$340

Business Description

We are a Delaware corporation incorporated on July 25, 1991. We do business as Papa John's International, Inc. and Papa John's. Our principal business address is P.O. Box 99900, 2002 Papa John's Boulevard, Louisville, Kentucky 40269-0900. We operate and sell franchises for the operation of pizza businesses known as Papa John's restaurants. We also sell certain items to our franchisees.

Prior Experience

Papa John's Pizza was started in March of 1984 by BAM, Inc., an Indiana corporation which operated a restaurant and tavern. Our founder, John H. Schnatter, was a principal of BAM, Inc. BAM, Inc.'s principal business address was 1448 Gateway Plaza, Jeffersonville, Indiana. The Papa John's pizza business of BAM, Inc. was acquired by our predecessor, Schnatter & Ehringer, Inc., in December of 1985. Our founder was a founder and principal of Schnatter & Ehringer, Inc., which was originally incorporated in Indiana on December 16, 1985 and subsequently changed its name to Schnatter-Ehringer, Inc. Schnatter-Ehringer, Inc. changed its name to Papa John's International, Inc. (hereinafter referred to as "PJ Indiana") in October of 1989. In November, 1991, PJ Indiana was merged into Papa John's. That transaction changed our corporate domicile from Indiana to Delaware. As a result of the merger, PJ Indiana ceased to exist. PJ Indiana's principal place of business was 11492 Bluegrass Parkway, Suite 175 Louisville, Kentucky 40299. All of the issued and outstanding stock of BAM, Inc. was sold by our founding stockholders in March of 1987, and at present neither we nor any of our officers or directors have any interest in BAM, Inc. As of December 30, 2018, we owned and operated 645 restaurants in the United States and intend to own and operate additional restaurants in the future directly or through our affiliates, including our wholly-owned subsidiary Papa John's USA, Inc., a Kentucky corporation, organized on January 17, 1991 ("PJ USA"). We also own a majority interest in one franchisee that operates 85 restaurants, one franchisee that operates 95 restaurants, and one franchisee that operates 3 restaurants. We have another wholly-owned subsidiary, PJ Food Service, Inc., a Kentucky corporation, organized in December, 1991 ("PJ Food Service"). PJ Food Service distributes and sells approved products to Papa John's restaurants that we own and Papa John's restaurants owned by our franchisees. PJ Food Service's principal business address is the same as ours. PJ Food Service operates regional dough production and food distribution facilities ("Quality Control Centers") that supply all Papa John’s restaurants in the contiguous U.S. states.

Business Offered

The Papa John's franchise that we offer is a retail restaurant devoted primarily to the sale of pizza and related food products. The majority of Papa John's franchises are operated on a delivery and carry-out basis. However, there are a few restaurants that offer dine-in service and there may be additional restaurants with dine-in service developed in the future. We also permit development of restaurants in non-traditional venues, such as sports stadiums and food courts. The traditional Papa John's franchise is typically operated in leased space located on or near main thoroughfares. Restaurants operated under our Non-Traditional Program are typically located in sports stadiums or arenas and generally do not offer delivery service. We offer individuals, corporations, limited liability companies or partnerships (“Area Developers”) an area development agreement (the "Development Agreement"), the form of which is attached as Exhibit E, which grants to the Area Developer the right and obligation to establish and operate a certain number of Papa John's restaurants in a specified area (the "Development Area"), over a specified period of time at specific locations to be designated in separate franchise agreements. We also currently offer development incentive programs. The eligibility requirements for the incentive programs are described on the following pages. Each restaurant must be opened in accordance with the development schedule set forth in the Development Agreement. A condition to exercising each development right is that you secure a location that we approve. After the location for the first restaurant is approved and a lease is fully signed (or in the event of a purchase, title is conveyed to you), you must sign a franchise agreement (the "Franchise Agreement") in the form attached as Exhibit B. This Franchise Agreement governs the construction and operation of the restaurant at the approved location. There are separate fees paid under the Development Agreement and the Franchise Agreement. In 2019, Papa John’s will offer various incentive programs for the opening of a traditional restaurant. In order to qualify for the benefits offered under the 2019 incentives for traditional restaurants, you must remain in good standing under your Development Agreement and/or Franchise Agreements and current in amounts owed to us or our affiliates. Also, a restaurant must be open to the public and operating during normal business hours on normal business days to be open and operating for purposes of qualification for the incentives that are based on a specified date. A promotional, token, or “soft” opening of a restaurant followed by closure for 48 hours or more does not constitute “open and operating” for purposes of the Development Schedule. If a restaurant does not open on time, some or all of the incentives may be withheld at Papa John’s discretion, and the Development Agreement deposit will not be refunded. If you fail to maintain good standing status, we may: (a) required payment of our standard fees for each restaurant; and (b) revoke the Royalty reduction and begin collecting then-current Royalty rate.

Initial Fees

The number of restaurants is determined by agreement between you and Papa John's before the Development Agreement is signed. In addition to establishing the number of restaurants to be developed in the Development Area, the Development Schedule in the Development Agreement will also specify when each of the restaurants is required to be opened. The total development fee deposit is computed by the product of the number of restaurants to be opened multiplied by $5,000 (the "Development Fee"). The entire amount of the Development Fee is due and payable in a lump sum to us at the time the Development Agreement is signed. Under the 2019 Incentive programs, the Development Fee is refundable for each restaurant that opens on or before its scheduled opening date (as provided in the Development Agreement). If a restaurant does not open by the scheduled date provided in the Development Agreement, we will retain $5,000 of the Development Fee, which then will be considered fully earned and nonrefundable. The initial franchise fee for a Non-Traditional Restaurant is $5,000. However, if you operate a Small Town Non-Traditional Restaurant and open a restaurant on or before its scheduled opening date, the Initial Franchise Fee will be waived under the 2019 Small Town Incentive Program. Under the 2019 Small Town Incentive Program, you must pay us a Development Fee. Under the 2019 Small Town Incentive, the Development Fee is refundable for each restaurant that opens on or before its scheduled opening date (as provided in the Development Agreement). If the state in which your Papa John's franchise will be operated (or a local taxing authority within the state) imposes a sales tax, use tax or similar tax on the Development Fee or Initial Franchise Fee, we will collect such tax from you in addition to the applicable Fee and remit the amount of the tax directly to the taxing authority. This does not include income taxes imposed on us, for which we are solely responsible. As described in Item 8, certain items are required to be purchased from us or our Affiliates, including the Information System, Designated Software, pizza dough and pizza sauce. Some of these items would be included as part of your opening inventory or are part of the "Information System" (as defined in Item 11) and therefore would be purchased from us or our affiliates and constitute payments made to us or our affiliates prior to opening. The amount will vary, but in 2018 ranged from $23,420 to $73,920, depending on how much you purchase from us. We will debit your bank account for these purchases as described in Item 6 below.

Financing

Except for the lease and payment arrangements described in this Item 10, we do not offer direct or indirect financing. We do not guarantee your note, lease or obligation. If you qualify for one of the development incentives described in Item 1, PJUSA will provide a 48-month lease on two Middleby-Marshall WOW ovens. During the lease period no monthly payments will be required. If the restaurant is still open and you are in good standing, you can purchase the equipment for $50 at the end of the lease period. The form of the lease agreement for the equipment (the ?Equipment Lease?) is attached hereto as Exhibit C-1. If you anticipate receiving the oven lease incentive, but are unable to open a restaurant in time to qualify for the equipment lease, you will be required to pay for the equipment. However, PJUSA will offer you a payment agreement (the ?Payment Agreement?), the form of which is attached hereto as Exhibit C-2. If the restaurant closes, or you are otherwise not in good standing during the lease period, we may require you to pay for the equipment or repossess and dispose of the equipment, at our election. The principal financing terms under the Equipment Lease and the Payment Agreement are as follows: • There are no interest or finance charges under either the Equipment Lease or the Payment Agreement. • Under the Equipment Lease, no periodic payments are due. A single payment of $50 is due at the end of the lease’s 48-month term. • Under the Payment Agreement, the cost of the equipment that you acquire must be paid in 12 equal monthly installments. The cost will depend on the cost of the equipment at the time that you acquire it. At the date of this Disclosure Document, the cost of a set of two Middleby-Marshall WOW ovens was $35,000, plus any applicable sales tax. • Under both the Equipment Lease and the Oven Payment Agreement, we will retain a security interest in the equipment, which will be filed with the appropriate authority in your state. • We do not require a guaranty specific to the Equipment Lease or the Payment Agreement. However, if you are a corporation, LLC or other business entity, under the Owner Agreement each of your owners must personally guarantee all of your debts and obligations to us and our affiliates. This would include payments due under the Equipment Lease or the Payment Agreement. A copy of the Owner Agreement is attached as Exhibit K. • Prepayment is not available under the Equipment Lease. The option to purchase the equipment for $50 applies only at the end of the lease term and only if the Restaurant is open and operating at that time. • Under the Payment Agreement, prepayment may be made at any time, without any charge or penalty. • If you are in default under either the Equipment Lease or the Payment Agreement; (a) we or our designated agents or representatives may enter the site and repossess the equipment; or (b) we may sue for a court ordered repossession; and in either case, you must pay all costs and charges incurred by us in connection with repossessing the equipment, including without limitation, costs or charges incurred by us to recover the equipment and return it to a location chosen by us. • Under the Equipment Lease: a. You are required to pay all costs of (a) transportation and freight charges for delivery of the equipment to your Restaurant; and (b) providing a suitable site for installation of the equipment and actual installation of the equipment at the Restaurant, including without limitation: rigging; structural alteration; rental of installation tools or equipment; necessary electrical power; and HVAC equipment and installations. b. If the Equipment Lease expires or is terminated and you are not eligible to purchase the equipment as provided under the Equipment Lease, within 10 days of termination or expiration you are required, and your own cost and expense, to prepare the equipment for shipping and deliver the equipment to PJUSA or its designated agent. If you fail or refuse to do so, you are required to allow PJUSA or its agents access to the premises where the equipment is located to take immediate possession. The equipment must be returned to PJUSA in substantially the same condition as received, ordinary wear and tear excepted. Upon receipt of the equipment, PJUSA will perform diagnostic testing to determine whether the equipment in is good condition and working order reasonably suited for its normal use and operation. If the equipment fails such diagnostic testing, you will be required to pay to PJUSA a maintenance fee equal to the cost to PJUSA of returning the equipment to good condition and working order. c. During the term of the Equipment Lease, the equipment remains the sole and exclusive property of PJUSA. You have no right or property interest in the equipment except for the right to possess and use the equipment in the operation of your Restaurant. The equipment remains personal property even if installed in or attached to real property. d. You are required to keep the equipment free and clear from all claims, levies, liens and encumbrances. e. The equipment may be used solely for operation of the Restaurant and not for any other commercial, personal, family or household purposes. f. You may not make any alterations to the Equipment without PJUSA’s prior written consent. g. During the term of the Equipment Lease, you must, at your own cost and expense, maintain the equipment in good working order and make any and all repairs necessary to maintain the equipment in good working order. h. You assume and bear the risk of loss or damage to the equipment from the time the equipment is delivered by PJUSA to a carrier for shipment to Lessee’s designated location until returned to PJUSA. You are required to keep the equipment insured against all risks of loss in an amount not less than the replacement cost of the equipment and carry general commercial liability insurance covering the equipment. i. You are obligated to indemnify and defend PJUSA against all claims, liabilities, costs, damages and expenses arising from or related to your possession, use or operation of the equipment. Neither Papa John’s nor any of our affiliates receives any consideration for placing financing with any lender. We are unable to estimate whether you will be able to obtain financing for any part or all of the investments necessary to open a Papa John’s franchise or the terms of any financing, all of which will depend on general credit conditions and the creditworthiness of you and your owners. Under the terms of the Franchise Agreement, a pledge of any Franchise Agreement or Development Agreement, or any rights or obligations under them, in connection with obtaining financing constitutes a transfer requiring our approval. It is our policy not to approve any pledge of any franchise or development rights, or other liens, royalty deferrals or subordination provisions that may be sought by the SBA or bank lenders. A lien against your assets to secure a loan for the construction, remodeling, equipping or operation of the restaurant is generally outside the scope of this restriction.

