of our team members is covered by a collective bargaining agreement. We consider our team member relations to be good.

Item 1A. Risk Factors

We are subject to various risks that could have a negative effect on our business, financial condition and results of operations. These risks could cause actual operating results to differ from those expressed in certain “forward looking statements” contained in this Form 10-K as well as in other Company communications. Although we believe our expectations are based on reasonable assumptions, actual results may differ materially from those in the forward-looking statements as a result of various factors:

We face substantial competition from other food industry competitors, and our results of operations can be negatively impacted by the actions of one or more of our competitors.

The QSR Pizza category and the restaurant industry in general are intensely competitive, and there are many well-established competitors with substantially greater financial and other resources than the Papa John’s system. Some of these competitors have been in existence for a substantially longer period than Papa John’s and may be better established in the markets where restaurants operated by us or our franchisees are, or may be, located. Demographic trends, traffic patterns, the type, number and location of competing restaurants, and changes in pricing or other marketing initiatives or promotional strategies, including new product and concept developments, by one or more of our major competitors can have a rapid and adverse impact on our sales and earnings and our system-wide restaurant operations.

Changes in consumer preferences or discretionary consumer spending could adversely impact our results.

Changes in consumer preferences and trends (for example, changes in dietary preferences that could cause consumers to avoid pizza in favor of foods that are perceived as healthier, lower-calorie or otherwise based on their nutritional content) could adversely affect our restaurant business. Also, our success depends to a significant extent on numerous factors affecting consumer confidence or discretionary consumer income, including higher tax rates domestically or in international markets, and adverse economic conditions such as continued high levels of unemployment, high fuel and energy costs and reduced access to credit. Such factors could cause consumers to spend less on food or shift to lower-priced products. Further adverse changes in these factors could reduce sales or inhibit our ability to increase pricing, either of which could materially adversely affect our results of operations.

Food safety and quality concerns may negatively impact our business and profitability.

Incidents or reports of food- or water-borne illness or other food safety issues, food contamination or tampering, employee hygiene and cleanliness failures or improper employee conduct at our restaurants could lead to product liability or other claims. Such incidents or reports could negatively affect our brand and reputation as well as our revenues and profits. Similar incidents or reports occurring at quick service restaurants unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us.

In addition, we rely on our domestic and international suppliers, as do our franchisees, to provide quality ingredients and to comply with applicable laws and industry standards. 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 business and profitability.

Our success depends on the differentiation of our brand and maintaining the value and quality reputation of our brand.

Our results depend upon our ability to differentiate our brand and our reputation for quality. Our brand has been highly rated in U.S. surveys and we strive to build the value of our brand as we develop international markets. The value of our brand and demand for our products could be damaged by incidents that harm consumer perceptions of the Company and our brand, such as product recalls, food safety issues, privacy breaches, and related negative publicity. Social media can be used to promote adverse consumer perceptions with significantly greater speed and scope than traditional media outlets. As a result, the value of our brand and the demand for our products could be damaged and have an adverse effect on our financial results.

We may not be able to execute our strategy or achieve our planned growth targets, which could negatively impact our business and our financial results.

Our growth strategy depends on the Company’s and our franchisees’ ability to open new restaurants and to operate them on a profitable basis. 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. 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. 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 franchisees remain dependent on the availability of financing to remodel or renovate existing locations or construct and open new restaurants. The reduced availability of credit has required, and may continue to require, the Company to provide financing to certain franchisees and prospective franchisees in order to mitigate store closings or allow new units to open. If we are unable or unwilling to provide such financing, our results of operations may be adversely impacted. To the extent we provide financing to franchisees in domestic and international markets, our results could be negatively impacted by the credit performance of our franchisee loans, particularly if our franchisees encounter worsening economic or political conditions in their markets.

Our stock price could decline or experience volatility if we do not meet expectations of the market for earnings per share, comparable store sales, net restaurant openings or revenue growth.

Our results of operations and the operating results of our franchisees may be adversely impacted by increases in the cost of food ingredients and other commodities.

We are exposed to ongoing commodity volatility, and 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 costs. Cheese, historically representing 35% to 40% of our 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. Additionally, increases in fuel, utility, and insurance costs could adversely affect the profitability of our restaurant and QC Center businesses. Our domestic franchisees buy substantially all of their food products from our QC Center business. We have pricing arrangements with certain of our suppliers that reset on time frames ranging from monthly to annually. For our Company-owned restaurants, we also have forward pricing arrangements for a portion of our cheese purchases.

Our dependence on a sole supplier or a limited number of suppliers for some ingredients could result in disruptions to our business.

Domestic restaurants purchase substantially all food and related products from our QC Centers. Domestically, we are dependent on sole suppliers for our cheese and flour products, and internationally we are dependent on a sole supplier for substantially all our cheese. Alternative sources may not be available on a timely basis to supply these key ingredients or be available on terms as favorable to us as under our current arrangements. Our corporate and franchised restaurants could also be harmed by any prolonged disruption in the supply of products from or to our QC Centers due to weather, crop disease, and other events beyond our control. Insolvency of key suppliers could also negatively impact our business.

Our international operations are subject to increased risks and other factors that may make it more difficult to achieve or maintain profitability or meet planned growth rates.

Our international operations could be negatively impacted by changes in international economic, political and health conditions in the countries in which the Company or our franchisees operate. In addition, there are risks associated with differing business and social cultures and consumer preferences, diverse and sometimes uncertain or unstable government regulations and structures, limited availability and high cost of suitable restaurant locations, and difficulties in sourcing high-quality ingredients and other commodities in a cost-effective manner. In addition, our international operations are subject to additional factors, including compliance with anti-corruption and other foreign laws, and various currency regulations and fluctuations. Accordingly, there can be no assurance that our international operations will maintain profitability or meet planned growth rates.

We are subject to numerous laws and regulations governing our workforce and our operations. Changes in these laws, including health care legislation and minimum wage increases or additional laws could increase costs for our system-wide operations.

Domestic system-wide restaurant operations are subject to federal and state laws governing such matters as wages, benefits, working conditions, citizenship requirements and overtime. A significant number of hourly personnel employed by our franchisees and us are paid at rates closely related to the federal and state minimum wage requirements. Accordingly, further increases in the federal minimum wage or the enactment of additional state or local minimum wage increases above federal wage rates would increase labor costs for our system-wide operations. Additionally, current conditions may make it easier for workers to form unions, potentially resulting in higher costs. Local government agencies have also implemented ordinances that restrict the sale of certain food or drink products. Compliance with additional government mandates, including menu labeling requirements, could increase costs and be harmful to system-wide restaurant sales.

U.S. health care reform law enacted in 2010 requires employers such as us to provide health insurance for all qualifying employees or pay penalties for not providing coverage. We are evaluating the impact the new law will have on our domestic operations, and although we cannot predict with certainty the financial impact of the legislation, we, like other industry competitors, expect that the requirement that we provide more extensive health benefits to employees than we currently provide, and/or fund a larger portion than previously funded, could impact our results of operations beginning in 2014.

Domestically and internationally, we operate in an increasingly complex regulatory environment, and the cost of regulatory compliance is increasing. Failure to comply with applicable U.S. and international labor, health care, food, anti-bribery and corruption, consumer and other laws, may result in civil and criminal liability, damages, fines and penalties. This could harm our reputation, limit our ability to grow and adversely affect our financial performance.

Our expansion into emerging or under-penetrated domestic and international markets may present increased risks.

Any or all of the risks listed above could be especially harmful to the financial viability of our franchisees in under-penetrated or emerging markets in addition to international markets with unstable political climates. A decline in or failure to improve financial performance for such franchisees could lead to reduced new restaurant openings or unit closings at greater than anticipated levels and therefore adversely impact our ability to achieve our targets for growth and results of operations as well as have a negative impact on market share.

Our business and brand may be harmed should the services of our Founder, John Schnatter, as Chief Executive Officer, Chairman or brand spokesman terminate for any reason. Failure to effectively execute succession planning could harm our Company and brand.

