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                      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 28, 1997
                                      OR
[_]    Transition report pursuant to Section 13 or 15(d) of the 
       Securities Exchange Act of 1934

                       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                           (I.R.S. Employer
incorporation or organization)                            Identification Number)

                      11492 Bluegrass Parkway, Suite 175
                       Louisville, Kentucky  40299-2370
                   (Address of principal executive offices)

                                (502) 266-5200
             (Registrant's telephone number, including area code)

- --------------------------------------------------------------------------------
     Securities registered pursuant to Section 12(b) of the Act:

                                                (Name of each exchange  
          (Title of Each Class)                 on which registered)
          None                                  None

     Securities registered pursuant to Section 12(g) of the Act:

          Common Stock, $.01 par value          The Nasdaq Stock Market 
- --------------------------------------------------------------------------------

     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       
                             -----              -----
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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.  [_]

     As of March 17, 1998, there were 29,199,131 shares of the Registrant's
Common Stock outstanding. The aggregate market value of the shares of
Registrant's Common Stock held by non-affiliates of the Registrant at such date
was $785,395,747 based on the last sale price of the Common Stock on March 17,
1998 as reported by The Nasdaq Stock Market. For purposes of the foregoing
calculation only, all directors and executive officers of the Registrant have
been deemed affiliates.

                      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 21, 1998.

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                               TABLE OF CONTENTS
                               -----------------



PART I
- ------

        Item 1.    Business

        Item 2.    Properties

        Item 3.    Legal Proceedings

        Item 4.    Submission of Matters to a Vote of Security Holders


PART II
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        Item 5.    Market for Registrant's Common Equity
                   and Related Stockholder Matters

        Item 6.    Selected Consolidated Financial Data

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

        Item 8.    Consolidated Financial Statements and Supplemental Data

        Item 9.    Changes in and Disagreements with Accountants
                   on Accounting and Financial Disclosure


PART III
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        Item 10.   Directors and Executive Officers of the
                   Registrant

        Item 11.   Executive Compensation

        Item 12.   Security Ownership of Certain Beneficial Owners
                   and Management

        Item 13.   Certain Relationships and Related Transactions


PART IV
- -------

        Item 14.   Exhibits, Consolidated Financial Statement
                   Schedules and Reports on Form 8-K

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                                    PART I


Item 1.   Business

General

     Papa John's International, Inc. (the "Company") operates and franchises
pizza delivery and carry-out restaurants under the trademark "Papa John's" in 41
states and the District of Columbia, encompassing substantially all of the
continental United States except the Northwest and upper Northeast region. The
first Company-owned restaurant opened in 1985 and the first franchised
restaurant opened in 1986. At December 28, 1997, there were 1,517 Papa John's
restaurants in operation, consisting of 401 Company-owned and 1,116 franchised
restaurants.

Strategy
 
     The Company's objective is to become the leading chain of pizza delivery
restaurants in each of its targeted markets. To accomplish this objective, the
Company has developed a strategy designed to achieve high levels of customer
satisfaction and repeat business, as well as to establish recognition and
acceptance of the Papa John's brand. The key elements of the Company's strategy
include:

     Focused, High Quality Menu. Papa John's restaurants offer a focused menu of
high quality pizza, breadsticks and cheesesticks. Papa John's original crust
pizza is prepared using fresh dough (not frozen), 100% real mozzarella cheese,
pizza sauce made from vine-ripened, fresh-packed tomatoes (not concentrate) and
proprietary mix of savory spices, and a choice of high quality meat and
vegetable toppings in generous portions. A thin crust pizza, introduced in 1996,
is made with a prepared crust and the same high quality toppings as Papa John's
original crust pizza. The Company believes its focused menu creates a strong
identity in the marketplace and simplifies operations.

     Efficient Operating System. The Company believes that its operating and
distribution systems, restaurant layout and designated delivery areas result in
lower restaurant operating costs, improved food quality and superior customer
service. The Company's commissary system takes advantage of volume purchasing of
food and supplies, and provides consistency and efficiencies of scale in 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. Because Papa John's restaurants have a focused menu and specialize
in delivery and carry-out services, each team member can concentrate on a well-
defined function in preparing and delivering the customer's order.

     Commitment to Employee Training and Development. The Company is committed
to the development and motivation of its team members through on-going training
programs, incentive compensation and opportunities for advancement. Team member
training programs for the Company and its franchisees are conducted at training
centers across the United States. The Company offers financial and stock
incentives to restaurant team members at various levels based on the achievement
of performance goals. The Company's growth also provides significant
opportunities for advancement. The Company believes these factors create an
entrepreneurial spirit throughout the organization, resulting in a positive work
environment and motivated, customer-oriented team members.

     Targeted, Cost-Effective Marketing. The Company's restaurant-level
marketing programs target the delivery area of each restaurant, making extensive
use of distinctive print materials in direct mail and store-to-door couponing.
Local marketing efforts also include a variety of community-oriented activities
with schools, sports teams and other organizations. In markets in which the
Company or its franchisees have a significant presence,

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local marketing efforts are supplemented with radio and television advertising.
The first national television commercial aired in the Fall of 1997.

     Franchise System. The Company is committed to developing a strong franchise
system by attracting experienced operators, expanding in a controlled manner and
ensuring that each franchisee adheres to the Company's high standards. In 1997,
the Company began developing an international franchise department and expects
to open the first franchised restaurants outside the U.S. in late 1998 or 1999.
The Company seeks to attract franchisees with experience in multi-unit
restaurant operations and with the financial resources and management capability
to open multiple locations. To ensure consistent food quality, each domestic
franchisee is required to purchase dough and spice mix from the Company and all
other supplies either from the Company or its approved suppliers. Commissaries
outside the U.S. may be operated by franchisees pursuant to license agreements.
The Company devotes significant resources to provide its franchisees with
assistance in restaurant operations, team member training, marketing, site
selection and restaurant design.

Unit Economics

     The Company believes its unit economics are exceptional. The 302 Company-
owned restaurants that were open throughout the entire 1997 fiscal year
generated average sales of $713,000, average cash flow (operating income plus
depreciation) of $142,000 and average restaurant operating income of $119,000
(or 16.7% of average sales). A significant number of these restaurants were
operating in newer markets. Historically, in the initial months of operations,
particularly in new markets, sales have been lower and costs higher than for
mature restaurants. However, recent trends indicate that new markets are opening
with higher than historical sales volumes.

     The average cash investment for the 76 Company-owned restaurants opened
during the 1997 fiscal year, exclusive of land and pre-opening costs, was
approximately $257,000. The Company expects the average cash investment for
restaurants to be opened in 1998 to approximate $260,000.

Expansion 

     A total of 364 restaurants were opened during 1997, consisting of 76
Company-owned and 288 franchised restaurants. The Company plans to open
approximately 70 restaurants in 1998 and expects its franchisees to open
approximately 300 restaurants in 1998. Newer market expansion is planned for the
Upper Northeast Coast, West Coast and Rocky Mountain regions, in addition to
building out existing markets throughout the country. As part of its growth
strategy, the Company will continue to consider acquiring restaurants from its
franchisees. The Company acquired 23 restaurants from its franchisees during the
1997 fiscal year. See "Note 3" of "Notes to Consolidated Financial Statements."

     The ability of the Company and its franchisees to open new restaurants is
affected by a number of factors, many of which are beyond the control of the
Company and its franchisees. These factors include, among other things,
selection and availability of suitable restaurant and commissary locations,
negotiation of suitable lease or financing terms, constraints on permitting and
construction of restaurants and the hiring, training and retention of management
and other personnel. Accordingly, there can be no assurance that the Company or
its franchisees will be able to meet planned growth targets or open restaurants
in markets now targeted for expansion.

     The Company's expansion strategy is to cluster restaurants in targeted
markets, thereby increasing consumer awareness and enabling the Company to take
advantage of operational, distribution and advertising efficiencies. The
Company's experience in developing markets indicates that market penetration
through the opening of multiple restaurants within a particular market results
in increased average restaurant sales in that market. The Company has co-
developed markets with franchisees or divided markets among franchisees, and
will

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continue to utilize market co-development in the future. In determining which
new markets to develop, the Company considers many factors, including the size
of the market, demographics and population trends, competition, and availability
and costs of real estate. Before entering a new market, the Company analyzes
detailed information of these factors and each market is toured and evaluated by
senior management.

Menu 

     Papa John's restaurants offer a focused menu of high quality pizza,
breadsticks and cheesesticks, as well as canned soft drinks. Papa John's
original crust pizza is prepared using fresh dough (not frozen). The Company's
thin crust pizza is made with a prepared crust which simplifies store-level
operations. All Papa John's pizzas are made from high protein wheat flour, 100%
real mozzarella cheese, pizza sauce made with vine-ripened, fresh-packed
tomatoes (not concentrate) and a proprietary mix of savory spices, and a choice
of high quality meat and vegetable toppings in generous portions. Fresh onions
and green peppers are purchased from local produce suppliers. Each original
crust pizza is served with a container of Papa John's special garlic sauce and
two pepperoncinis, and each thin crust pizza is served with a container of
special seasonings and two pepperoncinis. The Company believes its limited menu
helps create a strong identity among consumers and simplifies operations,
resulting in lower restaurant operating costs, improved food quality and
superior customer service. 

Restaurant Design and Site Selection

     The exterior of most Papa John's restaurants is characterized by backlit
awnings, neon window designs and other visible signage. A typical Papa John's
restaurant ranges from 1,200 to 1,500 square feet and is designed to facilitate
a smooth flow of food orders through the restaurant. The layout includes
specific areas for order taking, pizza preparation and routing, resulting in
simplified operations, lower training and labor costs, increased efficiency and
improved consistency and quality of food products. The typical interior of a
Papa John's restaurant has a vibrant red and white color scheme with green
striping, and includes a bright menu board, custom counters and a carry-out
customer area. The counters are designed to allow customers to watch the team
members slap out the dough and put sauce and toppings on pizzas.

     The Company considers the location of a restaurant to be important and
therefore devotes significant resources to the investigation and evaluation of
potential sites. The site selection process includes trade area demographics,
target population density, household income levels and competitive factors. A
member of the Company's development team inspects each potential Company-owned
or franchised restaurant location and the surrounding market before a site is
approved. Papa John's restaurants are typically located in strip shopping
centers or free-standing buildings that provide visibility, curb appeal and
accessibility. The Company's restaurant design may be configured to fit a wide
variety of building shapes and sizes, thereby increasing the number of suitable
locations for Papa John's restaurants.

     Since 1994, the Company has opened a greater number of free-standing
restaurants. The Company seeks either existing buildings suitable for
conversion, or locations suitable for the construction of its prototype
restaurant. Free-standing buildings generally provide more signage and better
visibility, accessibility and parking. The Company believes that these locations
improve Papa John's image and brand awareness and expects that, over time, free-
standing and prototype units will approximate 25% of total Company-owned
restaurants. During 1997, the Company constructed its first multi-bay unit,
housing a Company-owned restaurant in addition to third party tenants.
Management believes that improved site selection may result from the Company
maintaining control of the multi-bay development process. This strategy will
continue to be evaluated as operational and financial results for these types of
units become available for analysis.

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Commissary System; Purchasing

     The Company's commissary system supplies pizza dough, food products, paper
products, smallwares and cleaning supplies twice weekly to each Papa John's
restaurant in the U.S. This commissary system enables the Company to closely
monitor and control product quality and consistency, while lowering food costs.
The Company opened a distribution facility in Phoenix, Arizona in the first
quarter of 1997 and full-service commissaries in Rotterdam, New York in the
first quarter and Des Moines, Iowa in the third quarter of 1997. A full-service
commissary in Portland, Oregon is planned for mid-1998 and a new, expanded and
modernized Louisville commissary is planned for late-1998 to support restaurant
expansion plans. The Company's other full-service commissaries are in Orlando,
Florida; Raleigh, North Carolina; Jackson, Mississippi; and Denver, Colorado.
The Company also operates a distribution center in Dallas, Texas. The commissary
system capacity is continually evaluated in relation to planned restaurant
growth, and additional facilities developed as operational or economic
conditions warrant.

     The Company sets quality standards for all products used in Papa John's
restaurants and designates approved outside suppliers of food and paper products
which must meet the Company's quality standards. In order to ensure product
quality and consistency, all Papa John's restaurants are required to purchase
proprietary spice mix and dough from the Company's commissaries. Franchisees may
purchase other goods directly from approved suppliers or the Company's
commissaries. The Company has negotiated national purchasing agreements with
most of its suppliers. These agreements generally result in volume discounts to
the Company, allowing it to sell the products to franchisees at prices which the
Company believes are below those franchisees could normally obtain
independently. Products are distributed to restaurants by refrigerated trucks
leased and operated by the Company or transported by dedicated logistics
companies.

     All of the equipment, fixtures and smallwares needed to open a Papa John's
restaurant are available for purchase through the Company. The Company also
provides layout and design services and recommends subcontractors, signage
installers and telephone systems to its franchisees. Although not required to do
so, substantially all of the Company's franchisees purchase most of their
equipment from the Company.

Marketing Programs

     The Company's restaurant-level marketing programs target the delivery area
of each restaurant, making extensive use of distinctive print materials in
direct mail and store-to-door couponing. The local marketing efforts also
include a variety of community-oriented activities with schools, sports teams
and other organizations. In markets in which the Company or its franchisees have
a significant presence, local marketing efforts are supplemented with radio and
television advertising.

     In addition to extensive local store marketing, all Company-owned and
franchised Papa John's restaurants within a developed market are required to
join an advertising cooperative ("Co-op"). Each member restaurant contributes a
percentage of sales to the Co-op for market wide programs, such as radio,
television and billboards. The rate of contribution and uses of the monies
collected are determined by a majority vote of the Co-op's members. The
restaurant-level and Co-op marketing efforts are supported by print and
electronic advertising materials that are produced by the Papa John's Marketing
Fund, Inc., a non-profit corporation (the "Marketing Fund"), for use by both the
Company and its franchisees. The Marketing Fund produced and aired the systems
first national television commercial in 1997. Additional national television
buys are planned for 1998. The required Marketing Fund contribution can be up to
1.5% of sales, as established from time to time by the governing board of the
Marketing Fund (currently 1.0%). The required contribution can be increased
above 1.5% only upon approval of not less than 60% of Marketing Fund members.

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     The Company also provides both Company-owned and franchised restaurants
with catalogs for uniforms and promotional items and pre-approved, print
marketing materials. These items can be ordered through toll-free "800" numbers.

Company Operations 

     Restaurant Personnel. A typical Papa John's restaurant employs a restaurant
manager, two assistant managers and approximately 20 - 25 hourly team members,
most of whom work part-time. The manager is responsible for the day-to-day
operation of the restaurant and for maintaining Company-established operating
standards. The Company seeks to hire experienced restaurant managers and staff
and motivate and retain them by providing opportunities for advancement and
performance-based financial and stock incentives. The Company has a relatively
low managerial turnover rate which it believes results in decreased training
costs and higher productivity.

     The Company employs area supervisors, each of whom has responsibility for
overseeing three to five Company-owned restaurants. The Company also employs
regional vice presidents and district managers who oversee area supervisors and
managers within their respective markets. These team members are also eligible
to earn performance-based financial and stock incentives.

     Training and Education. The Company has team members dedicated to training
and overseeing new restaurant openings, including a full-time coordinator in
each of its markets. The Company provides an on-site training team three days
before and three days after the opening of each Company-owned and franchise
restaurant. Each regional vice president, district manager, area supervisor and
restaurant manager is required to complete the Company's management training
program and on-going development programs in which instruction is given on all
aspects of the Company's systems and operations. The programs include classroom
instruction and hands-on training at an operating Papa John's restaurant. The
programs are conducted at the Company's training centers located within Company-
owned and franchised restaurants. The Company's training also includes an
education and safety program for its delivery drivers.

     Point of Sale Technology. Point of sale technology (the Company's
proprietary PROFIT SystemTM) was in place in all Company-owned restaurants and
substantially all franchised restaurants at the end of 1997. The Company
believes this technology increases speed and accuracy in order taking and
pricing, reduces paper work and allows the restaurant manager to better monitor
and control food and labor costs. The Company believes the PROFIT System
enhances restaurant-level marketing capabilities through the development of a
data base containing information on customers and their buying habits with
respect to the Company's products. Polling capabilities allow the Company to
obtain current restaurant operating information, thereby improving the speed,
accuracy and efficiency of restaurant-level reporting.

     Reporting. Managers at Company-owned restaurants utilize daily reports of
sales, cash deposits and operating costs. Physical inventories of all food and
beverage items are taken weekly. The Company's area supervisors prepare weekly
operating projections for each of the restaurants under their supervision.

     Hours of Operations. Papa John's 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.

Franchise Program 

     General. The Company continues to attract many franchisees with significant
restaurant experience. The Company considers its franchisees to be a vital part
of the system's continued growth and believes its relationship

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with its franchisees is excellent. At December 28, 1997, there were 1,116
franchised restaurants operating in 40 states and the District of Columbia and
the Company had development agreements for approximately 715 additional
franchised restaurants committed to open through 2001. 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. During the 1997 fiscal
year, 288 franchised restaurants were opened.

     Approval. Franchisees are approved on the basis of the applicant's
business background, restaurant operating experience and financial resources.
The Company generally seeks franchisees who will enter into development
agreements for multiple restaurants. The Company seeks franchisees who have
restaurant experience or, in the case of franchisees who do not have restaurant
experience, the Company requires the franchisee to hire a full-time operator who
has either an equity interest or the right to acquire an equity interest in the
franchise operation.

     Development and Franchise Agreements. The Company enters into development
agreements with its domestic franchisees for the opening of a specified number
of restaurants within a defined period of time within a specified geographic
area. Under the Company's current standard development agreement, the franchisee
is required to pay, at the time of signing the agreement, a non-refundable fee
of $5,000 per restaurant covered by the development agreement. This amount is
credited against the standard $20,000 franchise fee payable to the Company upon
signing the franchise agreement for a specific location. Generally, a franchise
agreement is executed when a franchisee secures a location. In 1997, the Company
began developing an international franchise department and expects to open the
first franchised restaurants outside the U.S. in late 1998 or 1999.

     The Company's current standard franchise agreement provides for a term of
10 years (with one ten-year renewal option) and payment to the Company of a
royalty fee of 4% of sales. The current standard franchise agreement, as well as
substantially all existing franchise agreements, permit the Company to increase
the royalty fee up to 5% of sales after the agreement has been in effect for
three years. However, the royalty fee cannot be increased to an amount greater
than the percentage royalty fee then in effect for new franchisees.

     The Company has 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 the Company's policies and standards. Many state franchise
laws limit the ability of a franchisor to terminate or refuse to renew a
franchise.

     The Company has entered into a limited number of development and franchise
agreements for non-traditional restaurant units. These agreements generally
cover venues or areas not originally targeted for development and have terms
differing from the standard agreement. The Company does not believe these
contracts have a significant impact on revenues or profits.

     Franchise Restaurant Development. The Company provides assistance to its
franchisees in selecting sites and developing restaurants and the physical
specifications for typical restaurants. Each franchisee is responsible for
selecting the location for its restaurants but must obtain Company 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. The Company provides design plans, fixtures and equipment for most
franchisee locations at competitive prices.

     Franchisee Loan Program. At the beginning of the third quarter of 1996, the
Company established a program under which selected franchisees developing ten or
more Papa John's restaurants may borrow funds for use in the construction and
development of their restaurants. Loans made under the program typically bear
interest at fixed or floating rates (ranging from 5.5% to 10.0% at December 28,
1997), and are secured by the fixtures, equipment and signage (and where
applicable, the land) of the restaurant and the ownership interests in the
franchisee. In limited cases, the Company has obtained a purchase option with
respect to the financed restaurants.

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A franchisee utilizing the loan program must open at least 20% of the
restaurants covered by the franchisee's development agreement with its own
equity capital prior to receiving funds from the Company under the program.

     At December 28, 1997, loans outstanding under the franchise loan program
totaled $15.1 million, with commitments to lend up to an additional $4.5
million. The Company does not expect to significantly expand the franchise loan
program beyond current commitment levels at this time.

     Franchise Training and Support. Every franchisee is required to have a
principal operator approved by the Company who satisfactorily completes the
Company's two-week training program and who devotes his or her full business
time and efforts to the operation of the franchisee's restaurants. Each
franchised restaurant manager is also required to complete the Company's two-
week training program. The Company provides an on-site training crew three days
before and three days after the opening of a franchisee's first two restaurants
and ongoing supervision thereafter. Multi-unit franchisees are encouraged to
hire a full-time training coordinator to train new team members for their
restaurants. The Company's franchise consultants, reporting to the Vice
President of Franchise Operations, maintain open communication with the
franchise community, relaying operating and marketing information and new ideas
between the Company and franchisees.

     Franchise Operations. All franchisees are required to operate their Papa
John's restaurants in compliance with the Company's policies, standards and
specifications, including matters such as menu items, ingredients, materials,
supplies, services, fixtures, furnishings, decor and signs. Each franchisee has
full discretion to determine the prices to be charged to its customers.

     Franchise Advisory Board. The Company has a Franchise Advisory Board that
consists of Company and franchisee representatives. The Advisory Board holds
quarterly meetings to discuss new marketing ideas, operations, growth and other
relevant issues.

     Reporting. The Company collects weekly and monthly sales and other
operating information from its franchisees. The Company has agreements with most
of its franchisees permitting the Company to electronically debit the
franchisees bank accounts for the payment of royalties, Marketing Fund
contributions and purchases of commissary products from the Company. This system
significantly reduces the resources needed to process receivables, improves cash
flow and virtually eliminates past-due accounts related to these items.
Franchisees generally are required to purchase and install the Papa John's
PROFIT System in their restaurants. See "Company Operations -- Point of Sale
Technology."

Competition 

     The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well established
competitors with substantially greater financial and other resources than the
Company. Competitors include a large number of national and regional restaurant
chains, as well as local pizza operators. Some of the Company's competitors have
been in existence for a substantially longer period than the Company and may be
better established in the markets where the Company's restaurants are, or may
be, located. Within the pizza segment of the restaurant industry, the Company
believes that its primary competitors are the national pizza chains, including
Pizza Hut, Domino's and Little Caesars. A change in the pricing or other
marketing strategies of one or more of these competitors could have an adverse
impact on the Company's sales and earnings.

     The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, traffic
patterns and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
and the lack of

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experienced management and hourly team members may adversely affect the
restaurant industry in general and the Company's restaurants in particular.

     With respect to the sale of franchises, the Company competes with many
franchisors of restaurants and other business concepts. In general, there is
also active competition for management personnel, capital and attractive
commercial real estate sites suitable for Papa John's restaurants.

Government Regulation

     The Company and its franchisees are subject to various federal, state and
local laws affecting the operation of their 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. The Company's commissary and distribution facilities are licensed and
subject to regulation by state and local health and fire codes, and the
operation of its trucks is subject to Department of Transportation regulations.
The Company is also subject to federal and state environmental regulations.

     The Company is subject to Federal Trade Commission ("FTC") regulation and
various state laws regulating the offer and sale of franchises. Several state
laws also regulate substantive aspects of the franchisor-franchisee
relationship. The FTC requires the Company to furnish to prospective franchisees
a franchise offering circular containing prescribed information. A number of
states in which the Company might consider franchising also regulate the sale of
franchises and require registration of the franchise offering circular with
state authorities. 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 (some of which are now
pending) which would provide for federal regulation of the franchisor-franchisee
relationship in certain respects. 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.

     The Company is also subject to the Americans With Disabilities Act of 1990,
which, among other things, may require certain minor renovations to its
restaurants to meet federally-mandated requirements. The cost of these
renovations is not expected to be material to the Company. Further government
initiatives, if enacted, including a proposed system of mandated health
insurance, could adversely affect the Company and its franchisees as well as the
restaurant industry in general. 

Trademarks

     The Company's rights in its trademarks and service marks are a significant
part of its business. The Company is the owner of the federal registration of
the trademark "Papa John's." The Company has also registered "Pizza Papa John's
and design" as a trademark and a service mark. The Company owns federal
registrations for the marks "Pizza Papa John's Delivering the Perfect Pizza! and
design", "Call your Papa", "Perfect Pizza Perfect Price", "Delivering the
Perfect Pizza!", "Pizza Papa John's Print Network", "The Pizza of Summer" and
"We Deliver Perfection."
       
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     The Company has applied for the registration of "Pick 5", "Better
Ingredients. Better Pizza.", "Pizza Papa John's. Better Ingredients. Better
Pizza.", "Papa John's International Pizza Games", "Papa-size it" and "Perfect
Original and design" as trademarks and service marks. The Company has also
applied to register its principal trademark, "Pizza Papa John's and design" in
69 foreign countries and the European community. The mark has been registered in
17 countries. The Company is aware of the use by other persons in certain
geographic areas of names and marks which are the same as or similar to the
Company's marks. It is the Company's policy to pursue registration of its marks
whenever possible and to vigorously oppose any infringement of its marks.

Employees

     As of December 28, 1997, the Company employed 14,219 persons, of whom
approximately 12,579 were restaurant team members, 525 were restaurant
management and supervisory personnel, 453 were corporate personnel and 662 were
commissary and support services personnel. Most restaurant team members work
part-time and are paid on an hourly basis. None of the Company's team members is
covered by a collective bargaining agreement. The Company considers its employee
relations to be excellent.

Forward Looking Statements

     This Form 10-K contains forward looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Act"), including
information within Management's Discussion and Analysis of Financial Condition
and Results of Operation. The following cautionary statements are being made
pursuant to the provisions of the Act and with the intention of obtaining the
benefits of the "safe harbor" provisions of the Act. Although the Company
believes that its expectations are based on reasonable assumptions, actual
results may differ materially from those in the forward looking statements as a
result of various factors, including but not limited to, the following:

     1.   The ability of the Company and its franchisees to continue to expand
through the opening of new restaurants is affected by a number of factors, many
of which are beyond the control of the Company and its franchisees. These
factors include, among other things, selection and availability of suitable
restaurant locations, negotiation of suitable lease or financing terms,
constraints on permitting and construction of other restaurants, higher than
anticipated construction costs, and the hiring, training and retention of
management and other personnel. Accordingly, there can be no assurance that the
Company or its franchisees will be able to meet planned growth targets or open
restaurants in markets now targeted for expansion.

     2.   The restaurant industry is intensely competitive with respect to
price, service, location and food quality, and there are many well established
competitors with substantially greater financial and other resources than the
Company and its franchisees. Some of these competitors have been in existence
for a substantially longer period than the Company or its franchisees and may be
better established in the markets where restaurants operated by the Company or
its franchisees are, or may be, located. A change in the pricing or other
marketing or promotional strategies of one or more of the Company's major
competitors could have an adverse impact on sales and earnings at restaurants
operated by the Company and its franchisees.

     3.   Changes in consumer taste, demographic trends, traffic patterns and
the type, number and location of competing restaurants as well as increased food
and other costs could adversely affect the Company's restaurant business.

     4.   The Company's restaurant operations are subject to federal and state
laws governing such matters as wages, working conditions, citizenship
requirements and overtime. A significant number of hourly personnel employed by
the Company and its franchisees are paid at rates related to the federal minimum
wage. Accordingly, further increases in the minimum wage will increase labor
costs for the Company and its franchisees.

                                      10

<PAGE>
 

I
tem 2.  Properties

     As of December 28, 1997, the Company and its franchisees operated 1,517
Papa John's restaurants.

                           Company-owned Restaurants
                           -------------------------

<TABLE>
<CAPTION>
                                                                Number of
                                                               Restaurants
                                                               -----------
<S>                                                            <C>
     Colorado.................................................       23
     Delaware.................................................        8
     Florida..................................................       44
     Georgia..................................................       59
     Illinois.................................................        2
     Indiana..................................................       28
     Kentucky.................................................       28
     Maryland.................................................       45
     Missouri.................................................       12
     New Mexico...............................................        7
     North Carolina...........................................       42
     South Carolina...........................................        2
     Tennessee................................................       26
     Texas....................................................       56
     Virginia.................................................       16
     Washington, D.C..........................................        3
                                                                    ---

          Total Company-owned Restaurants.....................      401
                                                                    ===
</TABLE>

                                       11

<PAGE>

                            Franchised Restaurants
                            ----------------------

<TABLE>
<CAPTION>
                                                                Number of
                                                               Restaurants
                                                               -----------
<S>                                                            <C>
     Alabama..................................................      43
     Arkansas.................................................      13
     Arizona..................................................      14
     California...............................................      14
     Colorado.................................................       9
     Connecticut..............................................       3
     Florida..................................................     133
     Georgia..................................................      38
     Illinois.................................................      52
     Indiana..................................................      63
     Iowa.....................................................       8
     Kansas...................................................      11
     Kentucky.................................................      46
     Louisiana................................................      33
     Maryland.................................................      12
     Massachusetts............................................       6
     Michigan.................................................      23
     Minnesota................................................      26
     Mississippi..............................................      15
     Missouri.................................................      24
     Nebraska.................................................       7
     Nevada...................................................       5
     New Hampshire............................................       3
     New Jersey...............................................      11
     New Mexico...............................................       1
     New York.................................................      14
     North Carolina...........................................      33
     North Dakota.............................................       2
     Ohio.....................................................     134
     Oklahoma.................................................      12
     Pennsylvania.............................................      35
     South Carolina...........................................      33
     South Dakota.............................................       1
     Tennessee................................................      42
     Texas....................................................      82
     Utah.....................................................       8
     Virginia.................................................      68
     West Virginia............................................      15
     Wisconsin................................................      19
     Wyoming..................................................       4
     Washington, D.C..........................................       1
                                                                 -----
          Total Franchised Restaurants........................   1,116
                                                                 =====    
</TABLE>
 
                                       12

<PAGE>
 
     Most Papa John's restaurants are located in leased space. The initial term
of most restaurant leases is five years or less with most leases providing for
one or more options to renew for at least one additional term. Virtually all of
the Company's leases specify a fixed annual rent. Generally, the leases are
triple net leases which require the Company to pay all or a portion of the cost
of insurance, taxes and utilities. Certain leases further provide that the lease
payments may be increased annually based on changes in the Consumer Price Index.

     Information with respect to the Company's leased commissaries and other
facilities is set forth below.

<TABLE>
<CAPTION>
                Facility                         Square Footage
                --------                         --------------
<S>                                              <C>
     Louisville, KY Corporate Headquarters               58,000
     Louisville, KY Commissary                           38,000
     Jackson, MS Commissary                              30,000
     Raleigh, NC Commissary                              27,000
     Dallas, TX Distribution Center                      20,000
     Denver, CO Commissary                               21,000
     Phoenix, AZ Distribution Center                     26,000
     Des Moines, IA Commissary                           31,000
     Rotterdam, NY Commissary                            40,000
</TABLE>

     The Company owns approximately five acres in Orlando on which its 63,000
square foot full-service commissary is located. In addition, the Company owns
approximately 37 acres in Louisville, Kentucky, and has built a 40,000 square
foot building on the land consolidating its printing and promotional operations.
The Company has begun construction of additional facilities on the land in 1998
of approximately 242,000 square feet, approximately 30-40% of which will
accommodate relocation and expansion of the Louisville commissary operation and
Novel Approach promotional division, and the remainder of which will accommodate
relocation and consolidation of corporate offices. The facility is scheduled for
completion in late-1998 or early-1999. The Company believes that it will
continue to need additional office and commissary space.


Item 3.  Legal Proceedings

     The Company is subject to claims and legal actions in the ordinary course
of its business. The Company believes that all such claims and actions currently
pending against it are either adequately covered by insurance or would not have
a material adverse effect on the Company if decided in a manner unfavorable to
the Company.


Item 4.  Submission of Matters to a Vote of Security Holders

     Not applicable.

                                      13

<PAGE>
 
                     EXECUTIVE OFFICERS OF THE REGISTRANT

     Set forth below are the current executive officers of the Company, together
with their ages, their positions with the Company and the year in which they
first became an officer of the Company:

<TABLE>
<CAPTION>
                                                                                     First Elected
          Name                   Age                 Position                       Executive Officer
          ----                   ---                 --------                       -----------------
<S>                              <C>       <C>                                      <C>
          John H. Schnatter       36       Founder, Chairman and Chief                     1985
                                           Executive Officer

          Charles W. Schnatter    35       Senior Vice President, General                  1991
                                           Counsel and Secretary

          Blaine E. Hurst         41       President                                       1995

          E. Drucilla Milby       44       Chief Financial Officer and Treasurer           1991

          Wade S. Oney            37       Chief Operating Officer                         1995

          Robert J. Wadell        42       President - PJ Food Service, Inc.               1990

          Richard J. Emmett       42       Senior Vice President - Senior Counsel          1992

          J. David Flanery        41       Vice President and Corporate                    1994
                                           Controller

          Syl J. Sosnowski        56       Vice President -- Marketing and                 1995
                                           Support Services
</TABLE>

     John Schnatter created the Papa John's concept and founded the Company in
1985. He has served as Chairman of the Board and Chief Executive Officer since
1990, and from 1985 to 1990, served as President. John Schnatter has also been a
franchisee of the Company since 1986.

     Charles Schnatter has served as General Counsel and Secretary since 1991
and has been a Senior Vice President of the Company since 1993. From 1988 to
1991, he was an attorney with Greenebaum Doll & McDonald PLLC, Louisville,
Kentucky, a law firm which provides legal services to the Company. Charles
Schnatter was a franchisee of the Company from 1989 to 1997.

     Blaine Hurst has served as President since 1996. From 1995 to 1996, Mr.
Hurst served as Chief Information Officer after having joined the Company in
January 1995 as Vice President of Information Systems. From 1993 to 1995, Mr.
Hurst was Vice President of Information Systems for Boston Chicken, Inc. From
1989 to 1993, Mr. Hurst was a consulting partner with Ernst & Young LLP. Mr.
Hurst has been a franchisee of the Company since 1996.

     Dru Milby has served as Chief Financial Officer since 1995 and Treasurer
since 1993. Ms. Milby held the position of Vice President -- Finance from 1991
to 1995. From 1990 to 1991, Ms. Milby was Director of Financial Planning for
American Air Filter. From 1987 to 1990, Ms. Milby was Manager of Financial
Reporting and Systems Support for KFC International, the operator and franchisor
of KFC restaurants. From 1983 to 1987, Ms. Milby held various positions with KFC
International and KFC USA in the areas of general accounting, financial
reporting and financial systems. Ms. Milby is a licensed Certified Public
Accountant and Certified Management Accountant.