Franchisee Revenue and Profit

Presented below are average restaurant-level sales revenues of our domestic franchised and company-owned Papa John's restaurants for our fiscal year ended December 30, 2018, along with average restaurant-level cash expenses for company-owned Papa John's restaurants only. The following revenue and cash flow data is drawn from our financial books and records, which are kept on a basis consistent with Generally Accepted Accounting Principles ("GAAP") in the United States. All information is based on actual historical costs and results. Thus, there are no material assumptions associated with the data, other than the principles of GAAP. A number of factors may affect the comparability of the expense (or cash outflow) data, which is drawn solely from company-operated restaurants, to franchised restaurants and the data's effectiveness as a guide or template for potential operating results of a franchised restaurant. The most significant of these factors are discussed in the notes following the data. You should carefully consider these factors when reviewing, analyzing considering the data presented below. The following data refers only to standard (or "traditional") Papa John's restaurants. Performance data for NonTraditional Restaurants varies widely, depending upon the nature of the non-traditional location, number of events or sales dates and other widely varying factors. Thus, this Item 19 is applicable to traditional Papa John's restaurants only. We do not furnish or authorize our sales persons to furnish any oral or written information concerning the actual or potential sales, costs, income or profits of a Papa John's Non-Traditional Restaurant. Notes and Comments Historical Performance Data The foregoing information is drawn from actual historical data from our domestic restaurants. Historical information may not be a reliable predictor of future results or experience. Future performance may be affected by many factors at variance from the conditions that yielded past results and experience, including without limitation: volatility of commodity costs (such as cheese); inflation or rising costs in general, especially for labor and energy; general economic upturn or downturn; changing consumer tastes, preferences or sensibilities; and effectiveness of advertising or promotional campaigns. Expense Data: Company-Owned Restaurants Only Because we do not maintain or audit the accounting records of our franchisees, we would be unable to make any representation with respect to the reliability of the expense data of franchised restaurants. We are unable to determine, for example, whether franchisees' accounting and financial records are kept in a manner that would permit reporting of cost data in accordance with GAAP or whether the franchisees' bookkeeping and accounting systems, practices and controls are sufficiently robust to ensure that the data is reliable. As a result, we present only Company-owned restaurant data with respect to expense (or cash outflow) items. We have also excluded restaurants that were acquired from franchisees or divested to franchisees during the year from the Company-owned restaurants because we cannot verify or make any representations as to their expense data for the part of the year during which the restaurants were franchised rather than Company-owned. See “Full Year Only” note below for the number of Company-owned restaurants included in the average cash flow data. Full Year Only At the close of our fiscal year, there were 3,337 total domestic (United States) Papa John's restaurants, 646 of which were company-owned, including restaurants owned by franchisees in which we have a majority interest (a total of 183 restaurants). However, the foregoing data is drawn only from standard (or "traditional") restaurants that were open the entire year of 2018 because including results from Non-Traditional Restaurants and restaurants that were open only part of the year would skew the annual revenue and expense data. Therefore, the total number of restaurants included in the foregoing data is 2,980, comprising 2,358 franchised restaurants and 622 Company-owned restaurants. Averages The sales revenue data presented is based on averages for our domestic restaurants. Many restaurants have lower sales performance than the average for all restaurants. With a data base consisting of more than 3,000 restaurants, the lowest performing restaurants may have performance data that vary significantly from the average. Some restaurants have sold or earned as much as shown in the foregoing data. Your individual results may differ. We make no assurance that you will sell or earn as much. The cash expense data for our Company-owned restaurants represents averages across a population of more than 600 restaurants. Many Company-owned restaurants have costs that are higher than the system-wide average. Performance of a particular restaurant, in terms of both revenues and expenses, may be affected by many factors, including without limitation: location (whether the restaurant is in a freestanding building, in-line in a strip center or an end-cap in a strip center; whether the restaurant is in a high-visibility, high-traffic location); population density in the restaurant's trade area; business acumen and managerial skills of restaurant management personnel; prevailing wage rates and quality of the available labor pool; availability and cost of commercial rental property; the presence and aggressiveness of the competition; and utility costs. Core Business Revenues The revenue figures for both franchised and Company-owned restaurants include only sales of food and beverages arising in the ordinary course of retail operations. Non-recurring items, such as proceeds from the sale of used furniture or equipment, are not included. Non-Cash Items The cash flow data does not include depreciation expense or any other non-cash items. Over time, worn-out or obsolete restaurant equipment will have to be replaced and leasehold improvements, signage, computer systems and restaurant furnishings may have to be refurbished, remodeled, upgraded or replaced. The foregoing cash flow data does not include any reserves for funding any of these types of improvements or upgrades. Royalty Company-owned restaurants do not pay a royalty. The expenses incurred by a franchised restaurant will include our standard royalty. Economies of Scale Because we operate more than 600 company-owned restaurants, we are able to achieve certain economies of scale and operational efficiencies that may not be available to a franchisee operating one restaurant or a limited number of restaurants, as is the case for the typical