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https://cdn.kscope.io/3bdd44dbe07eacd828f59f412be3f969-Logo.jpg
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2024
OR
o    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)
Delaware61-1203323
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification number)
2002 Papa John’s Boulevard
Louisville, KY
40299-2367
(Address of principal executive offices)(Zip Code)
(502) 261-7272
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading SymbolName of each exchange on which registered:
Common stock, $0.01 par valuePZZAThe NASDAQ Stock Market LLC
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o
Indicate by check mark whether the Registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes x No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
xAccelerated filer o
Non-accelerated filer oSmaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
At May 3, 2024, there were 32,972,325 shares of the Registrant’s common stock outstanding.



INDEX
Page No.
i


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)March 31,
2024
December 31,
2023
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$27,768 $40,587 
Accounts receivable, net94,506 104,244 
Notes receivable, current portion5,802 5,199 
Income tax receivable1,906 2,577 
Inventories38,073 36,126 
Prepaid expenses and other current assets57,872 42,285 
Total current assets225,927 231,018 
Property and equipment, net273,303 282,812 
Finance lease right-of-use assets, net30,747 31,740 
Operating lease right-of-use assets153,880 164,158 
Notes receivable, less current portion, net11,010 12,346 
Goodwill75,975 76,206 
Other assets76,325 76,725 
Total assets$847,167 $875,005 
Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit
Current liabilities:
Accounts payable$61,014 $74,949 
Income and other taxes payable22,487 17,948 
Accrued expenses and other current liabilities143,401 158,167 
Current deferred revenue20,727 20,427 
Current finance lease liabilities8,495 9,029 
Current operating lease liabilities24,710 24,076 
Current portion of long-term debt1,800  
Total current liabilities282,634 304,596 
Deferred revenue18,780 20,366 
Long-term finance lease liabilities23,726 24,144 
Long-term operating lease liabilities143,797 151,050 
Long-term debt, less current portion, net761,317 757,422 
Other long-term liabilities62,395 60,192 
Total liabilities1,292,649 1,317,770 
Redeemable noncontrolling interests941 851 
Stockholders’ deficit:
Common stock ($0.01 par value per share; issued 49,278 at March 31, 2024 and 49,235 at December 31, 2023)
493 492 
Additional paid-in capital444,793 452,290 
Accumulated other comprehensive loss(7,554)(7,803)
Retained earnings218,608 219,027 
Treasury stock (16,674 shares at March 31, 2024 and 16,747 shares at December 31, 2023, at cost)
(1,118,196)(1,123,098)
Total stockholders’ deficit(461,856)(459,092)
Noncontrolling interests in subsidiaries15,433 15,476 
Total Stockholders’ deficit (446,423)(443,616)
Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit$847,167 $875,005 
See accompanying notes.
1


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
(In thousands, except per share amounts)March 31,
2024
March 26,
2023
Revenues:
Domestic Company-owned restaurant sales$176,224 $179,866 
North America franchise royalties and fees35,697 36,072 
North America commissary revenues203,287 212,566 
International revenues40,708 31,463 
Other revenues58,000 67,082 
Total revenues513,916 527,049 
Costs and expenses:
Operating costs (excluding depreciation and amortization shown separately below):
Domestic Company-owned restaurant expenses138,753 147,784 
North America commissary expenses185,199 196,415 
International expenses28,346 17,311 
Other expenses51,767 61,078 
General and administrative expenses58,459 51,944 
Depreciation and amortization17,674 14,721 
Total costs and expenses480,198 489,253 
Operating income33,718 37,796 
Net interest expense(11,063)(9,021)
Income before income taxes22,655 28,775 
Income tax expense7,741 6,229 
Net income before attribution to noncontrolling interests14,914 22,546 
Net income attributable to noncontrolling interests(278)(170)
Net income attributable to the Company$14,636 $22,376 
Basic earnings per common share $0.45 $0.66 
Diluted earnings per common share$0.44 $0.65 
Basic weighted average common shares outstanding32,644 34,155 
Diluted weighted average common shares outstanding32,909 34,324 
Dividends declared per common share$0.46 $0.42 
See accompanying notes.
2


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

Three Months Ended
(In thousands)March 31,
2024
March 26,
2023
Net income before attribution to noncontrolling interests$14,914 $22,546 
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments(546)1,442 
Interest rate swaps (1)
868 336 
Other comprehensive income (loss), before tax322 1,778 
Income tax effect:
Foreign currency translation adjustments123 (332)
Interest rate swaps (2)
(196)(77)
Income tax effect(73)(409)
Other comprehensive income (loss), net of tax249 1,369 
Comprehensive income before attribution to noncontrolling interests15,163 23,915 
Less: comprehensive income, redeemable noncontrolling interests(99)(46)
Less: comprehensive income, nonredeemable noncontrolling interests(179)(124)
Comprehensive income attributable to the Company$14,885 $23,745 
___________________________________
(1)    Amounts reclassified out of accumulated other comprehensive loss into net interest income (expense) include $200 and $(207) for the three months ended March 31, 2024 and March 26, 2023, respectively.
(2)    The income tax effects of amounts reclassified out of accumulated other comprehensive loss were $(45) and $47 for the three months ended March 31, 2024 and March 26, 2023, respectively.

See accompanying notes.
3


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit
(Unaudited)
Papa John’s International, Inc.
(In thousands)Common
Stock
Shares
Outstanding
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss (2)
Retained
Earnings
Treasury
Stock
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Deficit
For the three months ended
March 31, 2024
Balance at December 31, 202332,488 $492 $452,290 $(7,803)$219,027 $(1,123,098)$15,476 $(443,616)
Net income (1)
— — — — 14,636 — 179 14,815 
Other comprehensive income (loss), net of tax— — — 249 — — — 249 
Dividends on common stock— — 32 — (15,055)— — (15,023)
Exercise of stock options18 1 840 — — — — 841 
Acquisition of Company common stock— — — — — — — — 
Stock-based compensation expense— — (370)— — — — (370)
Issuance of restricted stock141 — (4,710)— — 4,710 —  
Tax effect of restricted stock awards(45)— (3,192)— — — — (3,192)
Distributions to noncontrolling interests— — — — — — (222)(222)
Other2 — (97)— — 192 — 95 
Balance at March 31, 202432,604 $493 $444,793 $(7,554)$218,608 $(1,118,196)$15,433 $(446,423)
(1)    Net income to the Company for the three months ended March 31, 2024 excludes $99, respectively, allocable to the redeemable noncontrolling interests for our joint venture arrangements.
(2)    At March 31, 2024, the accumulated other comprehensive loss of $7,554 was comprised of net unrealized foreign currency translation loss of $7,912 and net unrealized gain on the interest rate swap agreements of $358.

