Segment Information

3 Months Ended

Mar. 27, 2022

Segment Information

Segment Information

11. Segment Information

We have four reportable segments: domestic Company-owned restaurants, North America franchising, North America commissaries, and international operations. The domestic Company-owned restaurant segment consists of the operations of all domestic (“domestic” is defined as contiguous United States) Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, which are flatbread-style sandwiches, and side items, including breadsticks, cheesesticks, chicken poppers and wings, dessert items and canned or bottled beverages. The North America commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to domestic Company-owned and franchised restaurants in the United States and Canada. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The international segment principally consists of distribution sales to franchised Papa John’s restaurants located in the United Kingdom and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our international franchisees. International franchisees are defined as all franchise operations outside of the United States and Canada. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to marketing funds and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms.

Generally, we evaluate performance and allocate resources based on operating income and intercompany eliminations. Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation.

Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues.

Our segment information is as follows:

	Three Months Ended
	March 27,		March 28,
(In thousands)	2022		2021
Revenues:
Domestic Company-owned restaurants	$	198,765	$	197,234
North America franchising		34,268		32,715
North America commissaries		209,679		184,878
International		42,707		42,604
All others		57,273		54,315
Total revenues	$	542,692	$	511,746
Intersegment revenues:
North America franchising	$	1,053	$	1,060
North America commissaries		58,507		52,070
All others		19,379		19,148
Total intersegment revenues	$	78,939	$	72,278
Operating income:
Domestic Company-owned restaurants (1)	$	1,989	$	15,324
North America franchising		32,137		30,443
North America commissaries		9,334		9,713
International (2)		4,455		8,364
All others		3,719		6,118
Unallocated corporate expenses (3)		(37,111)		(23,162)
Elimination of intersegment (profits) losses		(88)		62
Total operating income	$	14,435	$	46,862
Property and equipment, net:
Domestic Company-owned restaurants	$	220,357
North America commissaries		149,503
International		14,857
All others		112,037
Unallocated corporate assets		234,115
Accumulated depreciation and amortization		(514,616)
Total property and equipment, net	$	216,253

(1) Includes a one-time, non-cash charge of $8.4 million associated with the refranchising of the Company’s ownership interest in a 90-restaurant joint venture, recorded as Refranchising and impairment loss. See Note 10 for additional information.

(2) Includes $3.5 million of one-time, non-cash reserves for certain accounts receivable and impairments of reacquired franchise rights in the first quarter of 2022. See Notes 2 and 10 for additional information.

(3) For the first quarter of 2022, Unallocated corporate expenses include $13.9 million of one-time, non-cash reserves of certain notes receivable and $5.0 million for the Legal Settlement. For the first quarter of 2021, Unallocated corporate expense includes $3.9 million of reorganization costs. See Notes 2 and 9 for additional information.

Disaggregation of Revenue

In the following tables, revenues are disaggregated by major product/service line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands):

	Reportable Segments
	Three Months Ended March 27, 2022
Major Products/Services Lines		Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	198,765	$	-	$	-	$	-	$	-	$	198,765
Franchise royalties and fees		-		35,321		-		13,435		-		48,756
Commissary sales		-		-		268,186		21,182		-		289,368
Other revenues		-		-		-		8,090		76,652		84,742
Eliminations		-		(1,053)		(58,507)		-		(19,379)		(78,939)
Total segment revenues	$	198,765	$	34,268	$	209,679	$	42,707	$	57,273	$	542,692
International other revenues (1)		-		-		-		(8,090)		8,090		-
Total revenues	$	198,765	$	34,268	$	209,679	$	34,617	$	65,363	$	542,692
	Reportable Segments
	Three Months Ended March 28, 2021
Major Products/Services Lines		Domestic Company-owned restaurants		North America franchising		North America commissaries		International		All others		Total
Company-owned restaurant sales	$	197,234	$	-	$	-	$	-	$	-	$	197,234
Franchise royalties and fees		-		33,775		-		12,208		-		45,983
Commissary sales		-		-		236,948		22,399		-		259,347
Other revenues		-		-		-		7,997		73,463		81,460
Eliminations		-		(1,060)		(52,070)		-		(19,148)		(72,278)
Total segment revenues	$	197,234	$	32,715	$	184,878	$	42,604	$	54,315	$	511,746
International other revenues (1)		-		-		-		(7,997)		7,997		-
Total revenues	$	197,234	$	32,715	$	184,878	$	34,607	$	62,312	$	511,746

(1) Other revenues as reported in the Condensed Consolidated Statements of Operations include $8.1 million and $8.0 million of revenue for the three months ended March 27, 2022 and March 28, 2021, respectively, that are part of the international reporting segment. These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to operating income but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations.