PJ AMERICA INC, S-1/A, 1997-07-14

PJ AMERICA INC
S-1/A, 1997-07-14
EATING PLACES

Previous: TICKETMASTER GROUP INC, 8-K, 1997-07-14

Next: FIREARMS TRAINING SYSTEMS INC, S-8, 1997-07-14

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1997.

REGISTRATION NO. 333-30109
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

AMEMDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

PJ AMERICA, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)

----------------
DELAWARE 5812 61-1308435
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

9109 PARKWAY EAST
BIRMINGHAM, ALABAMA 35206
(205) 836-1212
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

----------------

DOUGLAS S. STEPHENS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PJ AMERICA, INC.
9109 PARKWAY EAST
BIRMINGHAM, ALABAMA 35206
(205) 836-1212
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:
IVAN M. DIAMOND, ESQ. DAN BUSBEE, ESQ.
GREENEBAUM DOLL & MCDONALD PLLC LOCKE PURNELL RAIN HARRELL
3300 NATIONAL CITY TOWER (A PROFESSIONAL CORPORATION)
LOUISVILLE, KENTUCKY 40202-3197 2200 ROSS AVENUE, SUITE 2200
(502) 589-4200 DALLAS, TEXAS 75201-6776
(214) 740-8000

----------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]^
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JULY 14, 1997

1,200,000 SHARES

LOGO

PJ AMERICA, INC.

COMMON STOCK

Of the 1,200,000 shares of Common Stock offered hereby, 750,000 shares are
being sold by PJ America, Inc. (the "Company"), a franchisee of Papa John's
International, Inc., and 450,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Stockholders.

The Common Stock is traded on the Nasdaq National Market under the symbol
"PJAM." On June 24, 1997, the last reported sale price of the Company's Common
Stock as reported by the Nasdaq National Market was $17.00 per share. See
"Price Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholders
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
Total(3)......................... $ $ $ $
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 180,000 shares of Common Stock, solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
Price to Public will total $ , the Underwriting Discount will total
$ , the Proceeds to Company will total $ and the Proceeds to
Selling Stockholders will total $ . See "Principal and Selling
Stockholders" and "Underwriting."

The shares of Common Stock are offered by the Underwriters named herein when,
as and if delivered to and accepted by the Underwriters and subject to their
right to reject any order in whole or in part. It is expected that delivery of
certificates representing the shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.

-----------

MONTGOMERY SECURITIES ALEX. BROWN & SONS
incorporated

, 1997
<PAGE>

[Front Exterior of free- PJ AMERICA, INC. [Papa John's
standing PJ America Papa International,
John's Restaurant] "1994 Franchisee of the
Year" plaque awarded to
Extra Cheese, Inc.]

[Portion of "Pizza Papa [Large Papa John's [Portion of "Pizza Papa
John's" exterior sign] Pizza with "The Works"] John's" exterior sign]

[Papa John's delivery] ["Pizza Papa John's" [Pizza Papa John's
Logo] exterior
Sign with Papa John's
Restaurant]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF
REGULATION M. SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the financial
statements and the more detailed information appearing elsewhere in this
Prospectus. Unless otherwise noted, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option, and all references to
the "Company" include PJ America, Inc. and its subsidiaries. See "The Company"
and Note 1 of Notes to PJ America, Inc. and Subsidiaries Supplemental
Consolidated Financial Statements.

The Company succeeded to the businesses of five Papa John's International,
Inc. franchisees (the "Reorganization"). The Reorganization was completed on
October 30, 1996, concurrent with the closing of the Company's initial public
offering (the "IPO"). On June 5, 1997, a subsidiary of the Company merged with
Ohio Pizza Delivery Co. ("OPD") in a transaction accounted for as a pooling of
interests. Accordingly, supplemental consolidated financial statements
reflecting such transaction are included in this Prospectus. The Company
operates on a 52- or 53-week fiscal year ending on the last Sunday in December
of each year. Fiscal year 1995 had 53 weeks.

THE COMPANY

PJ America is the largest franchisee of "Papa John's" pizza delivery and
carry-out restaurants. At June 24, 1997, the Company owned and operated 58 Papa
John's restaurants in the Birmingham, Alabama area; in the Norfolk, Richmond
and Virginia Beach, Virginia areas; in East Texas; and in the Akron, Ohio area.
In addition to its existing territories, the Company has entered into a
development agreement with its franchisor, Papa John's International, Inc.
("PJI"), to develop Papa John's restaurants in the Ventura, Kern, San Luis
Obispo, and Santa Barbara counties, as well as the northwestern portion of Los
Angeles County (the "California Counties"). Further, the Company has been
granted by PJI the rights to enter into development agreements for Papa John's
restaurants in the Vancouver, Canada area and Puerto Rico. In addition, the
Company has an option, exercisable during 1998, to acquire the operations and
development rights for Papa John's restaurants in Utah from an affiliate of the
Company. On June 5, 1997, the Company acquired through a merger eight Papa
John's restaurants in the Akron, Ohio area. The Company intends to continue
pursuing selective strategic acquisitions of existing Papa John's franchisees.
At June 24, 1997, PJI and its franchisees (including the Company) operated
1,320 Papa John's restaurants in 39 states.

The key elements of the Papa John's concept include a focused menu of high
quality pizza and related items, an effective commissary, distribution and
equipment supply system and an efficient in-store operating design. Papa John's
original, medium thick crust is made from fresh dough (never frozen) produced
in PJI's regional commissaries. Every pizza is prepared using real mozzarella
cheese, pizza sauce made from fresh-packed tomatoes (not concentrate), a
proprietary mix of savory spices and a choice of high quality meat and
vegetable toppings in generous portions. This focused menu and the use of
quality ingredients enables Papa John's restaurants to concentrate on
consistently "Delivering the Perfect Pizza!"(TM) PJI's commissary system
supplies pizza dough, food products and paper products twice weekly to each of
the Company's restaurants. This commissary system enables PJI to closely
monitor and control product quality and consistency, while lowering food costs
for its franchisees. PJI also provides the Company assistance with restaurant
design and site selection and a complete equipment package for new restaurants.
This assistance provides the Company with a convenient, cost-effective means of
opening restaurants while ensuring a consistent restaurant appearance. The in-
store operating design includes specific areas for order taking, pizza
preparation and routing, resulting in simplified operations, lower training and
labor costs, increased efficiency and improved consistency and product quality.
The Company's restaurants are typically 1,200 to 1,500 square feet in size and
are located in strip centers or free-standing buildings which provide
visibility, curb appeal and accessibility.

3
<PAGE>

weeks ended March 30, 1997, the 41 restaurants that were open throughout the
period generated average sales of $732,000, average restaurant cash flow
(operating income plus depreciation) of $135,000 (or 18.4% of sales) and
average restaurant operating income after royalties of $114,000 (or 15.6% of
sales). However, there can be no assurance that such results can be maintained.
The average cash investment, including franchise fees, to open the 41 new
restaurants was approximately $175,000, exclusive of land and pre-opening
expenses. The Company expects that its average cash investment for restaurants
opened in 1997 will approximate $210,000, as the Company may increase the
proportion of free standing units. The Company also anticipates that occupancy
costs and the cash investment required to open restaurants in its new
territories will be higher than those experienced in its existing markets.

The Company's growth strategy focuses on further developing the Papa John's
concept through: (i) building out its existing markets; (ii) acquiring and
developing new territories; and (iii) strategically acquiring existing Papa
John's franchisee groups and territories, if available. The Company's objective
is to become the leading chain of pizza delivery restaurants in each of its
markets. Through a market-by-market expansion strategy focused on clustering
restaurants, the Company seeks to increase consumer awareness and take
advantage of operational and advertising efficiencies. During 1996, the Company
opened seven restaurants. In 1997 to date, the Company has opened four
restaurants and acquired eight restaurants from another Papa John's franchisee.
The Company anticipates that it will open an additional eight restaurants by
the end of 1997 and twelve restaurants in 1998.

The Company was organized as a Delaware corporation in August 1996, its
principal executive offices are located at 9109 Parkway East, Birmingham,
Alabama 35206, and its telephone number is (205) 836-1212.

RECENT DEVELOPMENTS

Recent Acquisition. On June 5, 1997, the Company acquired eight Papa John's
restaurants from OPD in the Akron, Ohio area in a transaction that has been
accounted for as a pooling of interests. Supplemental Consolidated Financial
Statements are presented elsewhere in this Prospectus. In addition, on June 26,
1997, the Company entered into an agreement with a PJI franchisee to acquire
one Papa John's restaurant adjacent to its Akron, Ohio area and a development
agreement to develop three additional Papa John's restaurants in such
territory. See "Selected Consolidated Financial Data" and "Certain
Transactions."

Recent Financial Results. The Comany had pro forma revenues of $12.0 million
and pro forma net income of $841,000 for its second fiscal quarter ended June
20, 1997 as compared to pro forma revenues of $9.4 million and pro forma net
income of $458,000 for the comparable period in 1996. Pro forma revenues and
pro forma net income for the six-month period ended June 29, 1997 were $22.6
million and $1.7 million, respectively, as compared to pro forma revenues of
$17.9 million and pro forma net income of $885,000 for the comparable period in
1996. The pro forma results for the second quarter and the six-month period in
1997 include expenses of $124,000 incurred in connection with the merger with
OPD, which were expensed in the second quarter of 1997. See "Recent
Developments."

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company......................... 750,000 shares
Common Stock offered by the Selling Stockholders............ 450,000 shares
Common Stock to be outstanding after the offering........... 5,783,084 shares(1)
Use of proceeds............................................. To fund restaurant development
and acquisitions and for general
corporate purposes
Nasdaq National Market symbol............................... PJAM
</TABLE>
- --------
(1) Excludes (i) a warrant issued to PJI to purchase 225,000 shares of Common
Stock at $11.25 per share and (ii) 375,500 shares of Common Stock issuable
upon the exercise of stock options as of June 24, 1997. See "Management--
Compensation of Directors," "--1996 Stock Ownership Incentive Plan" and
"Certain Transactions."

4
<PAGE>

SUMMARY FINANCIAL AND RESTAURANT DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF RESTAURANTS)

The following tables set forth summary financial and restaurant data for the
Company. The table "Income Statement Data--PJ America" represents the results
of operations of the Company for the entire period presented and the
acquisition of the Virginia restaurants from October 30, 1996 (the closing date
of the IPO).

The table "Income Statement Data--PJ America Supplemental" represents the
results of operations of the Company restated to give retroactive effect to the
merger with OPD on June 5, 1997, which was accounted for as a pooling of
interests, as if the merger had occurred at the beginning of fiscal 1995.

The table "Pro Forma Income Statement Data--PJ America" represents the
results of operations of the Company as if the acquisition of the Virginia
restaurants had occurred at the beginning of 1995 and has been retroactively
restated to reflect the merger with OPD as if it also had occurred at the
beginning of 1995. In addition, the table "Restaurant Data--PJ America"
represents certain restaurant data for the Company's restaurants for each of
the years presented. See Note 3 below and "Certain Transactions."