See accompanying notes.









4


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit (continued)
(Unaudited)
Papa John’s International, Inc.
(In thousands)Common
Stock
Shares
Outstanding
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss (2)
Retained
Earnings
Treasury
Stock (3)
Noncontrolling
Interests in
Subsidiaries
Total
Stockholders’
Deficit
For the three months ended
March 25, 2023
Balance at December 25, 202234,736 $491 $449,829 $(10,135)$195,856 $(922,434)$15,729 $(270,664)
Net income (1)
— — — — 22,376 — 124 22,500 
Other comprehensive income (loss), net of tax— — — 1,369 — — — 1,369 
Dividends on common stock— — — — (14,663)— — (14,663)
Exercise of stock options15 — 614 — — — — 614 
Acquisition of Company common stock(2,523)— — — — (212,444)— (212,444)
Stock-based compensation expense— 1 3,897 — — — — 3,898 
Issuance of restricted stock197 — (4,609)— — 4,609 —  
Tax effect of restricted stock awards(72)— (5,999)— — — — (5,999)
Distributions to noncontrolling interests— — — — — — (23)(23)
Other3 — (46)— — 133 — 87 
Balance at March 26, 202332,356 $492 $443,686 $(8,766)$203,569 $(1,130,136)$15,830 $(475,325)
(1)    Net income to the Company for the three months ended March 26, 2023 excludes $46 allocable to the redeemable noncontrolling interests for our joint venture arrangements.
(2)    At March 26, 2023, the accumulated other comprehensive loss of $8,766 was comprised of net unrealized foreign currency translation loss of $7,586 and net unrealized loss on the interest rate swap agreements of $1,180.
(3)    Acquisition of Company common stock for the three months ended March 26, 2023, includes $2,804 of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022.

See accompanying notes.
5


Papa John’s International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
(In thousands)March 31,
2024
March 26,
2023
Operating activities
Net income before attribution to noncontrolling interests$14,914 $22,546 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for allowance for credit losses on accounts and notes receivable604 513 
Depreciation and amortization17,674 14,721 
Deferred income taxes532 2,031 
Stock-based compensation expense(370)3,898 
Impairment loss7,554  
Loss on disposal of property and equipment688  
Other315 496 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable9,084 2,182 
Income tax receivable660 2,822 
Inventories(1,981)4,330 
Prepaid expenses and other current assets(4,137)(4,351)
Other assets and liabilities1,873 71 
Accounts payable(14,406)(310)
Income and other taxes payable4,718 (512)
Accrued expenses and other current liabilities(24,451)(5,413)
Deferred revenue(1,284)(2,236)
Net cash provided by operating activities11,987 40,788 
Investing activities
Purchases of property and equipment(13,058)(18,410)
Notes issued(154)(976)
Repayments of notes issued886 1,069 
Other2,174 42 
Net cash used in investing activities(10,152)(18,275)
Financing activities
Net proceeds of revolving credit facilities5,300 208,200 
Proceeds from exercise of stock options840 614 
Acquisition of Company common stock (209,640)
Dividends paid to common stockholders(15,068)(14,603)
Tax payments for equity award issuances(3,192)(5,999)
Distributions to noncontrolling interests(231)(23)
Principal payments on finance leases(2,433)(1,743)
Other182 (18)
Net cash used in financing activities(14,602)(23,212)
Effect of exchange rate changes on cash and cash equivalents(52)34 
Change in cash and cash equivalents(12,819)(665)
Cash and cash equivalents at beginning of period40,587 47,373 
Cash and cash equivalents at end of period$27,768 $46,708 
See accompanying notes.
6


Papa John’s International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2024
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2024. For further information, refer to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) for the year ended December 31, 2023.
In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Canada, and “International” includes the rest of the world other than North America.
2. Significant Accounting Policies
Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements include the accounts of Papa John’s International, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated.
Variable Interest Entity
Papa Johns Domestic restaurants, both Company-owned and franchised, participate in Papa John’s Marketing Fund, Inc. (“PJMF”), a nonstock corporation designed to operate at break-even as it spends all annual contributions received from the system. PJMF collects a percentage of revenues from Company-owned and franchised restaurants in the United States and Canada for the purpose of designing and administering advertising and promotional programs. PJMF is a variable interest entity (“VIE”) that funds its operations with ongoing financial support and contributions from the Domestic restaurants, of which approximately 85 percent are franchised, and does not have sufficient equity to fund its operations without these ongoing financial contributions. Based on an assessment of the governance structure and operating procedures of PJMF, the Company determined it has the power to control certain significant activities of PJMF, and therefore, is the primary beneficiary. The Company has consolidated PJMF in its financial results in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation.”
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items that are subject to such estimates and assumptions include the allowance for credit losses on accounts and notes receivable, intangible assets, contract assets and contract liabilities including the customer loyalty program obligation, property and equipment, right-of-use assets and lease liabilities, gift card breakage, insurance reserves and tax reserves. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates.
Noncontrolling Interests
Papa Johns has joint venture arrangements in which there are noncontrolling interests held by third parties that included 98 restaurants at March 31, 2024 and March 26, 2023, respectively. Consolidated net income is required to be reported separately at amounts attributable to both the Company and the noncontrolling interests held by third parties.
7


