Good day, ladies and gentlemen, and welcome to the Papa John's Fourth Quarter 2016 Conference Call and Webcast. I would now like to introduce your host for today's conference call, Mr. Lance Tucker, CFO. You may begin, sir.

Thank you, Kevin. Good morning. Joining me on the call today are: Founder, Chairman and CEO, John Schnatter; and our President and COO, Steve Ritchie, as well as other members of our senior management team. After the financial update, John and Steve will have comments about our business, and the management team will then be available for Q&A. Our discussion today will contain forward-looking statements that involve risks related to future events. Actual events may differ materially from the projections we discuss today. All forward-looking statements should be considered in conjunction with cautionary statements in our earnings press release and the risk factors included in our SEC filings. And all statements made on this call are as of today. Please refer to our earnings press release in the Investor Relations section of our website for reconciliation and other disclosures related to our discussion of non-GAAP financial measures on this call. Unless otherwise noted, all comparisons are versus the comparable periods from a year ago. This call is being taped, and a replay will be available for a limited time on our website and in downloadable podcast format. Now, for a discussion of our fourth quarter operating results. Diluted EPS in the fourth quarter was $0.88 on a GAAP basis. Excluding special items, adjusted EPS was $0.69, up 11% over 2015. We ended the full year 2016 with diluted EPS of $2.74 on a GAAP basis. Excluding the special items, adjusted EPS was $2.55, an increase of 22% over adjusted 2015 EPS. Fourth quarter revenues were up 5.5%, mostly driven by 3.8% higher comp sales in our North American restaurants. In addition, international revenues were up nearly 9%. We opened 126 net global units in the fourth quarter and 204 units for the full year with 151 units on the international…

Okay. Thanks Lance and good morning everyone. Thanks for joining us on the call today as we discuss our fourth quarter and full year 2016 results. I'm pleased with our fourth quarter results with good comp sales leading to another quarter of solid earnings growth. For the full year we delivered 22% EPS growth and 3.5% comps for another year of strong performance from our corporate and franchise operators. We have an unmatched commitment to quality, a consistent operating model that allows for sustainable growth (06:09), and a best-in-class digital center pool (06:11), all of which have contributed to our excellent performance for many years. But none of that matters without the growth (06:17) team members of Papa John's that pull it all together. You may have seen our new brand campaign that highlights the Papa John's feed the (06:24). The family campaign highlights our most important ingredient, our people. (06:30) pizza delight with new commercials just hours ahead of Super Bowl 51. The ad features the key milestones of (06:38) journey. (05:40) knocked out the wall of (05:41) the broom closet at the father's – at my father's tavern and selling my pizza oven and selling the (06:46) first Papa John's pizza. It's a story of how we built our pizza company. For the first time we featured team members – real team members of Papa John's in the TV spots and a new Papa John's logo. None of the financial or operational success would be possible without our pizza family, our suppliers and quality control centers, franchisees, delivery drivers, pizza makers, and our loyal customers. Each has played a role in achieving the success and I'd be remiss to talk about our results without thanking all of them for their contributions. Moving back to some of the highlights…

Okay. Thank you, John, and good morning, everyone. I'd like to start by thanking our 120,000 plus team members in over 5,000 stores around the world for delivering another strong year for the Papa John's brand. As John stated, in the fourth quarter, our domestic comp sales were a solid 3.8% for North America, marking our 25th consecutive quarter of positive comp sales, and our 3.5% full year comps mark our 13th consecutive year of flat or positive sales growth. These strong results produced another year of record sales and profitability for both our corporate and franchise restaurants. As John mentioned, in mid-October, we launched our high-quality, fresh, never frozen Pan Pizza. We introduced the product at a value price of $10 and experienced high engagement and trialed (11:28) the product from our customers. Overall customer feedback has been very positive and we now have another best-in-class product to differentiate our brand with more opportunity for future category share growth. On the International front, our Q4 comps were also solid at 5.6%, representing our 28th consecutive quarter of positive comp sales and we delivered strong full year comps right at 6%. It was also an important year for international growth, opening a record six new countries in 2016 and setting the stage for strong development growth for 2017 and beyond. With now over 1,600 international stores in 45 countries, another 1,400 and growing in the development pipeline, our confidence in the future of the International business is unquestionable. From our humble beginnings in a broom closet back in 1984, our primary source can be attributed to – of success can be attributed to our most important ingredient, as John stated, our people. At Papa John's, we're more than a pizza company. We are a pizza family. We believe our continuous…

And Kevin, we're ready for questions.

