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Pizza Franchise
Research Report
Research Franchises
October 1, 2007
Franchise Comparison ‐ Pizza Industry
TABLE OF CONTENTS
General Information............................................................................................................................ 3
Industry Overview ............................................................................................................................. 3
Industry Financials............................................................................................................................. 8
Franchise Comparisons ................................................................................................................... 12
Brief Description .......................................................................................................................... 12
General Franchisor Information ................................................................................................. 13
Management/Contact Information............................................................................................. 14
Ownership Information ............................................................................................................... 14
Requirements of Franchisee ........................................................................................................ 14
Franchise Unit Investment .......................................................................................................... 15
Additional Unit Fees .................................................................................................................... 16
Franchise Renewal & Terms ....................................................................................................... 16
Brand History................................................................................................................................ 17
Distribution of Units .................................................................................................................... 18
Domestic Unit Foreclosures ........................................................................................................ 18
Franchise Concentration (Geographic Location of Current Units) ....................................... 18
Earning Claims Statement ........................................................................................................... 19
Financing Arrangements ............................................................................................................. 19
Bankruptcy & Litigation History................................................................................................ 20
Additional Resources ....................................................................................................................... 20
Glossary of Terms.............................................................................................................................. 21
Disclaimer........................................................................................................................................... 25
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Franchise Comparison ‐ Pizza Industry
General Information
Name of Industry: Limited Service – Restaurants‐Fast Food
General Industry Number: 72
Specific Industry Number: 722211
Names of the specific franchises that are covered in the research:
• Pizza Hut Inc
• Hungry Howie’s Pizza Subs & Inc
• FOX'S PIZZA DEN INC
• Papa Murphy’s International Inc
• Z Pizza International Inc
Industry Overview
Pizza Industry overview
The Pizza industry is fiercely competitive not only within its own industry but with other
fast food establishments. It is therefore important to look at the industry as a whole not
just other Pizza restaurants. Below is a quick note on the U.S. quick service restaurant, or
QSR, sector pizza category and its components.
According to a CREST report, the U.S. QSR pizza category is large, growing and highly
fragmented. With sales of $34.2 billion in the twelve months ended November 2006, the
U.S. QSR pizza category is the second largest category within the $216.6 billion U.S.
QSR sector. The U.S. QSR pizza category is primarily comprised of delivery, dine-in and
carry-out.
U.S. pizza deliveries $12.1 billion of sales accounted for 35% of total U.S. QSR pizza
category sales in the twelve months ending November 2006. Total pizza delivery sales
grew by 2.7% during that period. We believe that this growth is the result of well-
established demographic and lifestyle trends driving increased consumer emphasis on
convenience. The top three Pizza establishments account for approximately 46% of U.S.
pizza delivery, based on reported consumer spending, with the remaining 54%
attributable to regional chains and individual establishments.
Carry-out, which together with pizza delivery are the largest components of the U.S. QSR
pizza category. U.S. carry-out pizza had $13.6 billion of sales in the twelve months
ending November 2006.
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Franchise Comparison ‐ Pizza Industry
According to Info USA, as of July 2006 there were 69,386 U.S. Pizza Stores:
Independents and others 68.42%
Pizza Hut 10.90%
Domino’s Pizza 7.34%
Papa John’s 3.75%
Little Caesars 2.72%
All other top 25 10.48%
The top 25 chains own 35.19% of pizzerias and control 50.53% of sales.
Fast Food Industry Overview
The fast food market is defined as the sale of food and drinks for immediate consumption
either on the premises or in designated eating areas shared with other foodservice
operators, or for consumption elsewhere.
The market is broken down in to four segments: Quick Service Restaurants (QSR),
Takeaways, Mobile & Street Vendors and Leisure Locations. QSR's are defined as:
locations where the primary function is to provide full meals but where table service is
not offered. Takeaways are defined as: establishments that provide freshly prepared food
for immediate consumption and where typically 80% or more of revenues come from
consumers who take the food off the premises to consume. Mobile & street vendors are
defined as: Either individual mobile stalls or vans that offer a limited range of freshly
prepared food as well as beverages. Leisure locations are defined as: locations serving
food and drinks for immediate consumption on premises within leisure outlets (such as
Cinemas, Theatres, Racecourses etc.) that the Leisure operator owns and operates itself.
*The US fast food market generated total revenues of $51.3 billion in 2005, an increase
of 2.6% since 2004.
*Sales of fast food to quick service restaurants form by far the most lucrative segment of
the market, generating total revenues of $37.4 billion in 2005, equivalent to 72.8% of the
market's overall value.
*Looking forward, the market is forecast to maintain its current performance, with an
anticipated CAGR of 2.3% for the five-year period 2005-2010 expected to drive the
market to a value of $57.6 billion by the end of 2010.