                                      14

<PAGE>
 
     Wade Oney has served as Chief Operating Officer since 1995. From 1992 to
1995, Mr. Oney served as the Company's Regional Vice President of Southeast
Operations. From 1989 to 1992, Mr. Oney held various positions with Domino's
Pizza, Inc. as follows: from 1991 to 1992, Senior Vice President, Northeast;
from 1990 to 1991 Senior Vice President, Product Implementation; and from 1989
to 1990, Vice President of Operations. Mr. Oney has been a franchisee of the
Company since 1993.

     Robert Wadell has served as President of PJ Food Service, Inc. since 1995,
after having served as Vice President of Commissary Operations from 1990 to
1995. From 1988 to 1990, Mr. Wadell was employed with Mr. Gatti's in the
position of Regional Franchise Director, responsible for overseeing the
operations of 65 franchised restaurants in an eight-state area. From 1983 to
1988, Mr. Wadell was an Area Supervisor for Mr. Gatti's, and from 1979 to 1983,
was a store operator for Mr. Gatti's.

     Richard Emmett was appointed Senior Vice President and Senior Counsel in
March 1997, after having served as Senior Vice President-Development from August
1996 to March 1997. From 1992 to 1996, Mr. Emmett held the position of Vice
President and Senior Counsel. From 1983 to 1992, Mr. Emmett was an attorney with
the law firm of Greenebaum Doll & McDonald PLLC, having become a partner of such
firm in 1989. Mr. Emmett was a franchisee of the Company from 1992 to 1997.

     David Flanery has served as Vice President since 1995 after having joined
the Company in 1994 as Corporate Controller. From 1979 to 1994, Mr. Flanery was
with Ernst & Young LLP in a variety of positions, most recently as Senior Audit
Manager. Mr. Flanery is a licensed Certified Public Accountant.
        
     Syl Sosnowski has served as Vice President of Marketing and Support
Services since 1995. From 1990 to 1995, Mr. Sosnowski served as Vice President
of Marketing and Sales for Carvel Corporation.
        
     John and Charles Schnatter are brothers. There are no other family
relationships among the Company's executive officers and other key personnel.

                                      15

<PAGE>
 

                                    PART II


Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

     The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol PZZA. As of March 9, 1998, there were
approximately 719 record holders of common stock. The following table sets forth
for the quarters indicated the high and low sale prices of the Company's common
stock, as reported by The Nasdaq Stock Market. All sale prices have been
adjusted to reflect a 3-for-2 stock split to stockholders of record on March 12,
1996, and an additional 3-for-2 stock split to stockholders of record on
November 8, 1996. Each stock split was effected in the form of a 50% stock
dividend.


1997             High            Low
- ----             ----            ---
First Quarter   $35.13          $23.75
Second Quarter   37.50           22.63
Third Quarter    39.50           30.44
Fourth Quarter   37.75           28.00

1996
- ----
First Quarter   $29.83          $16.80
Second Quarter   35.33           25.67
Third Quarter    35.00           26.00
Fourth Quarter   37.33           29.50


    Since its initial public offering of common stock in 1993, the Company has
not paid dividends on its common stock, and has no plans to do so in the
foreseeable future.

                                       16

<PAGE>
 

Item 6. Selected Consolidated Financial Data

     The selected financial data presented below for each of the years in the
five-year period ended December 28, 1997 was derived from the audited
consolidated financial statements of the Company. The selected financial data
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.

<TABLE>
<CAPTION>
(In thousands, except per share data)                                                    Year Ended (1)
                                                               -----------------------------------------------------------------
                                                               Dec. 28,       Dec. 29,      Dec. 31,      Dec. 25,      Dec. 26,
                                                                 1997           1996         1995          1994          1993
                                                               -----------------------------------------------------------------
<S>                                                            <C>            <C>           <C>           <C>           <C>
System wide Restaurant Sales
  Company-owned                                                $251,153       $167,982      $111,747      $ 66,267      $ 32,505
  Franchised                                                    616,456        451,214       347,003       231,343       133,846
                                                               -----------------------------------------------------------------
  Total                                                        $867,609       $619,196      $458,750      $297,610      $166,351
                                                               =================================================================
Income Statement Data
  Revenues:
    Restaurant sales                                           $251,153       $167,982      $111,747      $ 66,267      $ 32,505
    Franchise royalties                                          24,318         17,827        13,561         9,163         5,290
    Franchise and development fees                                5,327          4,286         3,508         3,274         2,379
    Commissary sales                                            188,034        142,998       105,874        67,515        41,013
    Equipment and other sales                                    39,952         26,959        18,665        15,316         8,046
                                                               -----------------------------------------------------------------
  Total revenues                                                508,784        360,052       253,355       161,535        89,233

  Operating income(2)                                            39,194         25,629        15,819        10,064         6,221
  Other income                                                    3,431          3,917         1,910         1,318           247
                                                               -----------------------------------------------------------------
  Income before income taxes(2)                                  42,625         29,546        17,729        11,382         6,468
  Income tax expense(2)                                          15,772         10,932         6,525         4,182         2,393
                                                               -----------------------------------------------------------------
  Net income(2)                                                $ 26,853       $ 18,614      $ 11,204      $  7,200      $  4,075
                                                               =================================================================
  Basic earnings per share(2)                                  $    .93       $    .66      $    .45      $    .31      $    .20
                                                               =================================================================
  Diluted earnings per share(2)(3)                             $    .91       $    .65      $    .44      $    .30      $    .20
                                                               =================================================================
  Basic weighted average shares outstanding                      28,916         28,010        25,139        23,525        20,191
                                                               =================================================================
  Diluted weighted average shares outstanding(3)                 29,592         28,670        25,552        24,033        20,815
                                                               =================================================================
Balance Sheet Data
  Total assets                                                 $253,243       $212,061      $128,819      $ 76,173      $ 27,789
  Long-term debt                                                  1,505          1,680         2,510         1,279          -
  Stockholders' equity                                          212,733        180,643       106,282        62,609        19,269
</TABLE>

- -----------------------------------------------------

(1) The Company operates on a 52-53 week fiscal year ending on the last Sunday
of December of each year. The 1997, 1996, 1994, and 1993 fiscal years consisted
of 52 weeks and the 1995 fiscal year consisted of 53 weeks.

(2) Information for 1993 reflects pro forma adjustments assuming that the
Company had been treated as a C Corporation rather than an S Corporation for
income tax purposes for the entire year, with assumed combined federal, state
and local effective income tax rates aggregating 37%, and the Company's
compensation program for the top three executive officers that was adopted
during 1993 had been in effect for the entire year, which would have reduced
compensation expense by $154,000.

(3) Reflects the dilutive effect of stock options as required by Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". See "Note 2" of
"Notes to Consolidated Financial Statements."

                                       17

<PAGE>
 

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

Introduction

     Papa John's International, Inc. (the "Company") began operations in 1985
with the opening of the first Papa John's restaurant in Jeffersonville, Indiana.
At December 28, 1997, there were 1,517 Papa John's restaurants in operation,
consisting of 401 Company-owned and 1,116 franchised restaurants. The Company's
revenues are principally derived from retail sales of pizza to the general
public by Company-owned restaurants, franchise royalties, sales of franchise and
development rights, and sales to franchisees of food and paper products,
restaurant equipment, printing and promotional items, and information systems
and related services used in their operations.

     The Company intends to continue to expand the number of Company-owned and
franchised restaurants. The Company's expansion strategy is to cluster
restaurants in targeted markets, thereby increasing consumer awareness and
enabling the Company to take advantage of operational, distribution and
advertising efficiencies. The Company believes that its expansion strategy has
contributed to increases in comparable annual sales for Company-owned
restaurants of 9.3% in 1997, 11.9% in 1996 and 9.0% in 1995. The Company
anticipates that future comparable sales increases, if any, will be at a lesser
rate than in recent years. Average sales for Company-owned restaurants open a
full year increased to $713,000 for 1997 from $682,000 for 1996. This increase
is attributable to continuing strong sales of maturing restaurants and to the
fact that several new markets were entered in 1995 and 1996, with generally
lower sales volumes throughout 1996 as those markets were built out. Average
sales volumes in new markets are generally lower than in those markets in which
the Company has established a significant market position, although recent
trends indicate that new markets are opening with stronger than historical sales
volumes.

     Approximately 45% of the Company's revenues for 1997 and 47% for 1996 were
derived from the sale to franchisees of food and paper products, restaurant
equipment, printing and promotional items and information systems equipment and
software and related services by the Company, its commissary subsidiary, PJ Food
Service, Inc., and the Company's support services subsidiary, Printing &
Promotions, Inc. The Company believes that, in addition to supporting both
Company and franchised growth, these subsidiaries contribute to product quality
and consistency throughout the Papa John's system.

     The Company continually strives to obtain high quality sites with greater
access and visibility, and to enhance the appearance and quality of its
restaurants. The Company believes that these factors improve Papa John's image
and brand awareness. During 1997 and 1996, the Company pursued a greater number
of free-standing conversion and prototype locations and expects to continue this
strategy in 1998. Over time, the Company expects that these free-standing units
will approximate 25% of the total Company-owned restaurants.

     The average cash investment for the 76 Company-owned restaurants opened
during 1997, exclusive of land and pre-opening costs, increased to approximately
$257,000 from $208,000 for the 66 units opened in 1996. This increase was
primarily due to the planned increase in the percentage of higher-cost free-
standing units opened during 1997. The Company expects the average cash
investment for restaurants opening in 1998 to approximate $260,000 as the
Company plans to build a number of free-standing units in 1998 comparable to
1997.

     Pre-opening costs are capitalized and amortized on a straight-line basis
over a period of one year from the opening date of the restaurant or commissary
facility.

                                       18

<PAGE>
 
     In April 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued an Exposure Draft of a Proposed
Statement of Position, "Reporting on the Costs of Start-Up Activities" (the
"SOP") which, if finalized, would require adoption at the beginning of 1999. The
Company's initial application of the SOP would require the write-off of deferred
pre-opening costs as of the date of adoption, and such write-off would be
reported, on a net of tax basis, as the cumulative effect of a change in
accounting principle. The Company does not expect the adoption of the SOP to
significantly impact future operating income due to the relative consistency of
new facility openings and length of the current amortization period. Deferred
pre-opening costs as of December 28, 1997 were $3.8 million.

     The Company defers certain costs incurred in connection with the
development of its information systems and amortizes such costs over periods of
up to five years from the date of completion.

     The Company's fiscal year ends on the last Sunday in December of each year.
The 1997 and 1996 fiscal years consisted of 52 weeks and the 1995 fiscal year
consisted of 53 weeks.

     The Board of Directors approved a 3-for-2 stock split in February 1996 and
an additional 3-for-2 stock split in October 1996, each of which was effected in
the form of a 50% stock dividend. All share data included in this Annual Report
have been restated to reflect these stock splits.

Results of Operations

     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:


<TABLE>
<CAPTION>

                                                                Year Ended
                                                     ---------------------------------
                                                     Dec. 28,     Dec. 29,    Dec. 31,
                                                       1997         1996        1995
                                                     ---------------------------------
<S>                                                    <C>        <C>         <C>
Income Statement Data:
Revenues:
  Restaurant sales                                      49.4%        46.7%      44.1%
  Franchise royalties                                    4.7          4.9        5.3
  Franchise and development fees                         1.0          1.2        1.4
  Commissary sales                                      37.0         39.7       41.8
  Equipment and other sales                              7.9          7.5        7.4
                                                    --------------------------------
       Total revenues                                  100.0        100.0      100.0
Costs and expenses:
     Restaurant cost of sales(1)                        26.4         28.0       28.4
     Restaurant operating expenses(1)                   54.9         54.9       54.8
     Commissary, equipment and other expenses(2)        91.5         91.1       93.1
     General and administrative expenses                 7.3          7.4        7.9
     Depreciation and amortization                       3.9          3.8        3.4
       Total costs and expenses                      92.3         92.9       93.8
                                                    --------------------------------
Operating income                                         7.7          7.1        6.2
Other income (expense):
     Investment income                                   0.9          1.0        0.7
     Other                                              (0.2)         0.1        0.1
                                                    --------------------------------
Income before income taxes                               8.4          8.2        7.0
Income tax expense                                       3.1          3.0        2.6
                                                    --------------------------------
     Net income                                          5.3%         5.2%       4.4%
                                                    ================================
</TABLE>
 

(1)  As a percentage of Restaurant sales.
(2)  As a percentage of Commissary sales and Equipment and other sales on a
     combined bases.

                                       19


<PAGE>



<TABLE> 
<CAPTION> 

                                                                            Year Ended
                                                               ------------------------------------
                                                               Dec. 28,      Dec. 29,      Dec. 31,
                                                                 1997          1996          1995
                                                               ------------------------------------
<S>                                                            <C>           <C>           <C>
Restaurant Data:
Percentage increase in comparable Company-owned
   restaurant sales(3)                                              9.3%         11.9%          9.0%
Average sales for Company-owned restaurants
   open full year                                              $713,000      $682,000      $657,000
Number of Company-owned restaurants:
   Beginning of period                                              303           217           133
   Opened                                                            76            66            61
   Closed                                                            (1)           (2)            -
   Acquired                                                          23            22            23
                                                                -----------------------------------
   End of period                                                    401           303           217
Number of franchised restaurants:
   Beginning of period                                              857           661           499
   Opened                                                           288           224           190
   Closed                                                            (6)           (6)           (5)
   Sold to Company                                                  (23)          (22)          (23)
                                                                -----------------------------------
   End of period                                                  1,116           857           661
                                                                -----------------------------------
Total restaurants-end of period                                   1,517         1,160           878
                                                                ===================================
</TABLE>
 

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


1997 Compared to 1996

     Revenues. Total revenues increased 41.3% to $508.8 million in 1997, from
$360.1 million in 1996.

     Restaurant sales increased 49.5% to $251.2 million in 1997, from $168.0
million in 1996. This increase was primarily due to a 42.0% increase in the
number of equivalent Company-owned restaurants open during 1997 as compared to
1996. "Equivalent restaurants" represents the number of restaurants open at the
beginning of a given period, adjusted for restaurants opened or acquired during
the period on a weighted average basis. Also, comparable sales increased 9.3% in
1997 over 1996 for Company-owned restaurants open throughout both years.

     Franchise royalties increased 36.4% to $24.3 million in 1997, from $17.8
million in 1996. This increase was primarily due to a 30.5% increase in the
number of equivalent franchised restaurants open during 1997 as compared to
1996. Also, comparable sales increased 7.4% in 1997 over 1996 for franchised
restaurants open throughout both years.

     Franchise and development fees increased 24.3% to $5.3 million in 1997,
from $4.3 million in 1996. This increase was primarily due to the 288 franchised
restaurants opened during 1997, as compared to 224 opened during 1996, an
increase of 28.6%, partially offset by the lower per unit franchise and
development fees collected on certain non-traditional restaurant units opened in
1997. The average dollar amount of fees per franchised restaurant may vary from
period to period, depending on the mix of restaurants opened pursuant to older
development agreements and "Hometown restaurants" which generally have lower
required

                                       20

<PAGE>
 
fees than traditional restaurants opened pursuant to standard development
agreements. Hometown restaurants are located in smaller markets, generally with
less than 9,000 households.

     Commissary sales increased 31.5% to $188.0 million in 1997, from $143.0
million in 1996. This increase was primarily due to the increases in equivalent
franchised restaurants and comparable sales for franchised restaurants noted
above, partially offset by the impact of lower average cheese prices in 1997.

     Equipment and other sales increased 48.2% to $40.0 million in 1997, from
$27.0 million in 1996. This increase was primarily due to the increase in
equivalent franchised restaurants open during 1997 as compared to 1996 and the
increase in franchised restaurants opened during 1997 as compared to 1996. A
portion of the equipment and other sales increase was also attributable to the
increase in sales of the Papa John's PROFIT System, a proprietary point of sale
system, and related PROFIT support services to the franchisees, as well as
increasing insurance commissions from franchisees. The Company initiated an
insurance agency function for franchisees during the fourth quarter of 1996.

     Costs and Expenses. Restaurant cost of sales, which consists of food,
beverage and paper costs, decreased as a percentage of restaurants sales to
26.4% in 1997, from 28.0% in 1996. The primary reason for the decrease is
attributable to lower average cheese prices for the year and increased
efficiencies at both mature and newly-opened stores.

     Restaurant salaries and benefits increased as a percentage of restaurant
sales to 27.0% in 1997, from 26.7% in 1996. The increase is primarily due to the
impact of increases in the federal minimum wage in October 1996 and September
1997, and increased staffing levels during the second quarter of 1997 to ensure
quality customer service was delivered during the 12th Anniversary Promotion.

     Restaurant advertising and related costs decreased as a percentage of
restaurant sales to 9.3% in 1997, from 9.6% in 1996. The decrease in 1997 was
primarily the result of higher 1996 costs related to the fourth quarter rollout
of a new thin crust product. Also, restaurant level advertising is intentionally
managed to higher levels for new restaurants; therefore, as the percentage of
new Company-owned restaurant openings to existing Company-owned restaurants
decreases, the overall advertising cost percentage also decreases.

     Other restaurant operating expenses were relatively consistent as a
percentage of restaurant sales at 13.5% for 1997 and 13.6% for 1996. Other
operating expenses include an allocation of commissary operating expenses equal
to 3% of Company-owned restaurant sales in order to assess a portion of the
costs of dough production and food and equipment purchasing and storage to
Company-owned restaurants.

     Commissary, equipment and other expenses include cost of sales and
operating expenses associated with sales of food, paper, equipment, information
systems and printing and promotional items to franchisees and other customers.
These costs increased as a percentage of combined commissary sales and equipment
and other sales to 91.5% in 1997, from 91.1% in 1996. Cost of sales as a
percentage of combined commissary sales and equipment and other sales decreased
to 77.8% in 1997 from 79.3% in 1996, due to the timing of certain favorable
commodity price changes. The decrease was more than offset by an increase in
salaries and benefits and other operating expenses to 13.7% in 1997 compared to
11.8% in 1996, due primarily to increased

                                       21

<PAGE>
 
delivery costs resulting from larger commissary service areas and staffing and
other costs related to the opening of three commissary facilities in 1997.

     General and administrative expenses declined slightly as a percentage of
total revenues to 7.3% in 1997 from 7.4% in 1996.

     Depreciation and amortization increased as a percentage of total revenues
to 3.9% in 1997, from 3.8% in 1996. This increase was primarily due to
additional capital expenditures by the Company, intangibles related to
acquisitions, deferred pre-opening costs for newly-opened restaurants and
commissaries and other deferred expenses, primarily systems development costs.  

     Investment Income. Investment income increased to $4.5 million in 1997,
from $3.5 million in 1996. The increase was the result of higher average amounts
outstanding under the franchise loan program which earn higher average rates of
interest in comparison to the securities held in the investment portfolio.
Amounts receivable under the program increased from $5.1 million at December
1996, to $15.1 million at December 1997.

     Other Income (Expense). Other income (expense) fluctuated from income of
$433,000 in 1996, to expense of $1.1 million in 1997. This fluctuation was
primarily attributable to the equipment and leasehold write-offs related to an
increasing number of restaurant relocations during the year.

     Income Tax Expense. Income tax expense reflects a combined federal, state
and local effective income tax rate of 37.0% in 1997 and 1996.
  
1996 Compared to 1995

     Revenues. Total revenues increased 42.1% to $360.1 million in 1996, from
$253.4 million in 1995.

     Restaurant sales increased 50.3% to $168.0 million in 1996, from $111.7
million in 1995. This increase was primarily due to a 44.3% increase in the
number of equivalent Company-owned restaurants open during 1996 as compared to
1995. "Equivalent restaurants" represents the number of restaurants open at the
beginning of a given period, adjusted for restaurants opened or acquired during
the period on a weighted average basis. Also, comparable sales increased 11.9%
in 1996 over 1995, for Company-owned restaurants open throughout both years.

     Franchise royalties increased 31.5% to $17.8 million in 1996, from $13.6
million in 1995. This increase was primarily due to a 30.1% increase in the
number of equivalent franchised restaurants open during 1996 as compared to
1995. Also, comparable sales increased 5.9% in 1996 over 1995, for franchised
restaurants open throughout both years.

     Franchise and development fees increased 22.2% to $4.3 million in 1996,
from $3.5 million in 1995. This increase was primarily due to the 224 franchised
restaurants opened during 1996, as compared to 190 opened during 1995, an
increase of 17.9%, and an increasing number of franchise renewals.

                                      22

<PAGE>
 
     Commissary sales increased 35.1% to $143.0 million in 1996, from $105.9
million in 1995. This increase was primarily due to the increases in equivalent
franchised restaurants and comparable sales for franchised restaurants noted
above. Additionally, sales for the Orlando commissary increased in 1996 as
compared to 1995 due to its conversion from a dough production facility to a
full-service commissary and distribution center beginning in August 1995.

     Equipment and other sales increased 44.4% to $27.0 million in 1996, from
$18.7 million in 1995. This increase was primarily due to the increase in
equivalent franchised restaurants open during 1996 as compared to 1995, the
increase in franchised restaurants opened during 1996 as compared to 1995 and
the increased installations of point of sale technology (the Papa John's PROFIT
System) in franchised restaurants during 1996 as compared to 1995.

     Costs and Expenses. Restaurant cost of sales, which consists of food,
beverage and paper costs, decreased as a percentage of restaurants sales to
28.0% in 1996, from 28.4% in 1995. The primary reason for the decrease is
attributable to increased efficiencies at both mature and newly-opened stores,
offset somewhat by higher average cheese prices for the year.

     Restaurant salaries and benefits (26.7% in 1996 and 26.8% in 1995) and
occupancy costs (5.1% in 1996 and 5.3% in 1995) decreased slightly as a
percentage of restaurant sales primarily as a result of efficiencies related to
strong restaurant sales and a generally maturing restaurant base.

     Restaurant advertising and related costs increased as a percentage of
restaurant sales to 9.6% in 1996, from 9.4% in 1995. The increase was primarily
driven by fourth quarter advertising campaigns related to the roll-out of the
new Papa John's "Better Thin" product to all markets.

     Other restaurant operating expenses increased as a percentage of restaurant
sales to 13.6% for 1996, from 13.3% for 1995. The increase in other restaurant
operating expenses was primarily due to an increased emphasis on managerial
training programs throughout Company-owned restaurants during 1996.

     Commissary, equipment and other expenses include cost of sales and
operating expenses associated with sales of food, paper, equipment, information
systems and printing and promotional items to franchisees and other customers.
These costs decreased as a percentage of combined commissary sales and equipment
and other sales to 91.1% in 1996, from 93.1% in 1995. This improvement was
primarily due to volume related operating efficiencies in the commissaries.

     General and administrative expenses decreased as a percentage of total
revenues to 7.4% in 1996, from 7.9% in 1995. The decrease was primarily due to
improved organizational efficiencies over an increasing revenue base.
Additionally, savings in certain insurance costs were realized as a result of
coverage changes implemented during the fourth quarter of 1995.
     
     Depreciation and amortization increased as a percentage of total revenues
to 3.8% in 1996, from 3.4% in 1995. This increase was primarily due to
additional capital expenditures by the Company, intangibles related to
acquisitions, deferred pre-opening costs for newly-opened restaurants and
commissaries and other deferred expenses, primarily systems development costs.
These factors resulting in increased depreciation and amortization were
partially offset

                                      23

<PAGE>
 
by the impact of a change in the depreciable lives of certain restaurant
equipment and signage effective at the beginning of the third quarter of 1995 to
more accurately reflect the economic lives of such assets. The estimated useful
life for ovens and certain other restaurant equipment was extended from five to
seven years, and the estimated useful life for restaurant signage was extended
from five to ten years.

     Investment Income. Investment income increased to $3.5 million in 1996,
from $1.7 million in 1995. Average investment balances increased during 1996,
compared to 1995, as a result of the investment of the net proceeds of the
Company's public offerings of common stock in August 1995 and May 1996.

     Income Tax Expense. Income tax expense reflects a combined federal, state
and local effective income tax rate of 37.0% in 1996, as compared to 36.8% in
1995. This increase was primarily due to the impact of higher federal and state
statutory income tax rates due to higher taxable income levels, substantially
offset by the impact of tax-exempt income generated by the investment portfolio
during 1996.

Impact of Year 2000

     Some of the Company's older purchased software programs were written using
two digits rather than four to define the applicable year. As a result, this
time-sensitive software recognizes a date using "00" as the year 1900 rather
than the year 2000. This could cause a system failure or miscalculations
resulting in disruptions of important administrative processes, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

     The Company has completed an assessment and will have to modify or replace
portions of its software so that its systems will function properly with respect
to dates in the year 2000 and thereafter. Management believes the total Year
2000 project cost is immaterial to financial position, net income and
liquidity.  Much of the cost related to Year 2000 coincides with existing
management plans to replace certain systems (principally the general ledger and
related subsidiary systems) in order to accommodate the Company's planned
growth.

     The project is estimated to be completed in early 1999, which is prior to
any anticipated impact on its operating systems. The Company believes that with
modifications to existing software and/or conversions to new software, the Year
2000 issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material impact on certain
administrative processes of the Company.

Liquidity and Capital Resources

     The Company requires capital primarily for the development and acquisition
of restaurants, the addition of new commissary and support services facilities
and equipment, the enhancement of corporate systems and facilities and the
funding of franchisee loans. Capital expenditures of $43.1 million, acquisitions
of $6.2 million, and loans to franchisees of $12.3 million for 1997, were
primarily funded by cash flow from operations, available cash and liquidation of
investments.

                                      24

<PAGE>
 
     Total 1998 capital expenditures are expected to be approximately $84.0
million, primarily for the development or relocation of restaurants, commissary
facilities and corporate offices. The Company plans to open approximately 70 new
Company-owned restaurants during 1998, and has identified an additional 15
restaurants for potential relocation.

     The Company plans to open a full service commissary in Portland, Oregon by
mid-1998. In late-1998, the Company plans to open a 242,000 square foot facility
in Louisville, Kentucky, approximately 30-40% of which will accommodate
relocation and expansion of the Louisville commissary operations and Novel
Approach promotional division and the remainder of which will accommodate
relocation and consolidation of corporate offices.

     The Company has been approved to receive up to $21.0 million in incentives
under the Kentucky Jobs Development Act in connection with the relocation of the
corporate offices. Based upon the expected timing of completion of the facility,
the Company expects to earn approximately $14.0 million of such incentives
through 2007.

     Additionally, during 1998 the Company expects to fund up to $4.5 million in
additional loans under existing franchisee loan program commitments.
Approximately $15.1 million was outstanding under this program as of December
28, 1997. At this time, the Company does not expect to significantly expand the
program beyond existing commitments.

     Capital resources available at December 28, 1997 include $18.7 million of
cash and cash equivalents, $57.9 million of investments and $8.0 million under a
line of credit expiring in June 1998. The Company expects to fund planned
capital expenditures and disbursements under the franchise loan program for the
next twelve months from these resources and operating cash flows.

Impact of Inflation

     The Company does not believe inflation has materially affected earnings
during the past three years. Substantial increases in costs, particularly labor,
employee benefits or food costs, could have a significant impact on the Company.


                                      25

<PAGE>
 

I
tem 8.  Consolidated Financial Statements and Supplemental Data

Papa John's International, Inc. and Subsidiaries
Consolidated Statements of Income


<TABLE>
<CAPTION>
(In thousands, except per share amounts)                              Year Ended
- -------------------------------------------------------------------------------------------------
                                                     December 28,    December 29,    December 31,
                                                         1997            1996            1995
- -------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>
Revenues:
  Restaurant sales                                   $   251,153     $   167,982     $   111,747
  Franchise royalties                                     24,318          17,827          13,561
  Franchise and development fees                           5,327           4,286           3,508
  Commissary sales                                       188,034         142,998         105,874
  Equipment and other sales                               39,952          26,959          18,665
- -------------------------------------------------------------------------------------------------
Total revenues                                           508,784         360,052         253,355
Costs and expenses:
Restaurant expenses:
  Cost of sales                                           66,417          47,092          31,703
  Salaries and benefits                                   67,830          44,774          29,946
  Advertising and related costs                           23,298          16,074          10,513
  Occupancy costs                                         12,785           8,527           5,896
  Other operating expenses                                33,882          22,801          14,913
- -------------------------------------------------------------------------------------------------
                                                         204,212         139,268          92,971
Commissary, equipment and other expenses:
  Cost of sales                                          177,263         134,771         101,342
  Salaries and benefits                                   13,091           9,023           7,072
  Other operating expenses                                18,181          11,009           7,577
- -------------------------------------------------------------------------------------------------
                                                         208,535         154,803         115,991
General and administrative expenses                       37,051          26,694          19,954
Depreciation                                              13,267           9,063           5,776
Amortization                                               6,525           4,595           2,844
- -------------------------------------------------------------------------------------------------
Total costs and expenses                                 469,590         334,423         237,536
Operating income                                          39,194          25,629          15,819
Other income (expense):
  Investment income                                        4,505           3,484           1,659
  Other, net                                              (1,074)            433             251
- -------------------------------------------------------------------------------------------------
Income before income taxes                                42,625          29,546          17,729
Income tax expense                                        15,772          10,932           6,525
- -------------------------------------------------------------------------------------------------
Net income                                           $    26,853     $    18,614     $    11,204
=================================================================================================
Basic earnings per share                             $       .93     $       .66     $       .45
=================================================================================================
Diluted earnings per share                           $       .91     $       .65     $       .44
=================================================================================================
Basic weighted average shares outstanding                 28,916          28,010          25,139
=================================================================================================
Diluted weighted average shares outstanding               29,592          28,670          25,552
=================================================================================================
Supplemental Data:
  Revenues - affiliates                              $    62,986     $    47,012     $    34,673
=================================================================================================
  Other income - affiliates                          $       514     $        85     $        48
=================================================================================================
</TABLE>


See accompanying notes.

                                      26

<PAGE>
 
Papa John's International, Inc. and Subsidiaries
Consolidated Balance Sheets


<TABLE> 
<CAPTION> 

                                                      December 28, December 29,
(Dollars in thousands, except per share amounts)          1997         1996
- -------------------------------------------------------------------------------
<S>                                                  <C>           <C>  
Assets
Current asset:                                             
 Cash and Cash equivalents                              $ 18,692       $ 24,063
 Accounts receivable                                      12,678         10,169 
 Accounts receivable-affiliates                            2,454          2,932
 Inventories                                               9,091          6,839
 Deferred pre-opening costs                                3,827          2,654
 Prepaid expenses and other current assets                 2,434          1,591 
- -------------------------------------------------------------------------------
Total current assets                                      49,176         48,248
Investments                                               57,933         65,067
Net property and equipment                               112,601         80,717 
Notes receivable-franchisees                               7,083          2,646
Notes receivable-affiliates                                7,997          2,407

Other assets                                              18,453         12,976
- -------------------------------------------------------------------------------
Total assets                                            $253,243       $212,061
===============================================================================

Liabilities and stockholders' equity                                
Current liabilities:                                                
 Accounts payable                                       $ 15,148       $ 13,105
 Accrued expenses                                         15,132          9,237
 Deferred income taxes                                       102            672
- -------------------------------------------------------------------------------
Total current liabilities                                 30,382         23,014
Unearned franchise and development fees                    4,613          3,378
Deferred income taxes                                      3,987          3,285
Other long-term liabilities                                1,528          1,741
Stockholders' equity:                                     
 Preferred stock ($.01 par value per share;                         
  authorized 5,000,000 shares, no shares issued)               -              -
 Common stock ($.01 par value per share; authorized                 
  50,000,000 shares, issued 29,127,717 in 1997 and                  
   28,776,348 in 1996)                                       291            288
Additional paid-in capital                               149,850        143,978
Unrealized gain on investments                               321            977
Retained earnings                                         62,752         35,882 
Treasury stock (36,437 shares in 1997 and 36,460                    
 shares in 1996, at cost)                                   (481)          (482)
- ------------------------------------------------------------------------------- 
Total stockholders' equity                               212,733        180,643
- ------------------------------------------------------------------------------- 
Total liabilities and stockholders' equity              $253,243       $212,061
===============================================================================
</TABLE>
 
See accompanying notes.

                                      27

<PAGE>
 
Papa John's International, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity


<TABLE>
<CAPTION>
                                                 Additional       Unrealized                                     Total
                                      Common      Paid-In       Gain (Loss) on     Retained     Treasury     Stockholders'
(In thousands)                        Stock       Capital        Investments       Earnings      Stock          Equity
- --------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>        <C>            <C>                <C>          <C>          <C>
Balance at December 25, 1994          $  244     $   55,627       $   (651)        $  8,002     $  (613)      $   62,609
Issuance of common stock                  18         29,982             --               --          --           30,000
Exercise of stock options                  2            567             --               --          --              569
Tax benefit related to exercise of
  non-qualified stock options             --          1,085             --               --          --            1,085
Acquisitions                               4            782             --               --          --              786
Change in unrealized gain (loss)
  on investments                          --             --            388               --          --              388
Net income                                --             --             --           11,204          --           11,204
Other                                     --             --             --             (368)          9             (359)
- --------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1995             268         88,043           (263)          18,838        (604)         106,282
Issuance of common stock                  17         50,534             --               --          --           50,551
Exercise of stock options                  2          1,429             --               --          --            1,431
Tax benefit related to exercise of
  non-qualified stock options             --          1,315             --               --          --            1,315
Acquisitions                               1          2,602             --           (1,542)         --            1,061
Change in unrealized gain (loss)
  on investments                          --             --          1,240               --          --            1,240
Net income                                --             --             --           18,614          --           18,614
Other                                     --             55             --              (28)        122              149
- --------------------------------------------------------------------------------------------------------------------------

Balance at December 29, 1996             288        143,978            977           35,882        (482)         180,643
Exercise of stock options                  3          3,533             --               --           1            3,537
Tax benefit related to exercise of
  non-qualified stock options             --          2,339             --               --          --            2,339
Change in unrealized gain (loss)
  on investments                          --             --           (656)              --          --             (656)
Net income                                --             --             --           26,853          --           26,853
Other                                     --             --             --               17          --               17
- --------------------------------------------------------------------------------------------------------------------------
Balance at December 28, 1997          $  291     $  149,850       $    321         $ 62,752     $  (481)      $  212,733
==========================================================================================================================
</TABLE>


See accompanying notes.