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------- -----------------------
DEC. 25, DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1994 1995 1996 1996 1997
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA--
PJ AMERICA:
Restaurant sales....... $6,415 $10,457 $16,846 $2,998 $ 8,770
Operating income....... 554 1,074 1,662 290 982
Income before income
taxes ................ 532 1,009 1,670 272 1,137
Net income(1).......... 338 641 1,078 172 728
INCOME STATEMENT DATA--
PJ AMERICA
SUPPLEMENTAL:
Restaurant sales....... $16,744 $24,550 $4,915 $10,606
Operating income....... 1,856 2,510 520 1,181
Income before income
taxes................. 1,779 2,521 503 1,336
Net income(1).......... 1,095 1,580 309 845
PRO FORMA INCOME
STATEMENT DATA--PJ
AMERICA:
Restaurant sales....... $29,386 $37,968 $8,523 $10,606
Operating income....... 2,815 3,530 756 1,181
Income before income
taxes................. 2,582 3,405 689 1,336
Net income............. 1,605 2,143 427 845
Net income per share... $ 0.47 $ 0.57 $ 0.12 $ 0.16
Weighted average
shares................ 3,435(2) 3,750(2) 3,444 5,191
RESTAURANT DATA--PJ
AMERICA:
Percentage change in
comparable restaurant
sales(3) ............. 24.1% 3.3% 4.7% (1.7%) 11.9%
Average sales for
restaurants open for
full period(3)........ $ 731 $ 727 $ 721 $ 166 $ 187
Number of restaurants
open at end of period. 27 46 54 49 57
</TABLE>

<TABLE>
<CAPTION>
MARCH 30, 1997
----------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA--PJ AMERICA SUPPLEMENTAL:
Total assets........................................... $24,779 $36,460
Total debt, including current maturities............... -- --
Stockholders' equity................................... 22,324 34,005
</TABLE>
- --------
(1) Net income reflects a pro forma provision for income taxes assuming the
Company's predecessors, and OPD where appropriate, were C corporations
rather than S corporations for each period. See "Prior S Corporation Status
of the Company's Predecessors" and "Certain Transactions."
(2) See Note 6 of PJ America, Inc. and Subsidiaries Supplemental Consolidated
Financial Statements and "Certain Transactions."
(3) Includes restaurants open throughout the periods being compared excluding
the eight Papa John's restaurants acquired in the OPD merger. Fiscal 1995
comparable restaurant sales have been adjusted to reflect a 52-week period
versus a 53-week period.
(4) Adjusted to reflect the sale of 750,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $17.00 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."

5
<PAGE>

RISK FACTORS

In addition to the other information contained elsewhere in this Prospectus,
prospective investors should consider the following factors in evaluating an
investment in the Common Stock offered hereby:

UNCERTAINTIES OF EXPANSION STRATEGY

The Company has grown rapidly in recent periods and intends to continue
pursuing an aggressive growth strategy. The Company plans to use a portion of
the proceeds from this offering to open approximately eight additional
restaurants during the remainder of 1997 primarily in existing markets and
approximately twelve restaurants during 1998 primarily in new markets. The
Company has entered into a development agreement with PJI to develop Papa
John's restaurants in the California Counties and has been granted by PJI the
rights to enter into development agreements for Papa John's restaurants in the
Vancouver, Canada area and Puerto Rico. The Company estimates that these
territories could support approximately 90 to 100 Papa John's restaurants.
However, the Company has not entered into development agreements for the
Vancouver, Canada area and Puerto Rico, and there can be no assurance that the
Company will enter into development agreements for such territories or that
the terms of the development agreements offered by PJI will be acceptable to
the Company. If the Company fails to meet its development obligations, PJI
could, among other remedies, terminate the Company's development rights in
such areas.

In the course of its expansion, the Company will enter new geographic
regions in which it has no previous operating experience and where the Papa
John's brand name is relatively unknown. There can be no assurance that the
Company's restaurants will be successful in such new markets. In addition, the
Company intends to continue pursuing acquisitions of existing PJI franchisees
as part of its overall expansion strategy. The Company recently acquired eight
Papa John's restaurants in the Akron, Ohio area. There can be no assurance
that the Company will be able to successfully integrate the operations of
these restaurants or other Papa John's restaurants which may be acquired in
the future or to manage successfully the combined enterprise on a profitable
basis. The Company may face competition in acquiring existing PJI franchisees
from PJI, which has a right to approve and a right of first refusal with
respect to the sale of all Papa John's restaurants (which in certain instances
has been waived), and other PJI franchisees. There can be no assurance that
the Company will be able to acquire additional PJI franchises on terms
acceptable to the Company, if at all. See "--Dependence on PJI; Franchisee
Status," "Business--Expansion and Site Selection," "--Development and
Franchise Agreements" and "Certain Transactions."

The Company's continued growth will depend primarily upon its ability to
open and operate additional restaurants profitably. The opening of new
restaurants will depend upon a number of factors, many of which are beyond the
control of the Company. These factors include, among other things, selection
and availability of suitable locations, negotiation of acceptable lease or
purchase terms, timely construction of restaurants, securing required
governmental permits and approvals, and employment and training of qualified
personnel. Timely development of new territories by all Papa John's
franchisees, including the Company, also is dependent upon their ability to
obtain adequate food supplies for their restaurants. While the Company expects
to obtain such supplies for the California Counties and the Vancouver, Canada
area from PJI's commissary and distribution system, such facility for
Vancouver, Canada has not yet been opened. In Puerto Rico, the Company does
not expect that PJI will open a commissary; therefore, the Company will be
dependent upon its or PJI's ability to contract with local entities to provide
the Company with dough and other food supplies. The inability of PJI or the
Company, or both, to achieve their respective growth plans could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the Company's current expansion plan may pose
significant strains on the Company's managerial, operational, financial and
other resources. There can be no assurance that the Company will be able to
open the number of restaurants anticipated in a timely manner or that existing
restaurants or new restaurants opened by the Company will be operated
profitably. See "Business--Expansion and Site Selection."

6
<PAGE>

DEPENDENCE ON PJI; FRANCHISEE STATUS

The success of the Company will, in large part, be dependent upon the
success of the Papa John's system. In addition, significant matters relating
to the Company's growth and operational strategies must be coordinated with,
and approved by, PJI. In particular, PJI must approve the opening by the
Company of any new restaurant, including restaurants opened within the
Company's existing franchise territories. PJI also maintains discretion over
the menu items that may be offered in the Company's restaurants. The Company's
right to use PJI's trademarks and service marks are significant to the
Company's business. The franchise and development agreements with PJI require
the Company to pay to PJI certain fees on or before the opening of new
restaurants, as well as monthly royalties. PJI may increase the royalty fee to
5% of sales after a franchise agreement has been in effect for between three
to five years. In no event may the royalty fee be increased to an amount
greater than the royalty fee currently in effect for new Papa John's
franchisees. These agreements also provide for the termination of the Company
as a franchisee upon the failure of the Company to comply with certain
restrictions and applicable obligations. Should the Company fail to comply
with the development agreements for restaurants within the covered
territories, PJI could, among other remedies, terminate the Company's right to
open additional restaurants in such territories. PJI's consent is required for
the Company's acquisition of existing Papa John's restaurants from other
franchisees. In addition, PJI may choose not to grant additional development
rights to the Company. PJI's approval is also required for the renewal of
existing franchise agreements beyond the initial renewal period. There can be
no assurance that the Company will be able to obtain any such consents or
approvals from PJI. See "Business--Development and Franchise Agreements" and
"--Trademarks."

The Company currently purchases most of its food supplies and all of its
restaurant equipment from PJI. The Company is dependent on frequent deliveries
of food supplies from PJI's commissaries. The Company also elects, but is not
required, to purchase advertising, promotional and other materials from PJI.
Currently, the Company's restaurants are being supplied by PJI's Garner, North
Carolina; Jackson, Mississippi; and Rotterdam, New York commissaries; and
PJI's Dallas, Texas distribution center. The Company's development of
additional territories is dependent upon PJI's opening commissaries or
distribution centers to service such areas and the ability of such
commissaries to adequately service the Company's and PJI's restaurants. While
the Company expects to obtain such supplies for the California Counties and
the Vancouver, Canada area from PJI's commissary and distribution system, such
facility for Vancouver, Canada has not yet been opened. In Puerto Rico, the
Company does not expect that PJI will open a commissary; therefore, the
Company will be dependent upon its or PJI's ability to contract with local
entities to provide the Company with dough and other food supplies. PJI's
failure to deliver food supplies from its commissaries to the Company or to
continue expanding and successfully operating its commissary and distribution
system would adversely affect the Company. See "Business--Papa John's
International, Inc." and "--Marketing Programs."

LIMITED COMBINED OPERATING HISTORY

The Company opened its first restaurant in 1991 and has experienced rapid
growth in restaurant openings, revenues and level of operations. At June 24,
1997, 21 restaurants (36.2%) had been open less than two years. Consequently,
operating results achieved to date may not be indicative of the results that
may be achieved by any existing or new restaurant in the future.

INCREASES IN OPERATING COSTS; AVAILABILITY AND COST OF INSURANCE

An increase in operating costs could adversely affect the profitability of
the Company. Factors such as inflation, increased food costs, increased labor
and employee benefit costs and the availability of qualified management and
hourly employees may adversely affect the Company's operating costs. Most of
these factors are beyond the control of the Company. PJI currently purchases
all of the cheese which it supplies to its franchisees from one supplier.
Cheese currently represents approximately 40% of the Company's food costs. The
price of cheese, as well as that of other commodities, is subject to seasonal
fluctuations, weather, demand and other factors. In September 1997, the second
phase of an increase in the minimum wage, from $4.75 to $5.15, will be
implemented in accordance with the Federal Fair Labor Standards Act of 1996,
which could adversely affect the Company.

7
<PAGE>

A risk of the Company, as with other companies which offer delivery
services, is the potential for claims resulting from traffic accidents
involving its delivery personnel. The Company does not have, and has not in
the past offered, guaranteed delivery times. The Company maintains excess
liability coverage on its delivery drivers in an amount believed by management
to be adequate. In addition, the Company maintains property, casualty and
liability insurance on its business and employees. However, a change in the
cost or availability of such insurance, or the incurrence of a significant
number of claims or liability in excess of policy limits, could adversely
affect the Company.

GEOGRAPHIC CONCENTRATION

All of the Company's restaurants are currently located in Alabama, Virginia,
Texas and Ohio. The Company's geographic concentration exposes its business to
certain risks, including economic and weather conditions and demographic and
population changes in those regions. There can be no assurance that adverse
developments in the geographic regions in which the Company's business is
concentrated will not have an adverse effect on its future results of
operations or financial condition. See "Business--Restaurant Locations."

HIGHLY COMPETITIVE INDUSTRY; EASE OF ENTRY INTO BUSINESS

The restaurant industry is highly competitive and is affected by changes in
consumer tastes, as well as national, regional and local economic conditions
and demographic trends. The performance of individual restaurants can be
affected by changes in traffic patterns, local demographics and the type,
number and location of competing restaurants. The quick-service restaurant
industry is extremely competitive with respect to price, service, location and
food quality. The Company competes with a variety of other restaurants in the
quick-service restaurant industry, including those that offer dine-in, carry-
out and delivery services. These competitors include national and regional
chains, franchisees of other restaurant chains and local owner-operated
restaurants. Many competitors have been in existence longer and have a more
established market presence and substantially greater financial, marketing and
other resources than the Company. Due primarily to the relatively low start-up
cost of pizza delivery and carry-out restaurants, there are no major barriers
to entry into the pizza delivery and carry-out restaurant business. See
"Business--Competition."