Net income attributable to these joint ventures for the three months ended March 31, 2024 and March 26, 2023 was as follows:
Three Months Ended
(In thousands) March 31,
2024
March 26,
2023
Papa John’s International, Inc.$592 $397 
Redeemable noncontrolling interests99 46 
Nonredeemable noncontrolling interests179 124 
Total net income$870 $567 
The following summarizes the redemption feature, location and related accounting within the Condensed Consolidated Balance Sheets for these joint venture arrangements:
Type of Joint Venture ArrangementLocation within the Condensed Consolidated Balance SheetsRecorded Value
Joint ventures with no redemption featurePermanent equityCarrying value
Joint ventures with option to require the Company to purchase the noncontrolling interest - not currently redeemable or redemption not probableTemporary equityCarrying value
Deferred Income Tax Accounts and Tax Reserves
We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and the related assets and liabilities. The provision for income taxes includes income taxes paid, currently payable or receivable and those deferred. We use an estimated annual effective rate based on expected annual income to determine our quarterly provision for income taxes. The effective income tax rate includes the estimated domestic state effective income tax rate and applicable foreign income tax rates. The effective income tax rate is also impacted by various permanent items and credits, net of any related valuation allowances, and can vary based on changes in estimated annual income. Discrete items are recorded in the quarter in which they occur.
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets and liabilities are netted by tax jurisdiction. Deferred tax assets are also recognized for the estimated future effects of tax attribute carryforwards (e.g., net operating losses, capital losses, and foreign tax credits). The effect on deferred taxes due to changes in tax rates is recognized in the period in which the new tax rate is enacted. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts we expect to realize. Deferred tax assets and liabilities are recorded within Other assets and Other long-term liabilities on the Condensed Consolidated Balance Sheets.
Tax authorities periodically audit the Company. We record reserves and related interest and penalties for identified exposures as income tax expense. We evaluate these issues on a quarterly basis to adjust for events, such as statute of limitations expirations, court rulings or audit settlements, which may impact our ultimate payment for such exposures.
Fair Value Measurements and Disclosures
The Company determines the fair value of financial assets and liabilities based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. Certain assets and liabilities are measured at fair value on a recurring basis and are required to be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
Fair value is a market-based measurement, not an entity-specific measurement. Considerable judgment is required to interpret market data to estimate fair value; accordingly, the fair values presented do not necessarily indicate what the Company or its debtholders could realize in a current market exchange.
8


Our financial assets that were measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are as follows:
Fair Value Measurements
(In thousands)Carrying
Value
Level 1Level 2Level 3
March 31, 2024
Financial assets:
Cash surrender value of life insurance policies (a)
$29,137 $29,137 $ $ 
Interest rate swaps (b)
$367 $ $367 $ 
Financial liabilities:
Interest rate swaps (b)
$72 $ $72 $ 
December 31, 2023
Financial assets:
Cash surrender value of life insurance policies (a)
$29,449 $29,449 $ $ 
Interest rate swaps (b)
$107 $ $107 $ 
Financial liabilities:
Interest rate swaps (b)
$483 $ $483 $ 
___________________________________
(a)Represents life insurance policies held in our non-qualified deferred compensation plan.
(b)The fair value of our interest rate swaps is based on the sum of all future net present value cash flows. The future cash flows are derived based on the terms of our interest rate swaps, as well as considering published discount factors, and projected Secured Overnight Financing Rates (“SOFR”). Interest rate swaps entered into prior to 2023 were based on London Interbank Offered Rates (“LIBOR”).
There were no transfers among levels within the fair value hierarchy during the three months ended March 31, 2024 or fiscal year 2023.
The fair value of certain assets and liabilities approximates carrying value because of the short-term nature of the accounts, including cash and cash equivalents, accounts receivable, net of allowances, and accounts payable. The carrying value of notes receivable, net of allowances, also approximates fair value. The Company’s revolving credit facilities under the Company’s credit agreement approximate carrying value due to their variable market-based interest rate. The Company’s 3.875% senior notes are classified as a Level 2 fair value measurement since the Company estimates the fair value by using recent trading transactions, and have the following estimated fair values and carrying values (excluding the impact of unamortized debt issuance costs) as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
(In thousands)Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
3.875% Senior Notes
$400,000 $353,500 $400,000 $352,500 
Allowance for Credit Losses
Estimates of expected credit losses, even if remote, are based upon historical account write-off trends, facts about the current financial condition of the debtor, forecasts of future operating results based upon current trends of select operating metrics, and macroeconomic factors. Credit quality is monitored through the timing of payments compared to the prescribed payment terms and known facts regarding the financial condition of the franchisee or customer. Account and note balances are charged against the allowance after recovery efforts have ceased.
9


The following table summarizes changes in our allowances for credit losses for accounts receivable and notes receivable:
(In thousands)Accounts ReceivableNotes Receivable
Balance at December 31, 2023$8,353 $16,092 
Current period provision for expected credit losses, net684 (80)
Write-offs charged against the allowance(1,097) 
Balance at March 31, 2024$7,940 $16,012 
Recent Accounting Pronouncements
Segment Disclosures
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures.” The ASU expands the scope and frequency of segment disclosures and introduces the concept of a “significant expense principle,” which requires entities to disclose significant expense categories and amounts that are regularly provided to the chief operating decision maker (“CODM”) and included within the reported measure of a segment’s profit or loss. The ASU also changes current disclosure requirements by allowing entities to report multiple measures of a segment’s profit or loss, provided the reported measures are used by the CODM to assess performance and allocate resources and that the measure closest to GAAP is also provided. Finally, the ASU requires all segment profit or loss and assets disclosures to be provided on both an annual and interim basis and requires entities to disclose the title and position of the individual identified as the CODM. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and shall be applied retrospectively to all periods presented in the financial statements. The Company is currently evaluating the standard and determining the extent of additional interim and annual segment disclosures that will be required.
Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU provides for additional levels of details within the required rate reconciliation table to include additional categories of information about federal, state, and foreign income taxes and requires entities to further disaggregate information about income taxes paid, net of refunds. The ASU is effective for fiscal years beginning after December 15, 2024 and shall be applied prospectively. The Company is currently evaluating the standard and determining the extent of additional disclosures that will be required.
3. Leases
Lessor Operating Leases
The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases. At March 31, 2024, we leased and subleased 323 Papa Johns restaurants to franchisees in the UK. The initial lease terms on the franchised sites in the UK are generally 15 years. The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion. The initial lease terms of the franchisee subleases are generally five to ten years. Rental income, primarily derived from properties leased and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms. The Company recognized total sublease income of $2.3 million and $2.9 million for the three months ended March 31, 2024 and March 26, 2023, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.
Lease Guarantees
As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of 48 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 31, 2024, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $6.8 million. This contingent liability is not included in the Condensed Consolidated Balance Sheets as it is not probable to occur. The fair value of the guarantee is not material.
10