                                      28

<PAGE>
 
Papa John's International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
(In thousands)                                        Year Ended
- --------------------------------------------------------------------------------
                                        December 28,  December 29,  December 31,
                                            1997          1996          1995
- --------------------------------------------------------------------------------
<S>                                     <C>           <C>           <C>
Operating activities
Net income                                $ 26,853      $ 18,614      $ 11,204
Adjustments to reconcile net income to
 net cash provided by operating
 activities:
  Depreciation                              13,267         9,063         5,776
  Amortization                               7,255         5,241         2,960
  Deferred income taxes                        528         1,956         1,249
  Other                                       (601)          430           239
  Changes in operating assets and
   liabilities:
    Accounts receivable                     (2,017)       (2,903)       (4,701)
    Inventories                             (2,234)       (1,651)       (2,671)
    Deferred pre-opening costs              (5,823)       (4,247)       (3,282)
    Prepaid expenses and other 
     current assets                           (817)         (499)          (22)
    Other assets                              (827)       (3,253)       (2,074)
    Accounts payable                         2,043         3,717         2,626
    Accrued expenses                         5,885         2,630         2,376
    Unearned franchise and development
     fees                                    1,195           700           829
- --------------------------------------------------------------------------------
Net cash provided by operating
 activities                                 44,707        29,798        14,509
Investing activities
Purchase of property and equipment         (43,135)      (28,792)      (32,683)
Purchase of investments                    (41,445)      (65,031)      (15,247)
Proceeds from sale or maturity of
 investments                                46,696        26,572        12,387
Loans to franchisees                       (12,348)       (7,823)         (420)
Loan repayments from franchisees             2,321           --            --
Deferred systems development costs          (1,989)       (2,614)       (2,078)
Acquisitions                                (6,168)          (30)         (673)
Other                                          316           161           (81)
- --------------------------------------------------------------------------------
Net cash used in investing activities      (55,752)      (77,557)      (38,795)
Financing activities
Proceeds from issuance of long-term
 debt                                          --            --          2,000
Payments on long-term debt                    (175)       (1,367)       (2,492)
Proceeds from issuance of common stock         --         50,551        30,000
Proceeds from exercise of stock
 options                                     3,537         1,431           569
Tax benefit related to exercise of
 non-qualified stock options                 2,339         1,315         1,085
Other                                          (27)          (12)          255
- --------------------------------------------------------------------------------
Net cash provided by financing
 activities                                  5,674        51,918        31,417
- --------------------------------------------------------------------------------
Net (decrease) increase in cash and
 cash equivalents                           (5,371)        4,159         7,131
Cash and cash equivalents at beginning
 of year                                    24,063        19,904        12,773
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of
 year                                     $ 18,692      $ 24,063      $ 19,904
================================================================================
</TABLE>


See accompanying notes.

                                      29

<PAGE>
 
Papa John's International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1.   Description of Business

Papa John's International, Inc. (the "Company") operates and franchises pizza
delivery and carry-out restaurants under the trademark "Papa John's," currently
in 41 states and the District of Columbia. Substantially all revenues are
derived from retail sales of pizza to the general public by Company-owned
restaurants, franchise royalties, sales of franchise and development rights, and
sales to franchisees of food and paper products, restaurant equipment, printing
and promotional items, and information systems and related services used in
their operations.

2.   Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.

Fiscal Year

The Company's fiscal year ends on the last Sunday in December of each year. The
1997 and 1996 fiscal years consisted of 52 weeks and the 1995 fiscal year
consisted of 53 weeks.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.

Revenue Recognition

Franchise fees are recognized when a franchised restaurant begins operations, at
which time the Company has performed its obligations related to such fees. Fees
received pursuant to development agreements which grant the right to develop
franchised restaurants in future periods in specific geographic areas are
deferred and recognized on a pro rata basis as the franchised restaurants
subject to the development agreements begin operations. Both franchise and
development fees are nonrefundable. Franchise royalties, which are based on a
percentage of franchised restaurants' sales, are recognized as earned.

Cash Equivalents

Cash equivalents consist of all highly liquid investments with a maturity of
three months or less at date of purchase. These investments are carried at cost
which approximates fair value.

                                      30

<PAGE>
 
2.   Significant Accounting Policies (continued)

Accounts Receivable

Substantially all accounts receivable are due from franchisees for purchases of
food and paper products, restaurant equipment, supplies, printing and
promotional items, information systems and related services, and for royalties
from December sales. Credit is extended based on an evaluation of the
franchisee's financial condition and, generally, collateral is not required. The
Company considers substantially all amounts to be collectible.

Inventories

Inventories, which consist of food products, paper goods and supplies,
smallwares, store equipment and printing and promotional items, are stated at
the lower of cost, determined under the first-in, first-out (FIFO) method, or
market. 

Deferred Pre-Opening Costs

Pre-opening costs, which represent certain expenses incurred before a new
restaurant or commissary facility opens, are capitalized and amortized on a
straight-line basis over a period of one year from the facility's opening date.
Total costs deferred were approximately $5.8 million in 1997, $4.2 million in
1996 and $3.0 million in 1995. 

In April 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued an Exposure Draft of a Proposed
Statement of Position, "Reporting on the Costs of Start-Up Activities" (the
"SOP") which, if finalized, would require adoption at the beginning of 1999. The
Company's initial application of the SOP would require the write-off of deferred
pre-opening costs as of the date of adoption, and such write-off would be
reported, on a net of tax basis, as the cumulative effect of a change in
accounting principle. The Company does not expect the adoption of the SOP to
significantly impact future operating income due to the relative consistency of
new facility openings and the length of the current amortization period.
Deferred pre-opening costs as of December 28, 1997 were $3.8 million.

Investments

The Company determines the appropriate classification of investment securities
at the time of purchase and reevaluates such designation as of each balance
sheet date. All investment securities held by the Company at December 28, 1997,
have been classified as available-for-sale. Available-for-sale securities are
stated at fair value as determined primarily through quoted market prices.
Unrealized gains and losses, net of tax, are reported as a separate component of
stockholders' equity. The cost of debt securities is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization and
accretion, along with interest and dividends earned and realized gains and
losses, are included in investment income. The cost of securities sold is based
on the specific identification method.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets (generally
five to ten years for restaurant, commissary and other equipment, and 20 to 25
years for buildings and improvements).

                                      31


<PAGE>
 
2.  Significant Accounting Policies (continued)

Leasehold improvements are amortized over the terms of the respective leases,
including the first renewal period (generally five to ten years).

Systems Development Costs

The Company defers certain systems development and related costs which meet
established criteria. Amounts deferred are amortized over periods not exceeding
five years beginning in the month subsequent to completion of the related
systems project. Total costs deferred were approximately $2.0 million in 1997,
$2.6 million in 1996, and $2.1 million in 1995. Unamortized deferred systems
development costs were $4.3 million at December 28, 1997 and $3.8 million at
December 29, 1996, and are reported in other assets in the accompanying balance
sheets.

Advertising and Related Costs

Advertising and related costs include Company-owned restaurant activities such
as mail coupons, door hangers and promotional items, and Company-owned
restaurant contributions to the Papa John's Marketing Fund, Inc. (the "Marketing
Fund") and local market cooperative advertising funds. All such advertising and
related costs are expensed as incurred. Contributions by Company-owned and
franchised restaurants to the Marketing Fund and the cooperative advertising
funds are based on an established percentage of monthly restaurant revenues. The
Marketing Fund is responsible for the development of marketing and advertising
materials for use throughout the Papa John's system. The local market
cooperative advertising funds are responsible for developing and conducting
advertising activities in a specific market, including the placement of
electronic and print materials developed by the Marketing Fund. Such funds are
accounted for separately and are not included in the consolidated financial
statements of the Company.

Earnings per Share

In 1997, the Financial Accounting Standards Board (the "FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Diluted earnings per share is based upon
weighted average shares outstanding adjusted for the dilutive effect of stock
options. Basic and diluted earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the SFAS 128
requirements. The calculations of basic and diluted earnings per share for the
years ended December 28, 1997, December 29, 1996 and December 31, 1995 are as
follows (in thousands, except per share data):


                                                       1997      1996     1995
- --------------------------------------------------------------------------------
Basic earnings per share:                           
Net income                                           $26,853   $18,614   $11,204
Weighted average shares outstanding                   28,916    28,010    25,139
- --------------------------------------------------------------------------------
Basic earnings per share                             $  0.93   $  0.66   $  0.45
================================================================================

Diluted earnings per share:
Net income                                           $26,853   $18,614   $11,204
Weighted average shares outstanding                   28,916    28,010    25,139
Dilutive effect of outstanding common stock options      676       660       413
- --------------------------------------------------------------------------------
Diluted weighted average shares outstanding           29,592    28,670    25,552
- --------------------------------------------------------------------------------
Diluted earnings per share                           $  0.91   $  0.65   $  0.44
================================================================================
 

Options to purchase common stock with an exercise price greater than the average
market price were not included in the computation of diluted earnings per share
because the effect would have been antidilutive. The number of antidilutive
options was 695,000 in 1997, 217,000 in 1996, and 42,000 in 1995.


                                      32

<PAGE>

2.   Significant Accounting Policies (continued)
 
Prior Year Data

Certain prior year data has been reclassified to conform to the 1997
presentation.

Recently Issued Accounting Standards

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is required to be adopted for 1998 interim financial reporting. This
Statement will require additional disclosures related to comprehensive income
(which includes items such as unrealized gains and losses on available-for-sale
securities, not included in the income statement) in the Company's financial
statements.

Also in June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which is required to be adopted for 1998
year-end financial reporting. This Statement does not have any impact on the
financial results or financial condition of the Company, but may result in
certain changes in required disclosures of segment information.

                                      33

<PAGE>
 
3.  Business Combinations

During the second quarter of 1997, the Company acquired four Papa John's
restaurants in Arlington, Texas for approximately $488,000 in cash and 16 Papa
John's restaurants in North Carolina for $5.0 million (consisting of $4,960,000
in cash and a credit of $40,000 towards future development fees). A majority
ownership interest in the franchisee of the North Carolina restaurants was held
by certain directors and officers, including the Chief Executive Officer of the
Company.

During the fourth quarter of 1997, the Company acquired three Papa John's
restaurants near Denver, Colorado for $720,000 in cash. These restaurants were
owned by the Chief Executive Officer of the Company and his wife.

The above business combinations were accounted for by the purchase method of
accounting whereby operating results subsequent to the acquisition date are 
included in the Company's financial statements.

During the fourth quarter of 1997, the Company acquired a 49% equity ownership
interest in Mountain Pizza Group, L.L.C. ("MPG"), an entity which operates seven
Papa John's restaurants in Denver, Colorado, for $150,000 in cash. The operating
results of MPG will be accounted for by the equity method of accounting. The 49%
equity ownership interest was acquired from the President of the Company, who
remains the 51% majority owner of MPG.

During 1996, the Company purchased the assets of four Papa John's restaurants
from franchisees for total consideration of approximately $1.5 million,
consisting of 51,800 shares of common stock of the Company (valued at $1.4
million) and $30,000 in cash. Additionally during 1996, the Company acquired a
franchisee operating eighteen Papa John's restaurants in a transaction accounted
for as a pooling of interests. The Company issued 46,593 shares of its common
stock (valued at $1.5 million) and retired $3.5 million of acquiree debt in
connection with this acquisition.

During 1995, the Company purchased the assets of eight Papa John's restaurants
from franchisees for total consideration of approximately $2.0 million,
consisting of 54,170 shares of common stock of the Company (valued at $650,000),
$574,000 in credits toward future development and franchise fees and $770,000 in
cash. Additionally during 1995, the Company acquired franchisees operating 15
Papa John's restaurants in transactions accounted for as poolings of interests.
The Company issued 346,080 shares of its common stock (valued at $6.0 million)
and retired $1.2 million of acquiree debt in connection with these acquisitions.

                                      34

<PAGE>
 
4.   Investments

A summary of the Company's available-for-sale securities as of December 28, 1997
and December 29, 1996 follows (in thousands):
 

<TABLE>
<CAPTION>
                                                 Gross          Gross      Estimated
                                 Amortized    Unrealized     Unrealized      Fair
                                    Cost         Gains          Losses       Value
- ------------------------------------------------------------------------------------
<S>                              <C>          <C>            <C>           <C>
December 28, 1997
  U.S. Government securities     $   1,001    $       --     $      (4)    $     997
  Corporate debt securities            500            --            (1)          499
  Municipal bonds                   40,073           125            (1)       40,197
  Mortgage-backed securities           556             5            --           561
  Fixed income mutual funds         10,822            --          (217)       10,605
  Equity securities                  3,320           736            --         4,056
  Interest receivable                1,018            --            --         1,018
- ------------------------------------------------------------------------------------
Total                            $  57,290    $      866     $    (223)    $  57,933
====================================================================================

December 29, 1996
  U.S. Government securities     $   4,003    $       11     $     (17)    $   3,997
  Corporate debt securities            500            --            (1)          499
  Municipal bonds                   45,852           142            (1)       45,993
  Mortgage-backed securities         1,078            --            (1)        1,077
  Fixed income mutual funds         10,822            --          (221)       10,601
  Equity securities                     --         1,772            --         1,772
  Interest receivable                1,128            --            --         1,128
- ------------------------------------------------------------------------------------
Total                            $  63,383    $    1,925     $    (241)    $  65,067
====================================================================================
</TABLE>


The amortized cost and estimated fair value of securities at December 28, 1997,
by contractual maturity, are shown below (in thousands). Expected maturities
will differ from contractual maturities because the issuers of securities may
have the right to prepay obligations without prepayment penalties.
 

<TABLE>
<CAPTION>
                                                      Amortized      Estimated
                                                        Cost         Fair Value
- -------------------------------------------------------------------------------
<S>                                                   <C>            <C>
Due in one year or less                               $  26,277      $   26,322
Due after one year through three years                   15,297          15,371
Mortgage-backed securities                                  556             561
Fixed income mutual funds                                10,822          10,605
Equity securities                                         3,320           4,056
Interest receivable                                       1,018           1,018
- -------------------------------------------------------------------------------
Total                                                 $  57,290      $   57,933
===============================================================================
</TABLE>


                                      35

<PAGE>
 
5.   Net Property and Equipment

Net property and equipment consists of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                        1997           1996
- -------------------------------------------------------------------------------
<S>                                                   <C>            <C>
Land                                                  $  14,219      $  10,273
Buildings and improvements                               13,478         10,734
Leasehold improvements                                   35,406         20,169
Equipment and other                                      70,419         49,496
Construction in progress                                 11,790         10,841
- -------------------------------------------------------------------------------
                                                        145,312        101,513
Less accumulated depreciation and amortization          (32,711)       (20,796)
- -------------------------------------------------------------------------------
Net property and equipment                            $ 112,601      $  80,717
===============================================================================
</TABLE>


6.   Franchisee Loan Program

During 1996, the Company established a program under which selected franchisees
may borrow funds for use in the construction and development of their
restaurants. Loans outstanding to franchisees were approximately $15.1 million
as of December 28, 1997 and $5.1 million as of December 29, 1996. As of December
28, 1997, commitments to lend up to an additional $4.5 million had been made.
Such loans bear interest at fixed or floating rates (ranging from 5.5% to 10.0%
at December 28, 1997), and are generally secured by the fixtures, equipment,
signage and, where applicable, land of each restaurant and the ownership
interests in the franchisee. Interest earned on franchisee loans was
approximately $1.1 million in 1997 and $153,000 in 1996, and is reported in
investment income in the accompanying statements of income. Approximately $8.0
million of the loans outstanding as of December 28, 1997 were to franchisees in
which the Company or certain directors or officers of the Company had an
ownership interest.

7.   Accrued Expenses

Accrued expenses consist of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                          1997          1996
- -------------------------------------------------------------------------------
<S>                                                     <C>            <C>
Salaries, wages and bonuses                             $  2,124      $  1,738
Taxes other than income                                    4,045         2,857
Accrued insurance                                          3,520         1,242
Income taxes                                               2,495         1,228
Other                                                      2,948         2,172
- -------------------------------------------------------------------------------
Total                                                   $ 15,132      $  9,237
===============================================================================
</TABLE>


                                      36

<PAGE>
 
8.   Long-Term Debt and Credit Arrangements

Long-term debt consists of a $2.0 million economic development loan (the "Loan")
from the State of Mississippi in connection with the opening of a commissary in
Jackson, Mississippi. The balance of the loan was $1.5 million as of December
28, 1997 and $1.7 million as of December 29, 1996, and is classified in accrued
expenses and other long-term liabilities in the accompanying balance sheets.

The Company has a $10.0 million revolving credit agreement, which expires on
June 29, 1998. Outstanding balances accrue interest at 1% below the prime rate
or at rates tied to other interest indices at the election of the Company. In
the event of any default, the lender has a security interest in the Company's
cash account balances maintained with the lender. Letters of credit in the 
amount of $2.0 million have been issued under the agreement on the Company's
behalf, reducing the remaining borrowing capacity to $8.0 million at December
28, 1997.

9.   Income Taxes

A summary of the provision for income taxes follows (in thousands):


<TABLE>
<CAPTION>
                                             1997          1996          1995
- --------------------------------------------------------------------------------
<S>                                        <C>           <C>            <C>
Current
  Federal                                  $ 13,061      $  7,658      $  4,469
  State and local                             2,183         1,318           807
Deferred (federal and state)                    528         1,956         1,249
- --------------------------------------------------------------------------------
Total                                      $ 15,772      $ 10,932      $  6,525
================================================================================
</TABLE>

 
Significant deferred tax assets (liabilities) follow (in thousands):
 

<TABLE>
<CAPTION>
                                                          1997          1996
- -------------------------------------------------------------------------------
<S>                                                     <C>            <C>
Unearned development fees                               $  1,630      $  1,055
Unrealized loss on investments                                82            91
Accrued expenses                                           1,405           263
Other                                                        270           204
- -------------------------------------------------------------------------------
Total deferred tax assets                                  3,387         1,613
Valuation allowance related to
  unrealized loss on investments                             (82)          (84)
- -------------------------------------------------------------------------------
Net deferred tax asset                                     3,305         1,529
Deferred expenses                                         (3,158)       (2,107)
Accelerated depreciation                                  (3,833)       (2,594)
Unrealized gain on warrant                                  (270)         (656)
Other                                                       (133)         (129)
- -------------------------------------------------------------------------------
Total deferred tax liabilities                            (7,394)       (5,486)
- -------------------------------------------------------------------------------
Net deferred tax liability                              $ (4,089)     $ (3,957)
===============================================================================
</TABLE>


                                      37

<PAGE>
 
9.   Income Taxes (continued)

The reconciliation of income tax computed at the U.S. federal statutory rate to
income tax expense for the years ended December 28, 1997, December 29, 1996 and
December 25, 1995 is as follows (in thousands):


<TABLE>
<CAPTION>
                                             1997          1996          1995
- --------------------------------------------------------------------------------
<S>                                        <C>           <C>            <C>
Tax at U.S. federal statutory rate         $ 14,919      $ 10,341      $  6,063
State and local income taxes                  1,459         1,011           567
Tax exempt investment income                   (783)         (788)         (188)
Other                                           177           368            83
- --------------------------------------------------------------------------------
Total                                      $ 15,772      $ 10,932      $  6,525
================================================================================
</TABLE>


Income taxes paid were $11.0 million in 1997, $6.5 million in 1996 and $3.2
million in 1995.

10.  PJ America, Inc. Stock Warrant

PJ America, Inc. ("PJ America"), a franchisee of the Company, completed an
initial public offering ("IPO") of its common stock effective October 25, 1996.
In connection with the IPO, PJ America issued to the Company a warrant to
purchase 225,000 shares of its common stock. The warrant is exercisable in whole
or in part at any time within five years from the closing date of the IPO, and
the purchase price of each share of common stock pursuant to the warrant is
$11.25 per share (90% of the IPO price of $12.50 per share). The warrant was
issued by PJ America to the Company in consideration for the grant by the
Company of rights to enter into development agreements for certain specified
territories and the waiver by the Company of certain market transfer fees. The
Company's agreement with PJ America anticipates that PJ America will pay
standard development and franchise fees in connection with opening restaurants
in the specified territories.

The Company did not recognize income in connection with receipt of the warrant.
The warrant is classified as an available-for-sale security, and accordingly, is
stated at fair value in the balance sheet, with unrealized gains, net of tax,
reported as a separate component of stockholders' equity.

The fair value of the warrant was $731,250 on December 28, 1997, based upon a
closing price per share of $14.50 for PJ America common stock on that date, and
is reported in investments in the accompanying balance sheets. The intrinsic
value of the warrant (market value of PJ America common stock less the exercise
price of the warrant) is considered a reasonable approximation of the fair value
of the warrant.

Certain officers and/or directors of the Company are also officers and/or
directors of PJ America.

                                      38

<PAGE>
 
11.  Related Party Transactions

Certain officers and directors of the Company own equity interests in entities
that operate and/or have rights to develop franchised restaurants. Prior to the
Company's initial public offering of common stock in June 1993, certain of these
affiliated entities entered into agreements to acquire area development rights
at reduced development fees and also pay reduced initial franchise fees when
restaurants are opened. All such entities pay royalties at the same rate as
other franchisees. Following is a summary of transactions and balances with
affiliated entities (in thousands):

<TABLE> 
<CAPTION> 
                                            1997       1996      1995
- -----------------------------------------------------------------------
<S>                                       <C>        <C>        <C> 
Revenues from affiliates:

  Commissary sales                        $47,153    $35,972    $26,180

  Equipment and other sales                 8,187      5,628      4,265

  Franchise royalties                       6,265      4,512      3,518

  Franchise and development fees            1,381        900        710
- -----------------------------------------------------------------------
Total                                     $62,986    $47,012    $34,673
=======================================================================
 
Other income                              $   514    $    85    $    48
=======================================================================
Accounts receivable-affiliates            $ 2,454    $ 2,932    $ 2,093
=======================================================================
Notes receivables-affiliates              $ 7,997    $ 2,407    $   728
=======================================================================
</TABLE>
 
During 1997, the Company acquired full or partial ownership in 26 Papa John's
restaurants from related parties (see Note 3).

The Company paid $689,000 in 1997, $515,000 in 1996 and $149,000 in 1995 for
charter aircraft services provided by entities owned by certain directors and
officers, including the Chief Executive Officer, of the Company.

The Company advanced $197,000 in 1997 and $384,000 in 1996, in premiums for
split-dollar life insurance coverage on the Chief Executive Officer for the
purpose of funding estate tax obligations. The Company and the officer share the
cost of the premiums. The premiums advanced by the Company will be repaid out of
the cash value or proceeds of the policies.

In December 1996, the Company sold its 10% ownership interest in L-N-W Pizza,
Inc. ("L-N-W"), a franchisee that operates Papa John's restaurants in Florida,
back to L-N-W. The Chief Operating Officer of the Company was the 90% owner of
L-N-W prior to the sale and is now the sole owner. The Company sold its 10%
interest for total consideration of $411,000, which represented a gross value of
approximately $400,000 per restaurant.

                                      39

<PAGE>
 
12.  Lease Commitments

The Company leases office, retail and commissary space under operating leases
with terms generally ranging from three to five years and providing for at least
one renewal. Certain leases further provide that the lease payments may be
increased annually based on the Consumer Price Index. The Company also leases
certain equipment under operating leases with terms ranging from three to seven
years. Future minimum lease payments are as follows: 1998 - $8.3 million; 1999 -
$7.0 million; 2000 - $5.6 million; 2001 - $3.9 million; 2002 -$1.9 million; and
thereafter - $3.3 million. Total rent expense was $7.9 million in 1997, $4.6
million in 1996 and $3.2 million in 1995.

13.  Stock Options

In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires the use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise price of
the Company's employee stock options equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

The Company awards stock options under the Papa John's International, Inc. 1993
Stock Ownership Incentive Plan (the "Incentive Plan") and the Papa John's
International, Inc. 1993 Non-Employee Directors Stock Option Plan (the
"Directors Plan"). Shares of common stock authorized for issuance are 4,737,500
under the Incentive Plan and 270,000 under the Directors Plan. On February 26,
1998, the Board of Directors amended the Incentive Plan to increase the number
of shares available for issuance under the Plan to 6,000,000 shares. The
amendment will be submitted for stockholder approval at the Annual Meeting of
Stockholders scheduled for May 21, 1998. Options granted under both plans
generally expire ten years from the date of grant and vest over one to five year
periods, except for options awarded under a multi-year operations compensation
program which vest immediately upon grant.

Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 25, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1997
and 1996, respectively: risk-free interest rates of 5.7% and 5.9%; a dividend
yield of 0%; volatility factors of the expected market price of the Company's
common stock of .47; and a weighted-average expected life of the options of 3.6
years.

                                       40

<PAGE>
 
13.  Stock Options (continued)

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands, except per share amounts):

<TABLE> 
<CAPTION> 
                                            1997       1996      1995
=======================================================================
<S>                                       <C>        <C>        <C> 
Pro forma net income                      $19,754    $14,772    $10,922
Pro forma earnings per share:
  Basic                                   $  0.68    $  0.53    $  0.43
  Diluted                                 $  0.67    $  0.52    $  0.43
</TABLE>
 
Because SFAS 123 is applicable only to options granted subsequent to December
25, 1994, its pro forma effect will not be fully reflected until a complete five
years of vesting occurs for 1995 option awards in 2000.

Information pertaining to options for 1997, 1996 and 1995 is as follows (number
of options in thousands):

<TABLE> 
<CAPTION> 
                                            1997                           1996                              1995

                                    Number of   Weighted-Average  Number of    Weighted-Average     Number of    Weighted-Average

                                     Options     Exercise Price    Options      Exercise Price       Options      Exercise Price
                                    ============================  =============================     =============================
<S>                                 <C>         <C>               <C>          <C>                  <C>          <C> 
Outstanding-beginning of year         3,532           $20.98        1,725            $12.01           1,188           $ 6.46

Granted                               2,259            29.30        2,108             27.31             903            17.07

Exercised                               351            10.09          180              7.13             240             2.61

Cancelled                               243            25.91          121             19.04             126            11.48
                                    ----------------------------  -----------------------------     -----------------------------
Outstanding-end of year               5,197           $25.28        3,532            $20.98           1,725           $12.01
                                    ============================  =============================     =============================
Exercisable-end of year               1,567           $21.96          870            $13.19             421           $ 3.63
                                    ============================  =============================     =============================

Weighted-average fair value

  of options granted during

  the year                           $10.22                        $ 9.65                           $  5.03
                                    =======                       =======                           =======
</TABLE>
 
                                      41

<PAGE>
 
13.  Stock Options (continued)

The number, weighted-average exercise price and weighted-average remaining
contractual life of options outstanding as of December 28, 1997, and the number
and weighted average exercise price of options exercisable as of December 28,
1997 follow (number of options in thousands):


<TABLE>
<CAPTION>
                          Range of        Number of  Weighted-Average    Weighted-Average
                       Exercise Prices     Options    Exercise Price      Remaining Life
- -----------------------------------------------------------------------------------------
<S>                    <C>                <C>        <C>                 <C>
Outstanding options:   $ 5.44 - $ 9.99        206        $ 6.33                5.59
                        10.00 -  19.99      1,168         16.04                7.63
                        20.00 -  38.50      3,823         29.13                9.23
- -----------------------------------------------------------------------------------------
     Total                                  5,197        $25.28                8.73
=========================================================================================

Exercisable options:   $ 5.44 - $ 9.99        160        $ 6.08
                        10.00 -  19.99        683         16.33
                        20.00 -  38.50        724         30.79
- -----------------------------------------------------------------------------------------
     Total                                  1,567        $21.96
=========================================================================================
</TABLE>


As of December 28, 1997, approximately 75,750 shares were available for future
issuance under the Directors Plan. Contingent upon approval by the Company's
stockholders of the amendment to the Incentive Plan described above, 593,000
shares were available at December 28, 1997 for future issuance under such Plan.

14.  Defined Contribution Benefit Plan

The Company has established the Papa John's International, Inc. 401(k) Plan (the
"Plan"), as a defined contribution benefit plan, in accordance with Section
401(k) of the Internal Revenue Code. The Plan is open to all employees who meet
certain eligibility requirements and allows participating employees to defer
receipt of a portion of their compensation and contribute such amount to one or
more investment funds. Administrative costs of the Plan are paid by the Company
and are not significant.

15.  Quarterly Data (unaudited, in thousands, except per share data)


<TABLE>
<CAPTION>
Quarter                               1st                  2nd                    3rd                      4th
- -------------------------------------------------------------------------------------------------------------------------------
                              1997         1996        1997        1996        1997        1996        1997       1996
- -------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>           <C>        <C>         <C>        <C>          <C>         <C>        <C> 
Total revenues              $109,643      $76,726    $126,212    $87,680     $128,252     $92,729    $144,677   $102,917
Operating income               8,382        5,024       9,200      5,801        9,697       6,519      11,915      8,285
Net income                     5,693        3,519       6,271      4,232        6,854       4,914       8,035      5,949
Basic earnings per share    $    .20      $   .13    $    .22    $   .15     $    .24     $   .17    $    .28   $    .21
Diluted earnings per share  $    .19      $   .13    $    .21    $   .15     $    .23     $   .17    $    .27   $    .20
</TABLE>


All quarterly information above is presented in 13 week periods.

                                      42

<PAGE>
 
Report of Management

The consolidated financial statements appearing in this Annual Report have been
prepared by management, which is responsible for their preparation, integrity
and fair presentation. The statements have been prepared in accordance with
generally accepted accounting principles and necessarily include some amounts
that are based on management's best estimates and judgments.

Management is responsible for the system of internal controls over financial
reporting at Papa John's International, Inc. and its subsidiaries, a system
designed to provide reasonable assurance regarding the preparation of reliable
published financial statements. This system is augmented by written policies and
procedures and the selection and training of qualified personnel. Management
believes that the Company's system of internal controls over financial reporting
provides reasonable assurance that the financial records are reliable for
preparing financial statements.

The Audit Committee of the Board of Directors meets with the independent
auditors and management periodically to discuss internal controls over financial
reporting and other auditing and financial reporting matters. The Committee
reviews with the independent auditors the scope and results of the audit effort.
The Committee also meets with the independent auditors without management
present to ensure that the independent auditors have free access to the
Committee. The independent auditors are recommended by the Audit Committee of
the Board of Directors and selected by the Board of Directors. Based upon their
audit of the consolidated financial statements, the independent auditors, Ernst
& Young LLP, have issued their Report of Independent Auditors, which follows.

Report of Independent Auditors

The Board of Directors and Stockholders
Papa John's International, Inc.

We have audited the accompanying consolidated balance sheets of Papa John's
International, Inc. and subsidiaries (the "Company") as of December 28, 1997 and
December 29, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 28, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Papa
John's International, Inc. and subsidiaries at December 28, 1997 and December
29, 1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 28, 1997, in conformity
with generally accepted accounting principles.

                                               /s/ Ernst & Young LLP

Louisville, Kentucky
February 27, 1998


                                      43

<PAGE>
 

I
tem 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

     None.


                                   PART III


Items 10, 11, 12 and 13. Directors and Executive Officers of the Registrant;
      Executive Compensation; Security Ownership of Certain Beneficial Owners
      and Management; and Certain Relationships and Related Transactions.

     The information required by these items, other than the information set
forth in this Report under Part I, "Executive Officers of the Registrant," is
omitted because the Company is filing a definitive proxy statement pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Report which includes the required information. Such information is
incorporated herein by reference.


                                    PART IV


Item 14. Exhibits, Consolidated Financial Statement Schedules and Reports on
         Form 8-K

(a)(1)   Consolidated Financial Statements:

         The following consolidated financial statements, notes related thereto
and report of independent auditors are included in Item 8 of this Report:
                                                                
         Consolidated Statements of Income for the years ended December 28,
                1997, December 29, 1996 and December 31, 1995
         Consolidated Balance Sheets as of December 28, 1997 and December 29,
                1996
         Consolidated Statements of Stockholders' Equity for the years ended 
                December 28, 1997, December 29, 1996 and December 31, 1995
         Consolidated Statements of Cash Flows for the years ended December 28,
                1997, December 29, 1996 and December 31, 1995

         Notes to Consolidated Financial Statements

         Report of Independent Auditors

(a)(2)   Consolidated Financial Statement Schedules:

         All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and therefore have been omitted.

(a)(3)   Exhibits:

                                      44

<PAGE>
 
    3.1   The Company's Amended and Restated Certificate of Incorporation.
 
         Exhibit 3.1 to the Company's Registration Statement on Form S-1
          (Registration No. 33-61366) is incorporated herein by reference.

    3.2   The Company's Restated By-Laws. Exhibit 3.2 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-61366) is
          incorporated herein by reference.

    3.3   Certificate of Amendment of Amended and Restated Certificate of
          Incorporation of Papa John's International, Inc. Exhibit 3 to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          June 29, 1997, is incorporated herein by reference.

    4.1   Specimen Common Stock Certificate. Exhibit 4.1 to the Company's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1995
          (Commission File No. 0-21660) is incorporated herein by reference.

    4.2   Amended and Restated Certificate of Incorporation and Restated By-
          Laws (See 3.1, 3.2 and 3.3 above).

  *10.1   Consulting Agreement dated March 29, 1991, between the Company and
          Richard F. Sherman. Exhibit 10.4 to the Company's Registration
          Statement on Form S-1 (Registration No. 33-61366) is incorporated
          herein by reference.

   10.2   Lease dated November 7, 1990, including amendments I, II and III
          thereto, between the Company and CWK #7, a Texas limited partnership,
          relating to the Company's corporate offices. Exhibit 10.5 to the
          Company's Registration Statement on Form S-1 (Registration No. 33-
          61366) is incorporated herein by reference.

   10.3   Lease dated November 9, 1990, including amendments thereto, between
          the Company and Crow-Kessler, a Texas limited partnership, relating
          to the Company's commissary and distribution facility in Louisville,
          Kentucky. Exhibit 10.6 to the Company's Registration Statement on
          Form S-1 (Registration No. 33-61366) is incorporated herein by
          reference.

   10.4   Lease dated January 15, 1993, between the Company and CWK #7, a Texas
          limited partnership, relating to the Company's corporate offices.
          Exhibit 10.7 to the Company's Registration Statement on Form S-1
          (Registration No. 33-61366) is incorporated herein by reference.

  *10.5   Papa John's International, Inc. 1993 Stock Ownership Incentive Plan.
          Exhibit 10.2 to the Company's quarterly report on Form 10-Q for the
          quarter ended September 29, 1996, is incorporated herein by
          reference.

  *10.6   Papa John's International, Inc. 1993 Stock Option Plan for Non-
          Employee Directors. Exhibit 10.3 to the Company's quarterly report on
          Form 10-Q for the quarter ended September 29, 1996, is incorporated
          herein by reference.

  *10.7   Employment and Non-Competition Agreement dated January 1, 1993,
          between the Company and Richard J. Emmett. Exhibit 10.14 to the
          Company's Registration Statement on Form S-1 (Registration No. 33-
          61366) is incorporated herein by reference.