CONFLICTS OF INTEREST

Certain directors and executive officers of the Company own interests in
other Papa John's franchisees. In addition, Richard F. Sherman, Chairman of
the Board of the Company, is a director of PJI, and Charles W. Schnatter, a
director of the Company, is Senior Vice President, General Counsel, Secretary
and a director of PJI. An agreement between the Company and PJI provides that
a representative of PJI will serve on the Board of Directors of the Company
until October 1999. Mr. Schnatter serves as the representative of PJI on the
Board. Such directors and officers may have conflicts of interest with respect
to transactions between the Company and such franchisees or PJI. In addition,
such directors and officers may have conflicts of interest with respect to
corporate opportunities suitable for both the Company and such franchisees or
PJI. See "Certain Transactions."

DEPENDENCE UPON KEY PERSONNEL

Management of the Company is dependent on the continuing services of Douglas
S. Stephens, the Company's President and Chief Executive Officer, and other
key personnel. The Company maintains $3,000,000 in key man life insurance on
Mr. Stephens. The loss of the services of Mr. Stephens or other key personnel
could have a material adverse effect on the Company's business. See
"Management."

CONTROL BY OFFICERS AND DIRECTORS

Upon completion of this offering, the Company's executive officers and
directors will, in the aggregate, beneficially own 30.9% of the outstanding
Common Stock (29.9% if the Underwriters' over-allotment option is exercised in
full). These persons, if acting together, will have substantial control over
matters requiring approval by the stockholders of the Company, including the
election of directors. See "--Anti-Takeover Provisions," "Management" and
"Principal and Selling Stockholders."

8
<PAGE>

GOVERNMENT REGULATION

The restaurant industry is subject to numerous Federal, state and local
government regulations, including those relating to the preparation and sale
of food and building and zoning requirements. Also, the Company is subject to
laws governing its relationship with employees, including minimum wage
requirements, overtime, working conditions and citizenship requirements. The
failure to obtain or retain food licenses or an increase in the minimum wage
rate, employee benefit costs or other costs associated with employees could
adversely affect the Company. In September 1997, the second phase of an
increase in the minimum wage will be implemented in accordance with the
Federal Fair Labor Standards Act of 1996, which could adversely affect the
Company. See "Business--Government Regulation."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

The Company has been granted the rights to enter into development agreements
to open Papa John's restaurants in the Vancouver, Canada area and Puerto Rico.
The Company's ability to establish international operations is subject to
various risks, including changing political and economic conditions, currency
fluctuations, trade barriers, trademark rights, adverse tax consequences and
government regulations relating to, among other things, the preparation and
sale of food, building and zoning requirements, wages, working conditions, and
the Company's relationship with its employees. There can be no assurance that
the Company will be successful in establishing international operations.

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation and By-laws, as well as Delaware
corporate law, contain certain provisions that could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third
party from attempting to acquire, or take control of the Company. These
provisions could limit the price that certain investors might be willing to
pay in the future for shares of Common Stock. Certain of these provisions
allow the Company to issue, without stockholder approval, preferred stock
having voting rights senior to those of the Common Stock. Other provisions
impose various procedural and other requirements that could make it more
difficult for stockholders to effect certain corporate actions. In addition,
the Company's Board of Directors is divided into three classes with staggered
three-year terms which may make it more difficult for a third party to gain
control of the Board of Directors. As a Delaware corporation, the Company is
subject to Section 203 of the Delaware General Corporation Law which, in
general, prevents an "interested stockholder" (defined generally as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" for three years following the date such person
became an interested stockholder unless certain conditions are satisfied. As a
result, third parties may be discouraged from attempting to acquire or take
control of the Company. See "Description of Capital Stock--Certain Corporate
Governance Matters."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 5,783,084 shares of
Common Stock outstanding. Of these shares, 1,200,000 shares sold in this
offering, as well as the 2,070,000 shares sold in the IPO, will be freely
transferable without restriction or limitation under the Securities Act of
1933, as amended (the "Securities Act"), except for any shares purchased by
"affiliates" of the Company, as such term is defined in Rule 144 under the
Securities Act. The remaining 2,513,084 shares constitute "restricted
securities" within the meaning of Rule 144 such that the sale of such
securities would be restricted for one year from the date they were acquired.
The stockholders in the Reorganization, OPD and PJI, the holder of a warrant
to purchase 225,000 shares of Common Stock, will be entitled to certain
registration rights with respect to such shares. Further, the Company has
registered 760,000 shares of Common Stock reserved for issuance pursuant to
the Company's incentive compensation programs. At June 24, 1997, there were
outstanding options to purchase 375,500 shares of Common Stock. Options to
purchase shares become exercisable in four equal annual installments beginning
one year from the date of the grant. Sales of substantial amounts of shares of
Common Stock in the public market after this offering or the perception that
such sales could occur may adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale."

9
<PAGE>

The Company, its directors and executive officers, and certain stockholders
have agreed with the Underwriters not to sell or otherwise dispose of any
shares of Common Stock, any options to purchase Common Stock or any securities
convertible or exchangeable for shares of Common Stock for a period of 120
days after the date of this Prospectus without the prior written consent of
Montgomery Securities, except for (i) up to 350,000 shares which may be issued
in connection with acquisitions and (ii) shares issued pursuant to the
exercise of options granted under the Directors Plan or the 1996 Plan. See
"Underwriting."

LIMITED PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

The Common Stock has traded on the Nasdaq National Market since October 1996
and has a limited public market history. There can be no assurance that future
market prices for the shares will equal or exceed the price to public set
forth on the cover page of this Prospectus. The price at which the Common
Stock will trade will depend upon a number of factors, including, but not
limited to, the Company's historical and anticipated operating results and
general market and economic conditions, some of which factors are beyond the
Company's control. Factors, such as quarterly fluctuations in the Company's or
other restaurant companies', including PJI's, financial and operating results,
announcements by the Company or others, and developments affecting the
Company, PJI, its clients or the industry generally, could also cause the
market price of the Common Stock to fluctuate substantially. In addition, the
stock market has from time to time experienced extreme price and volume
fluctuations. These broad market fluctuations may adversely affect the market
price of the Common Stock. See "Price Range of Common Stock" and
"Underwriting."

10
<PAGE>

RECENT DEVELOPMENTS

Recent Acquisitions. On June 5, 1997, the Company acquired eight Papa John's
restaurants from OPD in the Akron, Ohio area in a transaction that has been
accounted for as a pooling of interests. Supplemental Consolidated Financial
Statements are presented elsewhere in this Prospectus. In addition, on June
26, 1997, the Company entered into an agreement with a PJI franchisee to
acquire one Papa John's restaurant adjacent to its Akron, Ohio area and a
development agreement to develop three additional Papa John's restaurants in
such territory. See "Selected Consolidated Financial Data" and "Certain
Transactions."

Recent Financial Results. The Company had pro forma revenues of $12.0
million and pro forma net income of $841,000 for its second fiscal quarter
ended June 29, 1997 as compared to pro forma revenues of $9.4 million and pro
forma net income of $458,000 for the comparable period in 1996. Pro forma
revenues and pro forma net income for the six-month period ended June 29, 1997
were $22.6 million and $1.7 million, respectively, as compared to pro forma
revenues of $17.9 million and pro forma net income of $885,000 for the
comparable period in 1996. Pro forma net income per share was $0.16 for the
second quarter in 1997 as compared to $0.13 for the comparable period in 1996,
and was $0.33 for the six-month period in 1997 as compared to $0.26 for the
comparable period in 1996. Approximately 50% more shares were outstanding
during the 1997 six-month period than during the comparable period in 1996.
The pro forma results for the second quarter and the six-month period in 1997
include expenses of $124,000 incurred in connection with the merger with OPD,
which were expensed in the second quarter of 1997. The increase in pro forma
revenues and pro forma net income for the second quarter and the six-month
period in 1997 were primarily due to (i) increases in comparable restaurant
sales of 8.8% in the second quarter and 10.1% in the six-month period; (ii)
incremental sales from additional restaurants; and (iii) improved operating
margins. The above results for the second quarter and six-month period in 1997
have been restated to give retroactive effect to the merger with OPD as if the
merger had occurred at the beginning of the year, and also include a pro forma
provision for income taxes as if OPD was a C corporation rather than an S
corporation. The above financial results for the second quarter of 1996 and
six-month period ended June 30, 1996 represent the results of the Company as
if the acquisition of the Virginia restaurants had occurred at the beginning
of the year, have been restated to give retroactive effect to the merger with
OPD as if the merger had occurred at the beginning of the year and include a
pro forma provision for income taxes as if the Company and OPD were C
corporations rather than S corporations.

PRIOR S CORPORATION STATUS OF THE COMPANY'S PREDECESSORS

From their inception through October 29, 1996, all but one of the Company's
predecessors were treated for Federal and state income tax purposes as S
corporations under Subchapter S of the Internal Revenue Code of 1986, as
amended, and comparable provisions of state income tax laws. Accordingly,
through October 29, 1996, the earnings of such of the Company's predecessors
were taxed for Federal and certain state income tax purposes directly to the
stockholders of the Company's predecessors. On October 29, 1996, the Company's
predecessors became subject to Federal and state income taxes.

The Company made distributions to its stockholders in each fiscal year from
1994 through October 29, 1996 to provide stockholders with funds to assist in
paying Federal and state income taxes on the undistributed earnings of the
Company. The Company used approximately $2.0 million of the proceeds from the
IPO to pay all undistributed S corporation earnings (as determined for income
tax purposes) of the Company ("Undistributed S Corporation Earnings") through
October 29, 1996. See "Dividend Policy" and "Certain Transactions."

USE OF PROCEEDS
The net proceeds to the Company from the sale of the 750,000 shares of
Common Stock offered hereby at an assumed public offering price of $17.00 per
share are estimated to be $11,680,625 ($14,579,975 if the Underwriters' over-
allotment option is exercised in full). The Company will not receive any of
the proceeds from the sale of shares of the Common Stock by the Selling
Stockholders.

The net proceeds of this offering will be used to fund new restaurant
development and for general corporate purposes. The Company plans to open
twelve new Papa John's restaurants in 1997, four of which have been opened to
date, and twelve new Papa John's restaurants in 1998. A portion of the
remaining net proceeds of the offering may be used to acquire other Papa
John's franchisees. Although the Company intends to pursue such

11
<PAGE>

acquisitions, the Company is not currently in any negotiations, nor does it
have any pending material agreements or understandings, concerning any material
acquisition at the date of this Prospectus. However, the Company has an option
and rights of first refusal to acquire the operations and development rights
for certain Papa John's restaurants owned by affiliates. Pending such uses, the
Company will invest the net proceeds in short-term, investment grade, interest-
bearing securities. See "Certain Transactions."

DIVIDEND POLICY
The Company intends to retain any future earnings for use in its business and
does not intend to pay cash dividends in the foreseeable future. The payment of
future dividends, if any, will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, future earnings,
operations, capital requirements, restrictions in future financing agreements,
the general financial condition of the Company and general business conditions.
Certain of the Company's predecessors made cash distributions to their
stockholders of $9,000, $932,000 and $3.4 million in 1994, 1995 and 1996,
respectively, which were related to the S corporation status of the Company's
predecessors. See "Description of Capital Stock--Common Stock."

PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been quoted on the Nasdaq National Market
under the symbol "PJAM" since its IPO on October 24, 1996. The Company's price
to the public was $12.50 per share. The table below sets forth for the fiscal
quarters indicated the reported high and low sale prices of the Common Stock,
as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
1996
<S> <C> <C>
Fourth quarter (from October 25, 1996)................... $22.25 $15.50
<CAPTION>
1997
<S> <C> <C>
First quarter............................................ $19.25 $14.00
Second quarter (through June 24, 1997)................... 18.88 12.13
</TABLE>
On June 24, 1997, the last reported sale price for the Company's Common Stock
as reported by the Nasdaq National Market was $17.00 per share. As of June 24,
1997, there were 66 holders of record of Common Stock, although the Company
believes that the number of beneficial owners of its Common Stock is
substantially greater.