Supplemental Cash Flow & Other Information
Supplemental cash flow information related to leases for the periods reported is as follows:
Three Months Ended
(In thousands)March 31, 2024March 26, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$386 $309 
Financing cash flows from finance leases2,433 1,743 
Operating cash flows from operating leases (a)
9,855 9,178 
Right-of-use assets obtained in exchange for new finance lease liabilities1,496 4,764 
Right-of-use assets obtained in exchange for new operating lease liabilities4,738 4,721 
Cash received from sublease income1,753 2,532 
___________________________________
(a)    Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion.
4. Papa John’s Marketing Fund, Inc.
PJMF, which is a consolidated VIE where the Company has been identified as the primary beneficiary, collects a percentage of revenues from Company-owned and franchised restaurants in the United States, for the purpose of designing and administering advertising and promotional programs for all participating Domestic restaurants. Contributions and expenditures are reported on a gross basis in the Condensed Consolidated Statements of Operations within Other revenues and Other expenses. PJMF also has a wholly-owned subsidiary, Papa Card, Inc., which administers the Company’s gift card programs.
Assets and liabilities of PJMF, which are utilized solely for the Company’s advertising and promotional programs, were as follows in the Condensed Consolidated Balance Sheets (in thousands):
March 31,
2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents$4,806 $5,494 
Accounts receivable, net13,901 18,026 
Prepaid expenses and other current assets14,661 2,223 
Total current assets33,368 25,743 
Deferred income taxes674 674 
Total assets$34,042 $26,417 
Liabilities
Current liabilities:
Accounts payable$1,948 $1,509 
Accrued expenses and other current liabilities30,162 22,245 
Current portion of long-term debt1,800  
Current deferred revenue4,004 4,327 
Total current liabilities 37,914 28,081 
Deferred revenue2,251 2,627 
Total liabilities$40,165 $30,708 
11


5. Revenue Recognition
Contract Balances
Our contract liabilities primarily relate to franchise fees, unredeemed gift card liabilities, and loyalty program obligations, which we classify as Deferred revenue on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2024 and March 26, 2023, the Company recognized $8.1 million and $8.4 million in revenue, respectively, related to deferred revenue.
The following table includes a breakout of contract liability balances (in thousands):
Contract Liabilities
March 31, 2024December 31, 2023Change
Franchise fee liabilities$20,068 $20,564 $(496)
Unredeemed gift card liabilities6,255 6,955 (700)
Customer loyalty program obligations13,184 13,274 (90)
Total contract liabilities$39,507 $40,793 $(1,286)
Our contract assets consist primarily of equipment incentives provided to franchisees. Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement. Contract assets were approximately $7.9 million at both March 31, 2024 and December 31, 2023. For the three months ended March 31, 2024 and March 26, 2023, revenue was reduced approximately $1.2 million and $0.9 million respectively, for the amortization of contract assets over the applicable contract terms. Contract assets are included in Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets.
Transaction Price Allocated to the Remaining Performance Obligations
The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period.
Performance Obligations by Period
Less than 1 Year1-2 Years2-3 Years3-4 Years4-5 YearsThereafterTotal
Franchise fees$2,792 $2,582 $2,413 $2,187 $1,951 $4,841 $16,766 
At March 31, 2024, approximately $3.3 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities, which are included in Deferred revenue, will be recognized in Company-owned restaurant revenues when gift cards are redeemed. The Company will recognize redemption fee revenue in Other revenues when cards are redeemed at franchised restaurant locations.
The Company applies the practical expedient in ASC 606, “Revenue Recognition” and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
6. Common Stock
Shares Authorized and Outstanding
The Company has authorized 100.0 million shares of common stock as of March 31, 2024 and December 31, 2023. The Company’s outstanding shares of common stock, net of repurchased shares of common stock held as treasury stock, were 32.6 million shares at March 31, 2024, compared to 32.5 million shares at December 31, 2023.
12


Share Repurchase Program
On October 28, 2021, our Board of Directors (the “Board”) approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock. The following table summarizes our repurchase activity under our share repurchase programs for the three months ended March 31, 2024 and March 26, 2023:
(In thousands, except average price per share)Total Number of Shares PurchasedAverage Price Paid per Share
Aggregate Cost of Shares Purchased (a)
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Three Months Ended
March 31, 2024 $ $ $90,160 
March 26, 20232,523 $83.10 $209,640 $90,160 
(a)    Aggregate cost of shares purchased for the three months ended March 26, 2023 excluded $2.8 million of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022. These costs were classified as non-cash financing activities during the three months ended March 26, 2023.
The shares repurchased during the three months ended March 26, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP (collectively, “Starboard”), at a price of $82.52 per share, for aggregate consideration of $179.6 million. The transaction was negotiated by an independent committee of the Board of Directors formed for the purpose of evaluating a possible transaction involving Starboard, and was approved by the full Board of Directors upon such independent committee’s recommendation. Starboard’s Chief Executive Officer is Jeffrey Smith, who previously served as the Company’s Chairman of the Board until his resignation on March 1, 2023.
The timing and volume of share repurchases under the Company’s share repurchase programs may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements. Repurchases under the programs may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate. Repurchases under the Company’s share repurchase programs may be commenced or suspended from time to time at the Company’s discretion without prior notice. Funding for the share repurchase programs will be provided through our credit facility, operating cash flow, stock option exercises and cash and cash equivalents.
Dividends
The Company paid aggregate cash dividends of approximately $15.1 million ($0.46 per share) for the three months ended March 31, 2024. On May 2, 2024, our Board of Directors declared a second quarter dividend of $0.46 per common share (approximately $15.2 million in the aggregate), which will be paid on May 31, 2024 to stockholders of record as of the close of business on May 20, 2024. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.
13