   10.8   The Company's standard Franchise Agreement. Exhibit 10.8 to the
          Company's Annual Report on Form 10-K for the fiscal year ended
          December 29, 1996, is incorporated herein by reference.

                                      45

<PAGE>
 
     10.9   Lease dated May 14, 1993, between PJ Food Service, Inc. and Sample
            Properties relating to the Company's commissary facility in Raleigh,
            North Carolina. Exhibit 10.16 to the Company's Registration
            Statement on Form S-1 (Registration No. 33-61366) is incorporated
            herein by reference.

     10.10  Amendment IV to Lease dated November 7, 1990 (and related leases),
            by and between the Company and CWK #7, a Texas limited partnership,
            relating to the Company's corporate offices. Exhibit 10.17 to the
            Company's Registration Statement on Form S-1 (Registration No. 33-
            73530) is incorporated herein by reference.

     10.11  Lease dated November 1, 1993, between PJ Food Service, Inc. and
            Jackson Developers, LLC, a Missouri limited liability company,
            relating to the Company's commissary and distribution facility in
            Jackson, Mississippi. Exhibit 10.18 to the Company's Registration
            Statement on Form S-1 (Registration No. 33-73530) is incorporated
            herein by reference.

     10.12  Second Amended and Restated Loan Agreement, and related promissory
            note, each dated June 30, 1995, between the Company and PNC Bank,
            Kentucky, Inc. Exhibit 10.1 to the Company's quarterly report on
            Form 10-Q for the quarterly period ended June 25, 1995 (Commission
            File No. 0-21660) is incorporated herein by reference.

     10.13  Amendment V to Lease dated November 7, 1990 (and related leases), by
            and between the Company and CWK #7, a Texas limited partnership,
            relating to the Company's corporate offices. Exhibit 10.22 to the
            Company's Registration Statement on Form S-1 (Registration No. 33-
            73530) is incorporated herein by reference.
        
     10.14  Loan Agreement among Mississippi Business Finance Corporation
            (acting for and on behalf of the State of Mississippi), Bank of
            Mississippi (as Servicing Trustee) and PJFS of Mississippi, Inc.
            Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the
            quarter ended March 27, 1994 (Commission File No. 0-21660) is
            incorporated herein by reference.

     10.15  Amendment VI to Lease dated November 7, 1990 (and related leases),
            by and between the Company and CWK #7, a Texas Partnership, relating
            to the Company's corporate offices. Exhibit 10.28 to the Company's
            Annual Report on From 10-K for the fiscal year ended December 25,
            1994 (Commission File No. 0-21660) is incorporated herein by
            reference.

     10.16  Third Amended and Restated Loan Agreement dated June 30, 1996,
            between the Company and PNC Bank, Kentucky, Inc. Exhibit 10.1 to the
            Company's quarterly report on Form 10-Q for the quarterly period
            ended September 29, 1996, is incorporated herein by reference.
            
     10.17  Agreement and Plan of Merger dated December 1, 1995, by and among
            Papa John's International, Inc., Papa John's USA, Inc., Kentuckiana
            Pizza, Ltd., Kentuckiana

                                      46

<PAGE>
 
             Pizza, Ltd., II (Collectively, "Kentuckiana Pizza") and all of the
             stockholders of Kentuckiana Pizza. Exhibit 2.1 to the Company's
             Current Report on Form 8-K dated December 1, 1995 (Commission File
             No. 0-21660) is incorporated herein by reference.

      10.18  Agreement and Plan of Merger dated October 16, 1995 by and among
             Papa John's International, Inc., Papa John's USA, Inc., NRG, Inc.
             ("NRG") and all of the stockholders of NRG. Exhibit 2.2 to the
             Company's Current Report on Form 8-K dated December 1, 1995
             (Commission File No. 0-21660) is incorporated herein by reference.

     *10.19  1996 Papa John's International, Inc. Executive Option Program.
             Exhibit 10.26 to the Company's Annual Report on Form 10-K for the
             fiscal year ended December 31, 1995, is incorporated herein by
             reference.

      10.20  Lease dated November 29, 1995 between PJ Food Service, Inc. and
             Arlington-OP&F, Inc. relating to the Company's distribution
             facility in Dallas, Texas. Exhibit 10.28 to the Company's Annual
             Report on Form 10-K for the fiscal year ended December 31, 1995, is
             incorporated herein by reference.

      10.21  Lease dated January 3, 1996, between PJ Food Service, Inc. and
             Fraser, L.L.C. relating to the Company's commissary and
             distribution facility in Denver, Colorado. Exhibit 10.29 to the
             Company's Annual Report on Form 10-K for the fiscal year ended
             December 31, 1995, is incorporated herein by reference.

      10.22  Amendment VII to Lease dated November 7, 1990 (and related leases)
             between the Company and CWK #7 Limited Partnership, related to the
             Company's corporate offices. Exhibit 10.30 to the Company's Annual
             Report on Form 10-K for the fiscal year ended December 31, 1995, is
             incorporated herein by reference.

      10.23  Lease dated January 23, 1996, between PJ Food Service, Inc. and CWK
             #8 relating to commercial and corporate office space in Louisville,
             Kentucky. Exhibit 10.31 to the Company's Annual Report on Form 10-K
             for the fiscal year ended December 31, 1995, is incorporated herein
             by reference.

      10.24  Agreement for Purchase and Sale of Real Estate dated February 28,
             1996, by and between Papa John's USA, Inc., NTS/Crossings
             Corporation and NTS Bluegrass Commonwealth Park, relating to
             approximately 6 acres of land in Louisville, Kentucky. Exhibit
             10.32 to the Company's Annual Report on Form 10-K for the fiscal
             year ended December 31, 1995, is incorporated herein by reference.

      10.25  Lease dated September 30, 1996, between PJ Food Service, Inc. and
             Opus Southwest corporation relating to the Company's commissary and
             distribution facility opened in Tempe, Arizona. Exhibit 10.27 to 
             the Company's Annual Report on Form 10-K for the fiscal year ended 
             December 29, 1996, is incorporated herein by reference.

                                       47

<PAGE>
 
      10.26  Sublease dated January 16, 1997, between PJ Food Service, Inc. and
             Distribution Unlimited, Inc. relating to the Company's commissary
             and distribution facility opened in Rotterdam, New York.
        
      10.27  Lease dated August 30, 1996, between PJ Food Service, Inc. and A.
             Terry Moss and Ira E. White relating to the Company's commissary
             and distribution facility opened in Des Moines, Iowa. Exhibit 10.29
             to the Company's Annual Report on Form 10-K for the fiscal year
             ended December 29, 1996, is incorporated herein by reference.

     *10.28  Amendment to Papa John's International, Inc. 1993 Stock Ownership
             Incentive Plan. Exhibit 10 to the Company's quarterly report on
             Form 10-Q for the quarter ended June 29, 1997, is incorporated
             herein by reference.

      10.29  Discretionary Line of Credit dated June 30, 1997, between the
             Company and PNC Bank, Kentucky, Inc. Exhibit 10.1 to the Company's
             quarterly report on Form 10-Q for the quarter ended September 28,
             1997, is incorporated herein by reference.

     *10.30  Amendment to Chief Operating Officer Agreement dated October 9,
             1997, by and between the Company and Wade S. Oney. Exhibit 10.2 to
             the Company's quarterly report on Form 10-Q for the quarter ended
             September 28, 1997, is incorporated herein by reference.

      10.31  Lease dated November 27, 1997 by and between the Company and SF
             Property Investments, LLC, an Oregon limited liability corporation,
             relating to the Company's commissary and distribution facility to
             be opened in Portland, Oregon.
             
      10.32  Amendment II to Lease dated November 9, 1990 between the Company
             and Crow-Kessler, a Texas limited partnership, relating to the
             Company's commissary and distribution facility in Louisville,
             Kentucky.

      10.33  Amendment VIII to Lease dated November 7, 1990 (and related leases)
             between the Company and CWK #7 Limited Partnership, related to the
             Company's corporate offices.

      10.34  First Lease Modification Agreement to Lease dated May 14, 1993
             between PJ Food Service, Inc., and Sample Properties relating to
             the Company's commissary and distribution facility in Raleigh,
             North Carolina.

      10.35  First Amendment to Lease dated November 29, 1995 between PJ Food
             Service, Inc. and Arlington-OP&F, Inc. relating to the Company's
             distribution facility in Dallas, Texas.

      10.36  Amendment IX to Lease dated November 7, 1990 (and related leases)
             between the Company and CWK #7 Limited Partnership, related to the
             Company's corporate offices.

      10.37  Amendment III to Lease dated November 9, 1990 between the Company
             and Crow-Kessler, a Texas limited partnership, relating to the
             Company's commissary and distribution facility in Louisville,
             Kentucky.

             
      21     Subsidiaries of the Company:
             (a)  PJ Food Service, Inc., a Kentucky corporation
             (b)  Papa John's USA, Inc., a Kentucky corporation
             (c)  Printing & Promotions, Inc., a Kentucky corporation
             (d)  PJFS of Mississippi, Inc., a Mississippi corporation
             (e)  Risk Services Corp., a Kentucky corporation
             (f)  Capital Delivery, Ltd., a Kentucky corporation

      23     Consent of Ernst & Young LLP

      27.1   Financial Data Schedule which is submitted electronically to the
             Securities and Exchange Commission for information only and not
             deemed to be filed with the Commission.

      27.2   Restated Financial Data Schedule including columns for the quarters
             ended September 28, 1997, June 29, 1997 and March 30, 1997 and
             fiscal year ended December 29, 1996. The schedule is submitted
             electronically to the Securities and Exchange Commission for
             information only and is not deemed to be filed with the Commission.

      27.3   Restated Financial Data Schedule including columns for the quarters
             ended September 29, 1996, June 30, 1996 and March 31, 1996 and
             fiscal year ended December 31, 1995. The schedule is submitted
             electronically to the Securities and Exchange Commission for
             information only and is not deemed to be filed with the Commission.

      99.1   Cautionary Statements. 

- ----------------
*Compensatory plan required to be filed as an exhibit pursuant to Item 14(c) of
Form 10-K.

(b)  Reports on Form 8-K

     There were no Reports on Form 8-K filed during the last fiscal quarter of
     the period covered by this report.

(c)  Exhibits

     The response to this portion of Item 14 is submitted as a separate section
     of this report.

(d)  Consolidated Financial Statement Schedules

     All schedules for which provision is made in the applicable accounting
     regulation of the Securities and Exchange Commission are not required under
     the related instructions or are not applicable and therefore have been
     omitted.

                                       48

<PAGE>
 

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date:   March 19, 1998                      PAPA JOHN'S INTERNATIONAL, INC.


                                            By: /s/ John H. Schnatter
                                                --------------------------------
                                                John H. Schnatter, Chairman and
                                                  Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                                  Title                         Date
- --------------------------------------------------------------------------------

/s/ John H. Schnatter        Chairman, Chief Executive Officer    March 19, 1998
- --------------------------     and Director (Principal Executive 
    John H. Schnatter          Officer)
 
                               
/s/ Charles W. Schnatter     Senior Vice President, Secretary,    March 19, 1998
- --------------------------     General Counsel and Director
    Charles W. Schnatter        


/s/ Blaine E. Hurst          President and Director               March 19, 1998
- --------------------------    
    Blaine E. Hurst       


/s/ O. Wayne Gaunce          Director                             March 19, 1998
- --------------------------    
    O. Wayne Gaunce       


/s/ Jack A. Laughery         Director                             March 19, 1998
- --------------------------    
    Jack A. Laughery      


/s/ Michael W. Pierce        Director                             March 19, 1998
- --------------------------    
    Michael W. Pierce

                                       49

<PAGE>

<TABLE> 
 
Signature                                  Title                         Date
- ------------------------------------------------------------------------------------
<S>                          <C>                                      <C>      
/s/ Richard F. Sherman       Director                                 March 19, 1998
- --------------------------     
   Richard F. Sherman


/s/ E. Drucilla Milby        Chief Financial Officer and Treasurer    March 19, 1998
- --------------------------     (Principal Financial Officer)
    E. Drucilla Milby           


/s/ J. David Flanery         Vice President and Corporate             March 19, 1998
- --------------------------     Controller (Principal Accounting
   J. David Flanery            Officer) 
</TABLE>
 
                                       50

<PAGE>

<TABLE> 
<CAPTION>  

                                 EXHIBIT INDEX

                                                                                           Sequentially
        Exhibit                                                                              Numbered
        Number          Description of Exhibit                                                 Page
- -------------------------------------------------------------------------------------------------------
        <C>     <S>                                                                     <C>
        10.26   Sublease dated January 16, 1997, between PJ Food Service, Inc.
                and Distribution Unlimited, Inc. relating to the Company's
                Commissary and Distribution Facility opened in Rotterdam, New
                York.

        10.31   Lease dated November 21, 1997 by and between the Company and SF
                Property Investments, LLC, an Oregon limited liability
                corporation, relating to the Company's commissary and
                distribution facility to be opened in Portland, Oregon.

        10.32   Amendment II to Lease dated November 9, 1990 between the Company
                and Crow-Kessler, a Texas limited partnership, relating to the
                Company's commissary and distribution facility in Louisville,
                Kentucky.

        10.33   Amendment VIII to Lease dated November 7, 1990 (and related
                leases) between the Company and CWK #7 Limited Partnership,
                related to the Company's corporate offices.

        10.34   First Lease Modification Agreement to Lease dated May 14, 1993
                between PJ Food Service, Inc., and Sample Properties relating to
                the Company's commissary and distribution facility in Raleigh,
                North Carolina.

        10.35   First Amendment to Lease dated November 29, 1995 between PJ Food
                Service, Inc. and Arlington-OP&F, Inc. relating to the Company's
                distribution facility in Dallas, Texas.

        10.36   Amendment IX to Lease dated November 7, 1990 (and related
                leases) between the Company and CWK #7 Limited Partnership,
                related to the Company's corporate offices.

        10.37   Amendment III to Lease dated November 9, 1990 between the
                Company and Crow-Kessler, a Texas limited partnership, relating
                to the Company's commissary and distribution facility in
                Louisville, Kentucky.

        21      Subsidiaries of the Company

        23      Consent of Ernst & Young LLP

        27.1    Financial Data Schedule which is submitted electronically to the
                Securities and Exchange Commission for information only and is
                not deemed to be filed with the Commission.

        27.2    Restated Financial Data Schedule including columns for the
                quarters ended September 28, 1997, June 29, 1997 and March 30,
                1997 and fiscal year ended December 29, 1996. The schedule is
                submitted electronically to the Securities and Exchange
                Commission for information only and is not deemed to be filed
                with the Commission.

        27.3    Restated Financial Data Schedule including columns for the
                quarters ended September 29, 1996, June 30, 1996 and March 31,
                1996 and fiscal year ended December 31, 1995. The schedule is
                submitted electronically to the Securities and Exchange
                Commission for information only and is not deemed to be filed
                with the Commission.

        99.1    Cautionary Statements
</TABLE>


  
                                       51





<PAGE>
 
                                                                   Exhibit 10.26




                              SUBLEASE AGREEMENT



                                      for



                              BUILDING 14, BAY 2
                           ROTTERDAM INDUSTRIAL PARK
                              ROTTERDAM, NEW YORK



                                    between



                         DISTRIBUTION UNLIMITED, INC.
                           ROTTERDAM INDUSTRIAL PARK
                                  BUILDING 6
                           ROTTERDAM, NEW YORK 12306



                                      and



                            P.J. FOOD SERVICE, INC.
                            11460 BLUEGRASS PARKWAY
                          LOUISVILLE, KENTUCKY 40299






<PAGE>
 
                               TABLE OF CONTENTS


<TABLE>
<CAPTION>

PARAGRAPH                                                                 PAGE
- ---------                                                                 ----
<S>                                                                       <C>
TERM....................................................................    1
RENTAL..................................................................    1
CONDITION OF PREMISES...................................................    1
UTILITIES...............................................................    2
ADDITIONAL RENT.........................................................    4
SERVICES-ADDITIONAL RENT................................................    4
USE.....................................................................    5
REPAIRS AND MAINTENANCE.................................................    6
ALTERATIONS AND LIENS...................................................    6
ENTRY AND INSPECTION....................................................    7
SUBLETTING AND ASSIGNMENT...............................................    7
LIABILITY AND INSURANCE.................................................    9
ABANDONMENT.............................................................   10
DEFAULT.................................................................   10
HOLDING OVER............................................................   11
DESTRUCTION.............................................................   11
CONDEMNATION............................................................   12
SALE OF PREMISES........................................................   13
ESTOPPEL................................................................   13
SIGNS...................................................................   13
ENTIRE AGREEMENT, WAIVER................................................   13
NOTICE..................................................................   14
ANCILLARY FACILITIES....................................................   14
SECURITY BARRIERS.......................................................   14
MASTER LEASE............................................................   14
NOTICE OF SUBLEASE EXTENSION............................................   15
ENVIRONMENTAL MATTERS...................................................   15
RENEWAL OPTION..........................................................   15
CONSUMER PRICE INDEX....................................................   15
BROKERAGE...............................................................   16
GUARANTY................................................................   17
PAINTING................................................................   17
PRIOR SUBLEASE..........................................................   17
EXHIBIT A - RENTAL AND TERM SCHEDULE....................................   18
EXHIBIT B - SITE PLAN ..................................................   19
GUARANTY OF SUBLEASE....................................................   20
</TABLE>



<PAGE>
 
                              SUBLEASE AGREEMENT

     THIS SUBLEASE made as of the 16th day of January, 1997, between
Distribution Unlimited, Inc., Rotterdam Industrial Park, Building 6, Rotterdam,
New York 12306,
 hereinafter referred to as the "Sublessor" and P.J. Food
Service, Inc., a Delaware corporation which has a business office at 11460
Bluegrass Parkway, Louisville, Kentucky 40299, hereinafter referred to as the
"Sublessee".

     WITNESSETH that the Sublessor hereby subleases to the Sublessee and the
Sublessee hereby hires and takes from the Sublessor those premises described as
Bay 2, Building 14 located in Rotterdam Industrial Park, Town of Rotterdam,
County of Schenectady, State of New York, hereinafter referred to as the
"Demised Premises", as shown on the map attached hereto and made a part hereof,
as Exhibit "B"; said Demised Premises being 44,620 square feet, which includes
the 1,400 square foot enclosed loading dock on the north side of Building 14, as
measured in accordance with the BOMA Standard Method of Measurement, American
National Standard Section Z65.1, which states that the rentable area of a floor
shall be computed by measuring to the center of the dominant portion of the
permanent outer buildings walls, and Sublessor hereby grants to Sublessee its
guests, invitees and licensees all easements, rights and privileges appurtenant
thereto including the right to use, in common with others, the loading dock
adjacent to Bay 1 servicing the Demised Premises, the adjoining parking areas,
driveways, roads, alleys, means of ingress and egress and other portions of the
other areas ("Common Areas") in common use by owners or lessees of the Rotterdam
Industrial Park and Sublessor agrees that it will not, during the term of this
Sublease, alter those portions of the Common Areas shown in yellow on Exhibit
"B" so as to materially and adversely affect ingress and egress to and from the
Demised Premises or parking adjacent to the Demised Premises. The foregoing
subleasing shall (be upon the terms and conditions hereinafter set forth, and
the Sublessee does hereby covenant with the Sublessor as follows:

1.   TERM: The initial term of this Sublease shall be for a period of
     approximately four (4) years and eleven (11) months commencing on the
     earlier to occur of (i) January 31, 1997 or (ii) the date that Sublessee
     first commences normal business operations in any portion of the Demised
     Premises (the earlier of such two dates being hereinafter referred to as
     the "Term Commencement Date") and ending December 31, 2001 ("Initial
     Term"). Commencing as of the date hereof, Sublessee shall be entitled to
     enter upon the Demised Premises for the purpose of making same ready for
     Sublessee's use.

2.   RENTAL: Commencing with the date Sublessee first enters the Demised
     Premises, Sublessee shall be responsible for the payment of all utility
     costs and Common Area charges allocable to the Demised Premises. As rental
     for the Demised Premises for the Initial Term the Sublessee hereby agrees
     to pay the Sublessor without deduction, setoff, prior notice or demand the
     sums as outlined in Exhibit A--Rental and Term Schedule, in advance on the
     Term Commencement Date (to the extent of any partial month's rent due
     because the Term Commencement Date is not the first day of a calendar
     month) and thereafter on the first day of each and every month, said rental
     to be paid to the Sublessor by good check mailed to Sublessor at P.O. Box
     98, Guilderland Center, New York 12085 or delivered to Sublessor's offices
     at Building 6, East Road, Rotterdam Industrial Park, Schenectady, New York,
     or at such other place or places as the Sublessor may from time to time
     direct. Sublessee shall pre-pay the first full month's rent and last
     months' rental at Sublease signing. The Sublessee shall pay a "late charge"
     of two (2%) percent per month from the due date of any installment of
     rental (Fixed Minimum, or other as may be construed as rent) if said rental
     payment not is made within three (3) days after receipt of telephone notice
     that said amount is past due. Nothing herein contained shall be deemed to
     limit any right or remedy which the Sublessor may have under this Sublease,
     at law or in equity,

3.   CONDITION OF PREMISES: The Sublessee covenants that the Sublessee has
     examined the Demised Premises, knows the condition thereof and acknowledges

<PAGE>
 
     that the same are accepted "as is", subject to the warranties as set forth
     hereafter. Sublessee shall comply with the requirements of the Occupational
     Safety and Health Act of 1970 and all other applicable laws relating to
     occupational safety and health and rules and regulations promulgated
     thereunder, and the Sublessee shall further comply with all laws, rules and
     regulations of the State of New York and any department agency, board, or
     political sub-division of the State pertaining to building construction or
     safety applicable to either the Sublessee or the Sublessor and shall hold
     the Sublessor harmless therefrom. Nothing herein shall be construed as
     preventing the Sublessor from taking such action as it shall deem necessary
     for the protection of its interests in respect to any order, decree,
     judgment or other act of any Federal or State department, agency or board.

4.   UTILITIES: The Sublessor or the local public utility shall provide and
     maintain the necessary mains, ducts and conduits in order to bring water,
     electricity and natural gas service to the Demised Premises and to carry
     sewage therefrom. All means of distribution of such services within the
     Demised Premises shall be supplied and maintained by the Sublessee at the
     Sublessee's expense.

     a.   ELECTRICAL: The Sublessee shall make known to the Sublessor its
          electricity requirements at or prior to the execution of this
          Sublease. In the event the Sublessee requires additional capacity, any
          additional risers, feeders, meters, wiring or other equipment required
          thereby shall be installed by the Sublessor or a qualified contractor
          upon the Sublessee's request and at the Sublessee's cost and expense,
          provided, however, that in the Sublessor's sole judgment, the same are
          reasonably necessary and will not cause permanent damage or injury to
          the Demised Premises or cause or create a dangerous or hazardous
          condition or entail excessive alterations, repairs or expense or
          unreasonably or materially interfere with or disturb other lessees.
          If, at the time of the commencement of this Sublease, the Demised
          Premises shall be unmetered for electricity consumption, the Sublessor
          shall cause such metering device or devices to be installed as the
          Sublessor shall deem necessary and the cost of such device, together
          with the expense of installing the same, shall not be paid by the
          Sublessee. If such electrical service is directly with the Niagara
          Mohawk Power Corporation, Sublessee shall request service in its own
          name prior to entering upon the Demised Premises and pay such costs
          directly to Niagara Mohawk Power Corporation.

     b.   WATER: The Sublessor shall install, or cause to be installed, at no
          cost to Sublessee, a water meter and thereby measure the Sublessee's
          water consumption, Throughout the duration of the Sublessee's
          occupancy, the Sublessee shall keep such meter and installation
          equipment in good working order and repair at its own expense. In the
          event of activation of the unmetered sprinkler system due to fire or
          acts of Sublessee, Sublessor shall render a bill for water consumption
          based on output per sprinkler head times the duration of sprinkler
          flow. The cost of water is to be the then current charge by the
          municipality. Sublessee is to make payment directly to the utility
          company supplying such water. Sublessor warrants that a water line of
          at least 2" or greater delivering at a constant flow of 60 to 80 PSI
          services the Demised Premises.

     c.   SEWER: Sublessee is to make payment, upon presentation of a bill by
          Sublessor, for the then current sewage charge by the municipality for
          the Demised Premises, and the amount thereof shall be deemed
          Additional Rent hereunder. Lessor warrants that a sewer line of at
          least 6" or greater services the Demised Premises.

                                       2

<PAGE>
 
     d.   FUEL OIL AND/OR NATURAL GAS AND/OR LP GAS: Sublessee is to contract
          for and pay all costs of liquid or gas fuels directly to supplier,
          provided service to the Demised Premises shall not be the obligation
          and expense of the Sublessee. Sublessor warrants that a gas line of at
          least 2" or greater delivering at a constant flow of 1.5 PSI to the
          Demised Premises.

     e.   SPRINKLERS: Sprinklers and sprinkler systems now existing in said
          Demised Premises shall be maintained and serviced by the Sublessor,
          provided, however, that if any such system or any of its appliances
          shall be damaged or injured or rendered otherwise than in proper
          working order by reason of any act or omission of the Sublessee, the
          Sublessee's agents, servants, employees, licensees or visitors, the
          Sublessee shall forthwith restore such equipment to good working
          condition and order at its own expense. If by reason of the acts or
          operations of the Sublessee, the New York Board of Fire Underwriters
          or the New York Fire Insurance Exchange or any bureau, department or
          official of the state or municipal government requires or recommends
          any change in such sprinklers or sprinkler system or if any change is
          necessary to prevent the imposition of a penalty or charge against the
          full allowance for a sprinkler system in the fire insurance rate as
          fixed by such exchange or by any fire insurance company, the Sublessee
          shall at its own expense promptly make such change; provided said
          change is a direct consequence of Sublessee's particular use of the
          Demised Premises. In the event said change is incident to the general
          usage of the Demised Premises as warehouse, industrial or
          distribution uses, Sublessee shall not be obligated to perform same at
          its expense. Any changes whatsoever in the sprinkler system desired by
          the Sublessee must be submitted to the Sublessor for the review and
          approval of the Sublessor's insurer.

     In the event the Sublessee shall fail to pay any tax, rent, levy or charge
     for any utility service, which by reason of such non-payment may become a
     lien upon any part of the premises of the Sublessor, the Sublessor may,
     upon ten (10) days' written notice thereof to the Sublessee, make payment
     of such tax, rent, levy or charge together with any interest, penalties or
     other accruals due thereon, and upon such payment the amount thereof shall
     immediately become due and payable by the Sublessee to the Sublessor as
     rent hereunder.

     The Sublessor may interrupt or suspend the supply of any such service to
     the Demised Premises in order to make any necessary repair or alteration to
     the Demised Premises or to any other building or other part of the premises
     of the Sublessor provided Sublessor notifies Sublessee, in writing,
     promptly after receiving notice thereof from any utility or governmental
     authority of any scheduled suspension of such service, and, in the case of
     a suspension of service necessitated by any activity of Sublessor or its
     affiliates, upon not less than ten (10) days' written notice sent prior to
     the Sublessee of the date for the commencement of any necessary repair or
     alteration. Said notice shall not be applicable in the event of an
     emergency involving the endangerment of life or the preservation of
     property from imminent destruction. There shall be no abatement in rent
     because of any such interruption or suspension provided that such repairs
     or alterations shall be made with reasonable diligence and provided further
     that any repair or alteration made by Sublessor shall not unreasonably
     interfere with the Sublessee's business. The Sublessor may at any time
     during the term of this Sublease assign, convey, transfer or set over to
     any municipality having jurisdiction or to any public utility corporation
     or private water corporation or sewage disposal corporation any or all of
     the Sublessor's right, title and interest in and to such public utility
     facilities and thereupon require the Sublessee to make payment for such
     services to such assignee, municipality, firm or corporation in accordance
     with such rates as such assignee may establish. Upon any such conveyance,
     assignment or transfer, there

                                       3


<PAGE>
 
     shall be no abatement of rent due and payable hereunder by reason of any
     interruption of such service resulting from the act or fault of such
     assignee, provided further that such conveyance, assignment or transfer
     shall not unreasonably interfere with the Sublessee's business.

5.   ADDITIONAL RENT: In addition to the rental herein provided, the Sublessee
     shall pay to the Sublessor as Additional Rent within twenty (20) days, that
     proportion of any real property taxes and assessments levied or assessed
     against the premises of which the Demised Premises are a unit, either
     school tax or town tax, as the total net rental area within the Demised
     Premises bears to the total net rental area within the building or
     buildings or land area, including the Demised Premises, which are included
     in the unit so taxed or assessed. The Sublessee shall also pay to the
     Sublessor as Additional Rent, similarly computed, premium rate charges
     incurred by the Sublessor with respect to insurance on the Demised Premises
     for general liability, fire and extended coverage. Such amounts shall be
     paid by the Sublessee to the Sublessor within ten (10) days after the
     receipt by the Sublessee of written notice thereof from the Sublessor. As
     of the date immediately preceding execution of this Sublease, Sublessor
     represents that the Demised Premises are listed on the applicable
     assessment rolls as being exempt from all real estate taxes. Sublessor
     agrees not to take any action to seek to have the Demised Premises become
     subject to real estate taxation. Nevertheless, should the Demised Premises
     become subject to any real estate taxes, Sublessee's liability or
     obligation for payment shall not exceed $33,465.00 (thirty-three thousand
     four hundred sixty-five and 00/100 dollars) (calculated by multiplying $.15
     x 44,620 square feet x 5 years) in the aggregate over the Initial Term.

6.   SERVICES - ADDITIONAL RENT: The Sublessee shall initially pay to the
     Sublessor as Additional Rent, as and when billed by the Sublessor, $.30 per
     square foot annual cost, paid monthly, for security and common area
     maintenance. The $.30 is an estimated amount expected due for the first
     year, or part thereof, which is subject to adjustments detailed later in
     the Sublease.

     Security and Common Area Maintenance: The charges for maintaining security
     and common area maintenance, as hereinbefore defined, shall include, but
     not be limited to, the costs of replacing, operating, managing, equipping,
     cleaning, lighting, repairing, and removing snow from main roads, ingress
     and egress thereto and parking areas (but excluding dock areas),
     landscaping and gardening, striping, sign, rail track maintenance and
     repair, traffic and safety control (including personnel), security
     personnel, maintenance and costs of labor, insurance materials and
     supplies, and the Sublessor's administrative and overhead costs for said
     services, which administrative and overhead costs shall be charged in the
     same manner as such costs are charged to other tenants in Rotterdam
     Industrial Park. The Sublessee shall pay its proportionate share, as
     hereinafter defined, of the total costs of security and common area
     maintenance in the manner hereinafter stated.

     In computing the charges for security and common area maintenance, as
     provided above, the Sublessee's proportionate share, currently 1.2%, shall
     be deemed to be the ratio of the total square footage of the floor area of
     the Demised Premises, presently 44,620, to the total square footage of the
     floor area of the entire industrial park, presently 3,743,204.

     Sublessor shall furnish the Sublessee a written estimate of the Sublessee's
     proportionate share of the charges specified above for the first calendar
     year or portion thereof, or for the next succeeding calendar year, as the
     case may be, and said charges shall be paid monthly with Fixed Minimum
     Rent, in advance commencing on the first day of the first Sublease Year.
     Charges for the first and last Sublease Years shall be on a pro rata basis
     based upon twelve (12) thirty (30) day months.

                                       4

<PAGE>
 
     The Sublessee shall at its own expense maintain all portions of the Demised
     Premises and immediately adjoining areas in a clean and orderly condition
     free of dirt and rubbish, and the Sublessee shall remove or cause to be
     removed all rubbish from the Demised Premises and immediately adjoining
     areas at the Sublessee's expense. Under no conditions will Sublessor permit
     Sublessee to use outside areas for parking of unregistered and/or disabled
     or nonfunctioning or damaged vehicles except for the temporary storage in
     the case of an emergency, or for the accumulation of pallets and/or other
     packing materials. Sublessee must install a dumpster or similar trash
     receptacle of ample size at inception of occupancy at a location proximate
     to the Demised Premises as provided by the Sublessor. In the event the
     Sublessee permits accumulations of rubbish, which the Sublessor in the
     exercise of its judgment may deem unreasonable or harmful, injurious or
     deleterious to the use and enjoyment of the remainder of the premises of
     the Sublessor of which the Demised Premises are a part, the Sublessor may
     remove such rubbish and charge the cost thereof to the Sublessee and the
     Sublessee shall thereupon become liable to the Sublessor for such cost as
     Additional Rent. Sublessee shall keep all fire doors clear and shall not
     obstruct dock areas with vehicles or goods excepting the normal process of
     loading and unloading operations from inside storage to transport vehicles.

7.   USE: The Demised Premises are hereby leased to the Sublessee upon the
     express condition that the Sublessee shall use the said Demised Premises
     for receiving, ordering, production, shipping and selling of products,
     materials and merchandise made or distributed by Sublessee or its
     affiliates and for no other purpose without the written consent of the
     Sublessor first obtained.

     1.   Will rail be utilized?  Yes X                           No
                                     ---                            ---
          If Yes, what will the average be?
          Rail Cars Per Day  .5           Month  15          Year  180
                            ----                ----              ------
     2.   Will there be any truck traffic?  Yes  X  No
                                                ----  ----
          If Yes, what will the average be?
          Trucks Per Day  25           Month  750         Year  8,900
                         ----                -----             --------
     3.   Number of employees in your local operation:
          Initial Start Up  50         After One Year approx. 125
                           ----                              -----
     4.   Number of employee parking spaces needed:
          Initial Start Up  65         After One Year  135  
                           ----                       -----   
     All uses to which the Demised Premises shall be put by the Sublessee shall
     conform to the requirements of any and all local laws, ordinances, rules or
     regulations adopted or enacted by the municipality having jurisdiction over
     the Demised Premises and shall also conform to any special use permit or
     certificate of occupancy or other permit of any kind issued or required to
     be issued by any governmental authority having such jurisdiction over the
     Demised Premises and shall not be put to any such use by the Sublessee
     until all governmental rules and regulations relative to or affecting such
     use have been complied with and all governmental permits required as a
     condition precedent to such use shall have been obtained. The Sublessee
     shall conduct its business throughout the term hereof in a first-class
     manner and shall not use the Demised Premises for or carry on or permit
     upon said Demised Premises any offensive, unreasonably noisy, or dangerous
     business, trade, manufacture or occupation or any nuisance or any activity
     contrary to public policy or any activity causing a noxious or offensive
     odor or causing pollution to the atmosphere, nor permit any auction sale to
     be held or conducted upon said Demised Premises, nor shall it use or permit
     the use of such

                                       5

<PAGE>
 
     Demised Premises or part thereof for any immoral or any other purpose
     prohibited by law or which will increase the rate of insurance upon the
     building in which said Demised Premises may be located or cause a
     cancellation of any insurance policy covering said building or any part
     thereof. The Sublessee shall not do or suffer anything to be done upon said
     Demised Premises which will cause structural injury to said Demised
     Premises or to the building of which the same form a part, nor shall it
     cause said Demised Premises to be overloaded, nor shall it permit any
     machinery, apparatus or other appliance to be used or operated upon said
     Demised Premises which will injure said Demised Premises or the building of
     which the same form a part, nor shall the Sublessee permit any noisemaking
     device to be operated or allowed upon said Demised Premises for the purpose
     of attracting trade or otherwise. The Sublessee shall not permit any use to
     be made of the Demised Premises which will in any way impair the efficient
     operation of the sprinkler within the building containing the Demised
     Premises. In addition to the Sublessee's liability for Additional Rent in
     respect of insurance premium rate increases as provided in Paragraph 5
     hereof, if any act on the part of the Sublessee or use of the Demised
     Premises by the Sublessee shall cause directly or indirectly any increase
     of the Sublessor's insurance expense, such additional expense shall be paid
     by the Sublessee to the Sublessor upon demand as Additional Rent. No such
     payment by the Sublessee shall limit the Sublessor in the exercise of any
     other rights or remedies or constitute a waiver of the Sublessor's right to
     require the Sublessee to discontinue such act or use.