Our first question comes from Alex Slagle with Jefferies.

Thanks. Good morning.

Hi, Al.

Question on the – the fourth quarter domestic same-store sales seemed to slow a little bit on a two-year and three-year basis. If you could just walk us through what you are seeing out there and how we should interpret the 2% to 4% comp for 2017 – the guidance. I mean, it seems like same place you started last year, but any thoughts on that?

Steve, you want to take that one?

Sure, John. And Alex – love to take it. It's Steve. So, I think a couple of comments. First off, our two-year comp's a little lighter as you said at 7.7%. But our three-year comps are really pretty much in line. I think we are at (17:32) 14.4% and relatively close to the last couple of years, I believe, 15% – was 14.9% – it was at 14.3%. Our annualized comps have been roughly in that kind of neighborhood, just south of 5%. So feel pretty good about the overall kind of trends that we're seeing, specifically though to your comment on the fourth quarter. So – and this was very much intentional as we talked about – and I talked about this on the last call just a bit. With the introduction of our Pan Pizza, which as we had stated is a fresh, never frozen product, it does require some operational change and adaptation. So we did reduce a little bit of some – our marketing activities in the fourth quarter to provide the opportunity for operators to adapt to that product. With that being said, there's a couple of other factors that we tried to quantify, you know is contributing pieces to our sales performance which we are clearly very proud of, a 3.8% comp in the fourth quarter given the industry trends that you guys have seen out there. In fact, I think our – of those that have reported thus far, we're on the top-three across the entire restaurant industry. So we feel good about that. Let me talk about the NFL for just a moment. So the NFL trends, if you've seen the ratings on a year-over-year basis, they were down 8% on the full year for the season. Given the fact that we…

Got it. That's very helpful. Now, if you could provide maybe an update on your digital initiatives. I know you touched on a little in prepared remarks, but with Mike as your new CIO and already made lots of progress with the digital order mix, now up to 55%. I mean, what's the top priority for 2017, if you could share that?

Sure, Alex, I'd love to. And I think – we're clearly very excited to have Mike on board. He is bringing the type of thought leadership that's really going to drive our overall strategy. With that said, we've had a lot of success. We're fast approaching 60% of our business on the digital side of the overall sales. So clearly, our digital business is very strong. If you think about our focus areas, to your question, it will continue to be on areas to enhance the customer experience, to drive more throughput, to drive the increases in the overall conversation rate. With that said, innovation is going to be a big priority. The addition of Mike to the team provides us the opportunity to take the innovation side of the business to the next level. So we've done a number of things in 2016. I think you'll see even more things coming out in 2017 from a competitive standpoint. I clearly don't want to speak to those specifically, but we're pretty darn excited about what's to come on the digital side for the Papa John's business.

Hey, Mike, why don't you give an overview of what you've seen on – very high level, very quickly the first two weeks of being at Papa John's?

Sure. Thank you, John, and I appreciate the opportunity. The reality is, when you look at the restaurant space in general and you look at what the industry is doing, you have to look holistically at the total customer journey. It's not just a matter of, hey, we've got an online ordering system as a supplement to our business. We actually have to look at how do we integrate that into our daily routines and our daily lives in our interactions with the customers who frankly are extensions of that pizza family image that we really believe in and we really support. So meeting them where they are, where they want to be, recognizing they've got a lot of choices; they could be driving on the way home and saying, hey I need a quick meal for my family. How do I get them to interact with us in such a way that meets that particular need, whether it be through a simple carryout or even through some of our mobile or some of our other e-commerce systems. And frankly, as Steve has already said, we're in a great position. We've done a lot of the plumbing and a lot of the processes are in place today to already enable and integrate the digital experience. I just think we have plenty of opportunities to take this to the next level by really considering the demographics and the customer segments we have, really targeting some of those segments very, very tactically in certain areas but – so that it all wraps together in a cohesive strategy so that I can actually work closely with our marketing teams and our operations teams to deliver technology solutions that make it easier for guests to do business with us however they choose to do so, be it through online, through mobile, through walking in, through the delivery, through the touch point of the delivery. There's so many unique things that we actually have available to us, but we just haven't found a way to stick into that digital strategy yet. But I'm confident we're going to; we've got the right plumbing in place and I'm excited to work with the team that's here to get us to that next level.