CAPITALIZATION
The following table sets forth the capitalization of PJ America Supplemental,
which represents the capitalization of the Company, restated to give
retroactive effect to the merger with OPD as of March 30, 1997, and as adjusted
to give effect to the issuance and sale by the Company of 750,000 shares of
Common Stock in this offering (at an assumed public offering price of $17.00
per share) and the application of the net proceeds therefrom. This table should
be read in conjunction with PJ America, Inc. and Subsidiaries Supplemental
Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 30, 1997
----------------
AS
ACTUAL ADJUSTED
------- --------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities............ $ -- $ --
------- -------
Stockholders' equity:
Preferred Stock, $1.00 par value, 1,000,000 shares
authorized; no shares outstanding.................... $ -- $ --
Common Stock, $.01 par value, 20,000,000 shares
authorized; 5,033,084 shares outstanding; 5,783,084
shares outstanding, as adjusted(1)................... 50 58
Paid-in capital....................................... 20,029 31,702
Retained earnings..................................... 2,245 2,245
------- -------
Total stockholders' equity.......................... 22,324 34,005
------- -------
Total capitalization.............................. $22,324 $34,005
======= =======
</TABLE>
- --------
(1) Excludes (i) a warrant issued to PJI to purchase 225,000 shares of Common
Stock at $11.25 per share and (ii) options to purchase 375,500 shares of
Common Stock issuable upon the exercise of stock options as of June 24,
1997. See "Management--Compensation of Directors," "--1996 Stock Ownership
Incentive Plan" and "Certain Transactions."

12
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

PJ AMERICA

The following table represents the results of operations of the Company for
the entire period presented and the acquisition of the Virginia restaurants
from October 30, 1996 (the closing date of the IPO).

The selected consolidated financial data of the Company as of and for the
years ended December 26, 1993, December 25, 1994, December 31, 1995 and
December 29, 1996 are derived from the consolidated financial statements of PJ
America, Inc. and Subsidiary which have been audited by Ernst & Young LLP,
independent auditors. The selected consolidated financial data as of and for
the year ended December 28, 1992 and as of and for the three months ended
March 29, 1996 and March 30, 1997 are unaudited.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------------------ -----------------------
DEC. 28, DEC. 26, DEC. 25, DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1992 1993 1994 1995 1996 1996 1997
----------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales....... $1,318 $3,127 $6,415 $10,457 $16,846 $2,998 $ 8,770
Costs and expenses:
Cost of sales........ 433 1,054 2,098 3,511 5,537 1,005 2,777
Salaries and
benefits............ 406 888 1,677 2,647 4,244 761 2,235
Other operating
expenses............ 344 772 1,481 2,393 3,922 677 2,059
General and
administrative
expenses............ 131 229 433 557 1,016 181 464
Depreciation and
amortization........ 50 79 172 275 465 84 253
------ ------ ------ ------- ------- ------ -------
Total costs and
expenses.......... 1,364 3,022 5,861 9,383 15,184 2,708 7,788
------ ------ ------ ------- ------- ------ -------
Operating income
(loss)................ (46) 105 554 1,074 1,662 290 982
Other income
(expense), net........ -- (6) (22) (65) 8 (18) 155
------ ------ ------ ------- ------- ------ -------
Income (loss) before
income taxes.......... (46) 99 532 1,009 1,670 272 1,137
Income tax expense
(benefit)(1).......... (17) 36 194 368 592 100 409
------ ------ ------ ------- ------- ------ -------
Net income
(loss)(1)......... $ (29) $ 63 $ 338 $ 641 $ 1,078 $ 172 $ 728
====== ====== ====== ======= ======= ====== =======
BALANCE SHEET DATA (END
OF PERIOD):
Total assets........... $ 432 $ 823 $1,655 $ 2,491 $22,373 $23,548
Total debt, including
current maturities.... -- 300 427 1,066 -- --
Stockholders' equity... 314 435 995 1,073 20,578 21,305
</TABLE>

- --------
(1) Net income reflects a pro forma provision for income taxes assuming the
Company's predecessors were C corporations rather than S corporations for
each period.

13
<PAGE>

PJ AMERICA SUPPLEMENTAL

The following table represents the results of operations of the Company
restated to give retroactive effect to the merger with OPD on June 5, 1997,
accounted for as a pooling of interests, as if the merger had occurred at the
beginning of fiscal 1995.

The selected financial data as of and for the years ended December 31, 1995
and December 29, 1996 are derived from supplemental consolidated financial
statements of PJ America, Inc. and Subsidiaries which have been audited by
Ernst & Young LLP, independent auditors, whose reports thereon are included
elsewhere in this Prospectus. The selected consolidated financial data for the
three months ended March 29, 1996 and March 30, 1997 are unaudited.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------ -----------------------
DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1995 1996 1996 1997
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales................... $16,744 $24,550 $4,915 $10,606
Costs and expenses:
Cost of sales.................... 5,630 8,064 1,647 3,373
Salaries and benefits............ 4,158 6,113 1,226 2,715
Other operating expenses......... 3,820 5,833 1,122 2,480
General and administrative
expenses........................ 887 1,402 278 564
Depreciation and amortization.... 393 628 122 293
------- ------- ------ -------
Total costs and expenses....... 14,888 22,040 4,395 9,425
------- ------- ------ -------
Operating income................. 1,856 2,510 520 1,181
Other income (expense)........... (77) 11 (17) 155
------- ------- ------ -------
Income before income taxes....... 1,779 2,521 503 1,336
Income tax expense............... 684 941 194 491
------- ------- ------ -------
Net income(1).................. $ 1,095 $ 1,580 $ 309 $ 845
======= ======= ====== =======
BALANCE SHEET DATA (END OF PERIOD):
Total assets....................... $ 3,628 $23,614 $24,779
Total debt, including current
maturities........................ 1,071 70 --
Stockholders' equity............... 1,885 21,518 22,324
</TABLE>

- --------

(1) Net income reflects a pro forma provision for income taxes assuming the
Company's predecessors and OPD were C corporations rather than S
corporations for the periods presented.

14
<PAGE>

PRO FORMA INFORMATION--PJ AMERICA (UNAUDITED)

The following table represents the results of operations of the Company as
if the acquisition of the Virginia restaurants had occurred at the beginning
of 1995 and has been retroactively restated to reflect the merger with OPD as
if it also had occurred at the beginning of 1995. See "Certain Transactions."

The pro forma financial data do not purport to represent what the Company's
financial position or results of operations actually would have been if such
transactions in fact had occurred on those dates, and should not be used to
project the Company's financial position or results of operations for any
future period.

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED(1) THREE MONTHS ENDED
------------------ --------------------
DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1995 1996 1996 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Restaurant sales...................... $29,386 $37,968 $ 8,523 $ 10,606
Costs and expenses:
Cost of sales....................... 9,946 12,643 2,867 3,373
Salaries and benefits............... 7,306 9,329 2,155 2,715
Other operating expenses............ 7,170 9,379 2,064 2,480
General and administrative expenses. 1,373 2,020 439 564
Depreciation and amortization....... 776 1,067 242 293
------- ------- -------- ---------
Total costs and expenses.......... 26,571 34,438 7,767 9,425
------- ------- -------- ---------
Operating income...................... 2,815 3,530 756 1,181
Other income (expense), net........... (233) (125) (67) 155
------- ------- -------- ---------
Income before income taxes............ 2,582 3,405 689 1,336
Income tax expense.................... 977 1,262 262 491
------- ------- -------- ---------
Net income(2)..................... $ 1,605 $ 2,143 $ 427 $ 845
======= ======= ======== =========
Net income per share.................. $ 0.47 $ 0.57 $ 0.12 $ 0.16
======= ======= ======== =========
Weighted average shares............... 3,435 3,750 3,444 5,191
</TABLE>

- --------

(1) See Note 6 to the PJ America, Inc. and Subsidiaries Supplemental
Consolidated Financial Statements.
(2) Net income reflects a pro forma provision for income taxes assuming the
Company's predecessors and OPD were C corporations rather than S
corporations for the periods presented.

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The Company is the largest franchisee of Papa John's pizza delivery and
carry-out restaurants. At June 24, 1997, the Company owned and operated 58
Papa John's restaurants in the Birmingham, Alabama area; in the Norfolk,
Richmond and Virginia Beach, Virginia areas; in East Texas; and in the Akron,
Ohio area. At June 24, 1997, PJI and its franchisees (including the Company)
operated 1,320 Papa John's restaurants in 39 states.

The Company succeeded to the businesses of five PJI franchisees in the
Reorganization which was completed on October 30, 1996 concurrent with the
closing of the Company's IPO. The Reorganization was an exchange of non-
monetary assets by stockholders and has been accounted for at historical cost.

On June 5, 1997, a subsidiary of the Company merged with OPD acquiring eight
Papa John's restaurants in the Akron, Ohio area. This transaction was
accounted for as a pooling of interests. Accordingly, supplemental
consolidated financial statements reflecting such transaction are included in
this Prospectus.

The Company's restaurants operate under separate franchise agreements, which
generally have terms between five and ten years (with renewal options between
five and ten years) and require payment of monthly royalties equal to 4% of
restaurant sales. The Company also has entered into development agreements
with PJI to open a certain number of restaurants over a defined period of time
within specific geographic areas. The Company's development agreements
generally require it to pay a non-refundable fee per restaurant covered by the
respective agreements and which fee is typically credited against the initial
franchise fee that the Company is required to pay for each new restaurant
opened. The Company amortizes development and franchise fees over a 20-year
period, beginning with the opening of a restaurant. See "Business--Development
and Franchise Agreements."

The Company's growth strategy focuses on further developing the Papa John's
concept through: (i) building out its existing markets; (ii) acquiring and
developing new territories; and (iii) strategically acquiring existing Papa
John's franchisee groups and territories, if available. The Company's market-
by-market expansion strategy focuses on clustering restaurants, thereby
increasing consumer awareness and enabling the Company to take advantage of
operational and advertising efficiencies. To date, the Company believes that
this strategy has contributed to increases in comparable restaurant sales,
although there can be no assurance that comparable restaurant sales will
continue to be positive. The Company expects that its average cash investment,
including franchise fees, required to open restaurants in 1997 will
approximate $210,000. The Company anticipates that the cash investment
required to open restaurants in its new territories will be higher than that
experienced in its existing markets. Pre-opening costs are expensed as
incurred.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements under the captions "Prospectus Summary," "Risk Factors,"
"Recent Developments," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," and elsewhere in this
Prospectus, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include
statements regarding the intent, belief or current expectations of the Company
and its management. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These factors include, among other things: (i) the
successful implementation of the Company's expansion strategy; (ii) the
Company's dependence upon the success of the Papa John's system; (iii) the
Company's ability to compete in an intensely competitive industry; and (iv)
other factors referred to in this Prospectus under the heading "Risk Factors."

16
<PAGE>

RESULTS OF OPERATIONS--PJ AMERICA

The following table sets forth the percentage relationship to restaurant
sales for certain income statement data of the Company for the entire period
presented and the acquisition of the Virginia restaurants from October 30,
1996 (the closing date of the IPO). Net income reflects a pro forma provision
for income taxes assuming the Company's predecessors were C corporations
rather than S corporations for each period.