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Franchise Comparison ‐ Pizza Industry
*Many of the US's leading fast food companies operate in diverse global markets, and
global trends tend to affect US companies.
Market Analysis
The United States fast food market has seen a healthy rise in its growth within the last
three years. Growth rates are set to be sustained going forward. Americans find quick
service restaurants the most convenient place to buy their fast food as more and more of
the population work longer hours and have less time to prepare food, and this is reflected
in the dominance of these outlets in generating revenues in this market.
The US fast food market generated total revenues of $51.3 billion in 2005, an increase of
2.6% since 2004, representing a compound annual growth rate (CAGR) of 2.3% for the
five-year period spanning 2001-2005. Market volumes in the US increased with a CAGR
of 1.2% between 2001-2005, to reach a total of 35.2 billion transactions in 2005.
Sales of fast food to quick service restaurants form by far the most lucrative segment of
the market, generating total revenues of $37.4 billion in 2005, equivalent to 72.8% of the
market's overall value. The takeaways segment also contributes significantly to the
market's performance, with total 2005 revenues of $9 billion, equating to 17.5% of the
market's revenues.
Looking forward, the market is forecast to maintain its current rate, with an anticipated
CAGR of 2.3% for the five-year period 2005-2010 expected to drive the market to a
value of $57.6 billion by the end of 2010. Transaction volumes are forecast to increase
with a CAGR of 1% to reach 35.2 billion by the end of 2010. Drivers of growth are likely
to include the increasing number of Americans in the workplace, which will tend to
reduce the amount of time spent on preparing meals at home, and the rise in popularity of
fast food with younger consumers, although health issues have been brought to the
public's attention, and this could hamper the market's growth in the future.
Industry Trends
Industry Growth.
Most large food service companies have found growth happens faster through
acquisitions than through development of their own sites. However, growth for many was
still focused on franchise development and expansion into foreign markets.
Training for the Future.
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Franchise Comparison ‐ Pizza Industry
Some restaurant chains in the United States started teaching English to Spanish-speaking
employees.
Redefining Family Dining.
There were more single parent families to consider than in the past. Family-dining chains
and fast-food operators were adapting marketing tactics and menu items to address the
needs of all types of families, including grandparents with kids.
Go Healthy.
The explosion of health-conscious diets, from the low-carb to the low-fat and all points in
between, caused restaurants of all types to reinvent their menus. In fast food, restaurants
were busily adding salads and special sandwiches to the menu, or retooling classic
favorites to suit different diets.
Workforce.
The aging population influenced more than menu choices; it was also influencing the
available work pool from which restaurants could find staff. Many countries were seeing
an increase in the use of senior members of the population.
Multibrand Restaurants.
Another trend in the fast food industry is the multibrand restaurant concept, where two to
three recognized brands sell food side-by-side under the same roof. This may be done
through the use of separate counters, so that the restaurant looks like a mini food court, or
one brand may dominate the menu and offer a few favorites of another brand.
Fast-Casual Restaurants.
Another emerging concept in the early twenty-first century was the "fast-casual"
restaurant, which like fast-food chains does not have a dining room wait staff, and
therefore, no tipping. However, the fast-casual restaurant offers a higher-quality menu
than the fast-food chains.
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Franchise Comparison ‐ Pizza Industry
Industry Financials
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Franchise Comparison ‐ Pizza Industry
Returns of Active Corporations Food Services and Drinking Places
Balance Sheet, Income Statement, and Selected Items, by Minor
Industry, by Size of Total Assets
(All figures are estimates based on samples--money amounts and size of
total assets are in thousands of dollars)
MAJOR CODE 722 Size of Total Assets
Returns with Net Income $1,000 $5,000 $10,000 $25,000 $50,000 $100,000 $250,000
Zero under under under under under under under
Total Assets $5,000 $10,000 $25,000 $50,000 $100,000 $250,000 $500,000
1 Number of
returns...................................... 124,365 8,300 5,882 444 245 67 34 31 18
2 Total
assets................................................ 142,503,756 - 10,846,429 2,884,309 3,701,408 2,251,074 2,390,617 4,797,186 6,207,884