8.   REPAIRS AND MAINTENANCE: Throughout the term of this Sublease the Sublessee
     shall take good care of the Demised Premises. Sublessor is responsible for
     maintenance of the structural elements, fire alarm system, and sprinklers,
     and Sublessee for the maintenance and repairs of all other non-structural
     elements and systems, including doors and windows. When used in this
     paragraph the term "repairs" shall include all necessary replacements,
     renewals, alterations, additions and betterments of a non-structural
     character. All repairs made by the Sublessee shall be at least equal in
     quality and class to the original work. The Sublessee shall make no
     structural alterations to the Demised Premises without prior permission of
     the Sublessor given in writing. Upon the expiration of the term of this
     Sublease or sooner termination, the Sublessee shall surrender the Demised
     Premises to the Sublessor in the same condition as received, ordinary weer
     and tear and damage by fire, earthquake, act of God or the elements alone
     excepted. Sublessor, acting in its reasonable judgment, may make demand
     that maintenance be accomplished if a hazardous or deteriorating condition
     exists. Sublessee desires services by Sublessor's maintenance personnel
     such will be performed on a work order basis only.

9.   ALTERATIONS AND LIENS: The Sublessee shall make no structural alterations
     or additions to the Demised Premises without prior written consent of the
     Sublessor. Upon the giving of such written consent all alterations,
     additions and improvements, excluding trade fixtures, furnishings and
     equipment made in, to or on the Demised Premises shall become the property
     of the Sublessor (or Master Lessor, as hereinafter defined) and shall
     remain upon and be surrendered with the Demised Premises, except that the
     Sublessee shall ascertain from the Sublessor within sixty (60) days before
     the expiration of this term whether the Sublessor desires to have the
     Demised Premises or any part or parts thereof restored to their condition
     as of the time of the delivery thereof to the Sublessee (except for any and
     all offices or office-related improvements which shall remain), and, if the
     Sublessor so desires, the Sublessee shall restore said Demised Premises or
     such part or parts thereof to such original condition before the end of the
     term of this Sublease entirely at the Sublessee's own cost and expense. The
     Sublessee shall indemnify and save and hold harmless the Sublessor from all
     liens, claims or demands arising out of any work performed, materials
     furnished or obligations incurred by or for the Sublessee upon said Demised
     Premises during said term and agrees not to suffer any such

                                       6

<PAGE>
 
     lien or encumbrance to be imposed on any of the Sublessor's premises. The
     Sublessor shall have the right, after the giving of not less than five (5)
     days' notice to the Sublessee to remove such lien or encumbrance, to bring
     such action or proceeding as may be necessary to effect the removal thereof
     and the costs and expenses thereof, including reasonable attorney's fees,
     shall become immediately due and payable by the Sublessee to the Sublessor
     as Additional Rent.

10.  ENTRY AND INSPECTION: The Sublessor and its agents may enter upon the
     Demised Premises at all reasonable times to inspect the same, to submit
     them to a prospective purchaser or to make any repairs which the Sublessor
     shall consider necessary for the protection, improvement or preservation of
     the building in which the Demised Premises are situated, or to make any
     changes in the plumbing, wiring, meters or other equipment, fixtures or
     appurtenances of the building, provided that the same may be performed
     without material interference with the business operations of the
     Sublessee, and there shall be no liability against the Sublessor in favor
     of the Sublessee for damages sustained by the Sublessee by reason of such
     repairs or changes nor shall the Sublessee be entitled to any abatement of
     rental by reason thereof. At any time after sixty (60) days prior to the
     termination of the Sublease the Sublessor may place on said Demised
     Premises any usual or ordinary "To Let" or "To Lease" signs. For the
     purposes of this paragraph, the Sublessor may hold at all times a duplicate
     set of keys to the Demised Premises. The Sublessee shall make no changes in
     locks or other facilities controlling access to the Demised Premises
     without the permission of the Sublessor and whenever such permission is
     granted, the Sublessee shall provide the Sublessor with a duplicate set of
     keys so as to provide the Sublessor with access at all times.

11.  SUBLETTING AND ASSIGNMENT: The Sublessee shall not, without the Sublessor's
     prior written consent, which consent shall not be arbitrarily withheld or
     unreasonably delayed, assign or sublet this Sublease or permit any person
     or entity other than the Sublessee to use or occupy, or store goods,
     materials or other property (such goods, materials and property being
     hereinafter referred to as "Property") at the Demised Premises or any part
     thereof.

     Notwithstanding the foregoing, or anything to be contrary elsewhere
     contained in this Sublease, Sublessee, without Sublessor's consent, but
     upon not less then thirty (30) days' prior written notice, may assign this
     Sublease or sub-sublet the Demised Premises, or any portion thereof, to its
     parent, any of its subsidiaries or to any other entity affiliated with
     Sublessee or its parent, or to a corporation or other entity resulting from
     any reorganization or merger to which Sublessee, its parent or any of its
     subsidiaries or affiliates is a party, provided Sublessee shall remain
     obligated under this Sublease (the foregoing being hereinafter referred to
     as a "Permitted Assignment"). The Sublessor will not divulge to any third
     parties, except if required by the applicable loan document, to Sublessor's
     lender, any confidential information received with respect to any proposed
     reorganization or merger.

     Any (a) assignment or subletting or (b) or the permitting of any person or
     entity other than the Sublessee to use, or occupy any portion of, or store
     any Property at the Demised Premises, without the consent of the Sublessor
     in each instance, shall be void and shall constitute a breach of this
     Sublease. In the event of such prohibited assignment, sublet or use,
     occupancy or storage, the Sublessor may avail itself of any other remedies
     contained in this Sublease and any other remedy available to it under
     applicable law. In addition to the foregoing, in the event of any breach of
     clause (b) in the preceding sentence, the Sublessor may cause the removal
     of such occupant and/or materials, goods or Property, at the sole cost and
     expense of the Sublessee.

                                       7

<PAGE>
 
     If the Sublessee proposes to assign the Sublease, enter into any sublease
     of the Demised Premises or grant to any person or entity the right to use,
     occupy, or store Property at any portion of the Demised Premises, the
     Sublessee shall deliver written notice thereof to the Sublessor, together
     with a copy of the proposed assignment, sublease or other agreement, if
     any, governing such use, occupancy or storage, and such financial
     information (i.e., balance sheet and annual reports concerning such
     sublessee, assignee or the person or entity that Sublessee proposes to let
     use or occupy, or store any Property at the Demised Premises (any such
     person or entity being hereinafter referred to as a "Licensee") as is
     acceptable to the Sublessor, in the exercise of Sublessor's reasonable
     discretion, the foregoing notice and financial information shall be
     delivered at least thirty (30) days prior to the effective date of the
     proposed assignment, the commencement date of the term of the proposed
     sublease or the date on which any person or entity proposes to use, occupy
     or store Property at the Demised Premises or any part thereof. Any proposed
     assignment, sublease or use, occupancy or storage of Property shall be
     expressly subject to the terms, conditions, and covenants of this Sublease.
     The Sublessee shall reimburse the Sublessor for all reasonable legal costs
     involved in reviewing a proposed assignment, subletting or agreement with
     any Licensee for the use, occupancy or storage of any Property.

     Any proposed assignment shall contain a written assumption by the assignee
     of all of the Sublessee's obligations under this Sublease. Any sublease
     shall (a) provide that the sub-sublessee shall procure and maintain a
     policy of insurance as required of the Sublessee under this Sublease; (b)
     provide for a copy to the Sublessor of any notice of default by either
     party, and (c) otherwise be reasonably acceptable in form to the Sublessor.

     No consent by the Sublessor to any subletting, assignment or use, occupancy
     or storage of Property by any Licensee shall be deemed to be a consent to
     any further subletting (or sub-subletting), assignment or any other use,
     occupancy or storage by any Licensee (including the Licensees for whom
     permission is being given).

     In the event that the Sublessee assigns or subleases any portion of the
     Demised Premises or permits the use, occupancy or storage of Property at
     any portion of the Demised Premises to anyone other than the Sublessee, or
     a subsidiary or affiliate of Sublessee pursuant to a Permitted Assignment,
     the Sublessee shall pay to the Sublessor monthly, as Additional Rent
     hereunder, one hundred (100%) percent of the amount calculated by
     subtracting from the rent and other charges and considerations payable from
     time to time by the assignee, sub-sublessee or Licensee to the Sublessee
     for aforesaid space, the amount of rent and other charges payable by the
     Sublessee to the Sublessor under this Sublease, allocated to the assigned,
     subleased or otherwise utilized portion of the Demised Premises.

     A) Except for a Permitted Assignment, Sublessee shall not have the right to
     sublet or assign the Demised Premises except on the following terms and
     conditions:

          1) Such subletting or assignment shall not relieve the Sublessee from
          its duty to perform fully all of the agreements, covenants and
          conditions set forth in this Sublease or any Guarantor from the
          obligations of any Guaranty executed and delivered in connection with
          this leasing.

          2) The Sublessee shall first obtain the Sublessor's written consent to
          the subletting or assignment in each instance.

          3) The Sublessee shall provide the name of the proposed sub-sublessee
          or assignee, the terms and conditions of the proposed subletting or
          assignment, the nature and character of the business of the proposed
          sub-sublessee or assignee, and the banking, financial and other credit
          information to the,

                                       8

<PAGE>
 
          proposed assignee or sub-sublessee reasonably sufficient to enable
          Sublessor to determine the financial responsibility of said proposed
          sub-sublessee or assignee.

     B) If Sublessor shall not exercise its option within the period aforesaid,
     then Sublessor's consent to such request shall not be unreasonably
     withheld but will be given only on the following conditions acknowledged by
     Sublessee to be reasonable and proper:

          1) That the subletting or assignment is for the entire Demised
          Premises only;

          2) That the subletting or assignment shall be to a sub-sublessee whose
          occupancy will be in keeping with the dignity and character of the
          then use and occupancy of the premises by other lessees and whose
          occupancy will not be more objectionable or more hazardous than that
          of Sublessee herein. In no event shall any subletting or assignment be
          permitted to a school of any kind or an employment or placement
          agency; or governmental or quasi-governmental agency;

          3) That the subletting or assignment shall not be to any Sublessee,
          sub-sublessee or assign of any leased space in the premises of which
          the Demised Premises form a part;

          4) That no subletting or assignment shall be permitted to any person
          or entity who is then a tenant or occupant of Rotterdam Industrial
          Park, Northeastern Industrial Park or Scotia-Glenville Industrial
          Park;

          5) That the sublease or assignment will expressly prohibit assignment
          of the Sublease agreement or further subletting by the sub-sublessee
          without Sublessor's written consent;

          6) If this Sublease shall be assigned, or if the Demised Premises or
          any part thereof, be sublet or occupied by any person or persons other
          than Sublessee, Sublessor may, after default by Sublessee, collect
          rent from the assignee, subtenant or occupant, and apply the net
          amount collected to the rent herein reserved, but no such assignment,
          subletting, occupancy or collection of rent shall be deemed a waiver
          of the covenants contained in this Sublease, nor shall it be deemed
          acceptance of the assignee, subtenant or occupant as a tenant or a
          release of Sublessee from the full performance by Sublessee of all of
          the terms, conditions and covenants of this Sublease.

12.  LIABILITY AND INSURANCE: The Sublessee shall keep, save and hold the
     Sublessor harmless and free from all liability, penalties, losses, damages,
     costs, expenses, causes of action, claims and/or judgments arising by
     reason of any injury or damage to any person or persons or property
     including, without limitation, the Sublessee, its servants, agents and
     employees, from any cause or causes whatsoever, except for intentional acts
     or gross negligence of Sublessor, including leakage, while in, upon or in
     any way connected with said Demised Premises or its appurtenances.

     The Sublessor shall not be liable for any loss or damage occasioned by
     defective wiring, plumbing, gas, sprinkler, steam, sewer, water or other
     pipes or fixtures; the bursting, leaking, running or clogging of the above
     pipes or fixtures or of any heating or air conditioning equipment, cistern,
     tank, sprinkler system, boiler, wash stand, closet or wastepipe; accidental
     discharge of the sprinkler; water, snow, ice or other foreign matter being
     upon or coming through the roof, skylights, trapdoors, doors, windows or
     otherwise, unless in each case the foregoing result from the gross
     negligence or intentional acts of Sublessor; acts or negligence or failure
     to

                                       9

<PAGE>
 
     comply with lease covenants by other tenants of the Sublessor; acts of
     negligence of guests, invitees and employees of the Sublessee or other
     occupants of the Demised Premises; acts of negligence of any owners or
     occupants of adjacent of contiguous property or their employees; acts of
     God; acts of negligence of any persons not in the employ of the Sublessor.
     In connection with any defect in or damage to the structural portions of
     the Demised Premises or the building-wide systems servicing the same (not
     arising from the act or omission of Sublessee or its sub-subtenants, or
     their respective employees, agents or invitees), Sublessor agrees to take
     commercially reasonable good faith steps to have Sublessor's landlord or
     any other appropriate party repair same.

     The Sublessee shall take out and keep in force during the term hereof, at
     the Sublessee's expense, public liability and other insurance in companies
     acceptable to the Sublessor to protect against any liability to the public,
     whether to persons or property, incident to the use of said Demised
     Premises or resulting from accident occurring in or about said Demised
     Premises or the areas immediately adjacent thereto, which insurance shall
     be in an amount not less than $1,000,000.00 to indemnify against the claim
     of one person for personal injuries and not less than $3,000,000.00 to
     indemnify against the claim of two or more persons for personal injuries in
     any one occurrence and in an amount not less than $1,000,000.00 per
     occurrence to indemnify against a claim or claims for property damage. The
     Sublessee shall cause every insurer to agree by endorsement upon the policy
     or policies issued by it, or by independent instrument furnished to the
     Sublessor, that such insurer will give the Sublessor ten (10) days' written
     notice at the address where rental is paid before the policies in question
     shall be altered or canceled. Certified copies of said policies or
     certificates of insurance naming the Sublessor as additional insured shall
     be furnished at the time of Sublease inception.  Said policies shall be
     renewed at the end of each policy period.

     The Sublessor and Sublessee hereby release one another and their respective
     officers, agents, employees and servants from any and all claims or demands
     for damages, loss, expense or injury to the Demised Premises or to the
     furnishings and fixtures and equipment or inventory or other property of
     either the Sublessor or the Sublessee in, about or upon the Demised
     Premises, as the case may be, which may be caused by or result from perils,
     events or happenings which are the subject of insurance carried by the
     respective parties and in force at the time of any such loss, provided,
     however, that such release and waiver shall be effective only to the extent
     of the insurance coverage for such loss. This paragraph does not preclude
     the respective parties from any and all other remedies at law which are
     available and in no way are their respective rights prejudiced.

13.  ABANDONMENT: In the event the Demised Premises become abandoned or
     surrendered or in the event the Sublessee be dispossessed or evicted by
     process of law, the Sublessor, in addition to all other remedies granted by
     this Sublease or available by operation of law, may deem that any personal
     property belonging to the Sublessee left on said Demised Premises is
     abandoned, and the Sublessor may enter upon said Demised Premises and
     remove therefrom any and all equipment, fixtures and merchandise and sell
     the same at public or private sale at such price and upon such terms as the
     Sublessor may determine without notice to or demand upon the Sublessee. Out
     of the proceeds of such sale the Sublessor may reimburse itself for the
     expense of such taking, removal and sale and for any indebtedness of the
     Sublessee to the Sublessor and the surplus, if any, shall be accounted for
     the Sublessee.

14.  DEFAULT: In the event the Sublessee (a) fails to pay the rental herein
     provided or any part thereof or any other sum required by the Sublessee to
     be paid to the Sublessor within five (5) days of receipt of notice that
     said amount is past due the date when due or in the manner herein provided;
     however, if (5) such notices of

                                      10


<PAGE>
 
     delinquency in the aggregate are sent during the term of this Sublease,
     then thereafter in the event Sublessee fails to pay the rental provided or
     any part thereof or any sum required by Sublessee to be paid to the
     Sublessor within ten (10) days of the time herein provided or, if at any
     time rent is not paid, in the manner herein provided; or (b) if the
     Sublessee abandons said Demised Premises or violates any of the provisions
     of this Sublease respecting assignments or subletting; or (c) makes default
     in any of the other covenants or conditions on the Sublessee's part to be
     performed hereunder and such default is not cured within thirty (30) days
     after notice by the Sublessor to the Sublessee of such default, then such
     default or breach or act shall give the Sublessor the right to re-enter the
     Demised Premises and remove all persons and all or any property therefrom
     either by summary dispossess proceedings or by any suitable action or
     proceeding at law, or by force or otherwise, without being liable to
     indictment, prosecution or damages therefor, and repossess and enjoy said
     Demised Premises together with all additions, alterations and improvements,
     and in such case the Sublessor may either relet the Demised Premises or any
     parts thereof as agent of the Sublessee and receive the rents applying the
     same first to the payment of such expenses as the Sublessor may have
     incurred and then to the fulfillment of the covenants of the Sublessee. The
     Sublessor may rent said Demised Premises for a term extending beyond the
     term hereby granted without releasing the Sublessee from any liability.
     Upon the expiration of this Sublease prior to the expiration of its term by
     operation of any provision hereof or by summary proceedings or otherwise,
     then, whether or not the Demised Premises be relet, the Sublessee shall
     remain liable for and shall pay the Sublessor, until the time when this
     Sublease would have expired but for such termination or expiration, the
     equivalent of the amount of all of the rent and Additional Rent reserved
     herein, less the avails of reletting, if any, and the same shall be due and
     payable by the Sublessee to the Sublessor on the several rent days above
     specified. The Sublessee hereby expressly waives any and all rights of
     redemption in the event of eviction or dispossession by judgment or warrant
     of any court or judge, and the Sublessee waives and will waive all right to
     trial by jury in any summary proceeding hereafter instituted by the
     Sublessor against the Sublessee in respect of the Demised Premises. All
     remedies herein provided shall be deemed cumulative and shall in no way
     limit or restrict the Sublessor from pursuing such other and further
     remedies as may be allowed at law or in equity.

15.  [DELETED PRIOR TO EXECUTION]

16.  HOLDING OVER: In the event the Sublessee holds over the term hereby created
     with the consent of the Sublessor, the Sublessee shall become a tenant from
     month to month at the average monthly rental payable hereunder for the
     immediately preceding six (6) month period, plus twenty-five (25%) percent
     increase at discretion of Sublessor.

17.  DESTRUCTION: In the event the Demised Premises are damaged by fire,
     earthquake, enemy, act of God or the elements or other casualty, the
     Sublessor, unless it shall otherwise elect as hereinafter provided, shall
     take commercially reasonable, good faith steps to have the Master Lessor
     repair the same with reasonable dispatch after written notice of the
     damage. If such damage is so extensive as to render the Demised Premises
     untenantable, but the election is made to nevertheless repair same, then
     the rent shall be abated to an extent corresponding with the time during
     which and the extent to which said Demised Premises may have been
     untenantable. If such repairs, however, are delayed because of the
     Sublessee's failure to adjust the Sublessee's own insurance claim, no
     rental reduction shall be allowed beyond a reasonable time allowed for such
     adjustment. If, however, such damage or destruction to said Demised
     Premises shall be caused by negligence or intentional, improper conduct on
     the part of the Sublessee or the Sublessee's agents, servants, employees,
     visitors or licensees, then, notwithstanding such damage or destruction,
     the Sublessee shall be liable for

                                       11

<PAGE>
 
     the rent during the unexpired portion of the demised term without abatement
     unless this Sublease is terminated by mutual agreement of the parties. The
     Sublessor shall have the right to determine, within a reasonable time after
     such occurrence regardless of its cause, whether to demolish, rebuild or
     reconstruct the building containing the Demised Premises and, in the event
     of such decision by the Sublessor to so demolish, rebuild or reconstruct,
     then, upon notice given by the Sublessor to the Sublessee, this Sublease
     shall terminate on a date to be specified in such notice as if that date
     had been originally fixed as the expiration date of the term here demised
     and the rent shall be adjusted as of the time of the occurrence of such
     damage or destruction. The Sublessee shall give immediate notice to the
     Sublessor in case of such damage or destruction. Notwithstanding anything
     else herein to the contrary, in the event the Demised Premises cannot, with
     reasonable effort, be repaired with one hundred twenty (120) days,
     Sublessee may, upon not less than thirty (30) days' prior written notice to
     Sublessor, terminate this Sublease, provided that any such notice must be
     given within thirty (30) days after Sublessor advises Sublessee that the
     Demised Premises cannot be repaired within one hundred twenty (120) days.

18.  CONDEMNATION: If the whole or a portion of the Demised Premises shall be
     taken for any public or quasi-public use by right of eminent domain, with
     or without litigation, or transferred by agreement or purchase in
     connection with such public or quasi-public use, the Sublease at the option
     of the Sublessor shall terminate as of the date title shall vest in the
     condemnor. If any part of the Demised Premises shall be so taken as to
     render the remainder thereof unusable for the purposes for which the
     Demised Premises were leased, then the Sublessee shall have the right to
     terminate this Sublease by giving notice as hereinafter provided. Upon any
     such taking, with or without a termination of this Sublease, all
     compensation awarded shall belong and be paid to the Sublessor and the
     Sublessee shall have no claim thereto and the Sublessee hereby irrevocably
     assigns, transfers, releases and sets over to the Sublessor any right to
     compensation for damages to which the Sublessee may become entitled during
     the term hereof by reason of such condemnation or taking, provided,
     however, that in the event of such taking and a termination of this
     Sublease by either party as a result of or in connection therewith the
     Sublessee shall be entitled to a payment from the Sublessor of an amount
     equal to the unamortized cost (depreciated on a straight line basis
     computed monthly) to the Sublessee of all leasehold improvements made by
     the Sublessee during the original term hereof and such payment shall be
     made by the Sublessor out of the proceeds received by the Sublessor from
     the condemning authority and such claim of the Sublessee shall not be
     deemed a claim against the condemning authority or a lien on such proceeds.
     In no event shall the amount which the Sublessor shall be obligated to pay
     the Sublessee hereunder exceed the amount of the Sublessor's award less all
     expenses incurred by the Sublessor in connection with the securing or
     obtaining of such award. In the event that upon such taking there shall be
     no termination of this Sublease by either party, this Sublease shall
     continue for the balance of its term as to the part of the Demised Premises
     remaining. In such event the base rent payable by the Sublessee to the
     Sublessor hereunder and all items of Additional Rent payable hereunder as
     are determinable by reference to the area of the Demised Premises shall be
     reduced pro rata in the proportion in which the area of the Demised
     Premises so taken bears to the area of the Demised Premises before such
     taking, and all other liabilities of the Sublessee hereunder shall remain
     unaffected. If upon such taking this Sublease shall not terminate and shall
     continue as herein provided, the Sublessor shall at its own cost and
     expense restore the remaining portion of the Demised Premises to the extent
     necessary to render it useable for the purposes for which it was leased and
     shall make all repairs to the building in which the Demised Premises are
     located to the extent necessary to constitute the building a complete
     architectural unit, provided that such work shall not exceed the scope of
     construction existing immediately prior to such taking and the cost of such
     restoration shall not exceed the proceeds of the condemnation

                                       12

<PAGE>
 
     award less the Sublessor's expenses in securing such award. Termination of
     this Sublease by either party under the provisions of this paragraph shall
     be effected by the delivery of a thirty (30) day notice by such party to
     the other.

19.  SALE OF PREMISES: In the event of a sale or conveyance by the Sublessor of
     all or any part of the Sublessor's estate containing the Demised Premises,
     the same shall operate to release the Sublessor from any future liability
     upon any of the covenants or conditions, express or implied, herein
     contained in favor of the Sublessee, and in such event the Sublessee agrees
     to look solely to the responsibility of the successor in interest of the
     Sublessor.

20.  ESTOPPEL: At Sublessor's request, Sublessee agrees, within ten (10) days
     after receipt, to execute a lease estoppel certificate stating that:
     a. The Sublease is unmodified and in full force and effect;
     b. The term of the Sublease has begun and rent payable under the Sublease
        is accruing;
     c. No notice of default or termination of the Sublease has been served on
        Sublessee under the terms of the Sublease;
     d. To the best of Sublessee's knowledge, neither he nor the Sublessor are
        in default in any way under the Sublease.  In addition, Sublessee
        certifies that no event has occurred that with the passage of time or
        giving notice would constitute default under the Sublease by either him
        or the Sublessor; and

        certifying with respect to such other information with respect to this
        Sublease and Sublessee's occupancy of the Demised Premises as Sublessor
        shall reasonably request.

21.  [DELETED PRIOR TO EXECUTION]

22.  SIGNS: The Sublessee shall not inscribe, paint or affix any signs, placards
     or advertisements on the exterior or roof of the Demised Premises or upon
     entrance doors, windows or upon any adjoining or appurtenant lands without
     obtaining the prior approval of the Sublessor in writing or without
     obtaining such permits therefor as may be required under any ordinance,
     local law, order, rules of regulation of the municipality having
     jurisdiction thereof. Any such sign, placard or advertisement so placed
     upon the Demised Premises shall be removed by the Sublessee at the
     termination of this Sublease and the Sublessee shall repair any damage or
     injury to the Demised Premises caused thereby, and upon the failure of the
     Sublessee to comply herewith, the Sublessor may have the same removed and
     the Sublessee shall be liable to the Sublessor for the expense thereof.

23.  ENTIRE AGREEMENT, WAIVER: This instrument contains all the agreements and
     conditions made between the parties hereto and may not be modified, changed
     or terminated in whole or in part orally or in any manner other than by
     agreement in writing signed by the parties hereto or their respective
     successors in interest. The receipt of rent by the Sublessor, with
     knowledge of any breach of this Sublease by the Sublessee or of any default
     on the part of the Sublessee in the observance or performance of any of the
     conditions or covenants of this Sublease, shall not be deemed to be a
     waiver of any provision of this Sublease. If the Sublessee makes any
     payment of any amount less than that due hereunder, the Sublessor without
     notice may accept the same as a payment on account; the Sublessor shall not
     be bound by any notation on any check involving such payment nor any
     statement in any accompanying letter. No failure on the part of the
     Sublessor to enforce any covenant or provision herein contained, nor any
     waiver of any right thereunder by the Sublessor, unless in writing, shall
     discharge or invalidate such covenant or provision or affect the right of
     the Sublessor to enforce the same in the event of any subsequent breach or
     default. The receipt by the Sublessor of any rent or any other sum of money
     or any other consideration hereunder paid by the Sublessee after the

                                       13

<PAGE>
 
    termination, in any manner, of the term herein demised, or after the giving
    by the Sublessor of any notice hereunder to effect such termination, shall
    not reinstate, continue or extend the term herein demised, or destroy, or in
    any manner impair the efficacy of any such notice of termination as may have
    been given hereunder by the Sublessor to the Sublessee prior to the receipt
    of any such sum of money or other consideration, unless so agreed to in
    writing and signed by the Sublessor. Neither acceptance of the keys nor any
    other act or thing done by the Sublessor of any agent or employee of the
    Sublessor during the term herein demised shall be deemed to be an acceptance
    of a surrender of said Demised Premises, excepting only an agreement in
    writing signed by the Sublessor accepting or agreeing to accept such a
    surrender. Any right herein granted to the Sublessor to terminate this
    Sublease shall apply to any extension or renewal of the term herein demised,
    and the exercise of any such right during the term herein demised shall
    terminate any extension or renewal of the term herein demised, and any right
    on the part of the Sublessee thereto. No act or conduct of any nature or
    character on the part of the Sublessor or its agents, servants or employees
    other than by an agreement in writing signed by the Sublessor shall be
    construed as a waiver of the provisions of this paragraph irrespective of
    any circumstances existing at the time of such act or conduct.

24. NOTICE: Any notice required hereunder or by law to be served upon either of
    the parties shall be in writing and it shall be sent by certified mail,
    postage prepaid, addressed to the Demised Premises in the instance of the
    Sublessee, and to the place where rental is paid in the instance of the
    Sublessor, or to such other address as may be from time to time furnished in
    writing by either party to the other. Notice in writing shall be deemed to
    be communicated twenty-four (24) hours from the time of mailing.

25. [DELETED PRIOR TO EXECUTION]

26. [DELETED PRIOR TO EXECUTION]

27. ANCILLARY FACILITIES: Sublessor agrees that Sublessee shall have the right,
    under the then prevailing terms, conditions and rates; and subject to their
    availability to use the following facilities at, nearby, or within the
    Rotterdam Industrial Park:

    a)  railroad-related transport, loading/unloading and storage facilities; or

    b)  cold, frozen and dry goods storage facilities.

28. SECURITY BARRIERS: Sublessor agrees to permit Sublessee to erect, install or
    otherwise construct whatever security-related barriers within the Demised
    Premises Sublessee deems necessary between the Demised Premises and any
    adjacent premises, provided the work is performed in accordance with all
    applicable governmental laws and regulations. Sublessee shall not be
    obligated to remove these security barriers upon surrender of the Demised
    Premises to Sublessor. Further, any work performed hereunder shall be
    subject to the provisions of Paragraph 9 of this Sublease as it refers to
    liens.

29. MASTER LEASE: Sublessor and Sublessee acknowledge that this Sublease is
    subject to all terms and conditions of that certain lease dated as of
    January 15, 1997 ("Master Lease") between The Dormitory Authority of the
    State of New York ("Master Lessor") and Sublessor. Notwithstanding the
    aforementioned, Sublessor warrants that any and all terms, conditions and
    representations made in this Sublease are not contrary to or in conflict
    with any terms, conditions and covenants of the Master Lease. This Sublease
    is contingent upon Sublessor obtaining the consent of the Master Lessor to
    this Sublease within ninety (90) days of its final execution.

                                      14

<PAGE>
 
30. NOTICE OF SUBLEASE EXTENSION: In the event Sublessor shall obtain the right
    to lease the Demised Premises from Master Lessor for a period beyond the
    expiration date of Sublessee's Renewal Term, as hereinafter described, then
    Sublessor shall promptly notify Sublessee or such fact.

31. ENVIRONMENTAL MATTERS: Sublessor represents and warrants that to its
    knowledge no leak, spill, discharge, emission or disposal or hazardous or
    toxic substances has occurred on the Demised Promises and that to
    Sublessor's knowledge, the soil, ground water, soil vapor on or under the
    Demised Premises is free of toxic or hazardous substances as of the date
    hereof. Except to the extent caused by Sublessee, Sublessor agrees not to
    attempt to hold Sublessee and its officers, employees and agents liable for
    any claims, judgements, damages, fines, penalties, costs, liabilities
    (including sums paid in settlement of claims) or loss including attorneys'
    fees, consultants' fees, and experts' fees which arise during or after the
    term or any renewal term or in connection with the presence or suspected
    presence of toxic or hazardous substances in the soil, ground water, or soil
    vapor or in, under or upon the Demised Premises.

    In the event Sublessee shall become aware of any environmental problem at
    the Demised Premises, which has, or in the exercise of reasonable discretion
    on the part of Sublessee could have, a material adverse affect upon
    Sublessee's business operations conducted at the Demised Premises, Sublessee
    shall have the right, on not less than thirty (30) days' prior written
    notice, to cancel this Sublease; provided that Sublessee must send such
    notice within thirty (30) days after the earlier to occur of (i) the date
    Sublessor advises Sublessee of the existence of such environmental problem
    or (ii) the date Sublessee first receives actual knowledge of such problem.

32. RENEWAL OPTION: If Sublessee shall not be in default of any of the terms,
    covenants and conditions of this Sublease at the time of giving the notice
    set forth within this Paragraph, as well as at the end of the Initial Term
    of this Sublease, the Sublessee is hereby granted the option to renew this
    Sublease for one (1) five (5) year period (the "Renewal Term") by giving
    notice, in writing, to Sublessor at least ninety (90) days prior to the
    expiration of the Initial Term. The rental for the Renewal Term shall be as
    outlined on Exhibit A with the Lessee paying its pro rata share of taxes
    (but with no limitation as to amount), insurance and security and common
    area maintenance (triple net costs) calculated and paid in the same manner
    as described herein.

33. CONSUMER PRICE INDEX:

    A. Definitions: For the purpose of calculating the cost of living adjustment
       referred to on Exhibit A, the following definitions shall apply: (i) the
       term "Base Month" shall mean the calendar month immediately preceding the
       calendar month in which the term of this Sublease commences; (ii) the
       term "Price Index" shall mean the "Consumer Price Index for All Urban
       Consumers" published by the Bureau of Labor Statistics of the United
       States Department of Labor, for New York-Northeastern, NJ, All Items,
       (1967=100) or any renamed local index covering the metropolitan New York
       area or any other successor or substitute index appropriately adjusted;
       (iii) the term "Price Index for the Base Month" shall mean the Price
       Index for the Base Month; and (iv) the term "Equalization Factor" shall
       mean one hundred percent (100%).