7. Earnings per Share
Basic earnings per common share are computed by dividing net income attributable to common shareholders by the weighted-average common shares outstanding. Diluted earnings per common share are computed by dividing the net income attributable to common shareholders by the diluted weighted average common shares outstanding. Diluted weighted average common shares outstanding consist of basic weighted average common shares outstanding plus weighted average awards outstanding under our equity compensation plans, which are dilutive securities.
The calculations of basic and diluted earnings per common share are as follows (in thousands, except per share data):
Three Months Ended
March 31,
2024
March 26,
2023
Net income available to common stockholders$14,636$22,376
Basic weighted average number of shares32,64434,155
Dilutive effect of outstanding equity awards (a)
265169
Diluted weighted average number of shares32,90934,324
Basic earnings per common share$0.45$0.66
Diluted earnings per common share$0.44$0.65
___________________________________
(a)    Excludes 103,000 and 22,000 shares underlying equity awards for the three months ended March 31, 2024 and March 26, 2023, respectively, as the effect of including such awards would have been anti-dilutive.
8. Debt
Long-term debt, net, consists of the following (in thousands):
March 31,
2024
December 31,
2023
Senior notes$400,000$400,000
Revolving facilities (a)
369,300364,000
Outstanding debt$769,300$764,000
Unamortized debt issuance costs(6,183)(6,578)
Current portion of long-term debt(1,800)
Total long-term debt, net$761,317$757,422
___________________________________
(a)    Revolving facilities as of March 31, 2024 includes $1.8 million outstanding under the PJMF Revolving Facility as defined and discussed below.
Senior Notes
On September 14, 2021, the Company issued $400.0 million of 3.875% senior notes (the “Notes”) which will mature on September 15, 2029. Interest on the Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year at a fixed interest rate of 3.875% per annum. Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for further description of the provisions and covenant requirements under the Senior Notes.
Credit Agreement
The Company’s amended and restated credit agreement, dated September 14, 2021 and amended May 30, 2023 (as amended, the “Credit Agreement”), provides for a senior secured revolving credit facility in an aggregate available principal amount of $600.0 million (the “PJI Revolving Facility”), of which up to $40.0 million is available as swingline loans and up to $80.0 million is available as letters of credit. The PJI Revolving Facility will mature on September 14, 2026. The remaining availability under the PJI Revolving Facility was approximately $232.5 million as of March 31, 2024. Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for further description of the provisions and covenant requirements under the Credit Agreement.
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PJMF Revolving Facility
PJMF has a $30.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015, and amended September 30, 2023, with U.S. Bank National Association, as lender. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving Facility matures on September 30, 2024, but is subject to annual amendments. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of a one month SOFR plus 1.975%. The applicable interest rate on the PJMF Revolving facility was 7.3% for the three months ended March 31, 2024. As of March 31, 2024, the principal amount of debt outstanding under the PJMF Revolving Facility was approximately $1.8 million and is classified as Current portion of long-term debt in the Condensed Consolidated Balance Sheets. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Company’s Credit Agreement.
Derivative Financial Instruments
On June 23, 2023, the Company entered into a new interest rate swap with an initial notional value of $100.0 million to replace the Company’s prior interest rate swaps, which had a notional value of $125.0 million and matured on April 30, 2023. The objective of the interest rate swap is to mitigate the Company’s exposure to the impact of interest rate changes associated with our variable rate debt under the PJI Revolving Facility. We have designated the interest rate swap as a cash flow hedge and will assess hedge effectiveness at regular intervals through the maturity date of June 30, 2025. The interest rate swaps are recorded at fair value at each reporting date, and any unrealized gains or losses are included in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets and reclassified to Net interest expense in the Condensed Consolidated Statements of Operations in the same period or periods during which the hedged transaction affect earnings.
As of March 31, 2024, we have the following interest rate swap agreements:
Effective DatesFloating Rate Debt Fixed Rates
June 23, 2023 through June 30, 2025$50 million4.55%
June 23, 2023 through June 30, 2025$50 million4.55%
The following table provides information on the location and amounts of our current and expired swaps in the accompanying condensed consolidated financial statements (in thousands):
Interest Rate Swap Derivatives
Balance Sheet LocationFair Value
March 31,
2024
Fair Value
December 31,
2023
Prepaid and other current assets$367$107
Other long-term liabilities$72$483
The effect of derivative instruments on the accompanying condensed consolidated financial statements is as follows (in thousands):
Derivatives -
Cash Flow
Hedging
Relationships
Amount of Gain or
(Loss) Recognized
in AOCL
on Derivative
Location of (Loss)
or Gain
Reclassified from
AOCL into
Income
Amount of (Loss) or Gain
Reclassified from
AOCL into
Income
Total Net Interest Expense
on Condensed
Consolidated Statements
of Operations
Interest rate swaps for the three months ended:
March 31, 2024$672Interest expense$200 $(11,063)
March 26, 2023$259Interest expense$(207)$(9,021)
Net interest paid, including payments made or received under the swaps, was $14.5 million and $10.9 million for the three months ended March 31, 2024 and March 26, 2023, respectively.
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9. Restructuring

International Restructuring
In December 2023, the Company announced international transformation initiatives (“International Transformation Plan”) designed to evolve our business structure to deliver an enhanced value proposition to our International customers and franchisees, ensure targeted investments and efficient resource management, and better position our largest markets, including the UK, for long-term profitable growth and brand strength. During the fourth quarter of the year ended December 31, 2023, the Company commenced approved initiatives under the International Transformation Plan related to establishing new regional hubs across APAC (Asia Pacific), EMEA (Europe, Middle East and Africa), and Latin America that will be led by experienced general managers and their teams.
During the quarter ended March 31, 2024, the Company commenced the next phase of the International Transformation Plan as approved by the Board of Directors, and began the process to close 43 underperforming Company-owned restaurants in the UK. The purpose of this plan is to optimize the Company's restaurant portfolio in the UK and improve overall profitability by closing unprofitable locations and allowing the Company to focus on improving profitability across its remaining portfolio of Company-owned and franchised restaurants in the UK. The Company is on track to complete these store closures in the second quarter of 2024. We are continuing to evaluate our restaurant portfolio in the UK, which may result in additional strategic restaurant closures or divestitures.
The Company evaluates its property and equipment and other long-lived assets (primarily right-of-use operating lease assets) for potential indicators of impairment at least annually, or as facts and circumstances indicate that the carrying value of the asset group may not be recoverable. The asset group is at the store level for our UK Company-owned restaurants and primarily includes lease right-of-use assets and fixed assets. Due to indicators of potential impairment associated with the 43 store closures, the Company performed a recoverability test and determined that the carrying amount of the asset groups were not recoverable. For the three months ended March 31, 2024, we recognized impairment charges for the amount by which the carrying value exceeded the estimated fair value of the asset groups. Fair values were determined based on an income approach, specifically a discounted cash flow ("DCF") model, primarily using estimated sublease income considering market rental rates. Management judgment is involved in determining the estimated fair value and includes uncertainties that under different assumptions and circumstances could drive material changes in the fair value determination.
In connection with these actions, the Company incurred restructuring related costs of $9.5 million for the three months ended March 31, 2024 primarily related to lease right-of-use asset and fixed asset impairment charges, employee severance benefits accounted for under ASC 712, “Compensation – Nonretirement Postemployment Benefits,” and professional advisory services. The Company has incurred total restructuring related costs of $11.7 million since commencement of the International Transformation Plan. These costs were included in General and administrative expenses in the Condensed Consolidated Statements of Operations.
Total estimated pre-tax costs associated with the International Transformation Plan are approximately $25 million to $35 million (inclusive of the $11.7 million spent through the first quarter of 2024), all of which will be recorded within our International segment, and we expect to incur the remainder of these costs through 2024 and 2025.
The following table summarizes restructuring related costs recorded for the three months ended March 31, 2024 (in thousands):