John H. Schnatter, our Founder, Chairman and Chief Executive Officer (CEO), does not serve under an employment agreement and we do not maintain key man life insurance on Mr. Schnatter. We also depend on Mr. Schnatter’s image and his services as spokesman in our advertising and promotion materials. While we have entered into a license agreement with Mr. Schnatter related to the use of certain intellectual property related to his name, likeness and image, our business and brand may be harmed if Mr. Schnatter’s services were not available to the Company for any reason or the reputation of Mr. Schnatter was negatively impacted. In addition, failure to effectively execute succession planning could harm our Company and brand.

Changes in purchasing practices by our domestic franchisees could harm our commissary business.

Although our domestic franchisees currently purchase substantially all food products from our QC Centers, they are only required to purchase tomato sauce, dough and other items we may designate as proprietary or integral to our system from our QC Centers. Any changes in purchasing practices by domestic franchisees, such as seeking alternative approved suppliers of food products or ingredients, could adversely affect the financial results of our QC Centers and the Company.

We may be required to resort to litigation to protect our intellectual property rights, which could negatively affect our results of operations.

We depend on our Papa John’s brand name and rely on a combination of trademarks, copyrights, service marks and similar intellectual property rights to promote our brand. We believe the success of our business depends on our continued ability to use our existing trademarks and service marks to increase brand awareness and further develop our brand, both domestically and abroad. We may not be able to adequately protect our intellectual property rights and we may be required to resort to litigation to enforce such rights. Litigation could result in high costs and diversion of resources, which could negatively affect our results of operations, regardless of the outcome.

Disruptions of our critical business or information technology systems could harm our ability to conduct normal business.

We rely heavily on information systems, including digital ordering solutions, through which a significant portion of our domestic sales originate. We also rely heavily on point-of-sale processing in our restaurants for data collection and payment systems for the collection of cash, credit and debit card transactions, and other processes and procedures. Our ability to efficiently and effectively manage our business depends on the reliability and capacity of these technology systems.

Our systems could be damaged or interrupted by power loss through various technological failures or acts of God. In particular, we may experience 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, our customers may be less inclined to return to our digital ordering solutions, as frequently or at all. If our systems do not operate properly, we may need to upgrade or replace these systems, which could require material capital investment from us and our franchisees. Part of our technology infrastructure is specifically designed for us and our operational systems, which could cause unexpected costs, delays or inefficiencies when infrastructure upgrades are needed. Significant portions of our technology infrastructure are provided by third parties, and the performance of these systems is largely beyond our control. Failure of our third party systems, and backup systems, to adequately perform, particularly as our online sales grow, could harm our business and the satisfaction of our customers. In addition, we may not have or be able to obtain adequate protection or insurance to mitigate the risks of these events or compensate for losses related to these events, which could damage our business and reputation and be expensive and difficult to remedy or repair.

We may incur significant costs resulting from a security breach, including a breach of confidential customer information from our digital ordering business.

We are subject to a number of privacy and data protection laws and regulations. Our business requires the collection and retention of large volumes of internal and customer data, including credit card data and other personally identifiable information of our employees and customers housed in the various information systems we use. The integrity and protection of that customer, employee and Company data is critical to us. Although we take significant steps to prevent security breaches, such as theft of customer and Company information, failure to prevent fraud or security breaches could result in significant costs to us and have a material adverse effect on our business.

We have been and will continue to be subject to various types of litigation, including class and collective action litigation, which could subject us to significant damages or other remedies.

We and our restaurant industry competitors are subject to the risk of litigation from various parties, including vendors, customers, franchisees and employees. We are involved in a number of lawsuits, claims, investigations, and proceedings consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. We are currently a defendant in cases containing class action allegations. Plaintiffs in these types of class action lawsuits often seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may not be accurately estimated. We evaluate all of the claims and proceedings involving us to assess the expected outcome and where necessary we estimate the amount of potential losses to us. In many cases, particularly the 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 assessments are made by management based on the information available at the time made and require the use of a significant amount of judgment, and actual outcomes or losses may materially differ. 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.

We may be subject to impairment charges.

Impairment charges are possible if our subsidiaries located in the United Kingdom (“PJUK”) and China or previously acquired domestic restaurants perform below our expectations. This would result in a decrease in our reported asset value and reduction in our net income.

Our results of operations could be materially impacted as a result of the credit risk of operators of leases for which we remain contingently liable.

We remain contingently liable for certain restaurant and commissary leases previously operated by us and subsequently sold or refranchised. We enter into these arrangements as part of the process of disposing of or refranchising our stores in the ordinary course of business. While the new operators are the primary obligors under such assigned leases, we could be liable in the event that one or more new operators are unwilling or unable to make any required lease payments. Continuing weakness in the economy and difficulty in credit markets could make it difficult for these operators to meet their contractual commitments. If these operators default on the leases and we are unable to sublease the properties for which we remain contingently liable, it could have a material impact on our results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 30, 2012, there were 4,163 Papa John’s restaurants system-wide. 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.

North America Restaurants:

	Company		Franchised		Total
Alabama		-		73		73
Alaska		-		6		6
Arizona		39		37		76
Arkansas		-		23		23
California		-		209		209
Colorado		22		25		47
Connecticut		-		11		11
Delaware		-		15		15
District of Columbia		-		10		10
Florida		46		221		267
Georgia		86		60		146
Hawaii		-		14		14
Idaho		-		11		11
Illinois		6		115		121
Indiana		41		84		125
Iowa		-		23		23
Kansas		13		19		32
Kentucky		42		70		112
Louisiana		-		61		61
Maine		-		6		6
Maryland		60		40		100
Massachusetts		-		19		19
Michigan		-		43		43
Minnesota		30		15		45
Mississippi		-		30		30
Missouri		41		33		74
Montana		-		10		10
Nebraska		-		17		17

North America Restaurants (continued):

	Company		Franchised		Total
Nevada		-		22		22
New Hampshire		-		2		2
New Jersey		-		87		87
New Mexico		-		17		17
New York		-		127		127
North Carolina		83		77		160
North Dakota		-		5		5
Ohio		-		152		152
Oklahoma		-		28		28
Oregon		-		16		16
Pennsylvania		-		94		94
Rhode Island		-		5		5
South Carolina		6		54		60
South Dakota		-		10		10
Tennessee		29		76		105
Texas		78		159		237
Utah		-		33		33
Vermont		-		1		1
Virginia		26		112		138
Washington		-		51		51
West Virginia		-		23		23
Wisconsin		-		26		26
Wyoming		-		6		6
Total U.S. Papa John’s Restaurants		648		2,483		3,131
Canada		-		73		73
Total North America Papa John’s Restaurants		648		2,556		3,204

International Restaurants:

Azerbaijan	-	1	1
Bahrain	-	19	19
Cayman Islands	-	1	1
Chile	-	18	18
China	48	132	180
Colombia	-	16	16
Costa Rica	-	14	14
Cyprus	-	9	9
Dominican Republic	-	10	10
Ecuador	-	13	13
Egypt	-	13	13
El Salvador	-	10	10
Guam	-	1	1
India	-	29	29
Ireland	-	44	44
Jordan	-	6	6
Kuwait	-	25	25
Lebanon	-	3	3
Malaysia	-	19	19
Mexico	-	57	57
Nicaragua	-	2	2

International Restaurants (continued):

	Company		Franchised		Total
Oman		-		6		6
Panama		-		4		4
Peru		-		19		19
Philippines		-		13		13
Puerto Rico		-		14		14
Qatar		-		10		10
Russia		-		40		40
Saudi Arabia		-		6		6
South Korea		-		72		72
Trinidad		-		6		6
Turkey		-		17		17
United Arab Emirates		-		21		21
United Kingdom		-		212		212
Venezuela		-		29		29
Total International Papa John’s Restaurants		48		911		959

Note: Company-owned Papa John’s restaurants include restaurants owned by majority-owned subsidiaries. There were 182 such restaurants at December 30, 2012 (22 in Colorado, 26 in Maryland, 30 in Minnesota, 78 in Texas, and 26 in Virginia).