3
Cash........................................................ 12,075,635 - 1,656,804 310,802 385,915 241,209 162,754 475,902 573,668
4 Notes and accounts
receivable.................... 7,978,001 - 482,865 107,076 230,160 206,667 138,658 266,768 395,563
5 Less: Allowance for bad
debts............... 168,993 - *2,332 *409 2,514 2,753 22,447 10,079 12,828
6
Inventories................................................. 4,032,093 - 382,502 238,507 103,860 83,230 66,425 131,926 180,128
7 U.S. govt. obligations,
total......................... *19,584 - 52 - - 1,023 - - 1,476
8 Tax-exempt
securities................................ 17,326 - - - 11,204 1,304 - - -
9 Other current
assets.................................. 3,963,777 - 531,711 60,171 184,171 111,591 82,023 252,412 252,843
10 Loans to
shareholders............................... 1,285,080 - 267,878 *76,354 71,170 16,781 15,591 4,714 9,146
11 Mortgage and real estate
loans.................. 402,645 - *234,691 *730 12,871 369 - - 20,403
12 Other
investments..................................... 36,638,797 - 681,878 129,238 368,503 197,128 240,511 492,987 430,879
13 Depreciable
assets................................... 92,688,816 - 11,499,309 2,628,234 3,275,391 1,701,064 2,157,605 4,516,228 4,829,425
14 Less: Accumulated
depreciation............ 47,323,880 - 6,924,181 1,439,680 1,757,487 867,798 1,026,100 2,339,562 2,276,337
15 Depletable
assets..................................... *76,778 - *74 *56,524 - 255 - 7,116 -
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Franchise Comparison ‐ Pizza Industry
16 Less: Accumulated
depletion................ *64,841 - *67 *48,652 - - - 7,106 -
17
Land........................................................ 7,786,506 - 634,840 163,983 364,674 192,834 143,430 365,699 558,072
18 Intangible assets
(Amortizable).................. 21,536,164 - 1,913,452 689,425 545,327 341,469 450,575 517,444 1,108,922
19 Less: Accumulated
amortization........... 5,307,906 - 743,148 241,551 190,852 113,042 45,804 117,618 190,344
20 Other
assets............................................ 6,868,174 - 230,100 153,554 99,015 139,742 27,397 240,354 326,867
21 Total
liabilities.......................................... 142,503,756 - 10,846,429 2,884,309 3,701,408 2,251,074 2,390,617 4,797,186 6,207,884
22 Accounts
payable..................................... 10,014,998 - 769,388 321,737 325,720 169,328 163,379 292,700 489,534
23 Mort, notes, and bonds under 1
yr.............. 5,681,815 - 672,549 213,930 233,325 112,591 112,521 122,340 133,025
24 Other current
liabilities............................... 11,769,656 - 1,210,149 295,093 345,330 292,884 310,708 551,656 731,129
25 Loans from
shareholders............................ 4,369,500 - 790,149 307,324 78,374 23,901 14,598 - -
26 Mort, notes, bonds, 1 yr or
more................ 35,282,934 - 3,641,288 874,034 1,568,765 703,775 828,858 1,389,467 2,379,435
27 Other
liabilities.......................................... 12,480,091 - 680,308 4,049 131,357 40,710 204,310 455,353 734,679
28 Net
worth................................................. 62,904,761 - 3,082,598 868,142 1,018,538 907,885 756,243 1,985,671 1,740,082
29 Capital
stock........................................... 12,026,150 - 350,680 47,803 189,300 163,290 182,162 505,275 247,817
30 Additional paid-in
capital........................... 25,684,039 - 1,868,905 257,624 345,331 201,181 402,704 1,153,534 2,099,618
31 Retained earnings,
appropriated................ 692,109 - *5,648 - 2,382 2,407 - - 124,221
32 Retained earnings,
unappropriated............. 42,729,020 - 1,312,253 599,557 582,021 571,729 192,781 415,829 -65,840
33 Less: Cost of treasury
stock.................... 18,226,557 - 454,888 *36,843 100,495 30,723 21,405 88,968 665,735
34 Total
receipts............................................ 231,766,014 1,298,721 28,385,699 7,015,014 7,288,408 4,387,992 4,759,722 8,296,478 10,078,780
35 Business
receipts..................................... 219,773,848 1,126,279 27,973,198 6,766,796 7,089,795 4,260,727 4,662,598 7,869,104 8,926,489
36
Interest.................................................... 1,132,249 *3,745 8,937 5,234 4,643 3,268 3,584 13,737 17,505
37 Interest on govt. obligations,
total............... 22,790 - *[1] - 412 508 8 1,929 279
38
Rents....................................................... 359,415 - 5,907 *10,113 4,644 14,379 8,365 25,383 47,275
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Franchise Comparison ‐ Pizza Industry
39
Royalties.................................................. 3,265,076 *3,053 56 779 31,514 41,076 29,807 127,182 562,571
40 Net S-T cap gain less net LT
loss............... 5,487 - - - 525 2 45 86 -
41 Net L-T cap gain less net ST
loss............... 318,940 *28,586 23,350 *7,193 7,918 445 1,535 53,048 49,523
42 Net gain, noncapital
assets........................ 309,098 58,810 21,623 7,727 7,334 7,915 1,510 20,336 6,422
