PAPA JOHNS INTERNATIONAL INCPZZA
PAPA JOHNS INTERNATIONAL INC Leases Disclosure
3. Leases
The Company has significant leases that include most Domestic Company-owned restaurant and commissary locations as well as our restaurant support center located in Atlanta, Georgia. Other Domestic leases include tractor and trailer leases used by our distribution subsidiary as well as commissary equipment. Additionally, the Company leases a significant number of restaurants within the UK, many of which contain early termination rights exercisable by the Company; these restaurants are then subleased to franchisees or operated as Company-owned restaurants. The Company’s leases generally have terms as follows:
| Average lease term | ||||||||
| Domestic Company-owned restaurants | Five years, plus at least one renewal | |||||||
| UK Company-owned and franchise-owned restaurants | 15 years | |||||||
| Domestic commissary locations | 10 years, plus at least one renewal | |||||||
| Domestic and International tractors and trailers | to seven years | |||||||
| Domestic and International commissary and office equipment | to five years | |||||||
The Company determines if an arrangement is or contains a lease at contract inception and recognizes a right-of-use asset and a lease liability at the lease commencement date. For all of its leases in which it is a lessee, the Company has elected to include both the lease and non-lease components as a single component and account for it as a lease. Leases with an initial term of 12 months or less but greater than one month are not recorded on the balance sheet for select asset classes. The lease liability is measured at the present value of future lease payments as of the lease commencement date. The right-of-use asset recognized is based on the lease liability adjusted for prepaid and deferred rent and unamortized lease incentives. An operating lease right-of-use asset is amortized on a straight-line basis over the lease term and is recognized as a single lease cost against the operating lease liability. A finance lease right-of-use asset is amortized on a straight-line basis, with
interest costs reported separately, over the lesser of the useful life of the leased asset or lease term. Operating lease expense is recognized on a straight-line basis over the lease term and is included in Cost of sales or General and administrative expenses. Variable lease payments are expensed as incurred.
The Company uses its incremental borrowing rates as the discount rate for its leases, which is equal to the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The lease terms for all the Company’s leases include the contractually obligated period of the leases, plus any additional periods covered by Company options to extend the leases that the Company is reasonably certain to exercise.
Certain leases provide that the lease payments may be increased annually based on the fixed rate terms or adjustable terms such as the Consumer Price Index. Future base rent escalations that are not contractually quantifiable as of the lease commencement date are not included in our lease liability.
The following schedule details the total right-of-use assets and lease liabilities on the Consolidated Balance Sheets as of December 28, 2025 and December 29, 2024 (in thousands):
| Leases | Classification | December 28, 2025 | December 29, 2024 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Finance lease assets, net | Finance lease right-of-use assets, net | $ | 39,039 | $ | 28,761 | |||||||||||||||
| Operating lease assets, net | Operating lease right-of-use assets | 161,606 | 184,425 | |||||||||||||||||
| Total lease assets | $ | 200,645 | $ | 213,186 | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current finance lease liabilities | Current finance lease liabilities | $ | 9,999 | $ | 7,280 | |||||||||||||||
| Current operating lease liabilities | Current operating lease liabilities | 23,725 | 25,756 | |||||||||||||||||
| Noncurrent finance lease liabilities | Long-term finance lease liabilities | 30,804 | 22,885 | |||||||||||||||||
| Noncurrent operating lease liabilities | Long-term operating lease liabilities | 156,405 | 173,557 | |||||||||||||||||
| Total lease liabilities | $ | 220,933 | $ | 229,478 | ||||||||||||||||