Most Papa John’s restaurants are located in leased space. The initial term of most domestic restaurant leases is generally five years with most leases providing for one or more options to renew for at least one additional term. Generally, the leases are triple net leases, which require us to pay all or a portion of the cost of insurance, taxes and utilities. Additionally, we lease our Company-owned restaurant sites in Beijing and North China. At December 30, 2012, we leased and subleased to franchisees in the United Kingdom 142 of the 212 franchised Papa John’s restaurant sites. The initial lease terms on the franchised sites are generally 10 to 15 years. The initial lease terms of the franchisee subleases are generally five to ten years. In connection with the 2006 sale of our former Perfect Pizza operations in the United Kingdom, we remain contingently liable for payment under approximately 40 lease arrangements, primarily associated with Perfect Pizza restaurant sites.

Seven of our ten domestic QC Centers are located in leased space, including the following locations: Raleigh, NC; Denver, CO; Phoenix, AZ; Des Moines, IA; Portland, OR;Pittsburgh, PA; and Cranbury, NJ. Our remaining three locations are in buildings we own, located in: Orlando, Florida; Dallas, Texas; and Louisville, Kentucky. Additionally, our corporate headquarters and our printing operations are located in Louisville, KY in buildings owned by us. Internationally, we own a full-service QC Center in the United Kingdom and lease office space near London. We also lease our QC Centers and office space in Beijing, China and Mexico City, Mexico.

Item 3. Legal Proceedings

The information contained under the heading “Litigation” in “Note 17” of “Notes to Consolidated Financial Statements” is incorporated by reference into this Item 3. We are party to various legal proceedings arising in the ordinary course of business, but, except as set forth in the items herein, are not currently a party to any legal proceeding that management believes could have a material adverse effect on the Company.

Item 4. Mine Safety Disclosures

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the current executive officers of Papa John’s:

Name	Age (a)	Position	First Elected Executive Officer

John H. Schnatter	51	Founder, Chairman and Chief Executive Officer	1985
Timothy C. O’Hern	49	Senior Vice President and Chief Development Officer	2005
Steve M. Ritchie	38	Senior Vice President, North and Latin American Operations and Global OST	2012
Thomas V. Sterrett	52	Senior Vice President, International	2010
Anthony N. Thompson	46	Executive Vice President, Chief Operating Officer, and President PJ Food Service	2009
Lance F. Tucker	43	Senior Vice President, Chief Financial Officer, Chief Administrative Officer, and Treasurer	2011
Andrew M. Varga	47	Senior Vice President and Chief Marketing Officer	2009

(a) Ages are as of January 1, 2013.

John H. Schnatter created the Papa John’s concept. The first Papa John’s Company-owned restaurant opened in 1985. He currently serves as Founder, Chairman and Chief Executive Officer. He previously served as Interim Chief Executive Officer from December 2008 to April 2009, Executive Chairman of the Company from 2005 until May 2007, as Chairman of the Board and Chief Executive Officer from 1990 until 2005, and as President from 1985 to 1990 and from 2001 until 2005.

Timothy C. O'Hern was appointed Senior Vice President and Chief Development Officer in July 2012. He previously served as Senior Vice President, Development since June 2009, a position he previously held from 2005 until 2007. From 2002 until 2005 and from 2007 until 2009, he managed the operations of a Papa John's franchisee in which he has an ownership interest. Prior to his departure from Papa John's in 2002, Mr. O'Hern held various positions, including Vice President of Global Development from February 2001 to 2002, Vice President of U.S. Development from March 1997 to February 2001, Director of Franchise Development from December 1996 to March 1997 and Construction Manager from November 1995 to December 1996. He has been a franchisee since 1993.

Steve M. Ritchie was appointed Senior Vice President, North American Operations & Global OST in August 2011, where he is responsible for all aspects of restaurant operations for company-owned restaurants and franchised units in the continental United States, Canada, Alaska and Hawaii, and he assumed additional responsibility for Latin American operations in July 2012. Mr. Ritchie has served in various capacities of increasing responsibility since joining Papa John’s in 1996. From December 2010 until August 2011, he served as Senior Vice President, Operations and Global OST, where he was responsible for leading the company’s domestic company-owned restaurant operations. In July 2010, he was named Vice President, Operations & Global OST, where he was responsible for overseeing all aspects of the company’s global operating support functions and strategic initiatives. Since 2006, he also has served as a franchise owner of multiple units in the Company’s Midwest Division.

Thomas V. Sterrett was named Senior Vice President, International in August 2010. Mr. Sterrett has served as Division Vice President from 2007 to 2010 (Midwest and South Divisions), Operations Vice President for the Company’s Midwest Division from 2005 to 2007, Director of Operations in the Nashville, Tennessee market from 2003 to 2005 and District Manager of the South Florida market from 1995 to 2003. Prior to joining Papa John’s, Mr. Sterrett spent eleven years with Dominos both as an employee and a franchisee.

Tony Thompson was appointed Chief Operating Officer in July 2012, after previously serving as Executive Vice President, Global Operations since July 2011. Mr. Thompson has served as President, PJ Food Service since May 2010. Mr. Thompson joined Papa John's in 2006 and has held the positions of Executive Vice President, North American Operations from December 2010 to July 2011, Senior Vice President, PJ Food Service from 2009 to May 2010 and Vice President, QCC Operations from 2006 to 2009. Prior to joining Papa John's, Mr. Thompson worked for the Scotts Company for six years as Plant Manager, Director of Marysville Operations and Director of Lawn and Controls Operations. Before joining the Scotts Company, Mr. Thompson spent four years with Conagra Grocery Products Company and seven years in various roles with Gulf Coast Coca Cola.

Lance F. Tucker was appointed Chief Administrative Officer in July 2012 and Chief Financial Officer and Treasurer in February 2011. Mr. Tucker previously held the positions of Chief of Staff and Senior Vice President, Strategic Planning from June 2010 to February 2011, after serving as Chief of Staff and Vice President, Strategic Planning since June 2009. Mr. Tucker was previously employed by the Company from 1994 to 1999 working in its finance department. From 2003 to 2009, Mr. Tucker served as Chief Financial Officer of Evergreen Real Estate, a company owned by John Schnatter. Mr. Tucker is a licensed Certified Public Accountant.

Andrew M. Varga was appointed Senior Vice President and Chief Marketing Officer in August 2009. Mr. Varga joined Papa John’s after 21 years with Brown-Forman Corporation. Mr. Varga served as Senior Vice President/Director of Marketing for Brown-Forman from 2007 until 2009, responsible for the company’s Wines and Spirits portfolio in the North American Region. From 2004 to 2007, Mr. Varga was Senior Vice President/Managing Director, Wines Marketing, with global responsibility for the wine portfolio.

There are no family relationships among our executive officers and other key personnel.

PART II

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 24, 2013, there were 743 record holders of common stock. However, there are significantly more beneficial owners of our common stock than there are record holders. The following table sets forth, for the quarters indicated, the high and low closing sales prices of our common stock, as reported by The NASDAQ Stock Market.

2012	High		Low
First Quarter	$	40.43	$	36.57
Second Quarter		49.38		36.78
Third Quarter		52.78		45.75
Fourth Quarter		54.00		47.05

2011	High		Low
First Quarter	$	30.55	$	27.54
Second Quarter		34.27		29.62
Third Quarter		33.79		27.47
Fourth Quarter		37.92		29.54

Since our initial public offering of common stock in 1993, we have not paid cash dividends on our common stock.

Papa John’s Board of Directors has authorized the repurchase of up to $1.1 billion of common stock under a share repurchase program that began December 9, 1999, and expires September 29, 2013. This includes $50 million of authorization by the Board of Directors in December 2012 and an additional $50 million authorized in February 2013. Through December 30, 2012, a total of 49.7 million shares with an aggregate cost of $959.6 million and an average price of $19.29 per share have been repurchased under this program. Subsequent to year-end, we acquired an additional 5,000 shares at an aggregate cost of $254,000. Approximately $115.2 million remained available under the Company’s share repurchase program as of February 24, 2013.