43 Dividends, domestic
corporations............... 42,302 - *873 *288 894 234 591 1,270 35,253
44 Dividends, foreign
corporations................... 283,059 - - - - - - 160 612
45 Other
receipts........................................... 6,253,749 78,248 351,754 216,883 140,729 59,438 51,679 184,243 432,852
46 Total
deductions....................................... 218,268,766 1,115,097 26,664,997 6,795,772 6,982,120 4,170,374 4,635,798 7,867,800 9,476,019
47 Cost of
goods........................................... 90,999,145 475,259 11,694,271 2,671,494 3,044,166 2,043,710 1,683,308 3,388,528 3,036,641
48 Compensation of
officers............................ 4,547,362 68,827 512,980 90,201 108,573 61,044 43,028 60,544 93,050
49 Salaries and
wages................................... 42,980,272 100,499 4,964,302 1,443,728 1,406,997 684,658 877,042 1,516,686 2,534,947
50
Repairs.................................................... 3,764,883 17,033 561,684 111,552 126,066 63,743 81,845 183,008 149,501
51 Bad
debts................................................ 169,744 *1,319 6,779 849 7,694 3,363 2,039 8,267 11,906
52 Rent paid on business
property.................. 13,445,703 108,502 1,786,339 440,623 380,618 247,275 249,884 390,805 424,305
53 Taxes
paid............................................... 8,627,125 59,901 1,029,037 298,944 253,971 133,667 154,611 315,912 417,908
54 Interest
paid............................................. 3,404,234 13,031 259,533 75,460 106,087 57,009 65,606 138,930 209,179
55 Charitable
contributions............................. 137,649 *2,749 2,840 *90 1,396 1,376 952 3,834 4,730
56
Amortization............................................. 1,066,834 *1,862 87,680 47,237 34,613 15,991 24,743 36,059 66,743
57
Depreciation............................................. 6,467,622 26,184 653,693 158,772 219,798 110,567 160,904 306,327 413,682
58
Depletion.................................................. 408 - - - 408 - - - -
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Franchise Comparison ‐ Pizza Industry
59
Advertising............................................... 5,443,864 23,164 886,758 198,991 238,082 89,138 96,181 248,839 288,933
60 Pension, profit sharing, stock,
annuity........ 438,448 458 21,564 30,539 7,627 3,964 8,347 12,016 79,703
61 Employee benefit
programs........................ 2,784,594 *2,282 260,416 103,402 90,561 49,808 66,934 128,607 144,302
62 Net loss, noncapital
assets........................ 236,319 *349 4,907 *479 3,692 9,359 6,716 12,767 17,938
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Franchise Comparison ‐ Pizza Industry
Franchise Comparisons
Brief Description
Franchise Concept Brief Description
Pizza Hut Inc. The Franchisor is Pizza Hut, Inc; a California
Corporation. PHI is a wholly owned subsidiary of
YUM! Brands, Inc..(YUM) f/k/a TRICON Global
Restaurants, Inc. (TRICON) on May 7, 2002, YUM
acquires Global Restaurants, Inc, which owns Long
Johns Silver's Restaurants and A & W All American
Restaurants. YUM adopted its new name on May17,
2002. More than 40 years later, Pizza Hut has
locations throughout the world serving its specialty
pizzas. PHI was originally incorporated as "Pizza Hut
of San Diego Inc," in 1967, and changes its name on
September 25, 1997, in anticipation of acquiring the
assets of Pizza Hut Inc.
Hungry Howie’s Pizza & Subs Inc Hungry Howie's Pizza & Subs, Inc., is the
Franchisor. Hungry Howie's is a Michigan
corporation, incorporated on December 21, 1981.
Hungry Howie's grants the right to sell Pizza,
submarine sandwiches, salads, deserts and
beverages.. Currently, Hungry Howie’s operates over
525 locations in 18 states.
FOX'S PIZZA DEN INC Fox's Pizza Den Inc is the Franchisor of Fox's Pizza
Distribution, Inc.Fox's Fox's Pizza Den Inc is a
Pennsylvania Corporation incorporated on September
16, 1974. The Corporation has no Predecessors .Fox's
Pizza Distribution, Inc is an affiliate of Fox's Pizza
Den Inc. which licenses the franchisee to operate a
retail store specializing in pizza and other specialty
food items using Fox's business and food service
methods and techniques.
Papa Murphy’s International Inc The restaurant was started in 1981. Papa Murphy's
International Inc is the Franchisor. Today there are
1,000 Papa Murphy's stores in 30 states and Canada.
Papa Murphy's pioneered the take and bake concept
and is the largest take and bake pizza company in the
world.
Z Pizza International Inc Z Pizza International Inc., is a California corporation
incorporated on January 22, 1999. They do not do
Business under any other name. Zpizza Corporation
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Franchise Comparison ‐ Pizza Industry
was the predecessor of Z Pizza International Inc.
They are offering and selling ZPizza franchises and
operating ZPizza Restaurants. ZPizza currently owns
and operates restaurants in Los Angeles ,and Seal
Beach, California and is the licensor of 17
restaurants.