    B. The rent payable during the Renewal Term shall be adjusted to reflect a
       cost of living adjustment. The adjustment shall be based on the
       percentage difference between the Price Index for the Base Month and the
       Price Index for the month immediately preceding the commencement of the
       Renewal

                                       15

<PAGE>
 
        Term (the "Adjustment Month"). (i) In the event the Price Index for the
        Adjustment Month reflects an increase over the Price Index for the Base
        Month, then the annual rental rate to be charged for the Renewal Term
        shall be multiplied by the Equalization Factor of the percentage
        difference between the Price Index for the Base Month and the Price
        Index for the Adjustment Month, and the resulting sum shall be added to
        such annual rental rate, effective as of commencement of the Renewal
        Term. Sublessee covenants and agrees that said adjusted annual rental
        rate shall thereafter be payable hereunder in equal monthly
        installments.

        The following illustrates the intentions of the parties hereto as to the
        computation of the aforementioned cost of living adjustment in the
        rental rate payable hereunder during the Renewal Term:

        Assuming that the fixed annual rent is $10,000, that the Equalization
        Factor is 100%, that the Price Index for the Base Month was 102.0 and
        that the Price Index for the Adjustment Month was 105.0, then 100% of
        the percentage increase thus reflected, i.e., 100% x 2.941%, or 2.94%,
        would be multiplied by $10,000, and the annual rental rate would be
        increased $294.00 (plus any other adjustments computed in accordance
        with the terms of this Sublease) effective as of the first day of the
        Renewal Term.

        In the event that any cost of living adjustment is not available as of
        the Adjustment Month, the monthly rent payments shall be made on the
        basis of the next preceding monthly rental until the cost of living
        adjustment is available when the monthly rental payment next due shall
        be computed on the basis of the cost of living adjustment increased to
        retroactively adjust the rental paid during the period at the old rate,
        and all subsequent monthly payments in such period shall be at the new
        rate.

    C.  No adjustments or recomputations, retroactive or otherwise, shall be
        made due to any revision with may later be made in the first published
        figure of the Price Index for any month.

    D.  Any delay or failure of Sublessor in computing or billing for the rent
        adjustments hereinabove provided, shall not constitute a waiver of or in
        any way impair the continuing obligation of Sublessee to pay such rent
        adjustments hereunder.
    
    E.  Notwithstanding any expiration or termination of this Sublease prior to
        the date that this Sublease is scheduled to expire (except in case of a
        cancellation by mutual written agreement) Sublessee's obligation to pay
        rent as adjusted under this Paragraph shall continue and shall cover all
        periods during the Renewal Term up to the date that this Sublease is
        scheduled to expire, and shall survive any default under this Sublease.

34. BROKERAGE: Sublessee warrants and represents that it has not dealt with any
    real estate broker or agent in connection with this Sublease or its
    negotiations except Richard Sleasman of Robert Cohn Associates, Inc.
    Sublessee shall indemnify and hold Sublessor harmless from any cost, expense
    or liability (including cost of suit and reasonable attorney's fees) for any
    compensation, commission or fees claimed by any other real estate broker or
    agent in connection with this Sublease or its negotiation by reason of any
    act of Sublessee. Sublessor agrees to pay a real estate commission pursuant
    to the Real Estate Brokerage Commission Agreement dated August 30, 1996, by
    and between Sublessor and Robert Cohn Associates, Inc.

                                      16

<PAGE>
  
35.  GUARANTY: This Sublease is entitled to the benefits of a certain Guaranty
     of Sublease dated on or about the date hereof executed by Papa John's USA,
     Inc.

36.  PAINTING: On or before June 30, 1997 Sublessor shall have the exterior of
     the Demised Premises painted. Sublessee shall reimburse Lessor, as
     Additional Rent, for a portion of the cost of such painting by paying an
     amount equal to one (1) month's base rent. Such amount shall become due and
     payable within thirty (30) days after Lessor has notified Lessee, in
     writing, of the completion of such painting.

37.  PRIOR SUBLEASE: This Sublease supersedes and replaces, in its entirety,
     that certain lease dated September 4, 1996 between Sublessor and Sublessee
     (the "Prior Sublease"), which Prior Sublease the parties hereto agree is
     hereby declared null, void and of no further force or effect.

     This Agreement shall be interpreted according to the laws of the State of
New York.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.


AS TO SUBLESSOR:
ATTEST:                              DISTRIBUTION UNLIMITED, INC.

/s/ Heidi Parkes                     BY: /s/ David M. Buicko 
- ----------------------------            ----------------------------
                                             David M. Buicko
                                             Executive Vice President

                                     DATE:   May 29, 1997
                                          --------------------------

AS TO SUBLESSEE:                     P.J. FOOD SERVICE, INC.
ATTEST:

/s/ James D. Westfall                BY: /s/ Robert J. Wadell 
- ----------------------------            ----------------------------
                                     NAME:   Robert J. Wadell
                                     TITLE:  President P.J. Food Service
         
                                     DATE:   May 26, 1997
                                          --------------------------

                                      17

<PAGE>
 
                             GUARANTY OF SUBLEASE

In order to induce Distribution Unlimited, Inc., a New York corporation, as
Sublessor, to enter into a Sublease (the "Sublease") with P.J. Food Service,
Inc., as Sublessee, the undersigned, Papa John's USA, Inc. (the "Guarantor"),
who owns all of the stock of P.J. Food Service, Inc., hereby guarantees to
Sublessor:

The full and prompt performance and observance by P.J. Food Service, Inc. of its
obligations under the Sublease to remove itself and all personal property from
the Demised Premises and to repair all damage caused by such removal at the
termination of the Sublease, whether because of a default under such Sublease,
the expiration of the stated term thereof or otherwise; without requiring any
notice of nonpayment, nonperformance or nonobservance, or notice or demand
whereby to charge the Guarantor therefor, all of which the Guarantor hereby
expressly waives.

This Guaranty constitutes the unconditional, direct and primary obligation of
the Guarantor, and shall be enforceable regardless of whether any steps shall
have been taken to enforce any rights against Sublessee and regardless of any
other condition or contingency. Guarantor consents that Sublessor may do or omit
from doing any or all of the following and the obligations of the Guarantor
hereunder shall not be terminated or impaired by reason thereof:

(i)   the assertion by Sublessor against Sublessee of any of the rights or
remedies reserved by Sublessor pursuant to the Sublease;

(ii)  the extension of the time for payment or performance on the part of
Sublessee of any agreement or condition under the Sublease;

(iii) the supplementing, modification or amendment of the Sublease by the
parties thereto;

(iv)  any failure, omission or delay on the part of Sublessor to enforce, assert
or exercise any right or remedy conferred on Sublessor under the Sublease; and,

(v)   the voluntary or involuntary liquidation, dissolution, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, or any similar proceeding affecting Guarantor or Sublessee
or any of their assets.

Guarantor hereby waives notice of acceptance of this Guaranty and the right of
trial by jury and the right to interpose a counterclaim in any litigation
arising out of or in connection with this Guaranty.

Guarantor represents and warrants that it is fully authorized to enter into this
Guaranty and that Guarantor has a financial interest in P.J. Food Service, Inc.

This Guaranty shall bind the legal successors and assigns of the Guarantor and
shall inure to the benefit of the Sublessor, its successor and assigns and shall
be construed for all purposes in accordance with the laws of the State of New
York.
 
ATTEST:                                PAPA JOHN'S USA, INC.

/s/ James D. Westfall                  By: /s/ Richard J. Emmett
- ------------------------                  -------------------------
                                       Name:   Richard J. Emmett
                                       Title:  Vice President

                                       Date:   May 27, 1997
                                            -----------------------

                                      18

<PAGE>
 
                           RENTAL AND TERM SCHEDULE


44,620 Square Feet in Building 14, Bay 2 in Rotterdam Industrial Park


Sublessor:        P.J. Food Service, Inc. 
                  11460 Bluegrass Parkway 
                  Louisville, KY 40299

Contact:          Robert Wadell (502-266-5200)

Initial Term:     Five (5) years

Renewal Term:     One (1) five (5) year term under the same terms and conditions
                  subject only to an adjustment in the rental rate based on the
                  change in the Consumer Price Index (as described in Paragraph
                  32 herein) as of the commencement date of the Sublease, but in
                  no event shall the increase in the Sublease rate exceed
                  fifteen percent (15%) of the Sublease rate for the initial
                  term. Said adjusted rental rate shall remain constant
                  throughout the Renewal Term.
 
Term Dates:       Initial Term:      January 31, 1997 through December 31, 2001
                  Renewal Term:      January 1, 2002 through December 31, 2006
 
Sublease Rates:   Initial Term:      $2.75 per square foot per annum, triple net
                  Renewal Term:      $2.75 per square foot per annum, increased
                                     one-time by any increase in the Consumer
                                     Price Index since the Lease Commencement
                                     Date, triple net

  
Triple net costs at Building 14, Rotterdam Industrial Park are currently $.48
per square foot per annum, of which $.15 per square foot per annum is allocable
to taxes, to the extent charged. Taxes are limited, as described in Paragraph 5
of this Lease, during the Initial Term of the Lease.


Prepared February 12, 1997

  

                     EXHIBIT A - RENTAL AND TERM SCHEDULE




<PAGE>
 
                                                                EXHIBIT 10.31

                               INDUSTRIAL LEASE

     THIS LEASE is made and entered into as of the 21 November 1997 by and
between SF Property Investment LLC, an Oregon limited liability corporation,
with its address at 1121 SW Salmon Street, Portland, Oregon 97205 ("Landlord"),
and PJ Food Service, Inc., with its address at PO Box 99900, Louisville,
Kentucky 40269-9990, (502) 267-0948 ("Tenant").

1. PREMISES AND TERM

     A.   Premises. In consideration of the covenants and agreements herein
          contained, Landlord does hereby lease, let and demise unto Tenant the
          leased space depicted on Exhibit "A" attached hereto ("Premises"),
          located at 15011 North Lombard Street, Portland, Oregon, and contains
          approximately 37,170 square feet ("Building"). Tenant's Premises
          represent approximately twenty-nine and thirty-six one hundredths
          percent (29.36%) of the total square footage of 126,600 square feet
          within the Building. This percentage shall be used as "Tenant's
          proportionate share" in determining Tenant's share of taxes,
          assessments and operating expenses if applicable. Landlord shall also
          provide the improvements shown on the attached Exhibit D.

     B.   Possession. Delivery of possession shall occur when the Premises are
          occupied by tenant or are ready to be occupied
 by Tenant with all work
          to be performed by Landlord substantially completed as determined by
          Landlord's architect. No notice shall be required from Landlord if the
          Premises are ready on the date set for commencement of the term or on
          the first business day thereafter. If Landlord is unable to deliver
          possession of the Premises to Tenant because of strikes, acts of God,
          or any other cause beyond Landlord's control, then Tenant may take
          possession when Landlord notifies Tenant that the Premises are ready
          for possession, and the term of this Lease shall commence on such date
          and continue for the specified number of months thereafter,
          notwithstanding the commencement and termination dates stated above.
          Tenant shall owe no rent until the Premises are ready for possession.
          Landlord shall have no liability for such delays in delivery of
          possession, and neither party shall have the right to terminate except
          that Landlord may cancel this Lease without liability if permission to
          construct, use, or furnish necessary utilities to the Premises is
          denied or revoked by a governmental agency or public utility with such
          authority.

     C.   Term. Landlord leases the Premises to Tenant for a term of sixty (60)
          months commencing December 1, 1997, the "Commencement Date" and
          continuing through November 30, 2002. Options to renew the lease as
          described in the attached Exhibit E may be available to Tenant.
 







<PAGE>
 
2.   BASE RENT AND SECURITY DEPOSIT

     A.   Base Rent.  Tenant agrees to pay to Landlord Base Rent for the
          Premises, in advance, without demand, deduction, or set off, for the
          entire Lease Term hereof in monthly installments payable on the first
          day of each calendar month at the rates shown in the Basic Lease
          Information.

B.   Security Deposit.  Tenant agrees to deposit with Landlord a security
          deposit in the amount specified in the Basic Lease Information as
          security for the performance of Tenant's covenants and obligations
          under this Lease, it being expressly understood and agreed that such
          deposit is not an advance rental deposit, not the last month's rent
          nor a measure of Landlord's damages in the event of Tenant's default.
          If Tenant shall at any time fail to make any payment or fail to keep
          or perform any term, covenant, or condition on Tenant's part to be
          made or performed or kept under this Lease, Landlord may, but shall
          not be obligated to, and without waiving or releasing Tenant from any
          obligation under this Lease, apply the whole or any part of the
          Security Deposit (a) to the extent of any sum due to Landlord; or (b)
          to make any required payment on Tenant's behalf; or (c) to compensate
          Landlord for any loss, damage, attorneys' fees, or expense sustained
          by Landlord due to Tenant's default. In such event, Tenant shall,
          within five (5) days of receipt of written demand by Landlord, remit
          to Landlord sufficient funds to restore the Security Deposit to its
          original sum; Tenant's failure to do so shall be a material breach of
          this Lease. Landlord shall not be required to keep the Security
          Deposit separate from its general funds, and Tenant shall not be
          entitled to interest on such deposit. Should Tenant comply with all of
          the terms, covenants, and conditions of this Lease and at the end of
          the term of this Lease leave the Premises in the condition required by
          this Lease, then the Security Deposit, less any sums owing to
          Landlord, shall be returned to Tenant (or, at Landlord's option to the
          last assignee of Tenant's interests hereunder) within 30 days after
          the termination of this Lease and vacancy of the Premises by Tenant.

3.   USE. The Premises shall be used and occupied for only the use described in
     the Basic Lease Information by Tenant and for no other purpose without
     prior written approval of Landlord, which approval shall not be
     unreasonably withheld. In connection with its use, Tenant shall, at
     Tenant's expense, comply with all applicable laws, ordinances, and
     regulations of any public authority, including those requiring alteration
     of the Premises because of Tenant's specific use; shall create no nuisance
     nor allow any objectionable liquid, odor, or noise to be emitted from the
     Premises; shall store no gasoline or other highly combustible materials on
     the Premises which would violate any applicable fire code or regulation nor
     conduct any operation that will increase


SN Properties Triple Net Lease - Page 2
September 24, 1997

<PAGE>
 
     Landlord's fire insurance rates for the Premises; shall not store, use or
     deposit, or cause to be stored, used or deposited, on the Premises or
     anywhere in the Building, any environmentally hazardous or potentially
     environmentally hazardous materials or substances and shall not overload
     the floors or electrical circuits of the premises or the Building. Landlord
     shall have the right to approve the installation of any power-driven
     machinery by Tenant and at its sole expense may select a qualified
     electrician whose opinion will reasonably control regarding electrical
     installations, an architect or engineer whose opinion will reasonably
     control regarding floor loads, and a certified industrial hygienist to
     evaluate materials to be used or stored in the Building or on the Premises.

4.   SIGNS.    Tenant may erect a sign on the exterior of the Building stating
     its name, business, and product after first securing Landlord's written
     approval, which approval shall not be unreasonably withheld, of the size,
     color, design, wording, and location, and all necessary governmental
     approvals. Landlord shall have no obligation to approve any sign which
     differs in style, size, color, design, or location from signs erected on
     the exterior of the Building, or from Landlord's standards or plans for the
     Building exterior signage. All signs installed by Tenant shall be removed
     upon termination of this lease, with the sign location restored to its
     former state. Tenant shall be responsible, at Tenant's sole cost and
     expense, to maintain the appearance of all of Tenant's signs. If Tenant
     fails to maintain any of Tenant's signs, Landlord may make required repairs
     or replace such signs, and Tenant shall promptly reimburse Landlord for the
     expense of the repairs or replacements. Window signs and awnings will not
     be permitted.

5.   ALTERATIONS.   Except for those alterations described in Exhibit C attached
     to this Lease, Tenant shall make no alterations, additions or improvements
     to the Premises, change the color of the exterior of the Building, or add
     any lighting to the exterior of the Building, without Landlord's prior
     written approval, may be withheld or conditioned as Landlord may deem
     appropriate within the exercise of its sole and absolute discretion, and
     without a valid building permit, when required, issued by the appropriate
     governmental agency. Upon termination of this Lease, any such alterations,
     additions, or improvements (including, without limitation, all electrical,
     lighting, plumbing, doors, windows, partitions, drapery, carpeting,
     counters, and physically attached fixtures) shall at once become part of
     the realty upon which the Premises are located and belong to Landlord
     unless the terms of the Lease provide otherwise, or unless Landlord
     requests in its prior written approval that part or all of the additions,
     alterations or improvements be removed. In such case, Tenant shall, at
     Tenant's sole cost and expense, promptly remove the specified additions,
     alterations, or improvements and repair and restore the affected portion of
     the Premises and Building to its or their original condition.

SN Properties Triple Net Lease - Page 3
September 24, 1997

<PAGE>
 
6.   UTILITIES.  Tenant shall pay, when due, all charges for electricity,
     natural gas, water, garbage collection, janitorial service, sewer, and all
     other utilities of any kind furnished to the Premises during the lease
     term, including any free rental period of this lease term. Landlord shall
     have no liability resulting from any interruption of utility services.
     Tenant shall control the temperature in the premises to prevent freezing of
     the sprinkler system and plumbing. Tenant shall be responsible to promptly
     repair or replace, at Tenant's own sole cost and expense, any parts of the
     sprinkler system or plumbing damaged by freezing or any other event,
     excluding other acts of God or negligence of Landlord.

7.   OPERATING EXPENSES

     A.   Taxes.  Tenant agrees to pay its proportionate share of any and all
          real and personal property taxes, regular and special assessments,
          license fees and other charges of any kind and nature whatsoever,
          payable by Landlord as a result of any public or quasi-public
          authority, private party, or owner's association levy, assessment or
          imposition against, or arising out of Landlord's interest in, the real
          estate described in Exhibit "B" attached hereto, together with the
          building and the grounds, parking areas, driveways, roads, and alley
          around the building in which the Premises are located, or any part
          thereof. Tenant shall not however, be obligated to pay any tax based
          upon Landlord's net income. During each month of the Lease Term at the
          same time and in the same manner as the payment of monthly base rent,
          Tenant shall make a monthly escrow deposit with Landlord ("the
          Property Tax Escrow Payment" and the "Insurance Escrow Payment") equal
          to 1/12 of its proportionate share of the charges which will be due
          and payable for that particular year. The charges are subject to
          adjustment after the end of the year on the basis of the actual cost
          for such year.

     B.   Monthly Common Area Maintenance Charges.  Common area charges charged
          to Tenant hereunder shall include all usual and necessary costs of
          operating and maintaining the Premises and any common areas including,
          but not limited to, common area entry and exterior loading docks, the
          cost of all utilities or services not paid directly by Tenant,
          security, management fees, property insurance, maintenance and repair
          of landscaping and HVAC units, parking areas and any other common
          facilities. Operating expenses shall not include structural repairs of
          the roof, exterior walls, and foundations of the buildings, which are
          the responsibility of the Landlord. During each month of the Lease
          Term at the same time and in the same manner as the payment of monthly
          base rent, Tenant shall make a monthly escrow deposit with Landlord
          "the Common Area Maintenance Escrow Payment" equal to 1/12 of its
          proportionate share of the Charges which will be due and payable for
          that particular year.


SN Properties Triple Net Lease - Page 4
September 24, 1997

<PAGE>
 
     C.   Prorations.  In the event a proration is necessary to determine
          Tenant's proportionate share of common area maintenance, taxes and
          insurance charges, the proportion shall be the same as the ratio of
          the gross leasable square feet of the Premises to the total applicable
          gross leasable square footage of the Building or such other equitable
          apportionment as may be adopted. Tenants proportionate share is stated
          in Section 1 of the lease.

     D.   Reconciliation's.  Tenant's escrow payments shall be reconciled
          annually. If the Tenant's total escrow payments are more than Tenant's
          actual pro rata share of the taxes, insurance, and common area
          maintenance charges, Landlord shall retain such excess and credit it
          to Tenant's Escrow Payment account. Tenant shall be allowed to deduct
          said excess from future escrow payments until said excess is fully
          used. Excess escrow payments may not be deducted from rent. If the
          Tenant's total Escrow Payments are less than Tenant's actual pro rata
          share of the taxes, insurance, and common area maintenance charges,
          Tenant shall reimburse Landlord within fifteen (15) days following
          delivery of notice.


8.   PARKING AND STORAGE AREAS

     A.   Parking.  Tenant, its employees, and customers shall have the
          exclusive right to use up to 52 private parking spaces adjacent to the
          portion of the Building upon which the Premises are located. Tenant
          shall control the use of such parking spaces so that there will be no
          unreasonable interference with the normal traffic flow, and shall
          permit no parking on any landscaped or unpaved surface. Under no
          circumstances shall trucks serving the Premises be permitted to block
          streets. Said parking spaces shall be limited to vehicles no larger
          than standard size automobiles or pickup utility vehicles, and Tenant
          shall not park larger trucks or other large vehicles except in areas
          designated by Landlord for "loading" or "truck parking".

     B.   Storage.  Outside storage, including without limitations, trucks or
          other vehicles, is prohibited without Landlord's prior written
          consent, which shall not be unreasonably withheld. Tenant shall not
          store any materials, supplies, or equipment outside in any unapproved
          or unscreened area. Trash and garbage receptacles shall be stored in
          designated areas and shall be kept covered at all times.


9.   TENANT RESPONSIBILITIES

     A.   Prohibition Against Liens.  Tenant shall not allow any liens to attach
          to the Premises, Building or real property, upon which the Premises
          are located, as a result of its activities.



SN Properties Triple Net Lease - Page 5
September 24, 1997


<PAGE>
 
     B.   Liability Insurance. Tenant shall carry public liability and property 
          damage insurance with limits of not less than One Million Dollars
          ($1,000,000.00) for injury to one person in one occurrence, Two
          Million Dollars ($2,000,000.00) for injuries to more than one person
          in one occurrence, and Five Hundred Thousand Dollars ($500,000.00)
          property damage. Such insurance shall be evidenced by a certificate
          delivered to Landlord stating that the coverage will not be canceled
          or materially altered without thirty (30) days' advance written notice
          to Landlord. Landlord shall be named as an additional insured on such
          policy.

     C.   Tenant's Liability. Tenant hereby agrees that Landlord shall not be 
          liable for injury to Tenant's business or any loss of income therefrom
          or for damage to the goods, wares, merchandise, equipment and vehicles
          or other property of Tenant, Tenant's employees, invitees, customers,
          or any person in or about the Premises, nor, unless through its sole
          negligence, shall Landlord be liable for injury to the person of
          Tenant, Tenant's employees, agents or contractors and invitees,
          whether such damage or injury is caused by or results from fire,
          steam, electricity, gas, water or rain, or from defects of pipes,
          sprinklers, wires, appliances, plumbing, air conditioning or lighting
          fixtures, or from any other cause, whether the said damage or injury
          results from conditions arising upon the Premises or upon other
          portions of the Building of which the Premises are a part, or from
          other sources or places, and regardless of whether the cause of such
          damage or injury or the means of repairing the same is inaccessible to
          Landlord or Tenant. Landlord shall not be liable for any damages
          arising from any act or neglect of any other tenant, if any, of the
          building in which the Premises are located.

     D.   Indemnity. Tenant shall indemnify, defend and hold Landlord harmless 
          from any and all claims, losses or damages arising from Tenant's use
          of the Premises, and the related parking areas and common areas, or
          from the conduct of its business or from any activity, work or things
          which may be permitted or suffered by Tenant in or about the Premises,
          and shall further indemnify, defend and hold Landlord harmless from
          and against any and all claims arising from any breach or default in
          the performance of any obligation on Tenant's part to be performed
          under the provisions of this Lease or arising from any act, omission
          or negligence of Tenant or any of its agents, contractors, employees,
          or invitees and from any and all costs, attorneys' fees, expenses and
          liabilities incurred in the defense of any such claim or action or
          proceeding brought thereon, including any appeal therefrom. Tenant
          hereby assumes all risk or damage to property or injury to persons in
          or about the Premises, and Tenant hereby waives all claims in respect
          thereof against Landlord, except where said damage arises out of
          negligence of Landlord.

SN Properties Triple Net Lease - Page 6
September 24, 1997

<PAGE>
 
     E.   Tenant shall, at its own cost and expense, enter into a regularly
          scheduled preventative maintenance/service contract with a maintenance
          contractor for servicing all heating and air conditioning systems and
          equipment within the Premises.

10.  CASUALTY DAMAGE

     A.   Casualty Damage. If fire or other casualty causes damage to the
          Premises in an amount exceeding thirty percent (30%) of the full
          construction-replacement cost of the Premises, Landlord may elect to
          terminate this Lease as of the date of the damage by notice in writing
          to Tenant within thirty (30) days after such date. Otherwise, Landlord
          shall promptly repair the damage and restore the Premises to their
          former condition as soon as practicable. Rent shall be abated during
          the period and to the extent the Premises are not reasonably usable
          for the use permitted by this Lease.

     B.   Insurance. Landlord shall be responsible for insuring the Premises and
          Tenant for insuring its personal property and trade fixtures located
          on the Premises. If any activity by Tenant on the Premises causes
          Landlord's fire insurance rate to increase, Tenant shall pay the
          amount of such increase promptly following written demand from
          Landlord.

     C.   Subrogation. Neither party shall be liable to the other for any loss
          or damage to the Premises or Tenant's personal property thereon caused
          by any of the risks covered by a standard fire insurance policy with
          extended coverage and sprinkler leakage endorsements, and there shall
          be no subrogated claim by one party's insurance carrier against the
          other party arising out of any such loss.

11.  CONDEMNATION. If a condemning authority takes the entire Premises or a
     portion sufficient to render the remainder unsuitable for Tenant's use,
     then either party may elect to terminate this Lease effective on the date
     that title passes to the condemning authority. Otherwise, Landlord shall
     proceed as soon as practicable to restore the remaining Premises to a
     condition comparable to that existing at the time of the taking. Rent shall
     be abated during the period of restoration to the extent the Premises are
     reasonably usable by Tenant, and rent shall be reduced for the remainder of
     the term in an amount equal to the reduction in rental value of the
     Premises caused by the taking. All condemnation proceeds shall solely
     belong to the Landlord.

12.  ASSIGNMENT AND SUBLETTING. Except to another wholly owned subsidiary of 
     Papa John's International, Tenant shall not assign its interest under this
     Lease nor sublet the Premises without first obtaining Landlord's consent in
     writing, which consent shall not be unreasonably withheld.


SN Properties Triple Net Lease - Page 7
September 24, 1997


<PAGE>
 
     No consent in one instance shall prevent this provision from applying to
     each subsequent instance. This provision shall apply to all transfers by
     operation of law including, but not limited to, mergers and changes in
     control of Tenant. No assignment shall relieve Tenant of its obligation to
     pay rent or perform other obligations required by this Lease. If Tenant
     assigns this Lease or sublets the premises for an amount in excess of the
     rent called for by this Lease, such excess shall be paid to Landlord
     promptly as it is received by Tenant. In the event that Landlord gives its
     consent, Tenant shall pay Landlord a reasonable fee, not to exceed $500.00,
     to reimburse Landlord for processing costs incurred in connection with said
     consent.

13.  DEFAULT

     Any of the following shall constitute a default by Tenant under this Lease:

          a.  Tenant's failure to pay rent or any other charge under this Lease
          within five (5) business days after receipt of notice that said amount
          is past due.

          b.  Failure to comply with any other term or condition of this lease
          other than rent or any other charge within thirty (30) business days
          following written notice from Landlord specifying the noncompliance.
          If such noncompliance cannot be cured within the thirty business (30)
          day period, this provision shall be satisfied if Tenant commences
          correction within such period and thereafter proceeds in good faith
          and with reasonable diligence to effect compliance as soon as
          possible.

          c.  Tenant's insolvency, assignment for the benefit of its creditors,
          business failure by Tenant, Tenant's voluntary petition in bankruptcy
          or adjudication as bankrupt, or the appointment of a receiver for
          Tenant's properties.

14.  REMEDIES FOR DEFAULT. In case of default as described in paragraph 13
     above, Landlord shall have the right to the following remedies which are
     intended to be cumulative and in addition to any other remedies, including
     but not limited to the rights of the Tenant, provided under applicable law:

          a.   Retake possession of the Premises and relet the Premises upon any
               reasonable terms. No such reletting shall be construed as an
               acceptance or a surrender of Tenant's leasehold interest.

          b.   Recover damages caused by Tenant's default, including, without
               limitation, reasonable attorneys' fees at trial and on any appeal
               therefrom, lost rentals and lease commissions incurred to re-
               lease the Premises. Landlord may sue

SN Properties Triple Net Lease - Page 8
September 24, 1997

<PAGE>
 
               periodically to recover damages as they occur throughout the
               lease term, and no action for accrued damages shall bar a later
               action for damages subsequently accruing. Landlord may elect in
               any one action to recover accrued damages plus damages
               attributable to the remaining term of the Lease equal to the
               difference between the rent under this Lease and the reasonable
               rental value of the Premises for the remainder of the term,
               discounted to the time of judgment at the prevailing rate on
               judgments.

          c.   Make any payment or perform any obligation required of Tenant so
               as to cure Tenant's default, in which case Landlord shall be
               entitled to recover all amounts so expended from Tenant, plus
               interest from the date of the expenditure at the rate of ten
               percent (10%) per annum.

15.  SURRENDER ON TERMINATION.  On expiration or early termination of this
     Lease, Tenant shall deliver all keys to Landlord, have final utility
     readings made on the date of move out, and surrender the Premises clean and
     free of debris inside and out, with all mechanical, electrical, and
     plumbing systems in good operating condition, all signage removed and
     defacement corrected and all repairs called for under this Lease completed.
     Subject to the provisions of section 5 hereof, the Premises shall be
     delivered in the same condition as at the commencement of the term, subject
     only to depreciation and wear from ordinary use. Tenant shall remove all of
     its furnishings and trade fixtures that remain Tenant's property and
     restore all damage resulting from such removal. Failure to remove shall be
     an abandonment of the property, and Landlord may dispose of it in any
     manner without liability.

16.  LANDLORD'S REPAIRS.  After reasonable notice from Tenant, Landlord shall
     repair structural problems occurring in the roof, exterior walls, building
     structure and foundations. Tenant shall repair and pay for any damage to
     such items to be maintained by Landlord caused by any act, omission or
     negligence of Tenant, or Tenant's employees, agents, licenses or invitees,
     or caused by Tenant's default hereunder. The Term "walls" as used herein
     shall not include windows, glass or plate glass, doors, special store
     fronts or office entries. Tenant shall immediately give Landlord written
     notice of defect or need for repairs, after which Landlord shall have a
     reasonable opportunity and time to repair same or cure such defect.
     Landlord's liability with respect to any defects, repairs or maintenance
     for which Landlord is responsible under any provisions of this Lease shall
     be limited to the cost of such repairs or maintenance or the curing of such
     defect. In no event will Landlord be responsible for paying incidental or
     consequential damages resulting from Landlord's failure to cure such
     defects.

17.  LATE CHARGES.  Landlord may impose a late charge for rent not paid within
     five (5) business days of when due. The late charge shall commence on the
     sixth business day following the due date and shall be

SN Properties Triple Net Lease - Page 9
September 24, 1997

<PAGE>
 
     equal to One Hundred Dollars ($100.00) per day until the rent due is paid
     in full. In the event Tenant fails to pay rent within five (5) business
     days of when due on greater than two (2) occasions during any calendar
     year, Landlord shall have the option to terminate this Lease by giving
     Tenant written notice of termination. In the event Landlord exercises its
     option to terminate this Lease, Tenant shall surrender the Premises to
     Landlord within ten (10) days of the notice of termination in accordance
     with the provisions of paragraph 15.

18.  SUBORDINATION.  This Lease may, at Landlord's option, be made subordinate
     to any ground lease, mortgage, land sale contract or deed of trust, which
     may hereafter affect the real property of which the Building and Premises
     form a part. Tenant or Tenant's successors in interest will execute and
     deliver any documents required to effectuate such subordination to any
     ground lease, mortgage, land sale contract or deed of trust. Landlord is
     hereby irrevocable appointed and authorized as attorney-in-fact for Tenant
     to execute all such subordination instruments in the event Tenant fails to
     execute and deliver said instruments within ten (10) days after Landlord's
     written demand for execution thereof.

19.  ESTOPPEL CERTIFICATE

     A.   Estoppel Certificate.  Tenant shall, at any time upon not less than
          five (5) business days' prior written notice from Landlord, execute,
          acknowledge and deliver to Landlord a statement in writing certifying
          that the Lease is in full force and effect (or, if modified, stating
          the nature of such modification and certifying that this Lease, as so
          modified, is in full force and effect) and the date to which the rent
          and other charges are paid in advance, if any, and acknowledging that
          there are not, to Tenant's knowledge, any uncured defaults on the part
          of the Landlord hereunder, or specifying such defaults, if any are
          claimed. Any such statement may be conclusively relied upon by
          prospective purchaser or encumbrance of the Premises or of the
          Building.

     B.   Tenant's failure to deliver such statement within such time shall be
          conclusive upon Tenant that this Lease is in full force and effect,
          without modification except as may be represented by Landlord that
          there are no uncured defaults in Landlord's performance, and that not
          more than one month's base rent has been paid in advance.

     C.   If Landlord desires to finance or refinance the entire Building, or
          any part thereof, Tenant hereby agrees to deliver to any lender
          designated by Landlord such financial statements of Tenant as may be
          reasonably required by such lender. Tenant shall also provide Landlord
          with Tenant's financial statements each year during the term of this
          lease on or before March 1, covering the prior


SN Properties Triple Net Lease - Page 10
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<PAGE>
 
          calendar year, or within ninety (90) days of the end of Tenant's
          fiscal year. All such financial statements shall be received by
          Landlord in confidence and shall be used for the purposes herein set
          forth.

21.  MODIFICATIONS TO PREMISES. If Tenant wants to make any modifications to the
     Tenant's space, Tenant shall, at Tenant's sole cost and expense, construct
     the improvements on the Premises, all of which are subject to paragraph 5
     above.

22.  HAZARDOUS SUBSTANCES. Tenant shall not, and shall not cause or allow any
     other party to, construct, use, deposit, store, dispose, place or locate on
     or about the Premises any Hazardous Substances (as later defined) without
     the prior written consent of Landlord, which shall not be unreasonably
     withheld as long as Tenant demonstrates to Landlord's reasonable
     satisfaction that (a) the nature and quality of any Hazardous Substances
     are necessary, useful, and appropriate to Tenant's business conducted at
     the Premises: (b) the Hazardous Substances will be used, kept and stored
     with the highest degree of care and in a manner that complies with all
     governmental laws, ordinances, regulations, orders, and policies regulating
     any such hazardous material so brought upon or used or kept in or about the
     Premises (c) such Hazardous Substances are disposed of off the Premises and
     the land described in Exhibit B, in a disposal site licensed or designated
     for such Hazardous Substances, with the utmost care and caution and in a
     manner consistent with applicable governmental laws, ordinances,
     regulations, orders and policies; (d) Tenant pays as additional rent any
     increase in the premiums charged Landlord for insurance coverage by reason
     of Tenant's storage, placement, location, or use of Hazardous Substances or
     any premiums for additional insurance coverage's deemed appropriate by
     Landlord because of the presence of such Hazardous Substances; and (e)
     Tenant procures any insurance coverage's demanded by Landlord.