Three Months Ended March 31, 2024
Long-lived asset impairment charges$7,554 
Employee severance643 
Professional services and other related costs1,346 
Total international transformation costs9,543 
Stock-based compensation forfeitures on unvested awards(20)
Total international transformation costs, net of stock-based award forfeitures$9,523 

The following table presents changes in the balance of accrued expenses relating to approved initiatives, which are recorded in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets (in thousands):
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Employee severanceProfessional services and other related costsRecruitingTotal
Balance as of December 31, 2023$1,227 $527 $29 $1,783 
Charges643 1,346  1,989 
Payments (648)(543)(29)(1,220)
Balance as of March 31, 2024$1,222 $1,330 $ $2,552 
10. Litigation, Commitments and Contingencies
Litigation
The Company is involved in a number of lawsuits, claims, investigations and proceedings, including those specifically identified below, consisting of intellectual property, employment, consumer, commercial and other matters arising in the ordinary course of business. In accordance with ASC 450, “Contingencies,” the Company has made accruals with respect to these matters, where appropriate, which are reflected in the Company’s condensed consolidated financial statements. We review these provisions at least quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.
In re Papa John’s Employee & Franchise Employee Antitrust Litigation is a putative class action filed in December 2018 in the United States District Court for the Western District of Kentucky. The suit alleges that the “no-poaching” provision previously contained in the Company’s franchise agreement constituted an unlawful agreement or conspiracy in restraint of trade and commerce in violation of Section 1 of the Sherman Antitrust Act. On April 14, 2022, the parties reached a settlement in principle to resolve the case. Pursuant to the terms of the proposed settlement, in exchange for the Company’s payment of a total aggregate settlement amount of $5.0 million and other non-monetary consideration, all claims in the action will be dismissed, the litigation will be terminated, and the Company will receive a release. The settlement amount was recorded in General and administrative expenses in the Condensed Consolidated Statements of Operations in the first quarter of 2022 and remained accrued in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets as of March 31, 2024. The proposed settlement remains subject to approval by the District Court and contains certain customary contingencies. The Company continues to deny any liability or wrongdoing in this matter.
11. Segment Information
We have four reportable segments: Domestic Company-owned restaurants, North America franchising, North America commissaries, and International operations. The Domestic Company-owned restaurant segment consists of the operations of all Domestic Company-owned restaurants and derives its revenues principally from retail sales of pizza, Papadias, and side items, including breadsticks, Papa Bites, cheesesticks, boneless chicken wings and bone-in chicken wings, dessert items and canned or bottled beverages. The North America franchising segment consists of our franchise sales and support activities and derives its revenues from sales of franchise and development rights and collection of royalties from our franchisees located in the United States and Canada. The North America commissary segment consists of the operations of our regional dough production and product distribution centers and derives its revenues principally from the sale and distribution of food and paper products to Domestic Company-owned and franchised restaurants in the United States and Canada. The International segment consists of the operations of all Company-owned restaurants located in the UK, as well as distribution sales to franchised Papa Johns restaurants located in the UK and our franchise sales and support activities, which derive revenues from sales of franchise and development rights and the collection of royalties from our International franchisees. All other business units that do not meet the quantitative thresholds for determining reportable segments, which are not operating segments, we refer to as “all other,” which consists of operations that derive revenues from the sale, principally to Company-owned and franchised restaurants, of printing and promotional items, franchise contributions to marketing funds and information systems and related services used in restaurant operations, including our point-of-sale system, online and other technology-based ordering platforms.
Generally, we evaluate performance and allocate resources based on operating income. Certain administrative and capital costs are allocated to segments based upon predetermined rates or estimated resource usage. We account for intercompany sales and transfers as if the sales or transfers were to third parties and eliminate the activity in consolidation.
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Our reportable segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different operational issues and strategies. No single external customer accounted for 10% or more of our consolidated revenues.

The following tables present our segment information.
Three Months Ended
(In thousands)March 31,
2024
March 26,
2023
Revenues:
Domestic Company-owned restaurants$176,224$179,866
North America franchising35,69736,072
North America commissaries203,287212,566
International46,67338,704
All others52,03559,841
Total revenues $513,916$527,049
Intersegment revenues:
North America franchising$1,049$1,052
North America commissaries49,26751,817
All others13,17216,835
Total intersegment revenues$63,488$69,704
Operating income:
Domestic Company-owned restaurants$10,359$6,650
North America franchising33,71133,400
North America commissaries12,33510,730
International (a)
(5,989)7,232
All others3,1983,157
Unallocated corporate expenses (b)
(19,642)(23,366)
Elimination of intersegment (profits) losses(254)(7)
Total operating income$33,718$37,796
Property and equipment, net:
Domestic Company-owned restaurants$263,832
North America commissaries162,491
International28,456
All others138,346
Unallocated corporate assets254,290
Accumulated depreciation and amortization(574,112)
Total property and equipment, net$273,303
___________________________________
(a)    The three months ended March 31, 2024 includes $9.5 million of costs related to the International Transformation Plan. See “Note 9. Restructuring” for additional information.
(b)    The three months ended March 26, 2023 includes $1.4 million of severance and related costs associated with the transition of certain executives.





18






Disaggregation of Revenue
In the following tables, revenues are disaggregated by major product/service line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands):
Reportable Segments
Three Months Ended March 31, 2024
Major Products/Services LinesDomestic Company-owned restaurantsNorth America franchisingNorth America commissariesInternationalAll othersTotal
Company-owned restaurant sales$176,224 $— $— $15,027 $— $191,251 
Franchise royalties and fees— 36,746 — 11,456 — 48,202 
Commissary sales— — 252,554 14,225 — 266,779 
Other revenues— — — 5,965 65,207 71,172 
Eliminations— (1,049)(49,267)— (13,172)(63,488)
Total segment revenues176,224 35,697 203,287 46,673 52,035 513,916 
International other revenues (a)
— — — (5,965)5,965 — 
Total revenues$176,224 $35,697 $203,287 $40,708 $58,000 $513,916 
Reportable Segments
Three Months Ended March 26, 2023
Major Products/Services LinesDomestic Company-owned restaurantsNorth America franchisingNorth America commissariesInternationalAll othersTotal
Company-owned restaurant sales$179,866 $— $— $— $— $179,866 
Franchise royalties and fees— 37,124 — 12,491 — 49,615 
Commissary sales— — 264,383 18,972 — 283,355 
Other revenues— — — 7,241 76,676 83,917 
Eliminations— (1,052)(51,817)— (16,835)(69,704)
Total segment revenues179,866 36,072 212,566 38,704 59,841 527,049 
International other revenues (a)
— — — (7,241)7,241 — 
Total revenues$179,866 $36,072 $212,566 $31,463 $67,082 $527,049 
___________________________________
(a)    Other revenues as reported in the Condensed Consolidated Statements of Operations include $6.0 million and $7.2 million of revenues for the three months ended March 31, 2024 and March 26, 2023, respectively, that are part of the International reporting segment. These amounts include marketing fund contributions and sublease rental income from international franchisees in the United Kingdom that provide no significant contribution to income before income taxes but must be reported on a gross basis under accounting requirements. The related expenses for these Other revenues are reported in Other expenses in the Condensed Consolidated Statements of Operations.
12. Acquisitions
UK Franchisee Acquisitions
As part of our investment to reposition our UK business, during 2023 we acquired a portfolio of Company-owned restaurants in the UK market that were previously franchised. As part of this investment, the Company acquired 91 Papa Johns restaurants previously operated by the M25 division of Drake Food Service International in the United Kingdom on June 2, 2023 for total consideration of approximately $13.7 million. The Company acquired an additional 27 Papa Johns restaurants in the United Kingdom during the third quarter of 2023 for total consideration of approximately $1.5 million. Collectively, we refer to these acquisitions as the “UK franchisee acquisitions.” The Company incurred substantially all acquisition and transition costs related to the UK franchisee acquisitions during the year ended December 31, 2023. The
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results of operations of the acquired restaurants after their respective acquisition dates are included within the International segment in the Company’s Condensed Consolidated Statements of Operations. The impact of the acquisitions was not material to the Company’s Condensed Consolidated Financial Statements.
The UK franchisee acquisitions have been accounted for as business combinations. As such, the Company concluded that the consideration was measured at fair value and has recorded the estimated fair value of the assets acquired and liabilities assumed as of the respective acquisition dates. Total consideration was approximately $15.2 million, of which $13.7 million was pre-existing accounts receivable and notes receivable. Assets acquired include approximately $10.6 million of property and equipment, net, $0.3 million of inventories and other assets and $4.3 million of goodwill.
The total goodwill recognized in conjunction with the UK franchisee acquisitions, all of which is expected to be deductible for tax purposes, has been assigned to the International operating segment. The purchase price exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, primarily due to synergies created from expected future benefits stemming from implementation of the Company’s operational capabilities and further control of the Company’s brand name in our most prominent international market. Goodwill also includes certain other benefits that do not qualify for recognition as intangible assets, such as an assembled workforce.
The following summarizes changes in the Company’s goodwill by reportable segment (in thousands):
Domestic Company-owned restaurantsInternationalTotal
Balance at December 31, 2023$56,609 $19,597 $76,206 
Acquisition accounting adjustments (a)
 95 95 
Foreign currency adjustments (326)(326)
Balance at March 31, 2024$56,609 $19,366 $75,975 
___________________________________
(a) We recorded acquisition accounting adjustments during the three months ended March 31, 2024 to increase property and equipment to fair value as a result of the finalization of our valuation of acquired property and equipment.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s.” Papa John’s began operations in 1984. As of March 31, 2024, there were 5,914 Papa John’s restaurants in operation, consisting of 653 Company-owned and 5,261 franchised restaurants operating in 49 countries and territories. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our Domestic Quality Control Centers (“QC Centers”), operation of our International QC Center in the United Kingdom (“UK”), contributions received by Papa John’s Marketing Fund (“PJMF”) which is our national marketing fund, printing and promotional items and information systems equipment, and software and related services. We believe that in addition to supporting both Company and franchised profitability and growth, these activities contribute to product quality and consistency throughout the Papa John’s system.
In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Canada, and “International” includes the rest of the world other than North America.
Recent Developments and Trends
The Company has focused on executing strategic priorities and building a foundation for long-term success, while navigating a challenging macroeconomic environment. Our progress and significant transactions during the first quarter of 2024 are described below.
Focusing on future growth, our “Back to BETTER 2.0” initiative is comprised of long-term strategic initiatives focused on driving systemwide sales through enhancing North America national marketing investment and effectiveness and accelerating North America development. In addition, we are evolving our Domestic Commissary business to provide cost savings for our franchisees and incremental profit for our business model.
During the first quarter of 2024, the Company made significant progress against our priorities of Back to Better 2.0 and International Transformation.
Back to Better 2.0
Product innovation and marketing strategy: We advanced our menu and digital innovations to drive new customers and ticket sales. At the end of the quarter, we launched our new Crispy Cuppy ‘Roni platform, which is available across a trio of menu items and price points. We also launched an all-new brand platform “Better Get You Some” that is part of our deepened commitment to, and investment in, our new marketing strategy. These investments are focused on improving audience segmentation, building consumer loyalty and driving cultural relevance.
Domestic commissary growth strategy: Our previously-announced change in the Domestic Commissary profit model was implemented during the quarter, with the fixed operating margin that Domestic QC Centers charge increasing to 5% paired with increased rebate opportunities for franchisees. As of the end of the first quarter, we project that more than 40% of franchisees are on track to earn a rebate for 2024. The operating income of the North America Commissary business has also increased, reflecting benefits for both franchisees as well as the Commissary. We also continue to pursue productivity efficiencies throughout the supply chain through improved operations and supplier relationships.
International Transformation Plan
In December 2023, the Company announced international transformation initiatives (“International Transformation Plan”) designed to evolve our business structure to deliver an enhanced value proposition to our International customers and franchisees, ensure targeted investments and efficient resource management, and better position our largest markets, including the UK, for long-term profitable growth and brand strength. Total estimated pre-tax costs associated with the International Transformation Plan are expected to be approximately $25 million to $35 million (inclusive of the $11.7 million spent through the first quarter of 2024), which the Company currently expects to be recognized in 2024 and 2025.
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See “Note 9. Restructuring” of “Notes to Condensed Consolidated Financial Statements” for additional details. Key elements and progress of our International Transformation Plan are set forth as follows:
International strategy - UK Optimization: The UK franchise business is trending positively, with improved comparable sales. However, our UK Company-owned stores have continued to incur operating losses, and we are moving forward with our previously-announced planned closures of 43 underperforming Company-owned stores in the second quarter, which we expect will reduce future operating losses incurred by the Company. The impending closures of these stores resulted in first-quarter 2024 charges of $9.5 million, primarily comprised of non-cash lease and fixed asset impairment charges. We are continuing to evaluate our restaurant portfolio in the UK, which may result in additional strategic restaurant closures or divestitures.
International strategy - Regional hubs: During the first quarter, we established hubs in our key regions - APAC (Asia Pacific), EMEA (Europe, Middle East and Africa), and Latin America. These hubs will enable us to deliver a frictionless, locally-valued offering with a recognizable and consistent customer experience. These regional hubs are led by General Managers, who bring a significant amount of restaurant and international franchise experience, and their teams who are partnering with franchisees to create a holistic strategy to boost performance in their markets. These teams are aligning global best practices in operations, marketing and technology with local preferences and needs to accomplish our long-term objective of increasing market share in key markets around the world.
Global Restaurant Sales and Unit Information
“Comparable sales” represents sales for the same base of restaurants for the same fiscal periods. “Comparable sales growth (decline)” represents the change in year-over-year comparable sales. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised restaurants open during the comparable periods, and “Global system-wide restaurant sales growth (decline)” represents the change in global system-wide restaurant sales year-over-year. Comparable sales, Comparable sales growth (decline), Global system-wide restaurant sales and Global system-wide sales growth (decline) exclude franchisees for which we suspended corporate support.
“Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis.
We believe Domestic Company-owned, North America franchised, and International Comparable sales growth (decline) and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. Comparable sales growth (decline) and Global system-wide restaurant sales information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of Global system-wide restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues.
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Three Months Ended
Amounts below exclude the impact of foreign currencyMarch 31,
2024
March 26,
2023
Comparable sales growth (decline):
Domestic Company-owned restaurants(3.0)%3.4%
North America franchised restaurants(1.5)%(0.8)%
North America restaurants(1.8)%—%
International restaurants(2.6)%(5.8)%
Total comparable sales growth (decline)(2.0)%(1.3)%
System-wide restaurant sales growth (decline):
Domestic Company-owned restaurants(2.0)%4.9%
North America franchised restaurants(1.6)%0.8%
North America restaurants(1.7)%1.6%
International restaurants1.4%3.3%
Total global system-wide restaurant sales growth (decline)(0.9)%2.0%