That's great. Thanks, Mike.

Our next question comes from Will Slabaugh with Stephens.

Yeah. Thanks, guys. Wanted to ask you a little bit more about Pan and how that works for you. Would you consider that launch successful and it sounds like you were pretty happy with the trial there. So I wonder if you could speak a little bit to the trial versus what you expected? And then any average ticket impact that you saw, given that $10 initial price point?

Steve, I'll take this to the half level (24:35) and then you can give him the details. The mix, we hit it dead on. We plan on being at 22% and we hit 22%. I do think the competitive nature, the other – some of the other competitors were doing $6 and $7 Pans and we were doing $10 Pans. But frankly, I don't think it could have gone any smoother from an operational and executional point of view. Steve?

Sure. Thanks, John. Will, it's Steve. To John's point, right in terms of the level of mix that we anticipated. Consumer feedback, which is obviously the most critical. Likeability of the product. It is a premium product. We have a number of mechanisms, i.e. using NPS. We got a lot of good feedback on the product. It's a little early to understand repeat business and frequency as it relates to the product, but overall I think we're very pleased with it. It's another weapon within the arsenal for us to be able to compete. We were the last, I guess, in the pizza category among the chains to introduce the Pan product, but we do think it clearly is an opportunity to not only drive frequency for our business, it's an opportunity to take share. Just in terms of the overall ticket average. At the promotional price at $10, there was no material difference than what you've seen with some of our other promotions. And the overall food cost on that product is also relatively consistent with what you see with some of our large promotions.

Got it. That's helpful. And if I could follow up with one additional question, just more high level. As we continue to see this space become more competitive, they are apparently reacting more quickly to what you are doing. Consumer is volatile, et cetera. Can you speak to how you guys can continue to succeed and then maybe even accelerate that momentum that you have been seeing, given what's going on out there? And sort of the crux of the question is, does this mean that given the competitive activity, Papa John's need to continue going sort of upstream and pushing quality, quality, quality, and maybe that means additional ticket, or am I thinking about that a little bit too aggressively on the premium end?

I'll take the big part of it, and then Steve or Robert, you can take the marketing end (26:43). The fundamentals of the company have never been better. Our food, our pizza scores, our service – our culture is at an all-time high; and you can feel, when you come in the building, when you go out in the restaurants. So the things that got us successful over the last 32 years are well in place. The things that I think are going to get us ahead are this Clean Label initiative that Sean Muldoon and his team are working on. And then, of course, the technology. The technology, I mean, we're now, what, at 60% digital mix, approaching that, and that's going to go to 80%. Sooner or later, it's going to 80% and that's why we brought Mike in. So, Rob or Steve, you want to talk about some of the initiatives that we're doing?

Sure, John. It's Steve. And Robert might jump in as well. So I think to add to your point, the technology advantage, clearly with – the percentage of sale there is key. But it also provides us with the pace of playing and speed to be able to adapt to a ever-changing environment as it relates to price. So having that many of our consumers within our online database leveraging our very powerful loyalty program of Papa Rewards, we feel really good about our opportunity to be able to adapt. What you won't see is us walking away from quality. Quality is who we are and that's a key differentiator for the last 13 years of our growth, and it – I believe it will be for the next 13 years. The key thing is balance; understanding the right level of balance with the promotional activity, with what we convey from a branding perspective, and what happens at the individual restaurant level. I mean it's all about execution at the individual restaurant level, from the ops to the service experience to what we do from a local store marketing standpoint, i.e., as I mentioned before, we have 160-plus partnerships, and those are local partnerships. So leveraging those to – as the smaller player amongst the chains within the category, we're (28:40) making our dollars and our activities work harder for us is how we've been successful and we'll continue to do so. Robert, I don't know if you'd mention anything else that we have going on out there?