The following table summarizes our repurchase activity by fiscal period during 2012 (in thousands, except per share amounts):

						Total Number		Maximum Dollar
	Total		Average			of Shares Purchased		Value of Shares
	Number		Price			as Part of Publicly		that May Yet Be
	of Shares		Paid per			Announced Plans		Purchased Under the
Fiscal Period	Purchased		Share			or Programs		Plans or Programs

12/26/2011 - 01/22/2012		60	$	37.72			47,533	$	219,292
01/23/2012 - 02/19/2012		-		-	*		47,533	$	219,292
02/20/2012 - 03/25/2012		312	$	37.09			47,845	$	207,719
03/26/2012 - 04/22/2012		248	$	37.57			48,093	$	198,391
04/23/2012 - 05/20/2012		22	$	38.67			48,115	$	197,561
05/21/2012 - 06/24/2012		315	$	46.78			48,430	$	182,810
06/25/2012 - 07/22/2012		264	$	47.12			48,694	$	170,390
07/23/2012 - 08/19/2012		111	$	51.25			48,805	$	164,710
08/20/2012 - 09/23/2012		140	$	52.05			48,945	$	157,392
09/24/2012 - 10/21/2012		103	$	52.46			49,048	$	151,959
10/22/2012 - 11/18/2012		48	$	52.80			49,096	$	149,409
11/19/2012 - 12/30/2012		653	$	52.03			49,749	$	115,444

* There were no share repurchases during this period.

Our share repurchase authorization increased from $975.0 million to $1.1 billion as of February 24, 2013. For presentation purposes, the maximum dollar value of shares that may be purchased was adjusted retroactively to December 26, 2011.

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. There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise.

In May 2012, 13,000 shares of the Company’s common stock were acquired from employees to satisfy minimum tax withholding obligations that arose upon (i) vesting of restricted stock granted pursuant to approved plans, and (ii) distribution of shares of common stock issued pursuant to deferred compensation obligations.

Stock Performance Graph

The following performance graph compares the cumulative total return of the Company's common stock to the NASDAQ Stock Market (U.S.) Index and a group of the Company's peers consisting of U.S. companies listed on NASDAQ with standard industry classification (SIC) codes 5800-5899 (eating and drinking places). Relative performance is compared for the five-year period extending through the end of fiscal 2012. The graph assumes the value of the investments in the Company's common stock and in each index was $100 at the end of fiscal 2007, and, with respect to the index and peer group, that all dividends were reinvested.

Item 6. Selected Financial Data

The selected financial data presented for each of the fiscal years in the five-year period ended December 30, 2012, were derived from our audited consolidated financial statements. The selected financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Consolidated Financial Statements” and Notes thereto included in Item 7 and Item 8, respectively, of this Form 10-K. As described in “Note 3” of “Notes to Consolidated Financial Statements,” we restated certain financial data to correct errors in our accounting for noncontrolling interests related to our joint ventures.

(In thousands, except per share data)	Year Ended (1)
	Dec. 30,			Dec. 25,			Dec. 26,			Dec. 27,			Dec. 28,
	2012			2011			2010			2009			2008
				(As Restated)			(As Restated)			(Unaudited -- As Restated)
Income Statement Data	53 weeks			52 weeks			52 weeks			52 weeks			52 weeks
North America revenues:
Domestic Company-owned restaurant sales	$	592,203		$	525,841		$	503,272		$	503,818		$	533,255
Franchise royalties (2)		79,567			73,694			69,631			62,083			60,592
Franchise and development fees		806			722			610			912			1,722
Domestic commissary sales		545,924			508,155			454,506			417,689			431,650
Other sales		51,223			50,912			51,951			54,045			61,415
International revenues:
Royalties and franchise and development fees (3)		19,881			16,327			13,265			11,780			11,858
Restaurant and commissary sales (4)		53,049			42,231			33,162			28,223			25,849
Total revenues		1,342,653			1,217,882			1,126,397			1,078,550			1,126,341
Operating income (5)		99,807			87,017			86,744			95,218			65,486
Investment income		750			755			875			629			848
Interest expense		(2,162	)		(2,981	)		(4,309	)		(11,660	)		(7,536	)
Income before income taxes		98,395			84,791			83,310			84,187			58,798
Income tax expense		32,393			26,324			27,247			26,702			19,980
Net income, including redeemable noncontrolling interests		66,002			58,467			56,063			57,485			38,818
Income attributable to redeemable noncontrolling interests (6)		(4,342	)		(3,732	)		(3,485	)		(3,756	)		(2,022	)
Net income, net of redeemable noncontrolling interests	$	61,660		$	54,735		$	52,578		$	53,729		$	36,796
Basic earnings per common share	$	2.63		$	2.19		$	2.00		$	1.94		$	1.31
Earnings per common share - assuming dilution	$	2.58		$	2.16		$	1.99		$	1.93		$	1.30
Basic weighted average shares outstanding		23,458			25,043			26,328			27,738			28,124
Diluted weighted average shares outstanding		23,905			25,310			26,468			27,909			28,264

Balance Sheet Data
Total assets	$	438,408		$	390,382		$	417,492		$	396,009		$	385,464
Total debt		88,258			51,489			99,017			99,050			130,654
Redeemable noncontrolling interests, including mandatorily redeemable		18,217			15,030			13,484			14,175			11,594
Total stockholders’ equity		181,514			205,647			195,608			173,145			129,986

(1)

We operate on a 52-53 week fiscal year ending on the last Sunday of December of each year. The 2012 fiscal year consisted of 53 weeks and all other years above consisted of 52 weeks. The additional week resulted in additional revenues of approximately $21.5 million and additional income before income taxes of approximately $4.1 million, or $0.11 per diluted share for 2012.

(2)	North America franchise royalties were derived from franchised restaurant sales of $1.85 billion in 2012, $1.71 billion in 2011, $1.62 billion in 2010, $1.58 billion in 2009 and $1.53 billion in 2008.

(3)	International royalties were derived from franchised restaurant sales of $388.4 million in 2012, $320.0 million in 2011, $258.8 million in 2010, $222.2 million in 2009 and $196.5 million in 2008.

(4)	Restaurant sales for international Company-owned restaurants were $16.2 million in 2012, $12.4 million in 2011, $11.0 million in 2010, $10.3 million in 2009 and $8.1 million in 2008.

(5)

The operating results include the consolidation of BIBP Commodities, Inc. (“BIBP”), which increased operating income approximately $21.4 million in 2010 (including a reduction in BIBP’s cost of sales of $14.2 million associated with PJFS’s agreement to pay to BIBP for past cheese purchases an amount equal to its accumulated deficit). BIBP increased operating income by $23.3 million in 2009 and reduced operating income by $8.6 million in 2008 (break-even results in 2011). See “Note 5” of “Notes to Consolidated Financial Statements” for additional information. Operating income also includes domestic and international restaurant closure, impairment and disposition losses of $8.8 million in 2008.

(6)	Represents the redeemable noncontrolling interests’ allocation of income for our joint venture arrangements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s” or in the first person notations of “we,” “us” and “our”) began operations in 1985 with the opening of the first Papa John’s restaurant in Jeffersonville, Indiana. At December 30, 2012, there were 4,163 Papa John’s restaurants in operation, consisting of 696 Company-owned and 3,467 franchised restaurants. Our revenues are principally derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, sales of franchise and development rights, sales to franchisees of food and paper products, printing and promotional items, risk management services, and information systems and related services used in their operations.

New unit openings in 2012 were 368 as compared to 321 in 2011 and 325 in 2010 and unit closings in 2012 were 88 as compared to 84 in 2011 and 148 in 2010. We expect net unit growth of approximately 230 to 260 units during 2013. Our expansion strategy is to cluster restaurants in targeted markets, thereby increasing consumer awareness and enabling us to take advantage of operational, distribution and advertising efficiencies.

We continue to generate strong sales in our domestic Company-owned restaurants even in a very competitive market environment. Average annual Company-owned sales for our most recent comparable restaurant base were $953,000 for 2012 (53-week year), compared to $897,000 for 2011 and $863,000 for 2010 (2011 and 2010 are on a 52-week basis). Average sales volumes in new markets are generally lower than in those markets in which we have established a significant market position. The comparable sales for domestic Company-owned restaurants increased 5.6% in 2012, increased 4.1% in 2011, and decreased 0.6% in 2010. The comparable sales for North America franchised units increased 2.9% in 2012, 3.1% in 2011 and 0.3% in 2010. “Comparable sales” represents sales generated by restaurants open for the entire twelve-month period reported.

We strive to obtain high-quality restaurant sites with good access and visibility, and to enhance the appearance and quality of our restaurants. We believe these factors improve our image and brand awareness. The average cash investment for the eight domestic Company-owned restaurants opened during 2012 was approximately $240,000, compared to the $260,000 investment for the eight units opened in 2011, exclusive of land and any tenant improvement allowances we received in both years.

Approximately 43% of our revenues for 2012, compared to 47% of our revenues for 2011 and 45% of our revenues for 2010, were derived from the sale to franchisees of food and paper products, printing and promotional items, risk management services and information systems equipment and software and related services by us. We believe that, in addition to supporting both Company and franchised profitability and growth, these activities contribute to product quality and consistency throughout the Papa John’s system.

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. The preparation of consolidated financial statements requires management to select accounting policies for critical accounting areas as well as estimates and assumptions that affect the amounts reported in the consolidated financial statements. The Company’s significant accounting policies are more fully described in “Note 2” of “Notes to Consolidated Financial Statements.” Significant changes in assumptions and/or conditions in our critical accounting policies could materially impact the operating results. We have identified the following accounting policies and related judgments as critical to understanding the results of our operations.

Fiscal Year

The Company follows a fiscal year ending on the last Sunday of December, generally consisting of 52 weeks made up of four 13-week quarters. The 13-week quarters consist of two four-week periods followed by one five-week period. Our 2012 fiscal year consisted of 53 weeks, including a six-week period in the fourth quarter. The additional week resulted in additional revenues of approximately $21.5 million and additional income before income taxes of $4.1 million, or $0.11 per diluted share for both the fourth quarter and full year of 2012.

Accounting Policies

Allowance for Doubtful Accounts and Notes Receivable

We establish reserves for uncollectible accounts and notes receivable based on overall receivable aging levels and a specific evaluation of accounts and notes for franchisees and other customers with known financial difficulties.

Intangible Assets – Goodwill

We evaluate goodwill annually in the fourth quarter or whenever we identify certain triggering events or circumstances that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Such tests are completed separately with respect to the goodwill of each of our reporting units.

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2011-08, “Testing Goodwill for Impairment,” permits us to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. We applied the qualitative assessment to our domestic Company-owned restaurants and China reporting unit, which is included in our international reporting segment. As a result of our qualitative analysis, we determined that it was more-likely-than-not that the fair value of our domestic Company-owned restaurants and China reporting unit was greater than the carrying amounts.

ASU 2011-08 allows us to bypass the qualitative assessment and perform the two-step quantitative goodwill impairment test if indicators are present. We applied the quantitative test for our subsidiary located in the United Kingdom (“PJUK”), which represents $15.4 million of goodwill as of December 30, 2012. Under the two-step quantitative goodwill impairment test, the fair value of the reporting unit is compared to its respective carrying amount including goodwill. If the fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the fair value, further analysis is performed to assess impairment. The fair value was calculated using an income approach that projected net cash flow over a 10-year discrete period and a terminal value, which were discounted using appropriate rates. The selected discount rates considered the risk and nature of our PJUK reporting unit’s cash flow and the rates of return market participants would require to invest their capital in the PJUK reporting unit. Additionally, we made various estimates and assumptions in determining the fair value, including growth rates.

The fair value of PJUK exceeded the carrying value by 37%. We believe our PJUK reporting unit will continue to improve its operating results through ongoing growth initiatives, by increasing Papa John’s brand awareness in the United Kingdom, improving sales and profitability for individual franchised restaurants and increasing PJUK franchised net unit openings over the next several years. If adverse economic events occur in the United Kingdom, there is risk of future impairment charges.

Subsequent to completing our annual qualitative and quantitative goodwill impairment tests, no indications of impairment were identified.

Insurance Reserves

Our insurance programs for workers’ compensation, general liability, owned and non-owned automobiles, property, and health insurance coverage provided to our employees are funded by the Company up to certain retention levels. Losses are accrued based upon undiscounted estimates of the aggregate retained liability for claims incurred using certain third-party actuarial projections and our claims loss experience. The estimated insurance claims losses could be significantly affected should the frequency or ultimate cost of claims differ significantly from historical trends used to estimate the insurance reserves recorded by the Company.

Deferred Income Tax Accounts and Tax Reserves

Papa John’s is subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining Papa John’s provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. As of December 30, 2012, we had a net deferred income tax liability of approximately $400,000.

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. We recognized reductions of $738,000, $1.9 million and $550,000 in our income tax expense associated with the finalization of certain income tax issues in 2012, 2011 and 2010, respectively (see “Note 15” of “Notes to Consolidated Financial Statements”).

Restatement of Previously Issued Financial Statements

In connection with the evaluation of the accounting for newly formed joint ventures in 2012, we reviewed our accounting for our previously existing joint venture arrangements. As a result of our review, we determined an error occurred in the accounting for one joint venture agreement, which contained a mandatorily redeemable feature added through a contract amendment in the third quarter of 2009. This provision contained in the 2009 contract amendment was not previously considered in determining the classification and measurement of the noncontrolling interest. In addition, we determined an additional redeemable noncontrolling interest was incorrectly classified in shareholders' equity and should be classified as temporary equity, which impacted the consolidated balance sheets and statements of stockholders' equity. As such, we are restating our previously issued consolidated financial statements for the fiscal years 2011, 2010 and 2009. The correction of the error related to the mandatorily redeemable noncontrolling interest had an impact on our consolidated statements of income, interest expense, income tax expense, and net income which is reflected herein for 2011 and 2010. The corrections were recorded to our “Unallocated Corporate Expenses” segment. Additionally, the corrections had no impact on total revenues, operating income, or operating cash flows and had no impact on our compliance with debt covenants in any periods presented. See “Note 3” of “Notes to Consolidated Financial Statements” for additional information.

Items Impacting Comparability; Non-GAAP Measures

The following table reconciles our financial results as reported under accounting principles generally accepted in the United States (“GAAP”) to certain non-GAAP measures. We present these non-GAAP measures to adjust for certain items which we believe impact the comparability of our results of operations.

	Year Ended
	Dec. 30,			Dec. 25,		Dec. 26,
(In thousands, except per share amounts)	2012			2011		2010
				(As Restated)		(As Restated)

Total revenues, as reported	$	1,342,653		$	1,217,882	$	1,126,397
53rd week of operations (a)		(21,500	)		-		-
Total revenues, as adjusted	$	1,321,153		$	1,217,882	$	1,126,397

Income before income taxes, as reported	$	98,395		$	84,791	$	83,310
53rd week of operations (a)		(4,145	)		-		-
Incentive Contribution (b)		2,971			-		-
Income from BIBP cheese purchasing entity (c)		-			-		(6,804	)
Income before income taxes, as adjusted	$	97,221		$	84,791	$	76,506

Items Impacting Comparability; Non-GAAP Measures (continued)

	Year Ended
	Dec. 30,			Dec. 25,		Dec. 26,
(In thousands, except per share amounts)	2012			2011		2010
				(As Restated)		(As Restated)

Net income, as reported	$	61,660		$	54,735	$	52,578
53rd week of operations (a)		(2,634	)		-		-
Incentive Contribution (b)		1,955			-		-
Income from BIBP cheese purchasing entity (c)		-			-		(4,339	)
Net income, as adjusted	$	60,981		$	54,735	$	48,239

Earnings per diluted share, as reported	$	2.58		$	2.16	$	1.99
53rd week of operations (a)		(0.11	)		-		-
Incentive Contribution (b)		0.08			-		-
Income from BIBP cheese purchasing entity (c)		-			-		(0.16	)
Earnings per diluted share, as adjusted	$	2.55		$	2.16	$	1.83

(a)	The Company follows a fiscal year ending on the last Sunday of December, generally consisting of 52 weeks made up of four 13-week quarters. In 2012, the Company’s fiscal year consisted of 53 weeks, with the additional week added to the fourth quarter (14 weeks) results.