General Franchisor Information
Franchise Concept Franchisor Company Corporate Entity (if
different)
Pizza Hut Inc. Pizza Hut, Inc. California Corporation
A California Corporation 14841 Dallas Parkway
14841 Dallas Parkway Dallas, TX 75284
Dallas, TX 75284 972-338-7700
972-338-7700 www.yum.com/franchising
www.yum.com/franchising
Hungry Howie’s Pizza & Hungry Howie's Pizza & Same as Franchisor Co.
Subs, Inc Subs, Inc; & Michigan
Corporation
30300 Stephenson Highway
Suite 200
Madison Heights, Michigan
48071
(248)414-3300
www.hungryhowies.com
FOX'S PIZZA DEN INC Fox's Pizza Den, Inc Fox's Pizza Distribution , Inc
3243 Old Frankstown Road, 3243 Old Frankstown Road,
Pittsburgh, Pittsburgh,
Pennsylvania 15239 Pennsylvania 15239
Ph:724-733-7888 Ph:724-733-7888
www.foxspizza.com www.foxspizza.com
Papa Murphy’s International Papa Murphy's International Papa Aldo's International Inc,
Inc Inc An Oregon Corporation
A Washington Corporation
8000 NE Parkway Drive,
Suite 350
Vancouver, Washington
98662
(360) 260-7272
www.papamurphys.com
Z Pizza International Inc Z Pizza International Inc, NPizza Corporation
A California Corporation 909 Canyon View
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Franchise Comparison ‐ Pizza Industry
450 Newport Center Drive, Laguna Beach
Suite 630 California 92651
New Port Beach, California
92660
949-719-3800
www.zpizza.com/
Management/Contacts
Franchise Concept CEO President Franchise Development
Pres. Or Manager
Pizza Hut Inc. David C. Novak David C. Novak David W. Gibbs
Hungry Howie’s Pizza Steven E. Jackson Robert S. Caffaro
& Subs, Inc
FOX'S PIZZA DEN James R. Fox James R. Fox James R. Fox
INC
Papa Murphy’s Terry Collins Mark R. Laramie
International Inc
Z Pizza International Christopher Bright
Inc
Ownership Information
Franchise Concept Parent Company Status Stock Ticker
Exchange Symbol
Pizza Hut Inc. YUM! Brands, Inc Private N/A N/A
Hungry Howie’s Pizza Hungry Howie’s Pizza & Private N/A N/A
& Subs Inc Subs Inc
FOX'S PIZZA DEN Fox's Pizza Den Private N/A N/A
INC
Papa Murphy’s Papa Aldo's International Private N/A N/A
International Inc Inc
Z Pizza International NPizza Corporation N/A N/A
Inc
Requirements of Franchisee
Franchise Concept Franchise Requirements
Pizza Hut Inc. PHI strongly recommends direct personal participation. There is no
restrictions on who you may hire to operate your WS co brand Outlet
and such a manager need not be an equity owner in you if you are a
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Franchise Comparison ‐ Pizza Industry
business entity. PHI will conduct training at Wingstreet Restaurants
and at meeting facilities such as hotels and/or convention centers at
various locations through out the United States
Hungry Howie’s Pizza You must personally be involved in the conduct and operation of your
& Subs Inc restaurant or QS. If you are not on the premises, a trained manager
under your supervision must be at the restaurant or QS while it is open
for business. The designated individual will be entitled to take part in
the Hungry Howie's training program
FOX'S PIZZA DEN Fox does require that you, or your identified and acceptable manager
INC or designee, complete the Fox's training program, and that qualified
management be at the retail store unit at all times. For company -
owned franchisees, a responsible manager must be named and trained
by Fox. The all food processing operations comply with approved
methods of preparation and preservation as well as with all applicable
local, state and/ or federal laws and regulations.
Papa Murphy’s The owner must participate fully in the actual day to day operation of
International Inc your franchised store, except as we may agree in writing for good
cause. The managers must successfully complete the mandatory
training program. The manager and all of your owners must agree to
be bound by confidentiality and non-compete provisions of the
franchise agreement.
Z Pizza International The Franchisor must at all times directly supervise the operation of the
Inc restaurant or you may employ a manager for this purpose. The
manager must complete the training .to their satisfaction. An area
developer must devote his full time supervision of restaurant operated
in the development area.
Franchise Unit Investment
Franchise Concept Franchise Unit Investment (Avg.)