     Tenant shall indemnify, defend, and hold Landlord harmless from any and all
     claims, judgments, damages, penalties, fines, costs, liabilities, or losses
     (including, without limitation, diminution in value of the Premises,
     damages for the loss or restriction on use of rentable or usable space or
     of any amenity of the Premises, damages arising from any adverse impact on
     marketing of space, and sums paid in settlement of claims, attorneys' fees,
     consultant fees, and expert fees) which arise during or after the lease
     term as a result of contamination by Hazardous Substances as a result of
     Tenant's use or activities, or of Tenant's agents or contractors. This
     indemnification of Landlord by Tenant includes, without limitation, costs
     incurred in connection with any investigation of the site conditions or any
     cleanup, remediation, removal, or restoration work required by any federal,
     state, or local governmental agency or political subdivision because of
     Hazardous Substances present in the soil or ground water on or under the
     Premises. Without limiting the foregoing, if the presence of any Hazardous
     Substances on the Premises caused or permitted by Tenant or its agents



SN Properties Triple Net Lease - Page 11
September 24, 1997


<PAGE>
 
     or contractors result in any contamination of the Premises, Tenant shall
     promptly take all actions at its sole expense as are necessary to return
     the Premises to the condition existing prior to the release of any such
     hazardous material to the Premises, provided that Landlord's approval of
     such actions shall first be obtained, which approval shall not be
     unreasonable withheld so long as such actions would not potentially have
     any material adverse long-term or short-term effect on the Premises. The
     foregoing indemnity shall survive the expiration or earlier termination of
     this lease.

     The term "Hazardous Substances" shall include (a) any chemical, material,
     element, compound, solution, mixture, substance, or other matter of any
     kind whatsoever which is a hazardous substance defined in, or related by
     the Federal Comprehensive Environmental Response Compensation and Liability
     Act, 42 USC (S)9601 et seq., as amended; the regulations promulgated from
     time to time thereunder; the waste listed in the United States Department
     of Transportation Hazardous Materials Table (49 CFR 172.101); the United
     States Environmental Protection Agency Hazardous Substances (40 CFR Part
     302), and amendments thereto; environmental laws and regulations
     administered by the Environmental Protection Agency or its delegees;
     similar laws and regulations of the State of Oregon, City of Portland, or
     any state or local governmental organization or agency, or additional or
     substitute laws or regulations with respect to the same subject matter
     enacted or promulgated by the federal, state, local, or quasi-governmental
     organization or agency; and (b) asbestos or materials containing asbestos,
     petroleum products, or such other substances, materials, and wastes that
     are or become regulated under the applicable local, state, or federal laws,
     whether or not within clause (a).

23.  RELOCATION. Landlord reserves the right to relocate Tenant, at Landlord's
     sole discretion and cost, to another similar location within the Building
     during the term of this Lease. In the event Landlord chooses to exercise
     its rights under this provision, Landlord shall also be responsible to
     reimburse Tenant for all reasonable additional costs and expenses incurred
     by Tenant and for any lost profits Tenant may incur as a result of said
     relocation.

24.  BROKERAGE FEES. Landlord agrees to pay a real estate fee to Tony Reser,
     Cushman & Wakefield. Landlord agrees to indemnify and hold Tenant free and
     harmless from and against all claims for brokerage commissions or fees
     and/or finder's fees by any person or entity claiming to have been retained
     by Landlord in connection with this transaction or to be the procuring
     cause of this transaction. Tenant agrees to indemnify and hold Landlord
     free and harmless from and against all claims for brokerage commissions or
     fees and/or finder's fees from any person or entity claiming to have been
     retained by Tenant in connection with this transaction or to be the
     procuring cause of this transaction, other than



SN Properties Triple Net Lease - Page 12
September 24, 1997


<PAGE>
 
     the real estate fee to Paul Breuer, Colliers through Tony Reser above which
     Landlord has agreed to pay hereunder.

25.  GENERAL PROVISIONS

     A.   Waiver by either party of strict performance of any provision of this
          Lease shall not be a waiver nor prejudice the party's right otherwise
          to require performance of the same provision or any other provision.

     B.   Subject to the limitations on transfer of Tenant's interest, this
          Lease shall bind and inure to the benefit of the parties, their
          respective heirs, successors and assigns.

     C.   Landlord shall have the right to enter upon the Premises at any time
          with provision of reasonable notice to determine Tenant's compliance
          with this Lease, to make necessary repairs to the Building or the
          Premises, or to show the Premises to any prospective tenant or
          purchasers subject to signing a Confidentiality and Non-disclosure
          Agreement, (Exhibit E). Within six (6) months of the end of the
          initial lease term or any renewal thereof in the event Tenant
          exercises any such renewal, Landlord may place and maintain upon the
          Premises notices for leasing or sale of the Premises notices for
          leasing or sale of the Premises.

     D.   If this Lease commences or terminates at a time other than the
          beginning or end of one of the specified rental periods, then the rent
          (including Tenant's share of real property taxes and common area
          charges, if any) shall be prorated as of such date, and in the event
          of termination for reasons other than default, all prepaid rent shall
          be refunded to tenant or paid on this account.

     E.   Landlord warrants that, so long as Tenant complies with all terms of
          this Lease, it shall be entitled to peaceable and undisturbed
          possession of the Premises free from any eviction or disturbance by
          Landlord or persons claiming through Landlord.

     F.   The term "Landlord" as used herein shall mean only the owner of the
          fee title to the Building and the land on which it is situated. In the
          event of any transfer of such title or interest, Landlord herein named
          (and in case of any subsequent transfers, the then Landlord) shall be
          relieved from and after the date of such transfer of all liability as
          respects Landlord's obligations thereafter to be performed, provided
          that any funds in the hands of Landlord, or the then Landlord at the
          time of such transfer, in which Tenant has an interest, shall be
          delivered to the succeeding Landlord.



SN Properties Triple Net Lease - Page 13
September 24, 1997


<PAGE>
 
     G.   Notices between the parties relating to this Lease shall be in
          writing, effective when delivered, or if mailed, effective on the
          second day following mailing, postage prepaid, certified mail, return
          receipt requested, to the address for the party stated in this Lease
          or to such other address as either party may specify by notice to the
          other. Rent shall be payable to Landlord at the same address.

          If to Landlord:   SF Property Investments, LLC
                            1121 SW Salmon Street
                            Portland, OR 97205
                            503-248-2000
                            Fax-503-248-9140

                            Attn: Jordan Schnitzer

          If to Tenant:     PJ Food Service, Inc.
                            PO Box 99900
                            Louisville, Kentucky 40269-9990
                            502-267-0948

     H.   Time is of the essence with respect to the performance of each and
          every provision of this Lease. This Lease shall be governed by the
          laws of the State of Oregon.

     I.   If either party brings legal action against the other party to enforce
          any provision of this Lease, the prevailing party shall be entitled to
          recover reasonable attorneys' fees in addition to any other damages
          awarded at arbitration, trial and upon any appeal.

     J.   In the event Tenant renews or extends this lease, Landlord shall not
          be responsible for paying any outside brokerage or consulting fees for
          the extension period. Should Tenant retain an outside broker,
          consultant, Tenant shall be solely responsible for any compensation
          due.

     IN WITNESS WHEREOF, the parties have executed this Lease as of the day and 
year first written above.

Landlord:                                   Tenant:
SF Property Investments LLC                 PJ Food Service, Inc.

By /s/ Harold Shultz                        By /s/ Robert J. Wadell   
   --------------------------                 --------------------------------

Title  President                            Title  President P.J. Food Service
     ------------------------                    -----------------------------

Date   Nov. 21, 1997                        Date   Nov. 13, 1997      
    -------------------------                   ------------------------------

SN Properties Triple Net Lease-Page 14
September 24, 1997




          

<PAGE>


                                   EXHIBIT A
                           
                           [FLOOR PLAN APPEARS HERE]

<PAGE>
 
                                   EXHIBIT B

                               LEGAL DESCRIPTION
                                   BLOCK 29
                                LOT 7, TRACT 1

A parcel of land located in the Northeast 1/4 of Section 26, Township 2 North,
Range 1 West, Willamette Meridian, City of Portland, Multnomah County, Oregon
and further described as follows:

Beginning at the Southeast corner of Lot 7 of the duly recorded plat of
"Rivergate Industrial District Block 29, Lots 1-8", recorded in book 1218, page
51, dated 5-21-86, said point being on the West right-of-way line of N. Lombard
Street; thence leaving the aforesaid right-of-way line, along the South Line of
Lot 7, North 90(degrees)00'00" West 465.81 feet, to the Southwest corner of Lot
7 of said plat; thence along the Westerly line of Lot 7 & 8, along the arc of a
2812.93 foot radius nontangent curve to the right, through a central angle of
7(degrees)20'09" a distance of 360.15 feet to a point that bears North
18(degrees)43'19" East a distance of 359.91 feet from the last described point;
thence along the Westerly line of Lot 8, North 22(degrees)23'23" East a distance
of 220.00 feet; thence leaving the Westerly line of Lot 8, South
72(degrees)27'08" East a distance of 279.49 feet to a point on the East line of
Lot 8 and the West right-of-way line of North Lombard Street; thence South
00(degrees)00'00" East along the West right-of-way line of N. Lombard Street, a
distance of 460.00 feet to the TRUE POINT OF BEGINNING, containing 4.41 acres
more or less.


PLA746
BUREAU OF PLANNING
City of Portland
First Floor . Permit Center
1120 S.W. Fifth Avenue
Portland, Oregon 97204-1992

                                  REGISTERED
                                 PROFESSIONAL
                                 LAND SURVEYOR
                              
                              /s/ David A. Foster
                              -------------------
                                    OREGON
                                 DEC. 10, 1909
                                DAVID A. FOSTER
                                     #1934

RENEWED THRU 12/31/97



<PAGE>
 
                                   EXHIBIT C

                        Tenant's Specialty Improvements

Upon termination of the Lease or an option period, where Tenant is required to 
vacate the Premises, Landlord may, at its option, require Tenant, at Tenant's 
sole expense, to remove Tenant's Speciality Improvements and restore the 
Premises to its original condition prior to construction of Tenant's Specialty 
Improvements.

     Attached are the layouts for the Building at Rivergate Distribution Center 
     at 15011 North Lombard Street, Portland, Oregon 97203.

     There is a layout for Phase One which will be constructed first and a
     layout for Phase Two which would be constructed once the store numbers are
     increased for the area.

     Narrative for Phase One:

          The Office Area includes Five Offices, Conference Room, Reception
          Area, Logistics Office, Shipping & Receiving Office, Copier Room,
          Women's & Men's Restroom, Break Room, Maintenance Area and a Mezzanine
          above the Office Area for added storage or future offices.

          There is going to be a Freezer and a Dough Cooler installed, to
          warehouse the dough balls and perishables, for the individual pizza
          stores.

          The Production Room will be the area where the dough will be produced.
          Inside the "Dough Room" there will be a mixer, divider, rounder,
          proofer and conveyors in which the dough balls will be placed into
          trays then conveyed to the dough cooler. There will be support
          utilities for the "Dough Room" which includes a chiller, ozonization
          system, water heater, air compressor with a dryer and a hydraulic
          pump. A Production Office will be connected to the Production Room.

          In the open Warehouse Area, there will be a Battery Charging Area for
          the forklifts, guardrails and a tray washer at the back of the
          building.

     Narrative for Phase Two:

          In additional to the above, a Cheese Cooler, a larger Tray Washer, an
          Automated Tray Conveyor, another Mixer, a Weigh Hopper and a Silo
          System would be installed at a later date. Also some of the Dough Room
          Equipment might be upgraded.

     See the attached drawings for the above Narratives.


<PAGE>
 




                             [DRAFT APPEARS HERE]







<PAGE>
 





                             [DRAFT APPEARS HERE]






<PAGE>
 
                                   EXHIBIT D

                                Landlord's Work

Landlord shall, at its sole cost and expense (unless otherwise noted below) 
construct the following improvements:

1.  Construct a demising wall to separate the lease space from the balance of 
the building.

2.  Provide Tenant with a 1,200 amp, 480 volt, 3-phase electrical panel.

3.  Install insulation to allow the building to be heated above 45 degrees 
Farenheit. Cost of said improvement shall be shared co-equally by Landlord and 
Tenant up to a maximum cost of $20,000.00 total, or $10,000.00 each to Landlord 
and Tenant.

4.  When required by Tenant, in writing, install a rail spur to the subject 
space sufficient to allow a rail car to be spotted at the northerly most rail 
door.

5.  Relocate unit space heaters as required by Tenant.














SN Properties Triple Net Lease - Page 19
September 24, 1997

<PAGE>
 
                                   EXHIBIT E

                                Renewal Options

If Lessee is not then in default, Lessee shall have the right to renew the Term
of the Lease for up to two (2) additional periods of five (5) years each. Lessee
must exercise its right to renew by providing Lessor with not less than six (6)
months advance written notice. Lessee may only exercise its right as to the
second option period if it is not then in default and it has previously
exercised the first option. The terms and conditions during any renewal Term
shall be the same as provided in the Lease except as to Base Rent which shall be
as set forth below.

     During the first Option Period (consisting of Lease years 6-10), Base Rent
shall increase annually over the preceding year's Base Rent effective on the
first day of the first month of each succeeding Lease Year in the same
proportion as any increase in the "Consumer Index" during the 12-month period
ending immediately before each such first day of the Lease Year; subject
however, to the limitation that such increase shall be not less than three
percent (3%) nor more than five percent (5%).

     At the beginning of the second Option Period (consisting of Lease years 11-
15), there shall be a one-time adjustment of Base Rent specifically for the
first year of the second Option Term (Lease Year 11) which could result in an
increase over the previous period (Lease Year 10), no change or a decrease. This
special one-time adjustment shall be determined by adding the actual annual
changes in the Consumer Index from each of the first ten (10) lease years
(increases, no changes or decreases) and applying that cumulative factor to the
Lease's initial annual Base Rent rate of $133,800.00. Thereafter, during Lease
Years 12-15, the Base Rent shall be increased annually in proportion to the
increase in the "Consumer Index" as described above; subject however, to the
same limitation that such increase shall be not less than three percent (3%) nor
more than five percent (5%).

The "Consumer Index" shall mean the Consumer Price Index for Urban Wage Earners
and Clerical Workers (1982-1984=100) U.S. City Average for All Items, as
published by the United States Department of Labor, Bureau of Labor Statistics.
If the Consumer Index is discontinued or revised during the Term, then such
other index or computation with which it is replaced or other reasonable
replacement as determined by Landlord shall be used. Landlord shall submit a
statement to Tenant reflecting the increase, if any, as provided in this
section. If such statement is delayed, Tenant shall continue to pay the Base
Rent in effect and shall immediately pay to Landlord any deficiency in Base Rent
due upon submission of such statement.


<PAGE>
 
                                   EXHIBIT F

                                PJ FOOD SERVICE
                  BUSINESS VISITORS CONFIDENTIALITY AGREEMENT
                             AND LIABILITY WAIVER

     PJ Food Service, Inc. ("PJFS") is engaged in the production, sale and
distribution of various food products. PJFS has acquired or developed, at
considerable expenditure of time and other resources, valuable proprietary
information, the unauthorized disclosure or use of which would adversely affect
the successful conduct of PJFS's business. In consideration of the opportunity
to visit PJFS's facilities to perform services for PJFS or otherwise in
furtherance of a business relationship between PJFS and the undersigned, the
undersigned hereby agrees as follows:

     1.  The undersigned assumes any risk attendant upon such visit and agrees
that PJFS, its employees, officers, directors and shareholders shall not be
liable under any circumstances for any injury to the undersigned or any agent or
employee of the undersigned or damage to the undersigned's property sustained
when on PJFS's premises, regardless of cause (excepting willful misconduct or
gross negligence of PJFS or its agents or employees).

     2.  In connection with my visit, the undersigned may acquire, have access
to or be exposed to "Confidential Information" of PJFS (as defined below). The
undersigned will not disclose or make available such Confidential Information,
directly or indirectly, to any other person or entity whatsoever (except as
strictly necessary in the performance of services for PJFS or in furtherance of
a business relationship with PJFS, subject to the provisions of paragraph 4,
below) and the undersigned will ensure the return to PJFS of all materials
containing Confidential Information (and any copies thereof) upon termination of
any business relationship with PJFS or upon PJFS's request, whichever first
occurs.

     3.  As used herein, the term "Confidential Information" means all
confidential proprietary information (regardless of whether marked or labeled as
such) used by PJFS in the development, production, processing, preparation,
sale, distribution or transportation of its food products, including: (a) all
processes, procedures, formulae, recipes or other techniques; (b) all technical,
business and economic information and data relevant to PJFS's food products; (c)
all machinery, tools and equipment, and all drawings, designs and specifications
therefor, used or developed by PJFS but which are not generally used by the
food service or baking industries at large; and (d) all research data and
information in PJFS's possession relating to PJFS's food products, including
products that are under development, consideration or study. Confidential
Information does not include information that: (i) is in the public domain; (ii)
becomes in the public domain or is acquired other than through breach of this
Agreement or breach by any party of any duty, obligation or restriction imposed
by agreement, operation of law or otherwise; or (iii) is already in the
possession of the undersigned company/business at the time of exposure or
disclosure by PJFS.

     4.  To the extent it becomes necessary for the undersigned to communicate
Confidential Information to other agents or employees of the undersigned, the
undersigned will inform them of the confidential nature of such information and
the necessity and responsibility for keeping such information confidential and
will make all reasonable efforts to ensure that such individuals keep such
information confidential.

    5.  The provisions of this Agreement shall apply to each and every visit
made by the undersigned to a PJFS facility and shall be interpreted and applied
in accordance with the laws of the Commonwealth of Kentucky. This Agreement
shall inure to the benefit of and be enforceable by, PJFS and its successors and
assigns.



- ---------------------------------         ---------------------------------
Company Name                              Individual Visitor


By: -----------------------------         ---------------------------------
                                          Individual Visitor


Title: --------------------------         ---------------------------------
                                          Individual Visitor






<PAGE>

                                                                   Exhibit 10.32
 
                                  AMENDMENT II
                                        
AMENDMENT 1, to be attached to and form a part of Lease Agreement dated 9
November 1990 and Amendment I dated 5 March 1992, which together with any
amendments, modifications and extensions thereof is hereinafter referred to as
"Lease Agreement",

    BETWEEN:
Crow Kessler, a Texas Limited Partnership

    hereinafter referred to as "LESSOR", and

Papa Johns International, Inc., a Delaware corporation

    hereinafter referred to as "LESSEE",

concerning the premises described as follows:

    Approximately 35,724 SF of office/warehouse space, which shall herein be
    deemed to be as displayed in Exhibit A-2, within Decimal Point Service
    Center #3, as described on Exhibit B-2.

WHEREAS, Lessor and Lessee desire to extend the term of said Lease Agreement;

Now, THEREFORE, in consideration of the mutual covenants herein set forth and
other good and valuable consideration, Lessor and Lessee hereby amend said Lease
Agreement to read as follows:

1.  Reference Paragraph 1, TERM: The term of the Lease is hereby renewed and
    extended for an additional term of six (6) months to commence on January 1,
    1998 and ending June 30, 1998.

2.  Reference Paragraph 2A. BASE RENT: During the extended term, commencing on
    the Commencement Date,
 Lessee agrees to pay Lessor for the leased premises,
    in advance, without demand the following:

                         Period        Monthly Rental
                         ------        --------------
                      1 - 6 Months    $14,498.66/Month

    The amount of monthly rental and the initial monthly escrow payments are as
    follows:

    (1) Base Rent as set forth in Paragraph 2A   $14,498.66
                                                  ---------
    (2) Tax Escrow Payment                       $ 1,190.80
                                                  ---------
    (3) Insurance Escrow Payment                 $   297.70
                                                  --------- 
    (4) Utility Charge                           $     ****
                                                  --------- 
    (5) Common Area Charge                       $ 1,190.80
                                                  ---------
    (6) Security Services                        $     ****
                                                  --------- 
    (7) Other (Drainage)                         $     ****
                                                  ---------
          Monthly Payment Total                  $17,177.96
                                                  ---------

3.  Lessee shall accept the premises for this renewal term on an "as is" basis.

All other terms of the original Lease Agreement dated 9 November 1990 and
Amendment I dated 5 March 1992 shall remain the same.

IN WITNESS WHEREOF, the parties hereto have signed this Amendment II this 21 day
of April, 1997.
 
LESSEE:                                LESSOR:
Papa Johns International               Trammell Crow Asset Management, Inc.
a Delaware Corporation                 a Delaware corporation
                                       Agent for Crow Kessler
By: /s/ Richard Emmett                 a Texas Limited Partnership
   --------------------------------

Title: Vice President                  By: /s/ Scott Robinson
      -----------------------------       -------------------------------------
                                          Scott Robinson, Senior Vice President

Witness: /s/ Barbara J. Allen          Witness: /s/ Patti Danagut
        ---------------------------            --------------------------------

<PAGE>
 
                                  EXHIBIT A-2
                                  -----------

                                LEASED PREMISES
                                   35,724 SF




                     [DIAGRAM OF FLOOR PLAN APPEARS HERE]

<PAGE>
 
                                  EXHIBIT B-2
                                  -----------

                         DECIMAL POINT SERVICE CENTER
                                 BUILDING 3 

Beginning at a point in the south line of a tract of land conveyed to Crow-
DiManino #5 as recorded in Deed Book 5414, Page 214, Deed Book 5432, Page 263
and Deed Book 5432, Page 272 in the aforementioned clerk's office and the
northwest corner of a tract of land conveyed to Crow-Kessler A Texas Limited
Partnership as recorded in Deed Book 5432, Page 263 in the aforementioned
clerk's office, thence with said line South 14 degrees 00' 00" East, 355.00 feet
to a point; thence leaving said line South 35 degrees 45' 31" West, 22.88 feet
to a point; thence South 76 degrees 00' 00" West, 129.09 feet to point; thence
North 14 degrees 00' 00" West, 20.57 feet to a point; thence South 76 degrees
00' 00" West, 105.00 feet to a point; thence North 14 degrees 00' 00" West,
258.73 feet to a point; thence with the arc of a curve to the right having a
radius of 144.41 feet and a chord of North 05 degrees 13' 59" West, 44.02 feet
to a point in the southern right-of-way line of Bluegrass Court; thence with the
south right-of-way line of Bluegrass Court with the arc of a curve tO the left
having a radius Of 60 feet and the following three chords: South 77 degrees 51'
40" East, 41.43 feet to a point; North 36 degrees 56' 33" East, 84.85 feet to a
point; North 13 degrees 40' 57" West, 11.76 feet to a point in the south line of
a tract of land conveyed tO Crow-DiMartino #5 as previously mentioned; thence
North 76 degrees 00'00" East, 141.70 feet to the point of beginning containing
1.941 acres.


                                                                     Lessor  AR
                                                                           -----

                                                                     Lessee  AJE
                                                                           -----



<PAGE>
 
Exhibit 10.33  -  Amendment VIII

AMENDMENT VIII, to be attached to and form a part of Lease Agreement dated 
7 November 1990, Amendment I dated 29 April 1991, Amendment II dated 19 August
1991, Amendment III dated 4 December 1992, Amendment IV dated 10 August 1993,
Amendment V dated 8 November 1993, Amendment VI dated 20 February 1995 and
Amendment VII dated 31 May 1995, (which together with any amendments,
modifications and extension thereof is hereinafter referred to as "Lease
Agreement"),

BETWEEN

CWK #7 Limited Partnership
       hereinafter referred to as "LANDLORD", and

Papa John's International Inc., a Delaware corporation
       hereinafter referred to as "TENANT",

concerning the premises described as follows:

Approximately 31,180 R.S.F. of office space, which shall herein be deemed to be 
as displayed in Exhibit "A-8", within the Decimal Point Corporate Center located
at 11492 Bluegrass Parkway, Louisville, Kentucky 40299, situated on real 
property described on Exhibit "B-8".

WHEREAS, Landlord and Tenant desire to extend the term of said Lease Agreement;

Now, THEREFORE, in consideration of the mutual covenants herein set forth and 
other good and valuable consideration, Landlord and Tenant hereby amend said 
Lease Agreement
 to read as follows:

1.  Reference Article 1: The term of the Lease is hereby extended six (6) months
    commencing January 1, 1998 ("Commencement Date") and ending June 30, 1998.

2.  Reference Article 2A: Base rent for the premises (31,180 R.S.F.) starting 
    January 1, 1998 shall be $38,117.55 per month.

3.  Entire Agreement: This Lease contains the entire agreement between the
    parties, and no agreement shall be effective to change, modify or terminate
    this Lease in whole or in part unless such agreement is in writing and duly
    signed by both parties. Landlord and Tenant acknowledge that there are no
    representations, either oral or written, between them other than those in
    this Lease.

All other terms and conditions of the original Lease Agreement dated 7 November 
1990, Amendment I dated 29 April 1991, Amendment II dated 19 August 1991, 
Amendment III dated 4 December 1992, Amendment IV dated 10 August 1993, 
Amendment V dated 8 November 1993, Amendment VI dated 20 February 1995 and 
Amendment VII dated 31 May 1995 shall remain the same.

WITNESS WHEREOF, the parties hereto have signed this Amendment VIII this 21 day 
of April, 1997.

TENANT:                           LANDLORD:
Papa John's International         Trammell Crow Asset Management, Inc.
a Delaware corporation            a Delaware corporation
                                  Agent for CWK#7 Limited Partnership

By:  /s/ Richard Emmett           By:  /s/ Scott Robinson, Senior Vice President
Title: Vice President                  Scott Robinson, Senior Vice President
Witness: /s/ Barbara Allen        Witness: /s/ Patti Baumgul

<PAGE>
 

Exhibit A-8
Lease Premises

Decimal Point Corporate Center
31,180 SF

<PAGE>
 
Exhibit B-8

Decimal Point Corporate Center

Legal Description of Premises
- -----------------------------

Beginning at a point in the southeast corner of a tract of land conveyed to 
Crow-Kessler, a Texas Limited Partnership, as recorded in Deed Book 5432, Page 
263 in the aforementioned clerk's office, and the west right-of-way line of 
Bluegrass Parkway thence  with the west right-of-way line of Bluegrass Parkway 
South 02 24' 46" East, 151.96 feet to a point; thence with the arc of a curve to
the left having a radius of 565.00 feet and a chord of South 07 31'23" East, 
100.65 feet to a point; thence with the arc of a curve to the right having a 
radius of 40.00 feet and a chord of South 30 35' 20" West, 54.79 feet to a 
point; thence with the north right-of-way line of Decimal Drive with the arc of 
a curve to the right having a radius of 260.0 feet and a chord of South 83 10' 
45" West, 84.64 feet to a point; thence North 87 27'10" West, 324.32 feet to a 
point; thence leaving the right-of-way of Decimal Drive North 02 32' 50" East, 
26.59 feet to a point thence with the arc of a curve to the left having a radius
of 149.98 feet and the following chords: North 13 23'23" West, 82.36 feet to a 
point; North 43 10' 26" West, 71.80 feet to a point, thence with the arc of a 
curve to the right having a radius of 150.0 feet and a chord of North 35 30' 41"
West, 110.01 feet to a point; thence North 76 00'00" East, 105.00 feet to a 
point; thence South 14 00'00" East, 20.57 feet to a point; thence North 76 
00'00" East, 129.099 feet to a point; thence North 35 45'31" East, 22.88 feet to
a point in the south line of a tract of land conveyed to Crow-Kessler, a Texas 
Limited Partnership as previously mentioned; thence with said line South 65 
54'55" East, 65.03 feet to a point; thence North 76 00'00" East, 200.00 feet to 
a point; thence South 02 24'46" East, 33.27 feet to a point; thence North 87 
35'14" East, 47.00 feet to the point of beginning containing 3.230 acres.



<PAGE>
 
                                                                   Exhibit 10.34



                                  FIRST LEASE
                                  -----------

                            MODIFICATION AGREEMENT
                            ----------------------

                                      For

                           P. J. Food Service, Inc.

                          101-A Vandora Springs Road

                            Vandora Shopping Center

                         Garner, North Carolina 27529





                                    LESSOR:
                                    -------

                               Sample Properties
                              Post Office Box 388
                       Garner, North Carolina 27529-0388



                                    LESSEE:
                                    -------

                           P. J. Food Service, Inc.
                      11492 Bluegrass Parkway, Suite #175
                          Louisville, Kentucky 40299







<PAGE>
 
STATE OF NORTH CAROLINA
COUNTY OF WAKE

                      FIRST LEASE MODIFICATION AGREEMENT

     THIS FIRST LEASE MODIFICATION AGREEMENT is made and entered into this 7th
day of November, 1997, by and between SAMPLE PROPERTIES, hereinafter known
"Lessor", and P. J. FOOD SERVICE, INC., a Kentucky Corporation, hereinafter
known as "Lessee".

                             W I T N E S S E T H:
                             --------------------

     WHEREAS, Lessor and Lessee have entered into a Lease Agreement dated May
14, 1993, for premises situated at 101-A Vandora Springs Road, Garner, Wake
County, North Carolina [with the legal description of said property attached to
this Agreement and made part of it with its inclusion as Exhibit ~C"], said
space being a 23,000-square-foot portion of a 26,750-square-foot masonry
building; and

     WHEREAS, the Lessee now desires to lease the adjacent and contiguous space
currently occupied by Tom Jones Discount Drugs on an "as is, where is" basis,
said space containing 3,750 square
 feet, said property identified as 101-B
Vandora Springs Road, Garner, Wake County, North Carolina; and

     WHEREAS, the parties hereto now desire to amend and modify the Lease
Agreement as hereinafter set forth:

     NOW, THEREFORE, by mutual agreement of the parties and in consideration of
the promises and obligations hereinafter set forth, said Lease Agreement is
hereby amended and modified as follows:

     1. Paragraph #2 is amended to extend the Lease Agreement for a period of
three [3] years and two [2] months commencing sixty [60] days after the date
Lessor turns possession of the Tom Jones space over to Lessee for fit-up plus
any time remaining to the end of the month. The total space being leased by
Lessor to Lessee shall be approximately 26,750 square feet.

     2. Paragraph #3 is amended to set the new rental rate for the combined
space at Three 11/100 Dollars [$3.11] per square foot which is Eighty-Three
Thousand One Hundred Ninety-Two 50/100 Dollars [$83,192.50] annually or Six
Thousand Nine Hundred Thirty-Two 71/100 Dollars [$6,932.71] per month during the
first year of the lease period, each monthly payment of which shall be due and
payable without setoff or demand to Lessor in advance by the first [1st] day of
each calendar month during the term of this Lease. Beginning on the first day of
the month following the anniversary of this First Lease Modification Agreement 
and on each subsequent anniversary date, the rentals due under the modified
Lease Agreement may be increased annually by an amount not to exceed three
percent [3%].

                                       2

<PAGE>
 
Rentals shall be paid to Sample Properties, and mailed to Post Office Box 388,
Garner, North Carolina 27529-0388. Checks resumed to Lessor by a Bank or other
such financial institution shall accrue a return-check charge of Fifty 00/100
Dollars [$50.00]. Lessor's Taxpayer Identification Number [TIN] is 56-1404287.

     3. Paragraph 8-E is amended to reflect the increased square footage, and
Common Area Maintenance is expanded to include the regular maintenance of
parking, common areas, service areas and landscaped areas all of which includes
regular maintenance, mowing grassed areas, vacuuming parking areas, picking up
trash, and maintenance and rehabilitation of landscaped areas, and for which
Lessee agrees to pay monthly to Lessor an additional amount of Fifteen Cents
[$.15] per square foot per year which is Three Hundred Thirty-Four 38/100
Dollars [$334.38] per month as additional rental. At the time this Lease
Amendment becomes effective, Lessor agrees to commence being responsible for the
electricity for area parking lights for all common areas of Vandora Shopping
Center, and Lessee agrees to reimburse Lessor for its pro-rata number of the
parking lot lights directly attributable to Lessee's commissary operations, that
number being [N] of a total number of [O] lights, with [N] being the numerator
and [O] being the denominator to determine the percentage of common area
electrical use chargeable to Lessee, and which Lessee shall pay each month to
Lessor as additional rental. Beginning with the first anniversary of this Lease
Modification Agreement, the CAM charge [not including the common area light
usage], may increase on an annual basis by an amount not to exceed Three percent
[3%].

     4. A new paragraph #34 with the heading "Lessor's Indemnity" is added with
the following language: Lessor shall be responsible for and shall indemnify
Lessee and hold it harmless from any and all liability for loss, damage or
injury to person or property caused by the negligence of Lessee, its agents or
employees. Lessor's obligation to indemnify Lessee hereunder shall include the
duty to pay any judgments or settlements, and al1 reasonable costs, fees and
expenses, including reasonable attorneys' fees, incurred in connection
therewith.

     5. A new paragraph #35 with the heading "Lessee's Indemnity" is added with
the following language: Lessee shall be responsible for and shall indemnify
Lessor and hold it harmless from any and all liability for loss, damage or
injury to person or property caused by the negligence of Lessee, its agents or
employees and in any product liability actions brought against Lessor by a
customer, directly or indirectly, of Lessee. Lessee's obligation to indemnify
Lessor hereunder shall include the duty to pay any judgments or settlements, and
all reasonable costs, fees and expenses, including reasonable attorneys'' fees,
incurred in connection therewith.

     6. Paragraph #22 is amended to add the following language: Lessee shall
execute at Lessor's request, and within five [s] business days thereof,
instruments evidencing the subordinate position of this Lease Agreement, and as
often as requested, shall sign estoppel certificates setting forth the date it
accepted possession, that it occupies the premises, the termination date of its
lease, the date to which rent has been paid, and the amount of monthly rent that
has been paid and the amount of monthly rent in effect as of such certification,
whether or not it has any defense or offset to the enforcement of the Lease, any
knowledge it has of any default or breach by Lessor, and that the Lease is in
full force and effect except as to modifications, agreements or amendments
thereto, copies of each of which shall be attached to the

                                       3

<PAGE>
 
certificate. Any sale of the real estate upon which the Premises are situated
shall be subject to the Lessee's interest and Lessor shall provide Lessee with a
written document acknowledging that its interest will be subject to this lease
Agreement. Lessee also agrees to sign within five [5] business days and as often
as requested by Lessor or his financial institution to sign Attornment,
Subordination and Non-Disturbance Agreements.