(b)	In connection with a new multi-year supplier agreement, the Company received a $5.0 million supplier marketing payment in 2012. The Company is recognizing the supplier marketing payment evenly as income over the five-year term of the agreement ($1.0 million per year). The Company then contributed the supplier marketing payment to the Papa John’s Marketing Fund (“PJMF”), an unconsolidated, non-profit corporation, for the benefit of domestic restaurants. The Company’s contribution to PJMF was fully expensed in 2012.

	PJMF elected to distribute the $5.0 million supplier marketing payment to the domestic system as advertising credits in 2012. Our domestic Company-owned restaurants’ portion of the advertising credits resulted in an increase in income before income taxes of approximately $1.0 million in 2012.

	The overall impact of the two transactions described above, which are collectively defined as the “Incentive Contribution,” was a reduction in income before income taxes of approximately $3.0 million in 2012 (or a reduction to diluted earnings per share of approximately $0.08).

(c)	BIBP was a franchisee-owned corporation that conducted a cheese-purchasing program on behalf of Company-owned and franchised restaurants operating in the United States through February 2011. As the primary beneficiary of the variable interest entity, we consolidated the operating results of BIBP. BIBP operated at break-even for the first two months of 2011 and the 2010 consolidation impact of BIBP on income before income taxes was $6.8 million. The 2010 consolidation impact of BIBP on income before income taxes excluded a reduction in BIBP’s cost of sales of $14.2 million associated with PJFS’s agreement to pay to BIBP for past cheese purchases an amount equal to its accumulated deficit (“BIBP Settlement”). Accordingly, BIBP recorded a decrease of $14.2 million in cost of sales and PJFS recorded a corresponding increase in cost of sales in 2010. This transaction did not have any impact on the Company’s 2010 consolidated income statement results since both PJFS and BIBP are fully consolidated.

The non-GAAP results shown above, which exclude the items impacting comparability, should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP results. Management believes presenting the financial information without these items is important for purposes of comparison to prior year results. In addition, management uses these non-GAAP measures to allocate resources, and analyze trends and underlying operating performance. Annual cash bonuses, and certain long-term incentive programs for various levels of management, are based on financial measures that exclude the Incentive Contribution. See “Discussion of Operating Results” for further analysis regarding the impact of these items.

In addition, we present free cash flow in this report, which is a non-GAAP measure. We define free cash flow as net cash provided by operating activities (from the consolidated statements of cash flows) less the purchases of property and equipment. We view free cash flow as an important measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP and as a result our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of our performance than the Company’s GAAP measures. See “Liquidity and Capital Resources” for a reconciliation of free cash flow to the most directly comparable GAAP measure.

The presentation of the non-GAAP measures in this report is made alongside the most directly comparable GAAP measures.

Percentage Relationships and Restaurant Data and Unit Progression

The following tables set forth the percentage relationship to total revenues, unless otherwise indicated, of certain income statement data, and certain restaurant data for the years indicated:

	Year Ended (1)
	Dec. 30,			Dec. 25,			Dec. 26,
	2012			2011			2010
				(As Restated)			(As Restated)
Income Statement Data:	53 weeks			52 weeks			52 weeks
North America revenues:
Domestic Company-owned restaurant sales		44.1	%		43.2	%		44.7	%
Franchise royalties		5.9			6.1			6.2
Franchise and development fees		0.1			0.1			0.0
Domestic commissary sales		40.7			41.7			40.4
Other sales		3.8			4.2			4.6
International revenues:
Royalties and franchise and development fees		1.5			1.3			1.2
Restaurant and commissary sales		3.9			3.4			2.9
Total revenues		100.0			100.0			100.0
Costs and expenses:
Domestic Company-owned restaurant cost of sales (2)		23.2			24.1			22.1
Domestic Company-owned restaurant operating expenses (2)		57.1			56.9			57.7
Domestic commissary and other expenses (3)		92.0			92.2			91.4
Income from the franchise cheese purchasing
program, net of minority interest (4)		0.0			0.0			(0.5	)
International operating expenses (5)		84.6			84.5			88.7
General and administrative expenses		9.8			9.2			9.8
Other general expenses		0.6			0.8			0.8
Depreciation and amortization		2.4			2.7			2.9
Total costs and expenses		92.6			92.9			92.3
Operating income		7.4			7.1			7.7
Net interest expense		(0.1	)		(0.1	)		(0.3	)
Income before income taxes		7.3			7.0			7.4
Income tax expense		2.4			2.2			2.4
Net income, including redeemable noncontrolling interests		4.9			4.8			5.0
Less: income attributable to redeemable noncontrolling interests		(0.3	)		(0.3	)		(0.3	)
Net income, net of redeemable noncontrolling interests		4.6	%		4.5	%		4.7	%

	Year Ended (1)
	Dec. 30,			Dec. 25,			Dec. 26,
	2012			2011			2010

Restaurant Data:	53 weeks			52 weeks			52 weeks
Percentage increase (decrease) in comparable domestic
Company-owned restaurant sales (6)		5.6	%		4.1	%		(0.6	%)
Number of Company-owned restaurants included in the
most recent full year's comparable restaurant base		615			581			577
Average sales for Company-owned restaurants included
in the most recent comparable restaurant base	$	953,000		$	897,000		$	863,000

Papa John's Restaurant Progression:
North America Company-owned:
Beginning of period		598			591			588
Opened		8			8			5
Closed		(3	)		(1	)		(2	)
Acquired from franchisees		57			-			-
Sold to franchisees		(12	)		-			-
End of period		648			598			591
International Company-owned:
Beginning of period		30			21			26
Opened		20			9			8
Closed		(2	)		-			(2	)
Acquired from franchisees		-			-			1
Sold to franchisees		-			-			(12	)
End of period		48			30			21
North America franchised:
Beginning of period		2,463			2,346			2,246
Opened		182			166			182
Closed		(44	)		(49	)		(82	)
Acquired from Company		12			-			-
Sold to Company		(57	)		-			-
End of period		2,556			2,463			2,346
International franchised:
Beginning of period		792			688			609
Opened		158			138			130
Closed		(39	)		(34	)		(62	)
Acquired from Company		-			-			12
Sold to Company		-			-			(1	)
End of period		911			792			688
Total Papa John's restaurants - end of period		4,163			3,883			3,646

(1)

We operate on a 52-53 week fiscal year ending on the last Sunday of December of each year. The 2010 and 2011 fiscal years consisted of 52 weeks and the 2012 fiscal year consisted of 53 weeks. The additional week in 2012 resulted in additional revenues of approximately $21.5 million and additional income before income taxes of approximately $4.1 million, or $0.11 per diluted share.

(2)	As a percentage of domestic Company-owned restaurant sales.

(3)	As a percentage of domestic commissary sales and other sales on a combined basis.

(4)	As a percentage of total Company revenues; the income is a result of the consolidation of BIBP, a VIE. The sales reported by BIBP are eliminated in consolidation.

(5)	As a percentage of international restaurant and commissary sales.

(6)	Includes only Company-owned restaurants open throughout the periods being compared.

Results of Operations

2012 Compared to 2011

Discussion of Revenues

Consolidated revenues increased $124.8 million, or 10.2%, to $1.34 billion in 2012, compared to $1.22 billion in 2011. The 53rd week of operations in 2012 approximated $21.5 million, or 1.8%. The increase in revenues was primarily due to the following:

Domestic Company-owned restaurant sales increased $66.4 million, or 12.6%, in 2012, primarily due to an increase in comparable sales of 5.6%, the net acquisition of 50 restaurants in the Denver and Minneapolis markets from a franchisee in the second quarter of 2012, and $10.6 million, or 2.0%, benefit from the 53rd week of operations.

