| Segment Information | 23. 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 principally generates revenues from retail sales of pizza and other food and beverage products. 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. International franchisees are defined as all franchise operations outside of the United States and Canada. 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. All other business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, which are not operating segments, we refer to as “All Other”. These consist of operations that derive revenues from 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. Prior to the sale of Preferred Marketing Solutions in the fourth quarter of 2023, All Other included revenues from the sale of printing and promotional items (principally to Company-owned and franchised restaurants). Our chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM evaluates performance and allocates resources to our segments based on Adjusted operating income. This measure excludes certain general and administrative expenses and other items that do not reflect normal, recurring expenses necessary to operate our business. During the annual budget and forecasting process, the CODM uses Adjusted operating income to allocate resources (including employees, property, and financial or capital resources) to the segments. The CODM regularly reviews trends in Adjusted operating income on at least a quarterly basis to evaluate the profitability of the segments and to make resource allocation decisions. When our CODM reviews balance sheet information, it is at a consolidated level. Certain administrative and capital costs are allocated to our segments based upon predetermined rates or estimated resource usage. In the fourth quarter of 2024, we updated our internal cost allocation methodology to reflect recent changes in the business, including changes to the CODM and ongoing transformation projects. The methodology updates better align corporate cost allocations with how the CODM allocates resources to the segments and evaluates segment profitability, and result in reductions to the Adjusted operating income of our segments. These changes are offset in Unallocated corporate expenses and have no impact on consolidated operating income. We have chosen to prospectively adopt this update in allocation methodology and the comparative information has not been restated. Segment Results The tables below present our operating results by segment (in thousands). The significant expense categories and amounts presented in the tables below align with the segment-level information that is regularly provided to the CODM. A reconciliation to Company results is included in the following section. Year Ended December 29, 2024 Domestic Company-owned restaurants North America franchising North America commissaries International Total Revenues from external customers $ 692,736 $ 139,091 $ 831,774 $ 174,054 $ 1,837,655 Intersegment revenues — 4,150 205,234 — 209,384 Revenues $ 692,736 $ 143,241 $ 1,037,008 $ 174,054 $ 2,047,039 Less costs and expenses (a) : COS - Product Costs $ 207,704 $ — $ 756,170 $ 51,889 $ 1,015,763 COS - Salaries & Benefits 226,325 — 116,645 13,759 356,729 General & Administrative (b) 39,822 35,064 37,690 38,379 150,955 Other Segment Expenses (c) 194,216 — 77,945 56,259 328,420 Adjusted operating income $ 24,669 $ 108,177 $ 48,558 $ 13,768 $ 195,172 Year Ended December 31, 2023 Domestic Company-owned restaurants North America franchising North America commissaries International Total Revenues from external customers $ 726,362 $ 144,550 $ 852,361 $ 182,487 $ 1,905,760 Intersegment revenues — 4,267 210,614 — 214,881 Revenues $ 726,362 $ 148,817 $ 1,062,975 $ 182,487 $ 2,120,641 Less costs and expenses (a) : COS - Product Costs $ 215,545 $ — $ 787,966 $ 54,514 $ 1,058,025 COS - Salaries & Benefits 238,434 — 118,678 17,853 374,965 General & Administrative 40,714 15,017 36,960 31,271 123,962 Other Segment Expenses (c) 198,199 — 76,055 59,794 334,048 Adjusted operating income $ 33,470 $ 133,800 $ 43,316 $ 19,055 $ 229,641 Year Ended December 25, 2022 Domestic Company-owned restaurants North America franchising North America commissaries International Total Revenues from external customers $ 708,389 $ 137,399 $ 869,634 $ 158,682 $ 1,874,104 Intersegment revenues — 4,122 217,570 — 221,692 Revenues $ 708,389 $ 141,521 $ 1,087,204 $ 158,682 $ 2,095,796 Less costs and expenses (a) : COS - Product Costs $ 218,732 $ — $ 820,636 $ 57,781 $ 1,097,149 COS - Salaries & Benefits 237,095 — 113,357 4,117 354,569 General & Administrative 29,510 13,639 33,291 21,889 98,329 Other Segment Expenses (c) 198,674 — 77,389 47,360 323,423 Adjusted operating income $ 24,378 $ 127,882 $ 42,531 $ 27,535 $ 222,326 ______________________________ (a) Costs and expenses excludes certain general and administrative expenses and other items that do not reflect normal, recurring expenses necessary to operate our business (see reconciliation table that follows). (b) As noted in the commentary above, the Company prospectively adjusted for updates in internal cost allocation methodologies in 2024, which increased the amount of internal general and administrative expenses allocated to the segments from Unallocated corporate expenses. The allocation updates resulted in the following increases to segment G&A in 2024: $0.4 million to Domestic Company-Owned restaurants, $22.9 million to North America franchising, $3.3 million to International and $0.1 million to North America commissaries. There was no impact on overall company profitability, as the change was offset within Unallocated corporate expenses (see