Restaurant ProgressionThree Months Ended
March 31,
2024
March 26,
2023
North America Company-owned:
Beginning of period531522
Opened5
Closed(2)
End of period536520
North America franchised:
Beginning of period2,9022,854
Opened1616
Closed(7)(6)
End of period2,9112,864
International Company-owned
Beginning of period117— 
End of period117
International franchised:
Beginning of period2,3562,322
Opened2343
Closed(29)(24)
End of period2,3502,341
Total restaurants – end of period5,9145,725
Trailing four quarters net store growth189209


23


Results of Operations
Revenues
The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations.
Three Months EndedIncrease
(Decrease)
(Dollars in thousands)March 31,
2024
March 26,
2023
YTD
Revenues:
Domestic Company-owned restaurant sales$176,224 $179,866 (2.0)%
North America franchise royalties and fees35,697 36,072 (1.0)%
North America commissary revenues203,287 212,566 (4.4)%
International revenues40,708 31,463 29.4 %
Other revenues58,000 67,082 (13.5)%
Total revenues$513,916$527,049(2.5)%
The comparability of results between 2024 and 2023 is impacted by the acquisition of 118 formerly franchised restaurants in the UK in the second and third quarters of 2023 (the “UK franchisee acquisitions”). The UK franchisee acquisitions impact the composition of International revenues and the results of the International segment. See “Note 12. Acquisitions” of the “Notes to Condensed Consolidated Financial Statements” for additional information on this transaction.
Total revenues decreased $13.1 million or 2.5% to $513.9 million for the three months ended March 31, 2024, as compared to prior year comparable period. Changes in total revenues are impacted by the transaction noted above.
Domestic Company-owned restaurant sales decreased $3.6 million, or 2.0% for the three months ended March 31, 2024, as compared to the prior year comparable period. The decrease was primarily due to a decline in comparable sales of 3.0%, partially offset by increased equivalent units of 3.1% for the three months ended March 31, 2024.
North America franchise royalties and fees decreased $0.4 million, or 1.0% for the three months ended March 31, 2024 as compared to the prior year comparable period primarily due to comparable sales decline of 1.5%. Equivalent units increased 2.1% for the three months ended March 31, 2024.
North America franchise restaurant sales decreased 1.6% to $759.3 million for the three months ended March 31, 2024 compared to the prior year comparable period. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales.
North America commissary revenues decreased $9.3 million, or 4.4% for the three months ended March 31, 2024, compared to the prior year quarter primarily due to declines in pricing of commodities and lower volumes.
International revenues increased $9.2 million, or 29.4% for the three months ended March 31, 2024, compared with the prior year comparable period. T