franchisee. For example, we have a multi-tiered management hierarchy. At the higher levels of management, we are able to rely on the expertise of management executives with a wealth of experience in the restaurant and food service industries. You may not be able to achieve the same level of management expertise. You will be relying principally on your own business acumen and managerial skills and perhaps that of your Principal Operator. However, the income from our company-owned restaurants ultimately must bear the costs of our management team and other corporate office overhead. These costs are not reflected in the foregoing cash flow data, which reflect operational cash flows at the restaurant level, excluding the burden of corporate overhead. Because of the size of our Company-owned operations, we are able to support a marketing department, with personnel dedicated to marketing functions, as well as dedicated cash management, payroll and other administrative functions. You and your Principal Operator will perform most of these functions, although some administrative functions may be outsourced. Unless you are developing a significant number of restaurants, you may not be able to have experienced personnel dedicated to specific functions, such as marketing. We are a publicly-traded company and have raised significant capital through our stock offerings. We typically do not require bank financing for construction or equipping of our restaurants or for capital improvements or for updating or replacement of worn-out or obsolete equipment in our restaurants. However, to the extent that we do require financing, we are able to draw on a significant line of credit from our primary bank. It is unlikely that these types of financing efficiencies will be available to you. We are also able to obtain economies of scale in other areas, such as insurance, that may not be available to franchisees. Because of the size of our operations, insurance risks are spread over a greater number of restaurants, which enables us to bargain for lower group-rate insurance costs. We are also able to use the size of our operations to achieve volume discounts and other cost savings based on our purchasing power. These cost savings, in areas including telephone services and advertising, may not be available to franchisees operating on a smaller scale. Restaurant and Market Maturity Sales of a particular restaurant may be affected by how long the restaurant has been in operation and how successfully the surrounding market has been penetrated. Typically, sales "ramp up" as the restaurant and market develop. New restaurants (open for less than one year) typically do not operate as efficiently or as profitably as more mature restaurants. In particular, sales at restaurants open less than one year are typically lower than more mature restaurants, as it takes some time to establish consumer recognition and build a customer base in a new trade area. Greater penetration (the greater the number and concentration of restaurants) in a market also may affect performance. Clusters of restaurants may be able to pool resources to purchase advertising on local television or radio, which would be prohibitively expensive for a single restaurant, or even a small cluster of restaurants in a large media market. The foregoing Company-owned restaurant data represents averages for all of our domestic restaurants, some of which are long-established in their location and some of which are relatively new. Most of our Company-owned restaurants are in highly developed and highly penetrated markets. Market Location Our company-owned restaurants are typically clustered in and around major metropolitan areas, such as Atlanta, St. Louis and Nashville. Many franchised restaurants are operated in less densely populated areas, with more limited access to advertising media. Traditional Restaurants Only The foregoing data refers only to standard (or "traditional") Papa John's restaurants. Performance data for Non-Traditional Restaurants varies widely, depending upon the nature of the non-traditional location, number of events or sales dates and other widely varying factors. Thus, this Item 19 is applicable to traditional Papa John's restaurants only. We do not furnish or authorize our sales persons to furnish any oral or written information concerning the actual or potential sales, costs, income or profits of a Papa John's Non-Traditional Restaurant. Other Data Except as described below, we do not furnish or authorize the furnishing to prospective franchisees of any oral or written information other than the data provided above. We may provide to you the actual performance data of a particular restaurant that you are considering purchasing. Also, we may, but we have no obligation to, provide to you supplemental data consisting of a segmentation or subset of the above data. For example, we may provide data for a particular region or individual state. If we do so, that supplemental data will be in writing and will be limited to the types of information set forth in the above data. We do not furnish and do not authorize anyone to furnish supplemental data that is outside the scope of the data provided above. Your Own Due Diligence You should construct your own pro forma cash flow statement and make your own projections concerning potential sales, operating costs, total capital investment requirements, operating cash requirements, debt, cash flow, and other financial aspects of operating a Papa John's restaurant. You should not rely solely on the information provided by us. You should conduct your own investigation of revenue and expense potential for your proposed Papa John's restaurant, including consultation with your own attorney, accountant or other adviser and other Papa John's franchisees. SOME RESTAURANTS HAVE EARNED THIS AMOUNT. YOUR INDIVIDUAL RESULTS MAY DIFFER. THERE IS NO ASSURANCE YOU WILL EARN AS MUCH. Substantiation of Data Written substantiation for the financial performance representation will be made available to prospective franchisees upon reasonable request. Other than the preceding financial performance representation, Papa John’s does not make any financial performance representations. We also do not authorize our employees or representatives to make such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records for that outlet. If you receive any other financial performance information or projections of your future income, you should report it to our management by contacting Anthony Hellmueller at P.O. Box 99900, Louisville, Kentucky 40269, telephone 502-261-4844, the Federal Trade Commission, and the appropriate state regulatory agencies.