I'll just add – to complement both what you and John has spoke to. The big part about our pizza family is really understanding the different dynamics within that family, making sure that we're very targeted and segmented, leveraging our rewards to consumers, providing those value offers to consumers who need that while providing that higher price – new product news that we will constantly develop and offer out there in the landscape of the pizza environment to those type of consumers. So really getting segmented and leveraging our technology to do so.

Thanks.

Our next question comes from Chris O'Cull with KeyBanc.

Thanks. Good morning guys. Steve, I just want to clarify or want to make sure that your sales comments that I understood those. Is it fair to say that the first quarter domestic comps are below the full year guided range of 2% to 4%?

I don't want to get into specifics, Chris, but I would say that in general we're softer than what we experienced in the fourth quarter some of the competitive activity. Obviously we don't get into cadence within the quarter, and we still got one whole period here to – almost one whole period here to go. We got a lot of activities, things. So there's a number of things that are just out of balance in January and February that's creating a little bit of the softness. That softness in the first quarter also ties into what we're guiding against from an EPS perspective. So there's just a lot of headwinds this year versus tailwinds last year, but we always make the appropriate changes to get the full year back on track.

Part of a follow-up then is, what gives you confidence that comps can accelerate on more difficult comparisons? Because I think last year you started out with difficult comparisons, and then things got easier which you were able to obviously benefit your comps really well against. How do you think about it playing out this year?

Sure. I mean, and I'll speak to somewhat similar what we did last year. The underlying strength of the core business – and I'll hit four areas, won't be long-winded with it, but quality, branding, technology, and culture, each of those four strategic areas, they are really the catalyst of our growth and the future of our business are getting stronger and stronger. Those things are always challenged when the competitive environment gets extremely aggressive with pricing, and not just within the pizza category, but it has a tendency to go beyond pizza into QSR and casual dining. Those are factors that we have to mitigate against, but I feel really good about the strength of that and our opportunity to get even stronger over the trailing three quarters. Mike Nettle spoke for a while on the digital side. So, we are clearly very excited about the opportunities that we have over the next three quarters with the addition of Mike and implementation of some of our initiatives to continue to grow traffic and drive the overall sales business – promotional. So clearly, extremely aggressive in terms of pricing in the first quarter. Our promotions in the first quarter were not necessarily as aggressive as some of our competitors in the first quarter. So, we will make adjustments where necessary, whether that be from a national perspective or local or on the digital side, and we'll do so to ensure that we continue to take share. The last thing I'll note is just execution. At the Operations side is Edmond Heelan who oversees our North American business for our franchise and corporate side. They continue to get better and better at product quality and service execution, and there's a number of initiatives that will be continue to put in motion for the duration of the year. And those factors will drive retention and repeat purchase from our consumers, and get us back on track to be the 2% comp sales to 4% comp sales, full year.

Will the increase in the national ad contribution rate have any impact on the 2017 funds?

Yeah, thanks for asking that, Chris. I mean, it – it's going to – as you saw – as you probably heard me say, we have a quarter point (33:10) per year that's coming in. That was folded in late into the fourth quarter of last year. So, modest in terms of the investment coming into 2017. As you may be aware, we are fighting some headwinds in terms of media inflation – specific media inflation to sports on the national television side and we buy – a significant amount of our media was sports. But we're doing some reallocations and incremental investments into the digital, social media side and some multicultural. So anticipated to be a factor, not a significant factor. But as the national investment continues to grow up to the 5% over the next three years, three-and-a-half years here, it will be a contributing factor to our overall growth.

Okay. Thank you. And then just one last one, I'll get back in the queue. Lance, cost of sales at the company restaurants were down in the fourth quarter, which was a little surprising given spot price of cheese is up year-over-year. What drove the improvement?

Yeah. Chris. This is Lance. I'll take that one. So yeah, you're right, block was up a bit. But both our meat and our dough were down fairly significantly in the fourth quarter, certainly more than enough to offset what was really a very slight cheese headwind with us because we did with our forward pricing arrangements mitigate a good bit of the cheese increase. So dough and meats were better and cheese weren't too bad.