reconciliation table below). (c) Other Segment Expenses represents all operating expenses that are not included in the significant segment expense categories. The components of Other Segment Expenses are: other cost of sales that are not included in “COS - Product Costs” or “COS - Salaries & Benefits” (including, but not limited to, delivery expenses, Company-owned restaurant advertising costs, insurance, rent, utilities, and aggregator fees), advertising costs, depreciation and amortization costs, and other operating expenses. Reconciliation of Segment Results to Company Results The following table reconciles Total Revenues from our segments to Total Revenues and Total Adjusted operating income from our segments to Income before income taxes (in thousands): Year Ended 2024 2023 2022 Total Revenues from our segments $ 2,047,039 $ 2,120,641 $ 2,095,796 All Other revenue (a) 279,385 296,440 298,282 Elimination of intersegment revenue (267,037) (281,368) (291,975) Total Revenues $ 2,059,387 $ 2,135,713 $ 2,102,103 Year Ended 2024 2023 2022 Total Adjusted operating income from our segments $ 195,172 $ 229,641 $ 222,326 All Other profit (a) 4,065 10,116 10,084 Unallocated corporate expenses (b) (51,054) (82,759) (74,043) Elimination of intersegment (profit) loss — 27 (905) Other income/(expense) adjustments (c) 8,521 (9,883) (48,432) Operating income 156,704 147,142 109,030 Net interest expense (42,578) (43,469) (25,261) Income before income taxes $ 114,126 $ 103,673 $ 83,769 ______________________________ (a) As noted in the commentary above, All Other revenue and profit is derived from business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, including: franchise contributions to marketing funds, information systems and related services used in restaurant operations, and sale of printing and promotional items (principally to Company-owned and franchised restaurants). (b) Unallocated corporate expenses represent administrative fees incurred by the restaurant support centers, including: information systems and related services, corporate salaries and bonuses, stock compensation expense, and other corporate costs. (c) Other income/(expense) adjustments represent certain general and administrative expenses and other items that do not reflect normal, recurring expenses necessary to operate our business. As such, management excludes these items from the evaluation of Adjusted operating income. For the periods above, the adjustments include: Year Ended (In thousands) December 29, 2024 December 31, 2023 December 25, 2022 Gain on sale of QC Center properties (See Note 22) $ 41,289 $ — $ — International restructuring costs (See Note 16) (27,273) (2,178) — Refranchising and impairment losses (5,495) — (26,702) UK repositioning and acquisition-related costs — (4,243) (5,223) Legal settlements — (577) (15,000) Other costs — (2,885) (1,507) Total adjustments $ 8,521 $ (9,883) $ (48,432) Depreciation and Amortization by Segment The following table presents depreciation and amortization by segment. (In thousands) 2024 2023 2022 Depreciation and amortization: Domestic Company-owned restaurants $ 16,560 $ 14,184 $ 11,495 North America commissaries 15,780 16,046 13,299 International 4,134 3,167 1,774 All Other 22,396 15,572 12,681 Unallocated corporate expenses 10,537 15,121 12,783 Total depreciation and amortization $ 69,407 $ 64,090 $ 52,032 Disaggregation of Revenue Our segments earn revenue from both external and internal customers. No single external customer accounted for 10% or more of our total revenues. We account for intercompany sales and transfers as if the sales or transfers were to third parties and subsequently eliminate the activity. The accounting policies of our segments are the same as those described in Note 2. Significant Accounting Policies. In the following tables, revenues are disaggregated by major product line. The tables also include a reconciliation of the disaggregated revenues by the reportable segment (in thousands): Year Ended December 29, 2024 Domestic Company-owned North America franchising North America International All Other Elimination of Intersegment Revenue Total Company-owned restaurant sales $ 692,736 $ — $ — $ 31,930 $ — $ — $ 724,666 Franchise royalties and fees — 143,241 — 47,941 — (4,150) 187,032 Commissary revenues — — 1,037,008 67,890 — (205,234) 899,664 Other revenues — — — 12,701 85,914 (14,933) 83,682 Advertising funds revenue — — — 13,592 193,471 (42,720) 164,343 Total Revenues $ 692,736 $ 143,241 $ 1,037,008 $ 174,054 $ 279,385 $ (267,037) $ 2,059,387 Year Ended December 31, 2023 Domestic Company-owned North America franchising North America International All Other Elimination of Intersegment Revenue Total Company-owned restaurant sales $ 726,362 $ — $ — $ 34,463 $ — $ — $ 760,825 Franchise royalties and fees — 148,817 — 50,437 — (4,267) 194,987 Commissary revenues — — 1,062,975 72,287 — (210,614) 924,648 Other revenues — — — 12,617 101,789 (16,369) 98,037 Advertising funds revenue — — — 12,683 194,651 (50,118) 157,216 Total Revenues $ 726,362 $ 148,817 $ 1,062,975 $ 182,487 $ 296,440 $ (281,368) $ 2,135,713 Year Ended December 25, 2022 Domestic Company-owned North America franchising North America International All Other Elimination of Intersegment Revenue Total Company-owned restaurant sales $ 708,389 $ — $ — $ — $ — $ — $ 708,389 Franchise royalties and fees — 141,521 — 49,422 — (4,122) 186,821 Commissary revenues — — 1,087,204 80,481 — (217,570) 950,115 Other revenues — — — 14,135 107,194 (19,683) 101,646 Advertising funds revenue — — — 14,644 191,088 (50,600) 155,132 Total Revenues $ 708,389 $ 141,521 $ 1,087,204 $ 158,682 $ 298,282 $ (291,975) $ 2,102,103 |