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
-------------------------- -----------------
DEC. 25, DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Restaurant sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................ 32.7 33.6 32.9 33.5 31.6
Salaries and benefits........ 26.1 25.3 25.2 25.4 25.5
Other operating expenses..... 23.1 22.9 23.3 22.6 23.5
General and administrative
expenses.................... 6.8 5.3 6.0 6.0 5.3
Depreciation and
amortization................ 2.7 2.6 2.7 2.8 2.9
----- ----- ----- ----- -----
Total costs and expenses... 91.4 89.7 90.1 90.3 88.8
----- ----- ----- ----- -----
Operating income............... 8.6 10.3 9.9 9.7 11.2
Other income (expense), net.... (0.3) (0.7) -- (0.6) 1.8
----- ----- ----- ----- -----
Income before income taxes..... 8.3 9.6 9.9 9.1 13.0
Income tax expense............. 3.0 3.5 3.5 3.3 4.7
----- ----- ----- ----- -----
Net income................. 5.3% 6.1% 6.4% 5.8% 8.3%
===== ===== ===== ===== =====
</TABLE>

Three Months Ended March 30, 1997 Compared to Three Months Ended March 29,
1996.

Restaurant Sales. Restaurant sales increased 193% to $8.8 million for the
three months ended March 30, 1997, from $3.0 million for the comparable period
in 1996. The increase was primarily attributable to the 46 restaurants open
throughout the period ended March 30, 1997 (includes 25 Virginia restaurants
acquired on October 30, 1996), as compared to the 15 restaurants open
throughout the period ended March 29, 1996, the three restaurants opened in
the first quarter of 1997, and an 11.9% increase in comparable restaurant
sales.

Costs and Expenses. Cost of sales, which consists of food, beverage and
paper costs, decreased as a percentage of restaurant sales to 31.6% for the
three months ended March 30, 1997, from 33.5% for the comparable period in
1996. This decrease was primarily attributable to the acquisition of the
Virginia restaurants which are included in the period ended March 30, 1997,
slightly lower cheese costs, and a maturing restaurant base.

Salaries and benefits, which consist of all store level employee wages,
taxes, and benefits increased slightly as a percentage of restaurant sales to
25.5% for the three months ended March 30, 1997, from 25.4% for the comparable
period in 1996. The increase in salaries and benefits as a percentage of
restaurant sales was primarily due to the increase in minimum wage in October
1996, partially offset by improved labor utilization.

Other operating expenses include other restaurant level operating costs, the
material components of which are automobile mileage reimbursement for delivery
drivers, rent, royalties, utility expenses, pre-opening expenses and
advertising expenses. Other operating expenses increased as a percentage of
restaurant sales to 23.5% for the three months ended March 30, 1997, from
22.6% for the comparable period in 1996. This increase was primarily
attributable to the acquisition of the Virginia restaurants, which
historically have had higher operating expenses as a percentage of restaurant
sales, partially offset by increased leverage of expenses as a result of
comparable store sales increases and increased purchasing power.

17
<PAGE>

General and administrative expenses decreased as a percentage of restaurant
sales to 5.3% for the three months ended March 30, 1997, from 6.0% for the
comparable period in 1996. This decrease was primarily due to the leveraging
of general and administrative expenses as a result of increased sales,
partially offset by additional corporate infrastructure necessary to support
planned growth.

Depreciation and amortization was relatively consistent as a percentage of
restaurant sales at 2.9% for the three months ended March 30, 1997, from 2.8%
for the comparable period in 1996.

Other Income (Expense). Other income (expense), consisting primarily of
investment income for the quarter ended March 30, 1997, was approximately
$155,000. The increase in investment income was a result of earnings on funds
received from the IPO. Investment balances are considered available to fund
growth and acquisitions.

1996 Compared to 1995.

Restaurant Sales. Restaurant sales increased 61.1% to $16.8 million in 1996
from $10.5 million in 1995. The increase in restaurant sales was attributable
to sales from the six new restaurants opened in 1996, a full year of
operations for the five restaurants opened during 1995, a 4.7% increase in
comparable restaurant sales for restaurants open throughout both fiscal years
and the acquisition of 25 Virginia restaurants on October 30, 1996. The
increase in comparable restaurant sales was primarily attributable to
continued market penetration, partially offset by the impact of inclement
weather in the first quarter of 1996.

Costs and Expenses. Cost of sales increased $2.0 million, but decreased as a
percentage of restaurant sales to 32.9% in 1996 from 33.6% in 1995. This
percentage decrease was primarily attributable to the acquisition of the
Virginia restaurants on October 30, 1996, when cheese costs were below the
average for all of 1996. Average cheese costs throughout the first three
quarters of 1996 were higher than the comparable periods in 1995.

Salaries and benefits increased $1.6 million, but decreased slightly as a
percentage of restaurant sales to 25.2% in 1996 from 25.3% in 1995.

Other operating expenses increased $1.5 million, and increased as a
percentage of restaurant sales to 23.3% in 1996 from 22.9% in 1995. This
percentage increase was primarily due to the acquisition of the Virginia
restaurants, which historically have had higher other operating expenses as a
percentage of restaurant sales.

General and administrative expenses increased $459,000, and increased as a
percentage of restaurant sales to 6.0% in 1996 from 5.3% in 1995. The dollar
and percentage increases were primarily due to expenses of $120,000 for two
new executives relocating to the Company's offices in Birmingham, Alabama, and
the addition of restaurant supervisory and corporate support personnel.

Depreciation and amortization increased by $190,000, and increased as a
percentage of restaurant sales to 2.7% in 1996 from 2.6% in 1995. The dollar
increase was primarily due to the addition of new and acquired restaurants.
The percentage increase was primarily due to 1995 being a 53-week year.

Other Income (Expense). Other income (expense), which consists primarily of
interest income and interest expense, increased $73,000 to $8,000 of income in
1996 from $65,000 of expense in 1995. The increase in other income was
primarily due to the payoff of Company debt, plus interest income earned on
investments as a result of the IPO.

1995 Compared to 1994.

Restaurant Sales. Restaurant sales increased 63.0% to $10.5 million in 1995
from $6.4 million in 1994. The increase in restaurant sales was attributable
to sales from the five new restaurants opened in 1995, a full year of
operations for the four restaurants opened in 1994, and a 6.6% increase in
comparable restaurant sales for the six restaurants open throughout both
fiscal years. The increase in comparable restaurant sales was primarily
attributable to increased market penetration in Birmingham, Alabama and the
surrounding areas.

18
<PAGE>

Costs and Expenses. Cost of sales increased $1.4 million and increased as a
percentage of restaurant sales to 33.6% in 1995 from 32.7% in 1994. This
percentage increase resulted from an increase in topping portion on pizzas and
more aggressive discounting.

Salaries and benefits increased $970,000, but decreased as a percentage of
restaurant sales to 25.3% in 1995 from 26.1% in 1994. The decrease in salaries
and benefits as a percentage of restaurant sales was primarily due to better
labor utilization and a smaller percentage of new restaurants opened in 1995
as compared to 1994.

Other operating expenses increased $912,000, but decreased as a percentage
of restaurant sales to 22.9% in 1995 from 23.1% in 1994. The decrease was
attributable to decreases in other operating expenses as a percentage of
restaurant sales in the Birmingham, Alabama area, partially offset by higher
other operating expenses for new restaurants opened in Texas.

General and administrative expenses increased $124,000 in 1995 to $557,000
from $433,000 in 1994, but decreased as a percentage of restaurant sales to
5.3% in 1995 from 6.8% in 1994. The dollar increase was the result of the
addition of restaurant supervisory and corporate support personnel. The
percentage decrease was primarily due to an increase in restaurant sales
without a proportionate increase in general and administrative expenses.

Depreciation and amortization increased $103,000 in 1995 to $275,000 from
$172,000 in 1994, but decreased slightly as a percentage of restaurant sales
to 2.6% in 1995 from 2.7% in 1994. The dollar increase was primarily related
to the opening of additional restaurants.

Other Income (Expense). Other expenses increased to $65,000 in 1995 from
$22,000 in 1994, primarily due to increased interest expense on borrowings.

RESULTS OF OPERATIONS--PJ AMERICA SUPPLEMENTAL

The following table sets forth the percentage relationship to restaurant
sales for certain income statement data of the Company, restated to give
retroactive effect to the merger with OPD on June 5, 1997, which was accounted
for as a pooling of interests, as if it had occurred at the beginning of
fiscal 1995. Net income reflects a pro forma provision for income taxes
assuming that the Company and OPD were C corporations rather than
S corporations for each period.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------- ----------------------
DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1995 1996 1996 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Restaurant sales.................. 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................... 33.6 32.8 33.5 31.8
Salaries and benefits........... 24.8 24.9 25.0 25.6
Other operating expenses........ 22.8 23.8 22.8 23.4
General and administrative
expenses....................... 5.3 5.7 5.7 5.3
Depreciation and amortization... 2.4 2.6 2.4 2.8
----- ----- --------- ---------
Total costs and expenses...... 88.9 89.8 89.4 88.9
----- ----- --------- ---------
Operating income.................. 11.1 10.2 10.6 11.1
Other income (expense), net....... (0.5) -- (0.4) 1.5
----- ----- --------- ---------
Income before income taxes........ 10.6 10.2 10.2 12.6
Income tax expense................ 4.1 3.8 3.9 4.6
----- ----- --------- ---------
Net income.................... 6.5% 6.4% 6.3% 8.0%
===== ===== ========= =========
</TABLE>

19
<PAGE>

Three months ended March 30, 1997 compared to three months ended March 29,
1996.

Restaurant Sales. Restaurant sales increased 116% to $10.6 million for the
three months ended March 30, 1997, from $4.9 million for the comparable period
in 1996. The increase was primarily attributable to the 54 restaurants open
throughout the period ended March 30, 1997 (includes 25 Virginia restaurants
acquired on October 30, 1996), as compared to the 22 restaurants open
throughout the period ended March 29, 1996, the three restaurants opened in
the first quarter of 1997, and an 11.9% increase in comparable restaurant
sales.

Costs and Expenses. Cost of sales decreased as a percentage of restaurant
sales to 31.8% for the three months ended March 30, 1997, from 33.5% for the
comparable period in 1996. This decrease was primarily attributable to the
acquisition of the Virginia restaurants which are included in the period ended
March 30, 1997, slightly lower cheese costs, and a maturing restaurant base.

Salaries and benefits increased slightly as a percentage of restaurant sales
to 25.6% for the three months ended March 30, 1997, from 25.0% for the
comparable period in 1996. The increase in salaries and benefits as a
percentage of restaurant sales was primarily due to the increase in minimum
wage in October 1996, partially offset by better labor utilization.

Other operating expenses increased as a percentage of restaurant sales to
23.4% for the three months ended March 30, 1997, from 22.8% for the comparable
period in 1996. This increase was primarily attributable to the acquisition of
the Virginia restaurants, which historically have had higher operating
expenses as a percentage of restaurant sales, partially offset by increased
leverage of expenses as a result of comparable store sales increases and
increased purchasing power for various expenses.

General and administrative expenses decreased as a percentage of restaurant
sales to 5.3% for the three months ended March 30, 1997, from 5.7% for the
comparable period in 1996. This decrease was primarily due to the leveraging
of general and administrative expenses as a result of increased sales,
partially offset by additional corporate infrastructure necessary to support
planned growth.