Would the meat and dough benefit continue for a while?

Certainly it'll be built into the guidance we have for 2017. Overall, we're expecting the commodity basket in 2017 to be actually a little bit up. So, cheese is going to continue to go up. We're about 50 basis points to 150 basis points up is the range we're projecting right now. So the meat and the dough will continue to help some, but cheese is going to bite into it more than it did in the fourth quarter certainly.

Great. Thank you, guys.

Our next question comes from Peter Saleh with BTIG.

Great. Thanks. I wanted to ask about the increase in the ad fund. Did the franchisees have to vote on this increase?

Yeah, Peter. This is John. They did vote. And, Steve, you can give specifics, but I think 95% of the system, which is unheard of, voted to increase it from 4% to 5% over a four-year period.

Yeah. You're exactly right, John. Was exactly 95%, which is a complement to the confidence in the investments that we have made in our national marketing as we increased it from roughly 3% up to 4% five years ago, and some of those investments into the NFL partnership, the Major League Baseball partnership, some of the things we've done with player associations and incremental national television and digital. So that's the direction we'll continue to go, but it is very important for our brand to balance the local investment from the national. Our national marketing fund going up to 5%, but our overall investments are between 8% and 9%. So, still roughly half or so that's happening at the local level.

Peter, (36:27) and this is a – and I give all the credit to Steve and his team. The relationship with the franchisees and the relationship with the Franchise Advisory Council is probably at an all time high. I mean, there's a lot of confidence in the system and a lot of confidence in this leadership team.

Great. And then just real quick on the Clean Label investment you guys have been making, do you feel like you're getting rewarded or paid for that for the investment that you are making or is that yet to come?

Sean Muldoon, I'll let you jump in here, but just give you directionally how this is going. Four years ago, 7% really were concerned about the ingredients. That number is now 38%. That's where it's headed. The educational and informational aspect of knowing what's in food is just growing, and it's important to the millennials and I think it's going to be important to the next generation. Sean, you want to comment on your progress?

Yeah. Hey, this is Sean. Thanks for that question. So, as John mentioned, we've been working hard at the Clean Label initiative probably for about seven years or eight years, and as a result of that we think we have the cleanest label of all the national pizza chains. And as John and Steve alluded to earlier, just in 2016 alone we removed the 14 unwanted ingredients that John mentioned. We removed artificial flavors and colors, high fructose corn syrup. We moved to – we transitioned to raised without antibiotic chicken and cage-free eggs, and that was just 2016 alone. So we think we keep widening the gap with our major competitors, and, yeah, I do think that it helps us with our consumer base. I think they reward us over the long term in terms of our – the consistency of our quality. And as John mentioned, with millennials, moms with kids, super important in terms of transparency, in terms of our ingredients, them understanding where those ingredients come from, that they have short, simple statements. They don't have long, chemically-sounding words that connotate bad for you. So, we do think that's a differentiator for us in a positive way.

Great. And then just my last question. It seems like one of your larger competitors is focusing a lot more on carryout. Is that something you guys are considering, or is there a reason why you guys don't focus a little bit more of your ads on the carryout business?

Steve, you want to take that one?

Sure, Peter. It's Steve. I mean, I think for us it's important with balance and the amount of dollars that we have to invest. One of our larger players is certainly – has got two times to three times the amount of marketing dollars to spend, so they can afford to have split message on delivery offers on one side of it, and on the other side of it, do carryout offers. Our carryout business as a whole has been very healthy. We really haven't seen any shift in our percentage of overall carryout business over the last 10 years, even with the growth of the online side of the business. With that being said, consumer behaviors continue to evolve and we'll continue to adapt to that. You may have see some things that we've done just from a testing perspective to appeal to that carryout consumer and you may see some things in the future that we'll leverage to ensure that we're taking advantage of those consumer behaviors.

All right. Thank you very much.

Thanks, Peter.

Our next question comes from Alton Stump with Longbow Research.

Thank you and good morning, everyone.

Good morning.