Pizza Hut Inc $265,000 and $1,000,000
Hungry Howie’s Pizza $9336 and $34045
& Subs Inc
FOX'S PIZZA DEN $8504 and $10504
INC
Papa Murphy’s $10815 & $17307
International Inc
Z Pizza International $207,22 and $286,11
Inc
Additional Unit Fees
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Franchise Comparison ‐ Pizza Industry
Franchise Concept Franchise Fee % Royalty Advertising
Fees
Pizza Hut Inc $10,000 6.5% Percentage of
Wingstreet
gross sales that
vary plus one
time $ 1000
advertising
contribution per
WS Co-Brand
Outlet3
Hungry Howie’s Pizza $15,000 5% of gross sales but Variable
& Subs Inc no less than $1,000 per
reporting period
FOX'S PIZZA DEN $10,000 $300 per month N/A
INC
Papa Murphy’s $ 15000 5% of your weekly Currently 1% of
International Inc revenue your weekly
gross revenue,
but may
increase to a
maximum of
2% of your
weekly gross
revenue at our
discretion
Z Pizza International $25,000 6% of Gross Sales 1% of Gross
Inc Sales
Franchise Renewal & Terms
Franchise Concept Franchise Term Renewal Conditions & Terms
Pizza Hut Inc 20 Years 20 years, unless on any
Checkpoint date, you fail to
upgrade at least 90% of the dine
in restaurant required to be
upgraded.
Hungry Howie’s Pizza 20 Years One option of 20 years
& Subs Inc
FOX'S PIZZA DEN 5 years Sign new Agreement (if in good
INC standing) 45 days before
expiration of term. Pay
administrative fee of $300.
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Franchise Comparison ‐ Pizza Industry
Papa Murphy’s 10 years If you are good standing, you
International Inc may renew for periods of
successive additional periods of
five years each under the term of
our current franchise agreement;
or shorter if under a non-
traditional shop agreement,
subject to a sublease or master or
master lease.
Z Pizza International 10 years One additional term of 10 years
Inc
Brand History
Franchise Concept 1st Franchise/Unit Current Franchisor –
Opened No. of Yrs.
Franchising
Pizza Hut Inc 1967 10 years*
Hungry Howie’s Pizza 1981 26 years
& Subs Inc
FOX'S PIZZA DEN 1971 **36 years
INC
Papa Murphy’s 1981 17 years***
International Inc
Z Pizza International 1986 8 years****
Inc
* PHI is the successor to old PHI, having acquired substantially all of its assets on September
30, 1997
** The franchise was operated by the owner James R. Fox from 1971 to 2007
*** In September 3, 1990 Papa Aldo’s International Inc (the predecessor) were purchased by
Collins New Corp., an Oregon Corporation
**** Zpizza was started in 1986, but it was incorporated in 1999
Distribution of Units
Franchise Domestic % of International % of Compa % of Totals
Concept Franchised Total Franchised Total ny Total
Units Units Units Units Owned Units
Units
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Franchise Comparison ‐ Pizza Industry
Pizza Hut Inc 146 14.2% 0 0% 875 85.8% 1021
Hungry 572 100 % 0 0% 0 0% 572
Howie’s
Pizza & Subs
Inc
FOX'S *308 100 % 0 0% 0 0% 308
PIZZA DEN
INC
Papa 786 98.75 0 0% 10 .1.25% 796
Murphy’s %
International
Inc
Z Pizza 28 77.8% 0 0% 8 22.2% 36
International
Inc
*Year 2007=308
Domestic Unit Foreclosures
Franchise Concept Year Total % Closures w/ % Closures
Closures1/ Transfers2 w/out
Transfers transfers3
Pizza Hut Inc 2006 0 0% 0%
Hungry Howie’s Pizza 2006 50 9% 2.7%
& Subs Inc
FOX'S PIZZA DEN *2006 46 16 % 19%
INC
Papa Murphy’s 2003 55 0% 0%
International Inc
Z Pizza International 2005 4 14% 16%
Inc
*2006=284
Franchise Concentration (Geographic Location of Current Units)
Franchise Concept Location/Concentration
Pizza Hut Inc AZ/5,Ca/1,CO/1,FL,8,GA/16,IA/1,IN/5,KS/10,KY/5,MD
/11,MI/4,MN/11,MO/8,MS/3.MT/2,NC/2,NE/2,NM/5,N
Y/1,OH/3,OR/1,PA/2,SC/2,TN/3,TX/16,VA/7,WA/8,W
Y/2
Hungry Howie’s Pizza AR/2,AL/11,AR/28,CA/36,CO/1,FL/204,GA/7,ID/4,IL/1
& Subs Inc ,IN/14,KY/1,MD/1,MH/236,NV/3,NC/11,OH/52,OK/3,O
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Franchise Comparison ‐ Pizza Industry
R/4,PY/2,SC/4,TN/4,TX/17,/2,WA/3,WV/1
FOX'S PIZZA DEN AL/7,AR/1,CA/1,DE/2,FL/4,GA/12,IL/4,IN/1,IO/1,LA/6
INC ,MD/7,MA/1,MI/7,MS/1,MO/6,NE/1,NV/5,NY/5,NC/7,
OH/26,OK/1,PA/117,SC/6,SD/2,TN/4,TX/4,VA/3,WV/3
0,WI/6
Papa Murphy’s AL/6,CA/173,CO/47,IO/20,IH/25,IL/20,IN/25,KA/16,MI
International Inc /2,MN/58,MI/19,MO/10,NE/16,NV/17,NM/4,ND/9,OH/
4,OR/85,SD/10,UT/38,WA/129,WS/46,WY/7
Z Pizza International AZ/4,CA/42,GA/2,KS/1,MD/3,NC/3,NV/3,PA/1,VA/11