Depreciation and amortization increased as a percentage of restaurant sales
to 2.8% for the three months ended March 30, 1997, from 2.4% for the
comparable period in 1996. This increase was primarily attributable to the
acquisition of the Virginia restaurants, which historically had higher
depreciation expense as a percentage of sales.

1996 Compared to 1995.

Restaurant Sales. Restaurant sales increased 46.6% to $24.5 million in 1996
from $16.7 million in 1995. The increase in restaurant sales was attributable
to sales from the seven new restaurants opened in 1996, a full year of
operations for the six restaurants opened during 1995, a 4.7% increase in
comparable restaurant sales for restaurants open throughout both fiscal years,
and the acquisition of 25 Virginia restaurants on October 30, 1996. The
increase in comparable restaurant sales was primarily attributable to
continued market penetration in Alabama and Virginia, partially offset by the
impact of inclement weather in the first quarter of 1996.

Costs and Expenses. Cost of sales increased $2.4 million, but decreased as a
percentage of restaurant sales to 32.8% in 1996 from 33.6% in 1995. This
percentage decrease was primarily attributable to the acquisition of the
Virginia restaurants on October 30, 1996, when cheese costs were below the
average for all of 1996. Average cheese costs throughout the first three
quarters of 1996 were higher than the comparable periods in 1995.

Salaries and benefits increased $2.0 million and increased slightly as a
percentage of restaurant sales to 24.9% in 1996 from 24.8% in 1995.

20
<PAGE>

Other operating expenses increased $2.0 million, and increased as a
percentage of restaurant sales to 23.8% in 1996 from 22.8% in 1995. This
percentage increase was primarily due to the acquisition of the Virginia
restaurants, which historically have had higher other operating expenses as a
percentage of restaurant sales.

General and administrative expenses increased $515,000, and increased as a
percentage of restaurant sales to 5.7% in 1996 from 5.3% in 1995. The dollar
increase was primarily due to expenses of $120,000 for two new executives
relocating to the Company's offices in Birmingham, Alabama, and the addition
of restaurant supervisory and corporate support personnel.

Depreciation and amortization increased by $234,000, and increased as a
percentage of restaurant sales to 2.6% in 1996 from 2.4% in 1995. The dollar
increase was primarily due to the addition of new and acquired restaurants.
The percentage increase was primarily due to 1995 being a 53-week year.

Other Income (Expense). Other income (expense), which consists primarily of
interest income and interest expense, increased $88,000 to $11,000 of income
in 1996 from $77,000 of expense in 1995. The increase in other expense was
primarily due to the payoff of Company debt, plus interest income earned on
investments as a result of the Company's IPO.

PRO FORMA RESULTS OF OPERATIONS--UNAUDITED

The following table sets forth the percentage relationship to restaurant
sales for certain income statement data as if the acquisition of the Virginia
restaurants had occurred at the beginning of 1995 and has been retroactively
restated to reflect the merger with OPD as if it also had occurred at the
beginning of 1995. Net income reflects a pro forma provision for income taxes
assuming the Company's predecessors and OPD were C corporations rather than S
corporations for the periods presented.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------- ------------------
DEC. 31, DEC. 29, MAR. 29, MAR. 30,
1995 1996 1996 1997
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Restaurant sales.................. 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................... 33.8 33.3 33.6 31.8
Salaries and benefits........... 24.9 24.6 25.3 25.6
Other operating expenses........ 24.4 24.7 24.2 23.4
General and administrative
expenses....................... 4.7 5.3 5.2 5.3
Depreciation and amortization... 2.6 2.8 2.8 2.8
----- ----- --------- ---------
Total costs and expenses...... 90.4 90.7 91.1 88.9
----- ----- --------- ---------
Operating income.................. 9.6 9.3 8.9 11.1
Other income (expense), net....... (0.8) (0.3) (0.8) 1.5
----- ----- --------- ---------
Income before income taxes........ 8.8 9.0 8.1 12.6
Income tax expense................ (3.3) (3.3) (3.1) (4.6)
----- ----- --------- ---------
Net income.................... 5.5% 5.7% 5.0% 8.0%
===== ===== ========= =========
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company requires capital primarily for the development and acquisition
of new restaurants. Total capital expenditures, including those of OPD, for
the three months ended March 30, 1997 and the year ended December 29, 1996
were approximately $1.0 million and $1.3 million, respectively.

The Company has financed its restaurant development principally through
internally generated funds and, prior to the IPO, through short-term credit
facilities with its lenders. Cash provided by operating activities, including
those of OPD, in the three months ended March 30, 1997 and the year ended
December 29, 1996 was $1.6 million and $3.6 million, respectively.

21
<PAGE>

The Company received $19.2 million in net cash proceeds from its IPO in
October 1996. In 1996, the Company used approximately $2.0 million of the IPO
proceeds to fund final S corporation distributions to stockholders, $400,000
for the purchase of equipment and $3.5 million to retire indebtedness
outstanding at the IPO. The remaining net proceeds of approximately $13.3
million were invested in various short-term investments and are expected to be
used for the development and acquisition of restaurants and for general
corporate purposes. The Company's cash, cash equivalents and investments,
including those of OPD, as of March 30, 1997 were $16.6 million.

The Company estimates that its total capital expenditures for the remainder
of 1997 will be approximately $2.0 million and $3.5 million in 1998, primarily
for the opening of new restaurants. The Company may also acquire the
operations of other Papa John's franchisees if such operations become
available on terms satisfactory to the Company. The Company expects that funds
remaining from its IPO, the proceeds from this offering and cash flow from
operations will provide sufficient funds to finance its capital expenditures
and potential acquisitions through 1998. The Company has not sought and does
not have commitments for any credit facilities.

IMPACT OF INFLATION

The Company does not believe inflation has materially affected earnings
during the past three years. Substantial increases in costs, particularly
labor, employee benefits or food costs, could have a significant impact on the
Company.

22
<PAGE>

BUSINESS

GENERAL

The Company is the largest franchisee of "Papa John's" pizza delivery and
carry-out restaurants. At June 24, 1997, the Company owned and operated 58
Papa John's restaurants in the Birmingham, Alabama area; in the Norfolk,
Richmond and Virginia Beach, Virginia areas; in East Texas; and in the Akron,
Ohio area. The Company has entered into a development agreement with PJI to
develop Papa John's restaurants in the California Counties and has been
granted by PJI the rights to enter into development agreements for Papa John's
restaurants in the Vancouver, Canada area and Puerto Rico. On June 5, 1997,
the Company acquired eight Papa John's restaurants from OPD in the Akron, Ohio
area in a transaction that was accounted for as a pooling of interests. In
addition, the Company has an option, exercisable during 1998, to acquire the
operations and development rights for Papa John's restaurants in Utah from an
affiliate of the Company.

PAPA JOHN'S INTERNATIONAL, INC.

General. The Papa John's concept was initiated in 1985 with the opening of
the first Papa John's restaurant by PJI, a publicly-held company headquartered
in Louisville, Kentucky. At June 24, 1997, the Papa John's restaurant system
consisted of 1,320 restaurants in 39 states, including 360 restaurants
operated by PJI, 58 restaurants operated by the Company and 902 restaurants
operated by other franchisees. The key elements of the Papa John's concept
include a focused menu of high quality pizza and related items, an effective
commissary distribution and equipment supply system and an efficient in-store
operating design.

Menu. Papa John's restaurants offer a focused menu of high quality, value
priced pizza, breadsticks and cheesesticks. Papa John's original, medium thick
crust is made from fresh dough (never frozen) produced in PJI's regional
commissaries. Every pizza is prepared using real mozzarella cheese, pizza
sauce made from fresh-packed tomatoes (not concentrate), a proprietary mix of
savory spices and a choice of high quality meat and vegetable toppings in
generous portions. Fresh onions and green peppers are chopped daily at all
restaurants and are purchased from local produce suppliers. Each pizza is
complemented by the addition of a container of Papa John's special garlic
sauce (for dipping the crust) and two pepperoncinis. This focused menu and use
of quality ingredients enables Papa John's restaurants to concentrate on
consistently "Delivering the Perfect Pizza!"(TM). On October 1, 1996, PJI and
its franchisees began offering thin crust pizza in substantially all of their
markets. The Company is currently offering thin crust pizza in all of its
markets.

Purchasing and Distribution. PJI's commissary system supplies pizza dough
and other food and paper products twice weekly to each of its franchised
restaurants. PJI currently operates seven regional commissaries in Louisville,
Kentucky; Garner, North Carolina; Orlando, Florida; Jackson, Mississippi;
Denver, Colorado; Phoenix, Arizona; and Rotterdam, New York. PJI also operates
one distribution center in Dallas, Texas. PJI expects to open new commissaries
and distribution centers as PJI and its franchisees expand into new
territories. Specifically, PJI has begun construction of an additional
commissary in Des Moines, Iowa which is expected to be opened in the third
quarter of 1997. PJI's commissary system enables it to closely monitor and
control product quality and consistency, while lowering food and operating
costs for its franchisees. All Papa John's restaurants are required to
purchase a proprietary mix of savory spices and dough from PJI. Produce is
purchased locally by each franchisee to ensure freshness. Franchisees may
purchase other goods from approved suppliers or PJI, which has negotiated
purchasing agreements with most of its suppliers. The Company believes that
these agreements enable it to benefit from volume discounts which result in
prices the Company believes are below those which it could otherwise obtain.
In addition, all the equipment, counters and smallwares required to open a
Papa John's restaurant are available from PJI. PJI also provides layout and
design services and recommends subcontractors, signage installers and
telephone systems to its franchises. Although not required to do so, the
Company purchases substantially all of its food products, paper products and
restaurant equipment from PJI.

Restaurant Layout and Design. Papa John's restaurants are typically 1,200 to
1,500 square feet in size and are located in strip centers or free-standing
buildings which provide visibility, curb appeal and accessibility. The
exterior of a Papa John's restaurant is generally characterized by backlighted
awnings, neon window designs and

23
<PAGE>

other visible signage. The layout is designed to facilitate a smooth flow of
food orders through the restaurant. The layout includes specific areas for
order taking, pizza preparation and routing, resulting in simplified
operations, lower training and labor costs, increased efficiency and improved
consistency and quality of food products. The decor of a restaurant has a
vibrant red and white color scheme with green striping, and includes a bright
menu board, custom counters and a carry-out customer area. The counters are
designed to allow customers to watch the employees slap out the dough and put
sauce and toppings on pizzas. Although most Papa John's restaurants are
designed primarily for carry-out and delivery service, certain of the
Company's restaurants have seating areas which may accommodate up to 30
customers. PJI provides the Company assistance with restaurant design, site
selection and a complete equipment package for new restaurants. This
assistance provides the Company with a convenient, cost-effective means of
opening restaurants while ensuring a consistent restaurant appearance.

RESTAURANT LOCATIONS

The following table sets forth the location and number of Company
restaurants at June 24, 1997 (exclusive of three restaurants under
construction at such date).