Just talk about Pan Pizza – not to harp on it, obviously. It's already come up quite a few times, but I think you mentioned, John it was mixing at 22% of sales, if I heard that right which is in a awfully high number, but obviously we had a promotional price point, which I would guess that probably having a discount price might have offset all – most of any – benefit, the traffic that you guys saw. A) Is that true? And then B) How long do you plan on keeping that $10 price point that you have currently on the Pan Pizza?

Alton, this is John. I'll take it from a high level and then Steve, you can get into the details. Our largest competitor, who is known for Pan Pizza was at $7, very aggressive when we were at $10. So previous question on quality and clean ingredients and really positioning the brand as a quality leader, it definitely pays dividends. Traffic, the 22% is when you're promoting. And of course that drops off somewhat when you don't promote it. But we hit that dead on and traffic in Q4 was up. Steve?

John – it's Steve. So I think, again Alton, pretty pleased with how the product performed. The factors that I had spoken to before I think were the factors that maybe kept the overall comps from being slightly higher, and many of those were intentional on our part as I alluded to. In terms of the price promotion, we don't have a – necessarily a national $10 promotion price out there right now. But strategically, because of the value of the Pan Pizza product, we have aligned it directly with our large pizza. So you may see that our large promotion out there right now that we do have at $9.99 for a 2-Topping Large or a Pan Pizza. In addition too, we have an LTO product out there right now, our Ultimate Meats product that you can also get Large or Pan for that price point. So I think it's $11 price point on our Ultimate Meats product. So that would be the strategy moving forward, to try to bring more into the fold by opening up the opportunity, have another crust type at a value, and we'll attempt to align that strategically with our Large pricing.

Yeah. Alton the – Steve and the team, Sean, R&D, they've worked very hard on this for over a year-and-a-half to get this product right. As you know, we have a restaurant in the building, so I can watch what the 900 people in the building do every day and get a pretty good idea of whether the product is good or not, and I can tell you that the mix in the building is not going down at all. People like this product. And if you get the product right, and again the culture and the service, it just works long-term.

That's helpful. Thanks, John and Steve. And then just looking back to the, first, to the – your price point of the two Large pizzas for $8. If I'm right, that's actually a bit less aggressive than the buy one get one free, those type of deals that you guys have done over the last couple years at the first of the year. If that's true, I guess what was the sort of reasoning behind being a bit less aggressive? And is that an opportunity now, to your point Steve, that things are a bit slower so far in the first quarter to get a bit more price aggressive going forward?

Sure, Alton. I'll answer that. So the price promotion or the Two Large 2-Topping Pizzas For $8 versus the BOGO, just in terms of the overall ticket average comparison, it's pretty consistent. A regular price Large 2-Topping pizza is pretty close $16. So it's pretty comparable. It's a way for us to get a price point out there at more of a value to be more appealing given some of our competitors have been priced in the deep discounting of selling $5 and $6 pizzas. So clearly being a premium brand, we've been able to give a slightly higher overall price on a per par basis. But as we look at that, there's been some learnings that we can apply into what we're doing the rest of the first quarter with the $9.99 2-Topping that's out there. If you go to our homepage, the website now, we've got a couple of – we got some new technology that provides us with what we call the sidekick. There's two additional offers that we're focused on, one being the $9.99 2-Topping. We're also featuring two mediums, 2-Toppings each for $6.99. So there's more value that's out there to the (44:27) consumer, especially since we got – again, nearly 60% of our consumer is going to that website. So we'll continue to adapt and evolve. If the pricing environment and the consumer demands value, we'll work through our value equation to ensure we continue to grow positive traffic and guide towards that 2% to 4% growth for the full year.

Thanks. And then just last one, I'll hop back in the queue. This one is for Lance. Just on the insurance cost front, looks like that's kind of fell down (44:57) here obviously – had that pop up back in 2015. Any outlook for 2017 and whether that could be up or down or flattish versus 2016?