Inc
Earning Claims Statement
Franchise Concept Earnings Claim See Appendix
Pizza Hut Inc No N/A
Hungry Howie’s Pizza No N/A
& Subs Inc
FOX'S PIZZA DEN No N/A
INC
Papa Murphy’s No N/A
International Inc
Z Pizza International No N/A
Inc
Financing Arrangements
Franchise Concept Company Secondary Party Name of Party
Financing Financing
Pizza Hut Inc No No N/A
Hungry Howie’s Pizza No No N/A
& Subs Inc
FOX'S PIZZA DEN No No N/A
INC
Papa Murphy’s No No N/A
International Inc
Z Pizza International No No N/A
Inc
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Franchise Comparison ‐ Pizza Industry
Bankruptcy & Litigation History
Franchise Concept Filed Litigation Litigation Litigation: Litigation Litigation:
bankruptcy : : Resolved : Class
in last 10 cases Pending cases Involving Action
yrs.? cited cases Franchise Suits
s
Pizza Hut Inc Yes 8 1 7 8 7
Hungry Howie’s Pizza No 1 0 1 1 1
& Subs Inc
FOX'S PIZZA DEN No No No No No No
INC
Papa Murphy’s No 5 1 4 5 No
International Inc
Z Pizza International No No No No No No
Inc
Additional Resources
Valuation Resources ‐ Industry Information Resources
http://www.valuationresources.com/IndustryReport.htm
American Association of Franchisees and Dealers
http://www.aafd.org/
Franchise News Center- Franchise Opportunity News Franchise-
http://www.franchisenewscenter.com/
US Small Business Administration
http://www.sba.gov/
Franchise Funding
http://franchisefunding.net/
SCORE- counselors to American small business
http://www.score.org/
2007 Franchise 500
http://www.entrepreneur.com/franchise500/index.html
BizStats.com
http://www.bizstats.com/mostpopular.htm
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Franchise Comparison ‐ Pizza Industry
Free small business valuation
http://www.findabusinessbroker.com/valuation.php
An Investor's Guide to Buying a Franchise
http://franchiseusa.net/cg.htm
Number of Consumer Households in Your Geographic Area
http://mailinglists.usadata.com/default.aspx?myAction=doLaunchConsumer
Number of Businesses in Your Geographic Area
http://mailinglists.usadata.com/default.aspx?myAction=doLaunchBusiness
Statistics from over 100 Federal agencies.
http://www.fedstats.gov/
U.S. Census Demographics
http://censtats.census.gov/cbpnaic/cbpnaic.shtml
Melissa Data
http://www.melissadata.com/Lookups/index.htm
City-Data
http://www.city-data.com/
Top 100 Lists
http://www.city-data.com/toplists.html
City by City Comparison
http://www.moving.com/Find_a_Place/Compare2Cities/
Glossary of Terms
Acknowledgement of Receipt
Included in the UFOC, it is the last page that you sign and return. It provides proof of the date
that you received the UFOC.
Advertising Fee
An annual fee paid by the franchisee to the franchisor for corporate advertising expenditures;
usually less then three percent of the franchisee’s annual sales and usually paid in addition to
the royalty fee. Not all franchisors charge advertising fees.
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Franchise Comparison ‐ Pizza Industry
Agreement (a/k/a Franchise Agreement)
It is the contract that you sign with a franchisor.
Approved Products
Proprietary products that a franchisee must purchase from the franchisor and/or that must be
purchased from approved suppliers. The goal is to achieve uniform quality assurance among all
franchisees.
Area Development Rights
The rights granted to a franchisee to develop a certain number of franchises within a specified
geographic area, usually within a certain time frame.
Broker
An intermediary who manages a sale and purchase. Brokers can represent either sellers or
buyers.
Buy‐Sell Agreement
A legal document that details the provisions under which a business may be sold.
Capital
Capital is cash in checking and savings accounts, insurance policy cash values, non‐IRA stocks
and bonds, and loan receivables due within 30 days.
Company‐Owned Outlet
Some franchisors establish company‐owned stores or offices that, in appearance, are identical to
the franchised outlets.
Conversion Franchise
This is a franchise that permits existing businesses to join a national franchise system to use its
recognized name and trademark and operating system.
Copyright
The exclusive right of a person to use, and to license others to use, an intellectual property such
as a book, pamphlet, or other published material.