<TABLE>
<CAPTION>
NUMBER OF
LOCATION RESTAURANTS
-------- -----------
<S> <C>
Birmingham, Alabama area...................................... 17
Norfolk, Richmond and Virginia Beach, Virginia areas.......... 28
East Texas.................................................... 5
Akron, Ohio area.............................................. 8
---
Total restaurants......................................... 58
===
</TABLE>

UNIT ECONOMICS

The Company believes the performance of its Papa John's restaurants has been
exceptional. The Company's average unit volumes have historically exceeded the
average of the Papa John's franchise system. During the 52 weeks ended March
30, 1997, the 41 restaurants that were open throughout the period generated
average sales of $732,000, average restaurant cash flow (operating income plus
depreciation) of $135,000 (or 18.4% of sales) and average restaurant operating
income after royalties of $114,000 (or 15.6% of sales). However, there can be
no assurance that such results can be maintained. The average cash investment,
including franchise fees, to open these 41 restaurants was approximately
$175,000, exclusive of land and pre-opening expenses. The Company expects that
its average cash investment for restaurants opened in 1997 will approximate
$210,000. The Company anticipates entering into Puerto Rico by the end of
1997, and new restaurant development in 1998 will be primarily in Puerto Rico
and California. The Company expects that occupancy costs and the cash
investment required to open restaurants in its new territories will be higher
than that experienced in its existing markets. The Company leases, rather than
owns, most of its properties and expects to continue to do so in the future.

EXPANSION AND SITE SELECTION

The Company's growth strategy will focus on further developing the Papa
John's concept through: (i) building out its existing markets; (ii) acquiring
and developing new territories; and (iii) strategically acquiring existing
Papa John's franchisee groups and territories, if available. The Company's
objective is to become the leading chain of pizza delivery restaurants in each
of its development markets. Through a market-by-market expansion strategy
focused on clustering restaurants, the Company seeks to increase consumer
awareness and take advantage of operational and advertising efficiencies.
During 1996, the Company opened eight restaurants. In 1997 through June 26,
the Company has opened four restaurants and acquired eight restaurants from
other Papa John's franchisees. The Company anticipates that it will open an
additional eight restaurants by the end of 1997 and twelve restaurants in
1998.

In addition to developing its existing territories, the Company has entered
into a development agreement with PJI to develop Papa John's restaurants in
the California Counties. Such agreement requires the Company to

24
<PAGE>

open three Papa John's restaurants in 1998, five additional restaurants per
year through 2004, and four restaurants in 2005. PJI has also granted the
Company the rights to enter into development agreements for Papa John's
restaurants in the Vancouver, Canada area and Puerto Rico. California, Canada
and Puerto Rico are new markets for Papa John's restaurants. In addition, the
Company has an option, exercisable during 1998, to acquire the operations and
development rights for Papa John's restaurants in Utah from an affiliated
party which currently owns and operates five restaurants. The development
rights with respect to the Utah territory provide for eight Papa John's
restaurants to be opened by December 31, 1997, with an additional six
restaurants to be opened in 1998, 1999 and 2000. There can be no assurance
that the Company will exercise the option for the Utah territory or that, if
exercised, such restaurants will be developed. PJI has waived its right of
first refusal with respect to the Company's possible acquisition of the Utah
territory.

The Company also has a right of first refusal, which expires on August 31,
2001, to acquire from an affiliated party the operations and development
rights for Papa John's restaurants in (i) Iowa, including the Moline and Rock
Island, Illinois areas (but excluding the Council Bluffs area of Iowa), in
which eight restaurants are currently open, and (ii) in the Baton Rouge,
Lafayette and Lake Charles, Louisiana areas, in which six restaurants are
currently open. The development rights with respect to such territories
provide that a total of 24 additional Papa John's restaurants will be opened
through 2002. There are no agreements, however, with respect to the Company's
acquisition of such territories, and there can be no assurance that such
territories will be acquired. PJI has waived its right of first refusal with
respect to the Company's possible acquisition of the Iowa and Louisiana
territories described above. In addition, certain officers, directors and
stockholders of the Company own interests in Papa John's franchisees that
operate in certain areas in Michigan, Ohio and South Carolina. PJI has waived
its right of first refusal with respect to the Company's possible acquisition
of such franchisees.

The Company devotes significant resources to the investigation and
evaluation of potential sites. The site selection process focuses on trade
area demographics, target population density, household income levels and
competitive factors. Management inspects each potential Company restaurant
location and the surrounding market before a site is approved. The Company's
restaurants are typically located in strip shopping centers or free-standing
buildings that provide visibility, curb appeal and accessibility. All site
selections must be approved by PJI. Papa John's restaurant design may be
configured to fit a wide variety of building shapes and sizes, thereby
increasing the number of suitable locations for Papa John's restaurants.

MARKETING PROGRAMS

The Company has restaurant-level marketing programs which target the
delivery area of each restaurant, making extensive use of distinctive print
materials in direct mail and store-to-door couponing. The Company tailors its
store-to-door coupons according to customer buying habits as tracked by the
Company's point of sale computer systems used in each restaurant. Local
marketing efforts also include a variety of community-oriented activities with
schools, sports teams and other organizations. The Company currently
supplements its local marketing efforts with a limited amount of radio and
television advertising. The Company believes that its marketing programs are
cost-effective and significantly increase Papa John's visibility among
potential customers. The Company's advertising expenditures as a percentage of
restaurant sales for the three month period ended March 30, 1997, were 6.2%.

The Company's restaurant-level marketing efforts are supported by print and
electronic advertising materials that are produced by the Papa John's
Marketing Fund, Inc. (the "Marketing Fund") for use by both PJI and its
franchisees. The required Marketing Fund contribution is established from time
to time by the governing board of the Marketing Fund and is currently 0.8% of
restaurant sales. The maximum required contribution for PJI franchisees is
1.5% of restaurant sales and can be increased above 1.5% only upon approval by
not less than 60% of Marketing Fund members. In addition, PJI may require the
Company to participate in an advertising cooperative for its designated market
area and to contribute a minimum amount of restaurant sales for local
advertising. PJI also provides each of its franchisees with catalogs for
uniforms and promotional items and pre-approved, print marketing materials
that can be ordered from PJI.

25
<PAGE>

RESTAURANT OPERATIONS

Management and Employees. A typical Company restaurant employs a restaurant
manager, two or three assistant managers and approximately 25 hourly
employees, most of whom work part-time. The restaurant manager is responsible
for the day-to-day operation of the restaurant and for the maintenance of
Company established operating standards. The Company seeks to hire experienced
restaurant managers and staff, and to motivate and retain them by providing
opportunities for advancement and performance-based financial incentives. In
addition, the Company has established the 1996 Stock Ownership Incentive Plan,
which will enable the Company to provide long-term equity-based incentives for
corporate and restaurant management personnel. See "Management--1996 Stock
Ownership Incentive Plan." The Company believes that it has a low managerial
turnover rate in comparison to the quick service restaurant industry and that
this low turnover rate results in decreased training costs and higher
productivity.

The Company employs 13 area supervisors, each of whom has responsibility for
overseeing four to six Company restaurants. The Company also employs regional
operations directors who oversee area supervisors and managers within their
respective markets.

Training. The Company has full-time training coordinators in its Alabama and
Virginia markets. In addition, PJI provides an on-site training team as
needed. Each regional area supervisor and restaurant manager is required to
complete PJI's two-week training program in which instruction is given on all
aspects of PJI's systems and operations. The program includes classroom
instruction and hands-on training at an operating Papa John's restaurant. In
addition, the Company has developed a specific education and safety program
for its delivery drivers.

Point-of-Sale System. Currently, all but four of the Company's existing
restaurants are equipped with the Papa John's PROFIT SystemSM. The Company
believes that this technology increases speed and accuracy in order taking and
pricing, reduces paper work and allows the restaurant manager to better
monitor and control food and labor costs. The point-of-sale system enhances
restaurant-level marketing capabilities through a database that provides
information on customers and their buying habits with respect to the Company's
products. The Company anticipates that in late 1997, polling capabilities will
allow the Company to obtain current restaurant reporting information, thereby
improving the speed, accuracy and efficiency of restaurant-level reporting.
Pursuant to its franchise agreements, the Company is required to equip the
four restaurants which do not have point-of-sale equipment with the Papa
John's PROFIT SystemSM by March 1998.

Reporting. Managers at restaurants prepare daily reports of sales, cash
deposits and operating costs. Physical inventories of all food and beverage
items are taken weekly. The Company's area supervisors prepare weekly profit
and loss statements for each of the restaurants. The Company believes that the
PROFIT SystemSM helps simplify and accelerate many of these reporting
functions.

Hours of Operation. The Company's restaurants are open seven days a week,
typically from 11:00 a.m. to 12:00 midnight Sunday through Thursday, and from
11:00 a.m. to 1:30 a.m. on Friday and Saturday.

DEVELOPMENT AND FRANCHISE AGREEMENTS

Development and Franchise Agreements. The Company has entered into
development agreements with PJI for the right to construct one or more Papa
John's restaurants pursuant to a development schedule within specified
geographic areas. The Company's existing territories consist of the
Birmingham, Alabama area; the Norfolk, Richmond and Virginia Beach, Virginia
areas; East Texas; and the Akron, Ohio area. The Company has entered into a
development agreement with PJI to develop Papa John's restaurants in the
California Counties. In addition, PJI has granted the Company the rights to
enter into development agreements for Papa John's restaurants in the
Vancouver, Canada area and Puerto Rico. See "Certain Transactions."

Generally, a franchise agreement is executed when the Company secures a
restaurant location. Each per restaurant development fee is typically credited
against PJI's franchise fee, which is payable to PJI upon signing the
franchise agreement for a specific location. The franchise fees payable with
respect to the Company's

26
<PAGE>

restaurants range between $10,000 and $18,500, depending upon the date of
execution of the development agreement. With respect to the California
Counties and the Vancouver and Puerto Rico territories, the Company expects to
pay PJI's standard franchise fee at the time the franchise agreement is
entered into, which is currently $20,000.

Under each of the Company's franchise agreements, the Company pays PJI a
royalty fee of 4% of sales, PJI's current standard royalty fee. Under such
agreements, PJI may increase the royalty fee to 5% of sales after the
agreement has been in effect for between three to five years. In no event may
the royalty fee be increased to an amount greater than the royalty fee
currently in effect for new PJI franchisees.

PJI's franchise agreements authorize the Company to use its trade names,
trademarks and service marks with respect to specific Papa John's restaurants.
PJI also provides general construction specifications, designs, color schemes,
signs, equipment, preparation methods for food and beverages, marketing
concepts, operations and financial control methods, management training,
technical assistance and materials. Each franchise agreement prohibits the
Company from transferring a franchise without the prior approval of PJI. PJI
has the contractual right to terminate a franchise agreement for a variety of
reasons, including a franchisee's failure to make payments when due or failure
to adhere to PJI's policies and standards. Many state franchise laws limit the
ability of a franchisor to terminate or refuse to renew a franchise. See "--
Government Regulation."

The development agreements, and each of the franchise agreements, prohibit
the Company, during the term of the agreements and for a two-year period
following their termination or expiration, from owning or operating any other
pizza delivery or take-out restaurant within ten to fifty miles of the
franchise granted or any other Papa John's franchise. In addition, the Company
and its senior executive officers have agreed through October 1999 not to
operate any restaurant concepts other than Papa John's without PJI's approval.
Also, the Company's directors (other than Messrs. Sherman, Schnatter and Hart)
have agreed not to be actively involved in the management of other restaurant
concepts during such period without PJI's consent.

Existing Territories. In order for the Company to maintain its development
rights under the agreements relating to the Birmingham, Alabama area; the
Norfolk, Richmond and Virginia Beach, Virginia areas; East Texas; and the
Akron, Ohio area, the Company is required to open five more stores during 1997
and 1998, respectively. Once the Company completes this development schedule,
it may open additional restaurants in these territories subject to PJI's
consent.