Sure, Alton. So a couple things I'd say there. In the fourth quarter in our last call, we had kind of warned that we were going to have some increases in auto insurance and we did. So we took a hit in the fourth quarter on that. As far as 2017 looks, that is one of several headwinds that we have as we look at 2017 and why those guidance numbers are a little lower. One of them certainly is auto insurance. We've got several things that are going to kind of be several pennies each, and auto insurance combined with the steps we're taking to mitigate that issue is certainly one of those. I'll mention a couple others. Commodities are going to be a little bit up. We've got some labor pressures. We've talked about the higher ad fund rate and the fact that that's largely going to offset media inflation. We're opening a new QCC in Georgia. So those are a few of the things that are going to cause us to be a little more cautious about 2017 here as we kick off the year, along with the little bit slower start to sales that we expected. So auto insurance is going to be in there. I don't think it's going to be as big as it's been in some past years out and as far as the increment, but we've just got to wait and see how that plays out.

Got it. Thank you.

Our next question comes from Mark Smith with Feltl and Company.

Hi, guys. First off, this might be for Lance. Can you walk us through your CapEx guidance, whether it's – is it being (46:34) spent on this year, how much is still new commissary and anything else in CapEx?

Sure, Mark. And we don't give the exact details, so I'm going to be high level on this. But typically, we spend directionally little bit over a third on technology, close to a third on restaurants. And by that I really meaning making sure that we're doing all the proper maintenance and reloads and remodels and things we need to do to keep the restaurants looking good. And then that last third kind of falls into a bucket between what we're doing with QCCs as well as some marketing investments. As you look at 2016, we were a little bit higher coming in at $55 million. That was because – mainly driven by that QCC in Georgia. As you look to 2017, the QCC number is still going to be higher than it has been in past years. It will not be as high as it was in 2016 relative to that Georgia QCC. So, overall, you'll see our guidance at $45 million to $55 million is a little bit less than we guided in the prior year, and that's because the Georgia QCC we also have some investment, but it will be less than it was last year.

And then, is there any update on the company units in China, kind of how that sale process is going? And then in line with that, can you give us just an update on kind of a outlook for your international market – international sales, any areas that are doing well or maybe that are not doing as well?

Lance, why don't you answer the question on China? And Steve, you can give an overview of the entire International.

Absolutely. So, Mark, this is Lance. On the China piece, we do continue to pursue the divestiture. We're actually making very good progress on that. Clearly, it's taking a little longer than we would have liked, but we feel like we're on the right track. And certainly when a transaction has been completed, we will let you all know. Steve, on the rest of International?

Sure. Sure, Mark, and thanks for the question. I think this is an area, as I commented in my prepared remarks that generates the most excitement for the brand if you're a long-term holder. This is why you should be keenly interested in the Papa John's brand. So our International business is performing overall quite well. As you can see, our full year comps last year is 6%. The majority of our regions were contributors to that, that 6% comp. The majority of our regions were over the 6% comp. Latin America had a great year, building off of a great year the previous year. So we feel really good about the overall region in each market within Latin America and the opportunity for future growth. We're not in the country of Brazil at this stage of the game. So that's clearly one country that we look at in that region based on the success that we've had within the Latin American region. You move over to Europe – and I'll throw the UK into that – that business has been on fire for the last couple of years. So, UK business doing quite well, our business throughout Europe. Russia, where we're most heavily penetrated in terms of units – number of units. But our six new countries are predominantly focused in the European region as we've opened stores in France and Spain, the Netherlands. Those stores are coming out of the gates really strong, and we have a long runway in terms of additional units. Our Chief Development Officer, Tim O'Hern, spends a predominant amount of his time talking about the feature of our International business. And I can tell you that he's quite optimistic about the future within that region of the world. We are more heavily penetrated…

Great. Thank you.

Our next question comes from Chris O'Cull with KeyBanc.

Thanks. I just had a follow-up. Lance, you mentioned in the release that the earnings outlook does not assume the adoption or, I guess the impact of the new accounting standard for stock compensation expense. But it looks like it would be – have a pretty meaningful benefit to earnings per share. Why not include at least some of the benefit of a lower tax rate into the guidance? And I guess also, can you give us any color as to maybe which quarter do executive RSUs vest and how potentially it could impact the year?

Yeah, Lance, before you take the question, Chris, just to kind of give you an overview. Last year this time, February of 2016, we gave our EPS guidance of 13% to 18% and we came in at 22%. So, it's kind of our nature to be a little more conservative at the beginning of the year, especially with a little bit of a false start. Lance?

