Papa John's International Inc. has surpassed Little Caesars to become the number 3 pizza chain, behind Pizza Hut and Domino's, with more than 2,300 restaurants scattered across the United States and five other countries. Most restaurants offer delivery or take-out only. 1. Go to http://www.papajohns.com and click on Papa John's Story. In what year did the first Papa John's restaurant open? Click on Our Pizza Story. What is the focus of Papa John's? 2. In the left-hand column, click on Investor Relationships followed by SEC Filings in the right- hand column. Choose the most recent annual report by clicking on Form Type 10-K. Under Part I select Item 1: Business. Scan the first three pages. (Note: For easier viewing you may want to select font size smallest and click on enter.)

a. For a company-owned restaurant, over the past fiscal year Papa John's reported how much in average sales? Average cash flow? Average operating income? What is the expected cash investment per company-owned restaurant opening next year?

b. Why is Papa John's expansion strategy to cluster restaurants in targeted markets? 3. Assume the value of the investment decreases to zero over a ten-year period of time. Use the information from 2

(a) for the following computations. For one company-owned Papa John's restaurant, compute the

a. payback period

b. accounting rate of return

c. net present value assuming a 16% required rate of return

d. internal rate of return (Appendix B contains present-value tables.) 4. Does a Papa John's company-owned restaurant appear to be a good investment? Why or why not? 5. Continue to scroll down the document. How much does a franchisee pay for the right to operate a Papa John's restaurant in the United States? (Note: In the 1999 Annual Report this information was around page 7.) 6. Should a new franchisee expect to achieve the same rate of return as a company-owned Papa John's restaurant? Why or why not?