North America franchise royalty revenues increased approximately $5.9 million, or 8.0%, in 2012, due to an increase in comparable sales of 2.9%, an increase in net franchise units over the prior year, and a $1.4 million, or 1.8%, benefit from the 53rd week of operations. These increases were slightly offset by reduced royalties attributable to the Company’s net acquisition of the 50 restaurants noted above.

Domestic commissary sales increased $37.8 million, or 7.4%, in 2012, primarily due to higher commissary product volumes primarily resulting from increases in the volume of restaurant sales. The benefit from the 53rd week of operations was approximately $8.5 million, or an increase of 1.7%.

International revenues increased $14.4 million, or 24.5%, in 2012, primarily due to an increase in the number of restaurants and an increase in comparable sales of 7.1%, calculated on a constant dollar basis, which excludes the impact of foreign currency translation. The benefit from the 53rd week of operations was approximately $800,000, or 1.4%.

Discussion of Operating Results

Our income before income taxes totaled $98.4 million in 2012, as compared to $84.8 million in 2011, an increase of approximately $13.6 million. Income before income taxes is summarized in the following table on a reporting segment basis (in thousands):

	(a)			(a)			Increase
	2012			2011			(Decrease)
	53 weeks			52 weeks
				(As Restated)

Domestic Company-owned restaurants (b)	$	38,114		$	28,980		$	9,134
Domestic commissaries		34,317			30,532			3,785
North America franchising		69,332			66,222			3,110
International		3,063			(165	)		3,228
All others		2,889			(441	)		3,330
Unallocated corporate expenses (c)		(48,958	)		(39,727	)		(9,231	)
Elimination of intersegment profits		(362	)		(610	)		248
Income before income taxes	$	98,395		$	84,791		$	13,604

(a)

The 53rd week of operations increased income before income taxes by approximately $4.1 million in 2012 as follows:

	Increase (Decrease)
Domestic company-owned restaurants	$	1,609
Domestic commissaries		1,200
North America franchising		1,414
International		414
All others		215
Unallocated corporate expenses		(707	)
Income before income taxes	$	4,145

(b)

Includes the benefit of a $1.0 million advertising credit from PJMF related to the Incentive Contribution in 2012. See “Items Impacting Comparability; Non-GAAP measures” above for further information about the Incentive Contribution.

(c)

Includes the impact of the Incentive Contribution in 2012 ($4.0 million increase in expense).

Changes in income before income taxes for 2012 are summarized on a segment basis as follows:

●

Domestic Company-owned Restaurant Segment. Domestic Company-owned restaurants’ income before income taxes increased $9.1 million from the prior comparable period, including approximately $1.6 million related to the 53rd week of operations. The remaining increase was due to the previously noted comparable sales increase, favorable commodity costs, and various supplier incentives.

●

Domestic Commissary Segment. Domestic commissaries’ income before income taxes increased $3.8 million in 2012 as compared to the comparable 2011 period. Approximately $1.2 million of the increase was due to the impact of the 53rd week of operations. The remaining increase was primarily due to higher commissary product volumes resulting from increased sales volumes from the previously noted increase in net units and comparable sales.

●

North America Franchising Segment. North America franchising income before income taxes increased approximately $3.1 million in 2012, including approximately $1.4 million related to the 53rd week of operations in 2012. The remaining increase was due to the previously mentioned royalty revenue increase, partially offset by both an increase in development incentive costs and a reduction in royalties attributable to the Company’s net acquisition of the 50 Denver and Minneapolis restaurants.

●

International Segment. The international segment reported income before income taxes of approximately $3.1 million in 2012 compared to a loss of approximately $165,000 in 2011. The improvement in operating results of $3.2 million was primarily due to increased royalties due to growth in the number of units and a comparable sales increase of 7.1%, and improved operating results in our United Kingdom commissary. The 53rd week of operations increased operating results by approximately $400,000 in 2012.

●

All Others Segment. The “All others” segment reported operating income of approximately $2.9 million in 2012, representing an increase of approximately $3.3 million, as compared to the corresponding 2011 period. The increase was primarily due to an improvement in our online and mobile ordering (“eCommerce”) business. This improvement was somewhat offset by reduced operating results at our wholly-owned print and promotions subsidiary, Preferred Marketing Solutions (“Preferred”).

●

Unallocated Corporate Segment. Unallocated corporate expenses increased $9.2 million in 2012, as compared to the prior year, including approximately $700,000 related to the 53rd week of operations. The components of unallocated corporate expenses were as follows (in thousands):

	Year Ended			Year Ended
	December 30,			December 25,		Increase
	2012			2011		(Decrease)
				(As Restated)

General and administrative (a)	$	37,618		$	24,807	$	12,811
Supplier marketing payment (b)		4,000			-		4,000
Net interest expense		1,476			2,300		(824	)
Depreciation expense		7,193			8,021		(828	)
Franchise incentives and initiatives (c)		-			3,234		(3,234	)
Perfect Pizza lease obligation (d)		(135	)		832		(967	)
Other (income) expense (e)		(1,194	)		533		(1,727	)
Total unallocated corporate expenses	$	48,958		$	39,727	$	9,231

(a)

The increase in unallocated general and administrative costs was primarily due to increases in legal costs, including estimated costs associated with the tentative settlement of the Agne litigation (see “Note 17” of “Notes to Consolidated Financial Statements” for additional information), short-term management incentives, insurance costs, and higher costs related to our operators’ conference.

(b)

See “Items Impacting Comparability; Non-GAAP Measures” above for further information about the Incentive Contribution.

(c)

In 2011, we offered non-recurring incentives to domestic franchisees for meeting certain sales targets, including driving comparable sales, transactions and online sales. Other incentives offered are included in the North America Franchising segment.

(d)

The Perfect Pizza lease obligation relates to rents, taxes and insurance associated with the former Perfect Pizza operations in the United Kingdom. See the notes to the consolidated financial statements for additional information.

(e)

Other (income) expense improved primarily due to the prior year including both higher costs related to our online customer loyalty program and disposition and valuation costs associated with certain systems and other equipment.

Diluted earnings per share were $2.58 in 2012, compared to $2.16 in 2011, an increase of $0.42, or 19.4%. The 2012 diluted earnings per share include the benefit of the 53rd week of operations ($0.11 per diluted share increase), partially offset by the decrease of $0.08 per diluted share attributable to the Incentive Contribution. Diluted earnings per share increased $0.14 due to the reduction in weighted average shares outstanding (5.7% reduction).

Review of Consolidated Operating Results

Revenues. Domestic Company-owned restaurant sales were $592.2 million for 2012 compared to $525.8 million for 2011. The 12.6% increase was primarily due to a 5.6% increase in comparable sales and the net acquisition of 50 restaurants in Denver and Minneapolis from a franchisee in the second quarter of 2012, and $10.6 million, or 2.0%, benefit from the 53rd week of operations.

North America franchise sales increased 7.9% to $1.85 billion, from $1.71 billion in 2011, as domestic franchise comparable sales increased 2.9% and equivalent units increased 3.6%. “Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis. North America franchise sales are not included in our consolidated statements of income; however, our North America franchise royalty revenue is derived from these sales. North America franchise royalties were $79.6 million, representing an increase of 8.0% from the comparable period, including a $1.4 million, or 1.8% increase from the 53rd week of operations in 2012. The remaining increase in royalties was primarily due to the previously noted increase in franchise sales.

Average weekly sales for comparable units include restaurants that were open throughout the periods presented below. The comparable sales base for domestic Company-owned and North America franchised restaurants, respectively, includes restaurants acquired by the Company or divested to franchisees during the previous twelve months. Average weekly sales for non-comparable units include restaurants that were not open throughout the periods presented below and include non-traditional sites. Average weekly sales for non-traditional units not subject to continuous operation are calculated based upon actual days open.