Sure, Chris. So I'll hit the tax piece – and that's a good question. First of all, just to make sure, I think everybody on the call is aware of what the rules are, but let me just run through that real quick. So the new rules require you to recognize any additional tax benefit or tax charge you receive when tax options are exercised; also, when restricted shares vested in your P&L. The old rule, it went through your equity – your equity statement. Now it's going to be going through your P&L. So the first thing I would stress is, there is no cash or economic impact to (53:42) presentation. The reason that we didn't attempt to build it into our earnings at this point, Chris, is because it's going to create a lot of volatility, particularly for a company like us that has significant gains or value in our stock options. And if you just look back historically – we went back five years or six years – it could impact our EPS just based on prior years, anywhere from a few pennies to literally $0.25 pennies. And so, certainly, we could take a swag – and I'm not going to give you this number – we could take a swag at what might it be, but it requires us to predict what's the stock price going to be and what kind of stock option exercises will come at that particular stock price. So what we would prefer to do and what we're going to do is give you the numbers without it and then we will tell you what the number is with it as we have significant impacts to our tax rate as we go. Because otherwise – I mean it – otherwise, it would expand the guidance range to 10% of earnings growth and that just – to me, that's less meaningful than doing it this way. As far as timing, a lot of it has to do when things are going to hit when people – when people actually exercise options, and we have things that vest at various times in the year. So I'm not going to attempt to tell you, it's going to be higher in Q1 versus Q3 or Q4 too.

Okay. No, that's very helpful. Thank you.

Our next question comes from Peter Saleh with BTIG.

Hey. Great. Thanks for taking the question. So last year at this time, I think we were in a highly promotional environment as well and you guys seemed to be able to snap out of it and reaccelerate the overall comps. So, can you remind us again what exactly happened last year, what changed on your marketing schedule that allowed the comps to kind of bend and turn the other way and where you guys are in the process I guess of maybe adjusting the marketing schedule?

Yeah, Peter. This is John. I'll give you the high view and then Steve, you can give the details. We've been – I've been doing this for 41 years. I mean, we've been doing Papa John's for 32 years. So we know this business and we know what levers to pull to make the business go up. We – every morning at 8:59 we're on a call with 60 of the folks out in the field talking about what happened last night and what's going to happen today. So we do this every day. And so, if sales are high, we kind of go, what happened? If sales are a little bit soft, we go, what can we do to rectify it? So this is something that we've been dealing with. But then, this will have ups and downs. And so, when it's up, it's great, and when it's slightly down, you got to kind of – you got to pull some levers.

Sure. John and Peter – or Peter, it's Steve. I'll comment on a couple of other things. I think John hit it pretty good because that makes – that's how we look at the business. Always looking big picture, but getting down to the tactical efforts on a daily basis to understand the factors that are moving the sales. So last year, the – similar to this year; extremely competitive environment, heavy, heavy spend. We're seeing more spend and more activity this year versus last year. All three of our largest players are out there on, as I had stated before, $5 and $6 kind of promotions. Last year, we made some tweaks to our promotion where it was an online-only promotion at our $9.99 up to five toppings. We opened that up more broadly to online and offline business, and we made some incremental investments to ensure that we were getting the share of voice necessary. Not too dissimilar to this year. Our share of voice has been a challenge when you've got heavy, heavy media spend and more aggressive price promotions. We'll pull the levers necessary to ensure that our price and promotion and our share of voice is out there to move the business in the right direction. So, clearly, we have some plans in place currently for the duration of the first quarter, and more specifically a number of things that we got in motion that drive the confidence on the full year.

Peter, we haven't been negative for 13 years, and we don't have any plans on being negative anytime soon. So when it's soft, we're on it; and when it's doing well, then we kind of enjoy it.

Great. Thank you very much.

Thanks, Peter.

And I'm not showing any further questions at this time. I would like to turn the call back over to Lance Tucker.

Right. Thank you, Kevin, and thanks, everybody, for being on the call. We appreciate your time, and we will talk to you when we announce our first quarter earnings in early May. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.