Lease costs for the years ended December 28, 2025, December 29, 2024 and December 31, 2023 were as follows:
| (Dollars in thousands) | Year Ended | |||||||||||||||||||
| December 28, 2025 | December 29, 2024 | December 31, 2023 | ||||||||||||||||||
| Finance lease: | ||||||||||||||||||||
| Amortization of right-of-use assets | $ | 10,565 | $ | 8,831 | $ | 8,949 | ||||||||||||||
| Interest on lease liabilities | 2,160 | 1,420 | 1,542 | |||||||||||||||||
| Operating lease: | ||||||||||||||||||||
| Operating lease cost | 41,686 | 43,345 | 41,514 | |||||||||||||||||
| Short-term lease cost | 4,463 | 4,237 | 4,239 | |||||||||||||||||
| Variable lease cost | 12,372 | 11,096 | 10,005 | |||||||||||||||||
| Total lease costs | 71,246 | 68,929 | 66,249 | |||||||||||||||||
| Sublease income | (10,480) | (9,748) | (9,842) | |||||||||||||||||
| Total lease costs, net of sublease income | $ | 60,766 | $ | 59,181 | $ | 56,407 | ||||||||||||||
Future minimum lease payments under contractually-obligated leases and associated sublease income as of December 28, 2025 were as follows (in thousands):
| Fiscal Year | Finance Lease Costs | Operating Lease Costs | Expected Sublease Income | |||||||||||||||||
| 2026 | $ | 11,979 | $ | 31,406 | $ | 7,997 | ||||||||||||||
| 2027 | 10,874 | 33,109 | 6,971 | |||||||||||||||||
| 2028 | 8,373 | 28,297 | 5,813 | |||||||||||||||||
| 2029 | 7,244 | 24,308 | 4,760 | |||||||||||||||||
| 2030 | 4,541 | 20,062 | 3,825 | |||||||||||||||||
| Thereafter | 2,977 | 100,640 | 11,783 | |||||||||||||||||
| Total future minimum lease payments | 45,988 | 237,822 | 41,149 | |||||||||||||||||
| Less imputed interest | (5,185) | (57,692) | ||||||||||||||||||
| Total present value of lease liabilities | $ | 40,803 | $ | 180,130 | ||||||||||||||||
Lessor Operating Leases
The Company subleases certain retail space to our franchisees in the UK which are primarily operating leases. At December 28, 2025, we leased and subleased approximately 330 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 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 $10.5 million, $9.7 million and $9.8 million for the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively, within Other revenues in the 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 approximately 80 Domestic leases. These leases have varying terms, the latest of which expires in 2036. As of December 28, 2025, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was approximately $12.1 million. This contingent liability is not included in the Consolidated Balance Sheets or future minimum lease obligation. The fair value of the guarantee is not material.
There were no leases recorded between related parties.
Supplemental Cash Flow & Other Information
The following table presents supplemental cash flow information related to leases for the years ended December 28, 2025, December 29, 2024 and December 31, 2023:
| (Dollars in thousands) | Year Ended | |||||||||||||||||||
| December 28, 2025 | December 29, 2024 | December 31, 2023 | ||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||
| Operating cash flows from finance leases | $ | 2,160 | $ | 1,416 | $ | 1,542 | ||||||||||||||
| Financing cash flows from finance leases | $ | 10,079 | $ | 8,529 | $ | 8,821 | ||||||||||||||
Operating cash flows from operating leases (a) | $ | 41,709 | $ | 40,488 | $ | 37,814 | ||||||||||||||
| Right-of-use assets obtained in exchange for new finance lease liabilities | $ | 21,455 | $ | 9,076 | $ | 16,734 | ||||||||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 25,911 | $ | 65,134 | $ | 24,380 | ||||||||||||||
| Cash received from sublease income | $ | 10,527 | $ | 7,442 | $ | 8,855 | ||||||||||||||
| Weighted-average remaining lease term (in years): | ||||||||||||||||||||
| Finance leases | 4.6 | 4.2 | 4.3 | |||||||||||||||||
| Operating leases | 9.1 | 9.2 | 7.8 | |||||||||||||||||
| Weighted-average discount rate: | ||||||||||||||||||||
| Finance leases | 5.4% | 5.0% | 4.9% | |||||||||||||||||
| Operating leases | 5.9% | 5.8% | 5.6% | |||||||||||||||||
______________________________
(a)Included within the change in Other assets and liabilities within the Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 26, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.