Designated Supplier
A supplier designated by the franchisor as the source for purchasing approved products.
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Franchise Comparison ‐ Pizza Industry
Disclosure Document
All franchisor companies are required by the Federal Trade Commission (FTC) to provide this
document to prospective franchisees at the first personal meeting to discuss the sale of the
franchise and at least ten business days prior to the prospective franchisee signing a franchise
agreement or paying the franchisor money to buy the franchise. The document aids the
prospective franchisee’s evaluation of the franchisor company.
Earnings Claims
Claims made by the franchisor as to the past performance of franchisees or to the potential
financial performance of a franchisee. If given, they must be disclosed in section 19 of the
UFOC.
Franchise
A verbal or written agreement, for consideration, by which a person permits the distribution of
goods or services under their trademark, service mark or trade name, during which time the
grantor retains control over others or renders significant assistance to others. (This definition is
substantially that of the Federal Trade Commission. See the Final Interpretive Guides, Federal
Register, Vol. 44, No 166, Friday, August 24, 1979, p. 49.966 etc.)
Franchise Agreement
Sets forth the expectations and requirements of the franchisor. It describes the franchisor’s
commitment to the franchisee and includes information about territorial rights of the franchisee,
location requirements, training schedule, fees, general obligations of the franchisee, general
obligations of the franchisor, etc.
Franchise Fee
A one‐time fee paid by the franchisee to the franchisor to ʺbuy intoʺ the franchise. Generally, the
fee reimburses the franchisor for the costs of initial training and support for new franchisees.
Franchisee
A person or entity to whom the right to conduct a business is granted by the franchisor or
licensor.
Franchising
Neither an industry nor a business, but a method of doing business within a given industry. At
least two parties are involved in franchising: the franchisor and the franchisee.
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Franchise Comparison ‐ Pizza Industry
Franchisor
A person or entity issuing or granting a franchise or license.
Master Franchisee
Describes an individual or company owning the exclusive rights to develop a particular
area/territory/continent for the franchising company.
Master Region
The region that a master franchisee acquires.
Multi‐Unit Franchise
Franchise agreement providing franchisee with the rights to develop more than a single unit. It
is also referred to as an Area Development Franchisee and/or a Sub‐franchisor.
Non‐compete Clause
A clause in a contract that prohibits you from entering into the same line of business for a
specified time and within a specified area after you leave employment or after you terminate,
sell, or otherwise leave a franchise.
Offer
An oral or written proposal to sell a franchise to a prospective franchisee upon understood
general terms and conditions.
Operating Manual
Comprehensive guidelines advising a franchisee on how to operate the franchised business. It
covers all aspects of the business, including general business procedures not necessarily
peculiar to the franchised business.
Personal Guaranty
Usually the owner(s) of a corporation cannot be held personally responsible for a corporation’s
debt. If a loan requires a personal guaranty it means that the lender is asking the owner to
personally guarantee the debt should the corporation default.
Pro Forma
A balance sheet, profit and loss or cash flow statement that estimates income and expense
sources. Assets, liabilities and net worth are forecast on the balance sheet. Pro forma statements
issued by the franchisor to the franchisee should be based on actual operating results of the
franchisor’s units or franchise establishments.
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Franchise Comparison ‐ Pizza Industry
Qualification Questionnaire
A document prepared by the franchisor to be completed by the prospective franchise, which
provides initial information to the franchisor in order to assist them in determining whether or
not the prospect is capable and motivated. Often a financial statement is included in the
questionnaire format.
Regional Development Agreement
(a/k/a Regional Franchisee, Regional Coordinator)
A franchise granted to develop or sell a person’s franchise rights to a third party in a defined
geographical area. A portion of the franchise fee is normally paid in advance for a certain
minimum number of franchise outlets which may be activated by the Regional Franchisee or
sold at a disclosed fee to an individual franchise buyer. This agreement normally awards a
share of the initial full franchise fee and a percentage of the royalty payment.
Renewal
You are granted a particular time frame in which to conduct business as a franchisee in your
initial Franchise Agreement. Renewal is the resigning of a Franchise Agreement after the initial
or subsequent terms of the franchise expires.
Royalty
A royalty refers to a percentage of gross sales that you pay to the franchisor monthly.
Uniform Franchise Offering Circular (a/k/a U.F.O.C., FOC)
This is the disclosure document that the franchisor must give you prior to selling you a
franchise. A form of disclosure document containing required information to be supplied by the
franchisor to the franchisee.
Disclaimer
The financial data, financial projections and other information contained in this report are
based on the representations made by the franchisors (as listed) in their franchise offering
circulars (UFOCs), SEC filings, company materials and other public records. Research
Franchises cannot guarantee the accuracy of the Pizza Franchise Industry Report provided.
Research Franchises disclaims all liability for any misstatements or omissions that may occur
in the publication of this document.
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