The comparable sales base and average weekly sales for 2012 and 2011 for domestic Company-owned and North America franchised restaurants consisted of the following:

	Year Ended						Year Ended
	December 30, 2012						December 25, 2011
	Domestic Company- owned			North America Franchised			Domestic Company- owned			North America Franchised

Total domestic units (end of period)		648			2,556			598			2,463
Equivalent units		624			2,415			589			2,332
Comparable sales base units		615			2,190			581			2,135
Comparable sales base percentage		98.6	%		90.7	%		98.6	%		91.6	%
Average weekly sales - comparable units	$	17,987		$	14,870		$	17,248		$	14,459
Average weekly sales - total non-comparable units*	$	12,604		$	10,389		$	11,218		$	10,708
Average weekly sales - all units	$	17,908		$	14,453		$	17,164		$	14,142

*Includes 215 traditional units in 2012 and 183 in 2011 and 158 non-traditional units in 2012 and 134 in 2011.

North America franchise and development fees were approximately $800,000 in 2012, or an increase of approximately $100,000 from 2011.

Domestic commissary sales increased 7.4% to $545.9 million in 2012, from $508.2 million in the prior comparable period. The increase was primarily due to higher commissary product volumes resulting from increases in the volume of restaurant sales. Our commissaries charge a fixed dollar mark-up on the cost of cheese. Cheese prices are based upon the block price, which decreased to an average price of $1.69 per pound in 2012 from $1.80 per pound in 2011.

Other sales increased $300,000 to $51.2 million in 2012. The increase primarily resulted from an increase in online sales, partially offset by a decline in sales at Preferred.

International franchise sales were $388.4 million in 2012, compared to $320.0 million in 2011. International franchise sales are not included in our consolidated statements of income; however, our international royalty revenue is derived from these sales. Total international revenues were $72.9 million for 2012 compared to $58.6 million in 2011, reflecting an increase in the number of Company-owned and franchised restaurants in addition to the 7.1% increase in comparable sales, calculated on a constant dollar basis. Our PJUK operations represented 51% of international revenues in both 2012 and 2011.

Costs and Expenses. The restaurant operating margin at domestic Company-owned units was 19.7% in 2012 (19.5% excluding the $1.0 million advertising credit from PJMF) compared to 19.0% in 2011. The increase of 0.7% consisted of the following differences:

●

Cost of sales was 0.9% lower as a percentage of sales in 2012 due to lower commodity costs, primarily cheese; 2012 also included various supplier incentives.

●

Salaries and benefits were 0.5% higher as a percentage of sales in 2012, primarily due to higher bonuses paid to general managers.

●

Advertising and related costs as a percentage of sales were relatively flat year-over-year and included a $1.0 million advertising credit received from PJMF. The higher costs, excluding the advertising credit, were due to increased local advertising, including additional costs for newly acquired markets.

●

Occupancy costs and other operating costs, on a combined basis, as a percentage of sales, were 0.2% lower in 2012 reflecting the benefit of increased sales.

Domestic commissary and other operating margin was 8.0% in 2012, compared to 7.8% in 2011, consisting of the following differences:

●

Cost of sales was 0.3% lower as a percentage of revenues in 2012, as compared to 2011 due to lower commodity costs, primarily cheese, which has a fixed-dollar markup and due to the benefit of increased online sales.

●

Salaries and benefits were 0.1% higher as a percentage of revenues in 2012, as compared to the same period of 2011.

●

Other operating expenses were 0.1% higher as a percentage of revenues in 2012, as compared to 2011.

International operating expenses were relatively consistent at 84.6% of international restaurant and commissary sales in 2012 as compared to 84.5% in 2011. An increase in operating expenses, primarily associated with the new Company-owned restaurants in China, was substantially offset by an improvement in operating results in the United Kingdom.

General and administrative expenses were $131.6 million, or 9.8% of revenues for 2012, as compared to $111.6 million, or 9.2% of revenues for 2011. The increase in general and administrative expenses is due to increases in legal costs, including estimated costs associated with the tentative settlement of the Agne litigation, short-term management incentives, insurance costs, and higher costs related to our operators’ conference. The 53rd week of operations in 2012 increased general and administrative expenses by approximately $700,000.

Other general expenses reflected net expense of $8.3 million in 2012, as compared to $9.8 million in 2011 as detailed below (in thousands):

						Increase
	2012			2011		(Decrease)

Supplier marketing payment (a)	$	4,000		$	-	$	4,000
Franchise and development incentives and initiatives (b)		3,194			4,921		(1,727	)
Provision for uncollectible accounts and notes receivable		826			379		447
Disposition and impairment losses (c)		362			1,745		(1,383	)
Pre-opening restaurant costs		321			273		48
Perfect Pizza lease obligation (d)		(135	)		832		(967	)
Other (income) expense (e)		(255	)		1,617		(1,872	)
Total other general expenses	$	8,313		$	9,767	$	(1,454	)

(a)	See “Items Impacting Comparability; Non-GAAP measures” above for further information about the Incentive Contribution.

(b)

Includes incentives provided to domestic franchisees for opening restaurants. The 2011 amount includes approximately $3.2 million in incentives offered to domestic franchisees for meeting certain sales targets, including driving comparable sales, transactions and online sales, which were not offered in 2012.

(c)	Disposition and impairment losses include costs associated with the disposition of certain systems and other equipment, which were higher in 2011.

(d)	The Perfect Pizza lease obligation relates to rents, taxes and insurance associated with the former Perfect Pizza operations in the United Kingdom.

(e)	The decrease is primarily a result of 2011 including higher costs related to our online customer loyalty program.

Depreciation and amortization was $32.8 million, or 2.4% of revenues for 2012, as compared to $32.7 million, or 2.7% of revenues, for 2011.

Net interest. Net interest expense was approximately $1.4 million in 2012, compared to $2.2 million in 2011. The decrease in net interest costs reflects a lower effective interest rate and a reduction in interest expense associated with a change in redemption value of noncontrolling interest in a joint venture whose noncontrolling interest is deemed mandatorily redeemable. See “Notes 2, 3, 4 and 22” of the “Notes to Consolidated Financial Statements” for additional information.

Income Tax Expense. Our effective income tax rate was 32.9% in 2012 compared to 31.0% in 2011. Our effective income tax rate may fluctuate for various reasons, including the settlement or resolution of specific federal and state issues. We recognized reductions of $738,000 and $1.9 million in our income tax expense associated with the finalization of certain income tax issues in 2012 and 2011, respectively.

2011 Compared to 2010

Discussion of Revenues

Consolidated revenues increased 8.1% to $1.22 billion in 2011 compared to $1.13 billion in 2010, primarily consisting of the following:

●

Domestic Company-owned restaurant sales increased $22.6 million, or 4.5%, in 2011 primarily due to an increase in comparable sales of 4.1%.

●

North America franchise royalty revenues increased approximately $4.1 million, or 5.8% in 2011 due to an increase in comparable sales of 3.1%, and an increase in the number of franchised restaurants.

●

Domestic commissary sales increased $53.6 million, or 11.8% in 2011 primarily due to an increase in the prices of certain commodities, most notably cheese, and an increase in sales volumes.

●

International revenues increased $12.1 million, or 26.1% in 2011, primarily due to an increase in the number of restaurants and an increase in comparable sales of 5.1%, calculated on a constant dollar basis. In 2010, the international segment included revenues from Company-owned restaurants located in the United Kingdom, which were sold in the third quarter of 2010.

Discussion of Operating Results

Our income before income taxes totaled $84.8 million in 2011, as compared to $83.3 million in 2010, an increase of approximately $1.5 million. Excluding the impact of BIBP (income before income taxes of $6.8 million, excluding the BIBP Settlement), our income before income taxes increased approximately $8.3 million, or 10.8%.

Income before income taxes is summarized in the following table on an operating segment basis (in thousands):

							Increase
	2011			2010			(Decrease)
	(As Restated)			(As Restated)

Domestic Company-owned restaurants	$	28,980		$	31,619		$	(2,639	)
Domestic commissaries *		30,532			14,188			16,344
North America franchising		66,222			62,229			3,993
International		(165	)		(4,771	)		4,606
All others		(441	)		1,847			(2,288	)
Unallocated corporate expenses		(39,727	)		(42,237	)		2,510
Elimination of intersegment profits		(610	)		(519	)		(91	)
Income before income taxes, excluding BIBP		84,791			62,356			22,435
BIBP, a variable interest entity *