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Papa John's Franchise Cost & Fees

Date of Incorporation: 1984

Franchising Since: 1985

Headquarters: Louisville, Kentucky


Business Description: The franchisor, Papa John's International, Inc., operates and sells franchises for the operation of pizza businesses known as Papa John's restaurants. It also sells certain items to the franchisees.


Franchise Offer: The Papa John's franchise offered is a retail restaurant devoted primarily to the sale of pizza and related food products. The majority of Papa John's franchises are operated on a delivery and carry-out basis. However, there are a few restaurants that offer dine-in service and there may be additional restaurants with dine-in service developed in the future. The franchisor also permits development of restaurants in non-traditional venues, such as sports stadiums and food courts. The traditional Papa John's franchise is typically operated in leased space located on or near main thoroughfares. Restaurants operated under the Non-Traditional Program are typically located in sports stadiums or arenas and generally do not offer delivery service.


Financial Assistance: Neither the franchisor nor any agents or affiliates offers, directly or indirectly, any financing arrangements. The franchisor’s affiliate, Capital Delivery Ltd., sometimes provides financing for transactions involving the purchase and sale of existing Restaurants. However, Capital Delivery Ltd. does not offer financing for a franchisee’s initial investment in the franchise. The franchisor has entered into a loan program agreement (the “Program Agreement”) with First Franchise Capital Corporation under which the Lender has agreed to make up to $5,000,000 in financing available to qualifying Papa John’s franchisees.


Training and Assistance: Before the opening of the franchisee’s first restaurant, the franchisor will provide initial training on the operation of the restaurant to the principal operator and the restaurant managers. The principal operator must attend training in a certified training restaurant identified by the franchisor, and at Papa John's University in Louisville, Kentucky. An opening support team made up of franchisor designated employees will be used for training prior to the franchisee’s first two Restaurant openings. The franchisor also reserves the right to require any of the franchisee’s employees or prospective employees to take part in training and instruction as it deems necessary.


Territory: The franchisee must operate the restaurant at a specific location identified in the Franchise Agreement. He or she may not conduct business at any site other than the restaurant, or relocate the restaurant without written consent, which the franchisor will not unreasonably withhold. The franchisor will not, during the term of the Franchise Agreement, locate nor license another to locate a standard Papa John's restaurant within a specified radius of the restaurant, generally 1.5 miles. In densely populated urban areas, the Territory may be reduced to a one-half mile radius. If the franchisee opens a Non-Traditional Restaurant, the Territory for that Restaurant will extend only to the bounds of the site in which the Non-Traditional Restaurant is located.


Term of Agreement and Renewal: The length of the franchise term is 10 years. The franchisee may renew for an additional 10-year term if he or she meets the requirements.


Obligations and Restrictions: The franchisee or the managing shareholder or partner is not obligated to participate personally in the direct operation of the restaurant. The franchisee must designate an individual to serve as the principal operator. If the franchisee is an individual, then he or she is the principal operator. If the franchisee is a corporation, limited liability company or partnership, the principal operator must meet the following qualifications: The principal operator must be an approved person who completes the initial training requirements and who participates in and successfully completes all additional training as may be reasonably designated. The franchisee must offer for sale and sell only those products and services approved and must make all menu items specified by the franchisor available for sale by carry-out and delivery service from the restaurant, except that no delivery service may be provided from a Non-Traditional restaurant without written consent. The franchisee may not offer for sale any products or provide any services that have not been approved.


Estimated Number of Units: 4,300

 

Investment Tables:

Initial Investment

Standard Restaurant:

Name of Fee  Low High
Initial Franchise Fee   $0 $25,000
Real Estate Brokerage Fees $0 $10,000
Professional Fees $500 $12,000
Construction/Leasehold Improvements $40,000  $200,000
Furniture, Fixtures and Equipment $30,000  $120,000
Information System $15,000  $30,000
On-Site Support Fee $0 $2,500
On-Site Installation and Support Fee $0 $3,000
Help Desk Service Fee $0 $1,000
Software Enhancement Fee $123 $123
Signage $3,000  $20,000
First Month's Rent $1,200  $5,000
Security Deposit and Other Deposits, Insurance Premium $1,000 $8,500
Opening Inventory and Supplies $3,000  $10,000
Grand Opening Advertising $3,000 $10,000
Training Expenses $1,000 $15,000
Miscellaneous Opening Costs $2,500 $20,000
Additional Funds - 3 months $15,000  $50,000
TOTAL ESTIMATED INITIAL INVESTMENT  $124,823 $542,123

 

Non-Traditional Restaurant:

Name of Fee  Low High
Initial Franchise Fee   $0 $5,000
Real Estate Brokerage Fees $0 $5,000
Professional Fees $1,000 $7,500
Construction/Leasehold Improvements $0  $125,000
Furniture, Fixtures and Equipment $0  $80,000
Information System $0  $30,000
On-Site Support Fee $0 $2,500
On-Site Installation and Support Fee $0 $3,000
Help Desk Service Fee $0 $1,000
Software Enhancement Fee $0 $123
Signage $3,000  $20,000
First Month's Rent $0  $3,000
Security Deposit and Other Deposits, Insurance Premium $1,000 $6,000
Opening Inventory and Supplies $2,000  $12,500
Grand Opening Advertising $0 $10,000
Training Expenses $2,000 $6,000
Miscellaneous Opening Costs $2,500 $20,000
Additional Funds - 3 months $15,000  $50,000
TOTAL ESTIMATED INITIAL INVESTMENT  $26,500 $381,623


Other Fees

Name of Fee   Amount 
Royalty  5% of Net Sales of the Restaurant for each Period.
On-Line Transaction Fee 1.5% of Net Sales via Internet on-line ordering.
Transfer $4,000, or if transfer is of multiple Restaurants to more than one unaffiliated transferee, $4,000 per transferee.
Renewal  $4,000
Audit Expenses Cost of audit, understatement plus interest at 12% per annum.
Management Fee Compensation, travel and living expenses of the appointed manager and a reasonable per diem fee determined by the franchisor.
Costs, Attorneys' Fees and Pre-judgement Interest Will vary under circumstances.
Indemnification Will vary under circumstances.
Marketing Fund Contributions

Maximum - Up to 3% of Net Sales unless higher amount approved by 2/3 majority vote of Members. As of the date of this Disclosure Document, 4%.

Non-Traditional Restaurants pay 25% of the standard rate.

Papa Card Transaction and IVR Fees Maximum - 2% of Papa Card redemption -transactions, 9 unless the franchisor approves a higher rate.
Cooperative Contributions Minimum - 2% of Net Sales; cannot exceed 6% less the then-current Marketing Fund Contribution rate without majority vote of the Restaurants in the cooperative or by agreement.
Local Advertising Minimum - 7% of Net Sales, less amounts contributed to the Marketing Fund and Cooperative.
On-Site Installation and Support Fee $1,500 for a standard 2-day installation, $750 per day for each additional day, plus expenses.
Software Enhancement Fee $41 per month.
Help Desk Service Fee Flat fee of $70 per month or per call fee of $80 per hour with a 1/2 hour minimum.
Required Purchases  Will vary under circumstances.
Training Fees $100 per year per Restaurant.

 

 

The above information has been compiled from the FDD of Papa John's. Year of FDD: 2013.

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