     7. A new paragraph #36 labeled "Force Majeure" is added with the following
language: Neither Lessor nor Lessee shall be liable to the other for any breach
or violation of this Lease Agreement resulting from any occurrence or event,
including any Act of God, strikes, lockouts, property damage or other casualty
or occurrence beyond the reasonable control of a party hereto.

     8. A new paragraph #37 entitled "Environmental" is added with the following
language: Lessor represents, covenants and warrants to Tenant that there are no
hazardous or toxic substances either under, about, on or in the Premises to the
best of its knowledge.

     Lessor shall indemnify Lessee and hold it harmless for any and all costs,
expenses, attorneys' fees, loss, damage or injury to person or property,
including any legal action brought against Lessor or Lessee by any federal,
state or local governmental agency, or subdivision thereof, or by any other
third party claimant, caused by any water, soil or other contamination in, under
or around the Premises resulting from the prior use of such Premises or any
surrounding areas by the Lessor or any prior owner or tenant, which
contamination was not caused by Lessee or which preceded the date of this Lease.

     Lessee shall indemnify Lessor and hold it harmless for any similar
environmental contamination to the extent such contamination is caused by Lessee
and occurs exclusively during the period hereof, including any renewals.

     9. A new paragraph #38 entitled "End of Lease Obligation" is added with the
following language: At the final termination of the initial lease term or, if
applicable, lease extension[s], Lessee shall remove all of his personal
property and de-identify the property by removing advertising signs and any
other decor or decorations which would identify Lessee's business. In
removing inventory, furniture, fixtures, advertising signs, equipment, personal
property and other miscellaneous items. Lessee shall not damage or destroy
Lessor's property and Lessee shall broom clean the premises and repair all
damage caused to the building by the removal of the above-identified items.
Lessee shall be responsible for damage to any HVAC, plumbing or electrical
equipment, structural portions of the building or common areas caused by the
moving out process. If Lessor must repair said damage, Lessee agrees to
reimburse Lessor for such damage within fifteen [15] days from invoice plus
reasonable attorney's fees and other costs of collection, if necessary.

A new exhibit shall be added to the Lease Agreement and marked as "Exhibit C"
which is identified as the legal description of the property and is attached and
made part of this Modification Agreement.

Except as hereby amended, all other terms and conditions of the original Lease
Agreement shall remain in full force and effect.

                                     --4--

<PAGE>
 
     IN WITNESS WHEREOF, the Lessor and Lessee have caused this First Lease
Modification Agreement [consisting of six (6) pages and one (1) exhibit] to be
duly executed the day and year first above written.


                                      LANDLORD:
                                      ---------

                                      SAMPLE PROPERTIES


                                      /s/ Joseph T. Sample           [SEAL]
                                      -------------------------------------
                                      by: Joseph T. Sample


                                      TENANT:
                                      -------

                                      P. J. FOOD SERVICE, INC.
 

                                      /s/ Robert Wadell      11-4-97 [SEAL]
                                      -------------------------------------
                                      by: Robert Wadell, President
                                                         P. J. Food Service
ATTEST:                                                  
        
      [Corporate Seal]

/s/ Charlotte L. Hendrick
- ---------------------------
By Asst Corporate Secretary

                                       5


<PAGE>
 
STATE OF NORTH CAROLINA
COUNTY OF WAKE


     I, M. Zane Sosna, a Notary Public in and for the aforesaid State and
County, do hereby certify that Joseph T. Sample personally appeared before me
this day and acknowledged the due execution of the foregoing instrument. Witness
my hand and official stamp or seal, this 7 day of November, 1997.


                                   M. Zane Sosna
                                   -----------------------------
                                   Notary Public

My commission expires: 02-06-2002




COMMONWEALTH OF KENTUCKY
COUNTY OF JEFFERSON


     I, Kathie R. West, a Notary Public for said County and State, do hereby
certify that Robert Wadell personally came before me and, who being by me duly
sworn, says that he is President of P. J. Food Service, Inc., a Kentucky
Corporation, and that the seal affixed for the foregoing instrument in writing
is the corporate seal of said P. J. Food Service, Inc., and that said writing
was signed and sealed by him in behalf of said corporation by its authority duly
given and duly attested by the Corporate Secretary. The said President
acknowledged the said writing to be the act and deed of the corporation. Witness
my hand and notarial seal this 5th day of November, 1997.


                                   Kathie R. West
                                   -----------------------------
                                   Notary Public


My Commission Expires: 3/22/2001

                                       6

<PAGE>
                                  EXHIBIT "C"


                               LEGAL DESCRIPTION

     BEGINNING at the Southeast intersection of Aversboro Road and New Vandora
Springs Road; runs thence along the South side of New Vandora Springs Road North
60 degrees 45 minutes East 381.92 feet to a point in the North Carolina Railroad
right of way; runs thence with the North Carolina Railroad right of way South 60
degrees 50 minutes East 213.55 feet to a point on the West side of Oak Circle;
runs thence with Oak Circle the following courses and distances: South 16
degrees West 213.2 feet, South 18 degrees 25 minutes West 50 feet, South 20
degrees 15 minutes West 25 feet, South 24 degrees 40 minutes West 25 feet,
South 31 degrees 58 minutes West 25 feet, South 40 degrees 46 minutes West 25
feet, South 56 degrees 51 minutes West 25 feet, South 67 degrees 51 minutes West
25 feet, South 76 degrees 38 minutes West 25 feet, South 84 degrees 30 minutes
West 25 feet, South 87 degrees 28 minutes West 25 feet, North 89 degrees 07
minutes West 82 feet, and North 86 degrees 53 minutes West 143.85 feet to the
point on the East side of Aversboro Road, thence North 10 degrees 42 minutes
West 284.5 feet to the point and place of BEGINNING, according to a survey
entitled "Property of Vandora Shopping Center, Inc." dated 5/21/79, by Linwood
E. Byrd, Registered Surveyors.

Wake County Revenue Department Property Identification Number 1711.14 24 7127 
000

                                       7



<PAGE>
                                                                   Exhibit 10.35

 
                            FIRST AMENDMENT TO LEASE
                            ------------------------
                                        
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is executed and effective this
10th day of February, 1997, (the "Effective Date"), between Arlington - OP&F,
Inc., a Delaware corporation ("Landlord" and PJ Food Service, Inc., a Kentucky
corporation ("Tenant").

                                    RECITALS

WHEREAS, Landlord and Tenant entered into that certain Lease Agreement dated
November 29, 1995 (the "Lease"), pursuant to which Tenant leased from Landlord
approximately 12,096 rentable square feet of space known as 1027 Avenue M, Grand
Prairie, Texas (the "Premises") in the building known as GSW 202 (the
"Building"); and

WHEREAS, Landlord and Tenant desire to modify the Lease as hereinafter
described;

NOW THEREFORE, in consideration of $10.00 and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties agree that the Lease is hereby amended as follows:

 1.  The term "Premises" as defined in the Lease shall be amended to include an
     additional +7,992 rentable square feet known as 1031 Avenue M, Grand
     Prairie, Texas (the "Additional Premises"), such space being outlined on
     the floor plan attached hereto marked Exhibit D, and signed by Landlord and
     Tenant for purposes of identification, for a term commencing on February
     14, 1997 and continuing through the termination date of the Lease, or such
     earlier date upon Which said term may expire pursuant to any of the
     conditions of limitation or other provisions of the Lease or of this
     Amendment, or pursuant to law and, in order to accomplish the addition of
     the Additional Premises to the leased premises demised by the Lease,
     Landlord DOES HEREBY LEASE
 to Tenant and Tenant DOES HEREBY TAKE from
     Landlord, for the term herein mentioned, the Additional Premises UPON and
     SUBJECT to the covenants, agreements, terms, provisions and conditions of
     the Lease and of this Amendment.

     The term "Premises", as defined in the Lease, shall be amended to mean
     approximately 20,088 rentable square feet, and Exhibit A of the Lease shall
     be amended to include the Additional Premises as outlined in Exhibit E
     attached hereto and signed by Landlord and Tenant for purposes of
     identification.

 2.  The termination date of the Lease shall be amended to mean February 29,
     2000.

 3.  Base rent shall be amended to mean $6,258.60 per month effective February
     14, 1997.

 4.  Tenant's pro rata share shall be amended to mean 34.4% on 20,088 square
     feet out of 58,321 square feet.

 5.  The security deposit, as required by Article 5 of the Lease, shall be
     increased by $2,730.60 for a total security deposit of $6,258.60. Such
     increased security deposit shall be due and payable as of the Effective
     Date of this First Amendment to Lease.

 6.  Tenant shall take the Premises in its "as-is" condition except that
     Landlord agrees to combine the electrical service between 1027 and 1031
     Avenue M and remove the existing concrete ramp located in front of 1031
     Avenue M. Such modifications are not to exceed $8,000.00.

 7.  Tenant shall not at any time occupy any part of the leased premises or
     project as sleeping or lodging quarters.

 8.  No dogs, cats, fowl, or other animals shall be brought into or kept in or
     about the leased premises or project.

 9.  None of the parking, recreation or lawn areas, entries, passages or doors
     shall be blocked or obstructed, or any rubbish, litter, trash, or material
     of any nature placed, emptied or thrown into these areas or such area
     be used by Tenant's agents, employees or invitees at any time for purposes
     inconsistent with their designation by Landlord.

10.  Tenant and its employees, agents and invitees shall park their vehicles,
     i.e., cars, trucks, only in those parking areas designated by Landlord.
     Tenant shall not leave any vehicle in a state of disrepair (including,
     without limitation, flat tires, out of date inspection stickers or
     license plates) on the leased premises or project. If Tenant or its
     employees, agents or invitees park their vehicles in areas other than the
     designated parking areas or leave any vehicle in a state of

                                       1

<PAGE>
 
     disrepair, Landlord, after posting written notice on the vehicle of such
     violation, shall have the right to remove such vehicles at vehicle owner's
     expense.

11.  The areas located directly in front of the dock doors shall strictly be
     used for loading and unloading and shall not be used for additional
     parking. Semi-trailers and/or trucks may not block or obstruct the traffic
     flow of the parking lot.

12.  Tenant shall not permit any objectionable or unpleasant odors, smoke, dust,
     gas, noise or vibrations to emanate from the Premises, nor take any other
     action that would constitute a nuisance or would disturb, unreasonably
     interfere with, or endanger Landlord or any other tenants of the Building
     in which the Premises are a part.

13.  Except as modified herein, all other terms and conditions of the Lease
     between the parties above described, shall remain unchanged and shall
     continue in full force and effect.

14.  The laws of the State of Texas and of the United States of America shall
     govern the rights, remedies, and duties of the parties hereto and the
     validity, construction, enforcement, and interpretation hereof

15.  This Amendment shall be binding upon and inure to the benefit of the
     parties hereto and their respective successors and assigns.

16.  If any provision of this Amendment is held to be illegal, invalid, or
     unenforceable under present or future laws, such provision shall be fully
     severable; this Amendment shall be construed and enforced as if such
     illegal, invalid, or unenforceable provision had never comprised a part
     hereof; and the remaining provisions hereof shall remain in full force and
     effect and shall not be affected by the illegal, invalid, or unenforceable
     provision or by its severance therefrom.

17.  Redress for any claim against Landlord under this Lease shall be limited to
     and enforceable only against and to the extent of Landlord's interest in
     the Building. The obligations of Landlord under this Lease are not intended
     to and shall not be personally binding on, nor shall any resort be had to
     the private properties of, any of its trustees or boards of directors and
     officers, as the case may be, its investment manager, the general partners
     thereof, or any beneficiaries, stockholders, employees, or agents of
     Landlord or the investment manager.

IN WITNESS WHEREOF, Landlord and Tenant have respectively signed this Amendment
to Lease as of the day and year first written above.

LANDLORD:                              TENANT:

Arlington - OP&F, Inc., a              PJ Food Service, Inc., a   
Delaware corporation                   Kentucky corporation

By:  RREEF MANAGEMENT COMPANY,
     a California corporation


       Phyllis L. Palis                       Robert Wadell
By:    ---------------------------     By:    -------------------------
            Phyllis L. Palis                        Robert Wadell

            District Manager                          President
Title: ---------------------------     Title: -------------------------

                 2/10/97                             Feb. 6, 1997
Date:  ---------------------------     Date:  -------------------------

                                       2

<PAGE>
 
                                   EXHIBIT D

         attached to and made part of First Amendment to Lease between
        Arlington - OP&F, Inc., a Delaware corporation, as Landlord and
           PJ Food Service, Inc., a Kentucky corporation, as Tenant

                              ADDITIONAL PREMISES

Exhibit D is intended to show the general layout of the Additional Premises as
of the beginning of the Term of this First Amendment to Lease. It does not in
any way supersede any of Landlord's rights with respect to arrangements and/or
locations of public parts of the Building and changes in such arrangements 
and/or locations. It is not to be scaled, any measurements or distances shown
should be taken as approximate.

                                       3

<PAGE>
 
                                   EXHIBIT E

         attached to and made part of First Amendment to Lease between
        Arlington - OP&F, Inc., a Delaware corporation, as Landlord and
           PJ Food Service, Inc., a Kentucky corporation, as Tenant
           
                                   PREMISES

Exhibit E is intended to show the general layout of the Premises as of the
beginning of the Term of this First Amendment to Lease. It does not in any way
supersede any of Landlord's rights with respect to arrangements and/or locations
of public parts of the Building and changes in such arrangements and/or
locations. It is not to be scaled; any measurements or distances shown should be
taken as approximate.

                                       4



<PAGE>

                                                                   Exhibit 10.36

                                 AMENDMENT IX


AMENDMENT IX, to be attached to and form a part of Lease Agreement dated 7 
November 1990, Amendment I dated 29 April 1991, Amendment II dated 19 August 
1991, Amendment III dated 4 December 1992, Amendment IV dated 10 August 1993, 
Amendment V dated 8 November 1993, Amendment VI dated 20 February 1995, 
Amendment VII dated 31 May 1995, and Amendment VIII dated April 21, 1997 (which
together with any amendments, modifications and extensions thereof is 
hereinafter referred to as "Lease Agreement"),

     BETWEEN:

CWK #7 Limited Partnership

     hereinafter referred to as "LANDLORD", and

Papa John's International Inc., a Delaware corporation

     hereinafter referred to as "TENANT",

concerning the premises described as follows:

     Approximately 31,180 R.S.F. of office space, which shall herein be deemed
     to be as displayed in Exhibit "A-9", within the Decimal Point Corporate
     Center located at 11492 Bluegrass Parkway, Louisville, Kentucky 40299,
     situated on real property described on Exhibit "B-9".

WHEREAS, Landlord and Tenant desire to extend the term of said Lease Agreement;

Now, THEREFORE, in consideration of the mutual covenants herein set forth and 
other good and valuable consideration, Landlord and Tenant hereby
 amend said 
Lease Agreement to read as follows:

1.   Reference Article 1: The term of the Lease is hereby extended six (6)
     months commencing July 1, 1998 ("Commencement Date") and ending December
     31, 1998.

2.   Reference Article 2A: Base rent for the premises (31,180 R.S.F.) starting 
     July 1, 1998 shall be $38,117.55 per month.

3.   Entire Agreement: This Lease contains the entire agreement between the 
     parties, and no agreement shall be effective to change, modify or
     terminate this Lease in whole or in part unless such agreement is in
     writing and duly signed by both parties. Landlord and Tenant acknowledge
     that there are no representations, either oral or written, between them
     other than those in this Lease.

All other terms and conditions of the original Lease Agreement dated 7 November 
1990, Amendment I dated 29 April 1991, Amendment II dated 19 August 1991, 
Amendment III dated 4 December 1992, Amendment IV dated 10 August 1993, 
Amendment V dated 8 November 1993, Amendment VI dated 20 February 1995, 
Amendment VII dated 31 May 1995 and Amendment VIII dated 21 April 1997 shall 
remain the same.

WITNESS WHEREOF, the parties hereto have signed this Amendment IX this 23 day 
of December, 1997.


TENANT:                                LANDLORD:
Papa Johns International               CIT Asset Management L.P.
a Delaware corporation                 Agent for CWK#7 Limited Partnership
                                       By:  Crow Family, Inc., its General 
                                            Partner



By: /s/ Richard J. Emmett              By: /s/ James C. Hendricks 
   ---------------------------            -------------------------------------
      Richard J Emmett                       James C. Hendricks 

Title: VP and Senior Counsel           Title: Vice President
      ------------------------               ----------------------------------

Witness: /s/ Lee Ann Zeller            Witness: /s/ David T. Cobell
        ----------------------                 --------------------------------



<PAGE>
      
                                  EXHIBIT A-9
                                  -----------

                                LEASED PREMISES





                        DECIMAL POINT CORPORATE CENTER
                                   31,180 SF




                  [DIAGRAM OF DECIMAL POINT CORPORATE CENTER]








<PAGE>
 
                                  EXHIBIT B-9


                        DECIMAL POINT CORPORATE CENTER


                         Legal Description of Premises


Beginning at a point in the southeast corner of a tract of land conveyed to 
Crow-Kessler, a Texas Limited Partnership, as recorded in Deed book 5432, Page
263 in the aforementioned clerk's office, and the west right-of-way line of
Bluegrass Parkway thence with the west right-of-way line of Bluegrass Parkway
south 02 degrees 24' 46" East, 151.96 feet to a point; thence with the arc of a
curve to the left having a radius of 565.00 feet and a chord of South 07 degrees
31' 23" East, 100.65 feet to a point; thence with the arc of a curve to the
right having a radius of 40.00 feet and a chord of South 30 degrees 35' 20"
West, 54.79 feet to a point; thence with the north right-of-way line of Decimal
Drive with the arc of a curve to the right having a radius of 260.00 feet and a
chord of South 83 degrees 10' 45" West, 84.64 feet to a point; thence North 87
degrees 27' 10" West, 324.32 feet to a point; thence leaving the right-of-way of
Decimal Drive North 02 degrees 32' 50" East, 26.59 feet to a point; thence with
the arc of a curve to the left having a radius of 149.98 feet and the following
chords: North 13 degrees 23' 23" West, 82.36 feet to a point; North 43 degrees
10' 26" West, 71.80 feet to a point; thence with the arc of a curve to the right
having a radius of 150.00 feet and a chord of North 35 degrees 30' 41" West,
110.01 feet to a point; thence North 76 degrees 00' 00" East, 105.00 feet to a
point; thence South 14 degrees 00' 00" East, 20.57 feet to a point; thence North
76 degrees 00' 00" East, 129.099 feet to a point; thence North 35 degrees 45'
31" East, 22.88 feet to a point in the south line of a tract of land conveyed to
Crow-Kessler, A Texas Limited Partnership as previously mentioned; thence with
said line South 65 degrees 54' 55" East, 65.03 feet to a point; thence North 76
degrees 00' 00" East, 200.00 feet to a point; thence South 02 degrees 24' 46"
East, 33.27 feet to a point; thence North 87 degrees 35' 14" East, 47.00 feet to
the point of beginning containing 3.230 acres.






<PAGE>

                                                                   Exhibit 10.37

                                 AMENDMENT III

AMENDMENT III, to be attached to and form a part of Lease Agreement dated 9 
November 1990, Amendment I dated 5 March 1992 and Amendment II dated 21 April 
1997, which together with any amendments, modifications and extensions thereof 
is hereinafter referred to as "Lease Agreement",

     BETWEEN:

Crow Kessler, a Texas Limited Partnership

     hereinafter referred to as "LESSOR", and

Papa Johns International, Inc., a Delaware corporation

     hereinafter referred to as "LESSEE",

concerning the premises described as follows:

     Approximately 35,724 SF of office/warehouse space, which shall herein be
     deemed to be as displayed in Exhibit A-3, within Decimal Point Service
     Center #3, as described on Exhibit B-3.

WHEREAS, Lessor and Lessee desire to extend the term of said Lease Agreement;

Now, THEREFORE, in consideration of the mutual covenants herein set forth and
other good and valuable consideration, Lessor and Lessee hereby amend said Lease
Agreement to read as follows:

1.   Reference Paragraph 1, TERM: The term of the Lease is hereby renewed and
     extended for an additional term of six (6) months to commence on July 1,
     1998 and ending December 31, 1998.

2.   Reference Paragraph 2A, BASE RENT: During the extended term,
 commencing on
     the Commencement Date, Lessee agrees to pay Lessor for the leased premises,
     in advance, without demand the following:

<TABLE> 
<CAPTION> 
             Period                    Monthly Rental
             ------                    --------------
<S>                                    <C> 
          1 - 6 Months                 $14,498.66/Month
</TABLE>
 

     The amount of monthly rental and the initial monthly escrow payments are as
     follows:

<TABLE>
<S>                                                   <C> 
     (1) Base Rent as set forth in Paragraph 2A       $ 14,498.66
                                                       ----------
     (2) Tax Escrow Payment                           $  1,190.80
                                                       ----------
     (3) Insurance Escrow Payment                     $    297.70
                                                       ----------
     (4) Utility Charge                               $      ****
                                                       ----------
     (5) Common Area Charge                           $  1,190.80
                                                       ----------
     (6) Security Services                            $      ****
                                                       ----------
     (7) Other (Drainage)                             $      ****
                                                       ----------
               Monthly Payment Total                  $ 17,177.96 
                                                       ----------
</TABLE>


3.   Lessee shall accept the premises for this renewal term on an "as is" basis.

All other terms of the original Lease Agreement dated 9 November 1990, Amendment
I dated 5 March 1992 and Amendment II dated 21 April 1997 shall remain the same.

IN WITNESS WHEREOF, the parties hereto have signed this Amendment III this 23
day of December, 1997.

LESSEE:                               LESSOR:
Papa Johns International              CIT Asset Management, L.P.
a Delaware Corporation                Agent for Crow Kessler
                                      a Texas Limited Partnership
                                      By: Crow Family, Inc., its General Partner

By: /s/ Richard J. Emmett             By: /s/ James C. Hendricks
    ---------------------------           --------------------------------------
    Richard J. Emmett                     James C. Hendricks 

Title: VP and Senior Counsel          Title: Vice President
       ------------------------              -----------------------------------

Witness: /s/ Lee Ann Zeller           Witness: /s/ David T. Cobell
         ----------------------                ---------------------------------


<PAGE>
 

                                  EXHIBIT A-3
                                  -----------

                                LEASED PREMISES
                                   35,724 SF





                           [FLOOR PLAN APPEARS HERE]






<PAGE>
 

                                  EXHIBIT B-3
                                  -----------

                         DECIMAL POINT SERVICE CENTER
                                  BUILDING 3


Beginning at a point in the south line of a tract of land conveyed to 
Crow-DiMartino #5 as recorded in Deed Book 5414, Page 214, Deed Book 5432, Page 
263 and Deed Book 5432, Page 272 in the aforementioned clerk's office and the 
northwest corner of a tract of land conveyed to Crow-Kessler A Texas Limited 
Partnership as recorded in Deed Book 5432, Page 263 in the aforementioned 
clerk's office; thence with said line South 14 degrees 00' 00" East, 355.00 feet
to a point; thence leaving said line South 35 degrees 45' 31" West, 22.88 feet 
to a point; thence South 76 degrees 00' 00" West, 129.09 feet to point; thence 
North 14 degrees 00' 00" West, 20.57 feet to a point; thence South 76 degrees 
00' 00" West, 105.00 feet to a point; thence North 14 degrees 00' 00" West, 
258.73 feet to a point; thence with the arc of a curve to the right having a 
radius of 144.41 feet and a chord of North 05 degrees 13' 59" West, 44.02 feet 
to a point in the southern right-of-way line of Bluegrass Court; thence with the
south right-of-way line of Bluegrass Court with the arc of a curve to the left 
having a radius of 60 feet and the following three chords: South 77 degrees 51' 
40" East, 41.43 feet to a point; North 36 degrees 56' 33" East, 84.85 feet to a 
point; North 13 degrees 40' 57" West, 11.76 feet to a point in the south line of
a tract of land conveyed to Crow-DiMartino #5 as previously mentioned; thence 
North 76 degrees 00' 00" East, 141.70 feet to the point of beginning containing 
1.941 acres.



<PAGE>
 
                                                                      Exhibit 21


                          Subsidiaries of the Company

          (a)   PJ Food Service, Inc., a Kentucky corporation
          (b)   Papa John's USA, Inc., a Kentucky corporation
          (c)   Printing & Promotions, Inc., a Kentucky corporation
          (d)   PJFS of Mississippi, Inc., a Mississippi corporation
          (e)   Risk Services Corp., a Kentucky corporation
          (f)   Capital Delivery, Ltd., a Kentucky corporation





<PAGE>
 
Exhibit 23



                        Consent of Independent Auditors


We consent to the incorporation by reference in (i) the Registration Statements
(Forms S-8 No. 333-27823, No. 333-16447 and No. 33-67472) pertaining to the Papa
John's International, Inc. 1993 Stock Ownership Incentive Plan, (ii) the
Registration Statement (Form S-8 No. 33-67470) pertaining to the Papa John's
International, Inc. 1993 Stock Option Plan for Non-Employee Directors, and (iii)
the Registration Statement (Form S-4 No. 33-96552) of Papa John's International,
Inc. of our report dated February 27, 1998, with respect to the consolidated
financial statements of Papa John's International, Inc. and subsidiaries
included in the Annual Report (Form 10-K) for the year ended December 28, 1997.


                                             /s/ Ernst & Young LLP


Louisville, Kentucky
March 16, 1998





<TABLE> <S> <C>


<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS            
<FISCAL-YEAR-END>               Dec-28-1997       
<PERIOD-START>                  Dec-30-1996       
<PERIOD-END>                    Dec-28-1997       
<CASH>                               18,692            
<SECURITIES>                         57,933            
<RECEIVABLES>                        15,132            
<ALLOWANCES>                              0                 
<INVENTORY>                           9,091             
<CURRENT-ASSETS>                     49,176            
<PP&E>                              145,312           
<DEPRECIATION>                       32,711            
<TOTAL-ASSETS>                      253,243           
<CURRENT-LIABILITIES>                30,382            
<BONDS>                               1,320             
<PREFERRED-MANDATORY>                     0               
<PREFERRED>                               0                 
<COMMON>                                291                 
<OTHER-SE>                          212,422           
<TOTAL-LIABILITY-AND-EQUITY>        253,243           
<SALES>                             479,139           
<TOTAL-REVENUES>                    508,784           
<CGS>                               243,680           
<TOTAL-COSTS>                       412,747           
<OTHER-EXPENSES>                     56,843            
<LOSS-PROVISION>                          0                 
<INTEREST-EXPENSE>                        0                 
<INCOME-PRETAX>                      42,625            
<INCOME-TAX>                         15,772            
<INCOME-CONTINUING>                  26,853            
<DISCONTINUED>                            0                 
<EXTRAORDINARY>                           0                 
<CHANGES>                                 0                 
<NET-INCOME>                         26,853            
<EPS-PRIMARY>                          0.93              
<EPS-DILUTED>                          0.91              
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
 
<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>                   <C>                   <C>                   <C> 
<PERIOD-TYPE>                   9-MOS                 6-MOS                 3-MOS                 12-MOS
<FISCAL-YEAR-END>                       DEC-28-1997           DEC-28-1997           DEC-28-1997            DEC-29-1996
<PERIOD-START>                          DEC-30-1996           DEC-30-1996           DEC-30-1996            JAN-01-1996      
<PERIOD-END>                            SEP-28-1997           JUN-29-1997           MAR-30-1997            DEC-29-1996    
<CASH>                                       19,663                 9,424                16,066                 24,063
<SECURITIES>                                 57,247                59,454                63,197                 65,067
<RECEIVABLES>                                13,547                13,613                13,475                 13,101
<ALLOWANCES>                                      0                     0                     0                      0
<INVENTORY>                                   8,524                 8,862                 8,067                  6,839
<CURRENT-ASSETS>                             47,181                37,610                42,537                 48,248
<PP&E>                                      133,727               124,477               112,165                101,513
<DEPRECIATION>                               29,328                26,020                23,274                 20,796
<TOTAL-ASSETS>                              241,289               226,584               218,928                212,061
<CURRENT-LIABILITIES>                        28,025                23,436                24,646                 23,014
<BONDS>                                       1,320                 1,320                 1,320                  1,505
<PREFERRED-MANDATORY>                             0                     0                     0                      0
<PREFERRED>                                       0                     0                     0                      0
<COMMON>                                        290                   290                   288                    288
<OTHER-SE>                                  202,956               194,350               185,851                180,355
<TOTAL-LIABILITY-AND-EQUITY>                241,289               226,584               218,928                212,061
<SALES>                                     343,059               221,927               103,072                337,939
<TOTAL-REVENUES>                            364,107               235,855               109,643                360,052
<CGS>                                       174,070               112,902                52,567                181,863
<TOTAL-COSTS>                               295,748               191,651                88,765                294,071
<OTHER-EXPENSES>                             41,080                26,622                12,496                 40,352
<LOSS-PROVISION>                                  0                     0                     0                      0
<INTEREST-EXPENSE>                                0                     0                     0                      0
<INCOME-PRETAX>                              29,870                18,990                 9,036                 29,546
<INCOME-TAX>                                 11,052                 7,026                 3,343                 10,932
<INCOME-CONTINUING>                          18,818                11,964                 5,693                 18,614
<DISCONTINUED>                                    0                     0                     0                      0 
<EXTRAORDINARY>                                   0                     0                     0                      0
<CHANGES>                                         0                     0                     0                      0
<NET-INCOME>                                 18,818                11,964                 5,693                 18,614
<EPS-PRIMARY>                                  0.65                  0.42                  0.20                   0.66
<EPS-DILUTED>                                  0.63                  0.40                  0.19                   0.65
        

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<TABLE> <S> <C>


<PAGE>
 
<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>                   <C>                   <C>                   <C> 
<PERIOD-TYPE>                   9-MOS                 6-MOS                 3-MOS                 12-MOS
<FISCAL-YEAR-END>                       DEC-29-1996           DEC-29-1996           DEC-29-1996            DEC-31-1995
<PERIOD-START>                          JAN-01-1996           JAN-01-1996           JAN-01-1996            DEC-26-1994      
<PERIOD-END>                            SEP-29-1996           JUN-30-1996           MAR-31-1996            DEC-31-1995    
<CASH>                                       19,169                31,871                11,143                 19,904
<SECURITIES>                                 67,730                58,408                33,322                 24,394
<RECEIVABLES>                                12,839                10,914                10,409                 10,198
<ALLOWANCES>                                      0                     0                     0                      0
<INVENTORY>                                   5,772                 5,639                 4,957                  5,188
<CURRENT-ASSETS>                             41,910                51,593                29,497                 38,318
<PP&E>                                       89,719                80,188                73,380                 68,552
<DEPRECIATION>                               18,113                15,777                13,658                 11,853
<TOTAL-ASSETS>                              198,696               189,478               132,949                128,819
<CURRENT-LIABILITIES>                        19,210                16,138                16,676                 16,900
<BONDS>                                       1,505                 1,505                 1,505                  1,680
<PREFERRED-MANDATORY>                             0                     0                     0                      0
<PREFERRED>                                       0                     0                     0                      0
<COMMON>                                        287                   191                   179                    268
<OTHER-SE>                                  172,961               167,162               110,379                106,014
<TOTAL-LIABILITY-AND-EQUITY>                198,696               189,478               132,949                128,819
<SALES>                                     241,404               154,392                71,977                236,286
<TOTAL-REVENUES>                            257,135               164,406                76,726                253,355
<CGS>                                       131,934                84,290                39,160                133,045
<TOTAL-COSTS>                               211,043               134,836                62,972                208,962
<OTHER-EXPENSES>                             28,748                18,745                 8,730                 28,574
<LOSS-PROVISION>                                  0                     0                     0                      0
<INTEREST-EXPENSE>                                0                     0                     0                      0
<INCOME-PRETAX>                              20,104                12,304                 5,586                 17,719
<INCOME-TAX>                                  7,439                 4,553                 2,067                  6,525
<INCOME-CONTINUING>                          12,665                 7,751                 3,519                 11,204
<DISCONTINUED>                                    0                     0                     0                      0 
<EXTRAORDINARY>                                   0                     0                     0                      0
<CHANGES>                                         0                     0                     0                      0
<NET-INCOME>                                 12,665                 7,751                 3,519                 11,204
<EPS-PRIMARY>                                  0.46                  0.28                  0.13                   0.45
<EPS-DILUTED>                                  0.45                  0.28                  0.13                   0.44
        


</TABLE>






<PAGE>
 
Exhibit 99.1 - Cautionary Statements

Information provided herein by the Company contains, and from time to time the
Company may disseminate materials and make statements which contain "forward-
looking" information within the meaning of the Private Securities Litigation
Reform Act of 1995 (the "Act"), including information within Management's
Discussion and Analysis of Financial Condition and Results of Operation. The
following cautionary statements are being made pursuant to the provisions of the
Act and with the intention of obtaining the benefits of the "safe harbor"
provisions of the Act. Although the Company believes that its expectations are
based on reasonable assumptions, actual results may differ materially from those
in the forward looking statements as a result of various factors, including but
not limited to, the following:

1.  The ability of the Company and its franchisees to continue to expand through
the opening of new restaurants is affected by a number of factors, many of which
are beyond the control of the Company and its franchisees.  These factors
include, among other things, selection and availability of suitable restaurant
locations, negotiation of suitable lease or
 financing terms, constraints on
permitting and construction of other restaurants, higher than anticipated
construction costs, and the hiring, training and retention of management and
other personnel.  Accordingly, there can be no assurance that the Company or its
franchisees will be able to meet planned growth targets or open restaurants in
markets now targeted for expansion.

2.  The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well established
competitors with substantially greater financial and other resources than the
Company and its franchisees.  Some of these competitors have been in existence
for a substantially longer period than the Company or its franchisees and may be
better established in the markets where restaurants operated by the Company or
its franchisees are, or may be, located.  A change in the pricing or other
marketing or promotional strategies of one or more of the Company's major
competitors could have an adverse impact on sales and earnings at restaurants
operated by the Company and its franchisees.

3.  Changes in consumer taste, demographic trends, traffic patterns and the
type, number and location of competing restaurants as well as increased food and
other costs could adversely affect the Company's restaurant business.

4.  The Company's restaurant operations are subject to federal and state laws
governing such matters as wages, working conditions, citizenship requirements
and overtime.  A significant number of hourly personnel employed by the Company
and its franchisees are paid at rates related to the federal minimum wage.
Accordingly, further increases in the minimum wage will increase labor costs for
the Company and its franchisees.