Franchise Restaurant Development. PJI assists the Company in selecting sites
and developing restaurants. PJI provides the Company with the physical
specifications for typical restaurants, both for free-standing restaurants and
restaurants located in strip shopping centers. The Company procures virtually
all of the design plans, counters and equipment for its restaurants from PJI
at prices the Company believes are favorable. The Company is responsible for
selecting the location for its restaurants but must obtain PJI's approval of
each restaurant design and each location based on accessibility and visibility
of the site and targeted demographic factors, including population, density,
income, age and traffic. The Company is responsible for all costs and expenses
incurred in locating, acquiring and developing restaurant sites.

Franchise Training and Support. Each regional operations director and area
supervisor must satisfactorily complete PJI's two-week training program and
must also devote his or her full business time and efforts to the operation of
the Company's restaurants. Each of the Company's restaurant managers report to
an area supervisor and are also required to complete PJI's two-week training
program. See "--Restaurant Operations--Training."

Franchise Operations. All Company restaurants are required to operate their
Papa John's restaurants in compliance with PJI's policies, standards and
specifications, including matters such as menu items, ingredients, materials,
supplies, services, fixtures, furnishings, decor and signs. The Company has
full discretion to determine the prices to be charged to its customers.

Reporting. PJI collects weekly and monthly sales and other operating
information from the Company. The Company has agreements with PJI permitting
PJI to electronically debit the Company's bank accounts for the

27
<PAGE>

payment of royalties, Marketing Fund contributions and purchases from PJI.
This system significantly reduces the resources needed to process payables. In
1995, PJI implemented a requirement that new and existing franchisees purchase
and install the PROFIT SystemSM in all of their restaurants.

COMPETITION

The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well-established
competitors with substantially greater financial and other resources than the
Company. Such competitors include a large number of national and regional
restaurant chains, as well as local pizza restaurant operators. Some of the
Company's competitors have been in existence for a substantially longer period
than the Company and may be better established in the markets where the
Company's restaurants are, or may be, located. Within the pizza segment of the
restaurant industry, the Company believes that its primary competitors are the
national pizza chains, including Pizza Hut, Domino's and Little Caesar's. A
change in the pricing, marketing or promotional strategies or product mix of
one or more of these competitors could have a material adverse impact on the
Company's sales and earnings. In general, there is also active competition for
management personnel and real estate sites suitable for Papa John's
restaurants.

The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, traffic
patterns and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
and the lack of experienced management and hourly employees may adversely
affect the restaurant industry in general and the Company's restaurants in
particular.

GOVERNMENT REGULATION

The Company is subject to various Federal, state and local laws affecting
its business. Each Papa John's restaurant is subject to licensing and
regulation by a number of governmental authorities, which include health,
safety, sanitation, building and fire agencies in the state or municipality in
which the restaurant is located. Difficulties in obtaining or failures to
obtain required licenses or approvals can delay or prevent the opening of a
new restaurant in a particular area. The Company is also subject to Federal
and state environmental regulations, but these have not had a material effect
on the Company's operations.

The Company's relationship with PJI is governed by the laws of several
states which regulate substantive aspects of the franchisor-franchisee
relationship. Substantive state laws that regulate the franchisor-franchisee
relationship presently exist or are being considered in a substantial number
of states and bills have been introduced in Congress (one of which is now
pending) which would provide for Federal regulation of substantive aspects of
the franchisor-franchisee relationship. These current and proposed franchise
relationship laws limit, among other things, the duration and scope of non-
competition provisions, the ability of a franchisor to terminate or refuse to
renew a franchise and the ability of a franchisor to designate sources of
supply.

The Company's restaurant operations are also subject to Federal and state
laws governing such matters as wages, working conditions, citizenship
requirements and overtime. Some states have set minimum wage requirements
higher than the Federal level, and the Federal government recently increased
the Federal minimum wage. In September 1997, the second phase of an increase
in the minimum wage will be implemented in accordance with the Federal Fair
Labor Standards Act of 1996. Significant numbers of hourly personnel at the
Company's restaurants are paid at rates related to the Federal minimum wage
and, accordingly, increases in the minimum wage will increase labor costs at
the Company's restaurants. Other governmental initiatives such as mandated
health insurance, if implemented, could adversely affect the Company as well
as the restaurant industry in general. The Company is also subject to the
Americans With Disabilities Act of 1990, which, among other things, may
require certain minor renovations to its restaurants to meet federally-
mandated requirements. The cost of these renovations is not expected to be
material to the Company.

28
<PAGE>

The Company has been granted by PJI the rights to enter into development
agreements for Papa John's restaurants in the Vancouver, Canada area and
Puerto Rico. The Company's ability to establish international operations is
subject to various risks, including changing political and economic
conditions, currency fluctuations, trade barriers, adverse tax consequences,
and government regulations relating to, among other things, the preparation
and sale of food, building and zoning requirements, wages, working conditions,
and the Company's relationship with its employees. There can be no assurance
that the Company will be successful in establishing its international
operations or that such risks will not have a material adverse effect on the
Company in the future.

TRADEMARKS

The Company's rights to use PJI's trademarks and service marks are
significant to the Company's business. PJI is the owner of the Federal
registration of the trademark "Papa John's." PJI has also registered "Pizza
Papa John's" and design as a trademark and a service mark. PJI owns Federal
registrations for the marks "Pizza Papa John's Delivering the Perfect Pizza!"
and design, "Call Your Papa," "Perfect Pizza Perfect Price," "Delivering the
Perfect Pizza!," "We Deliver Perfection," "The Official Pizza of Summer," and
"Pizza Papa John's Print Network." PJI has applied for the registration of
"Pizza Papa John's Better Ingredients, Better Pizza" and design, "Better
Ingredients, Better Pizza" and design, and miscellaneous design (Papa John's
logo). PJI is aware of the use by other persons in certain geographic areas of
names and marks which are the same as or similar to the Company's marks. It is
PJI's policy to pursue registration of its marks whenever possible and to
vigorously oppose any infringement of its marks.

PROPERTIES

All but one of the Company's restaurants are located in leased space. The
initial terms of most of the Company's leases are three to five years and
provide for one or more options to renew for at least one additional term. The
Company's leases generally specify a fixed annual rent with fixed increases,
or increases based on changes in the Consumer Price Index, at various
intervals during the lease term. Generally, the leases are net leases which
require the Company to pay all or a portion of the cost of insurance,
maintenance and utilities.

The Company leases approximately 7,000 square feet of corporate office space
collectively in Alabama, Virginia, Kentucky and Ohio.

EMPLOYEES

At March 30, 1997, the Company had approximately 1,500 employees of which
approximately 1,280 were restaurant employees, approximately 200 were
restaurant management and supervisory personnel and approximately 20 were
corporate personnel. Most restaurant employees are part-time and are paid on
an hourly basis. None of the Company's employees are currently represented by
a labor union, and the Company is not aware of any union organizing activity
among its employees. The Company believes that its relationship with its
employees is good.

LITIGATION

The Company is involved in lawsuits and claims arising in the normal course
of business. In the opinion of management of the Company, although the
outcomes of these lawsuits and claims are uncertain, in the aggregate they
will not have a material adverse effect on the Company's business, financial
condition or results of operations.

29
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND CERTAIN KEY EMPLOYEES

The following table sets forth certain information concerning each of the
Company's directors and executive officers and certain key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
Richard F. Sher- 53 Chairman of the Board
man(1)(2)(3)
Douglas S. Ste- 33 President, Chief Executive Officer and Director
phens(1)
D. Ross Davison 35 Vice President--Chief Financial Officer and Treasurer
James S. Riekel 37 Vice President--Operations
Robert W. Curtis 32 Senior Operations Director--Alabama
Stephen M. Saun- 28 Operations Director--Virginia
ders
James C. Bradshaw 29 Operations Director--East Texas
Stephen E. Reed 45 Operations Director--Ohio
J. David Walker 27 Controller
Michael M. 53 Vice Chairman of the Board
Fleishman(2)
Martin T. 61 Director
Hart(2)(3)
Frank O. Keen- 54 Director
er(3)
Stephen P. Lang- 43 Director
ford(2)
Charles W. 35 Director
Schnatter(3)
</TABLE>
- --------
(1) Member of the Executive Committee of which Mr. Sherman is Chairman.
(2) Member of the Compensation Committee of which Mr. Fleishman is Chairman.
(3) Member of the Audit Committee of which Mr. Hart is Chairman.

Richard F. Sherman has served as a director and Chairman of the Board of the
Company or certain predecessors since 1991. Mr. Sherman is a private investor
who has been a franchisee and a consultant to PJI since 1991. From 1993 to
present, Mr. Sherman has been a director of PJI. From 1987 to 1991, Mr.
Sherman was Chairman of the Board and President of Rally's Hamburgers, Inc.
From 1984 to 1987, Mr. Sherman was President and a director of Church's
Chicken, Inc. From 1971 to 1984, Mr. Sherman was Group Executive Vice
President and director of Hardee's Food Systems, Inc. and its parent, Imasco
USA, Inc. Mr. Sherman serves on the board of directors of Taco Cabana, Inc.,
Hartz Restaurants, Inc. and Reed's Jewelers, Inc.

Douglas S. Stephens has served as a director, President and Chief Executive
Officer of the Company or certain predecessors since 1991. From 1989 to 1991,
Mr. Stephens was the Vice President of Information Systems for the Kentucky
Lottery Corporation. From 1986 to 1989, Mr. Stephens was a systems consultant
for Andersen Consulting, a division of Arthur Andersen, LLP, an international
professional services firm.

D. Ross Davison has served as Vice President--Chief Financial Officer and
Treasurer of the Company since 1996. From 1985 to 1996, Mr. Davison was with
Arthur Andersen, LLP, an international professional services firm, and his
most recent position was Senior Manager. From 1983 to 1985, Mr. Davison was
with Cotton and Allen, P.S.C., a certified public accounting firm. Mr. Davison
is a licensed Certified Public Accountant.

James S. Riekel has served as Vice President--Operations of the Company and
a predecessor since 1992. From 1983 to 1992, Mr. Riekel was with Domino's
Pizza, Inc., where his most recent position was Regional Operations Director.

30
<PAGE>

Michael M. Fleishman has served as a director and Secretary of the Company
or certain predecessors since 1994. In June 1997 he became Vice Chairman of
the Board. Since 1970, Mr. Fleishman or his professional service corporation
has been a member of the law firm of Greenebaum Doll & McDonald PLLC, which
provides legal services to the Company. Mr. Fleishman served as a director of
Chi-Chi's, Inc. from 1983 to 1987. Mr. Fleishman also served as a director of
Rally's Hamburgers, Inc. from 1988 through April 1996.

Martin T. Hart has served as a director of the Company or certain
predecessors since 1992. Mr. Hart is a Denver-based private investor. Mr. Hart
has been a Trustee of MassMutual Corporate Investors and MassMutual
Participation Investors since 1991. Mr. Hart serves on the Board of Directors
of Schuler Homes, Inc., Optical Securities Group, Inc. and PNB Financial Group
(a bank holding company).

Frank O. Keener has served as a director of the Company or certain
predecessors since 1994. Since 1993, Mr. Keener has served as Executive Vice
President of First American National Bank, Nashville, Tennessee. From 1991 to
1993, Mr. Keener served as Senior Vice President of Dominion Banks. From 1989
to 1990, Mr. Keener was President and Chief Executive Officer of the Kentucky
Lottery Corporation.

Stephen P. Langford has served as a director of the Company or certain
predecessors since 1994. Mr. Langford has been involved in the television
industry since 1979 and has been the General Sales Manager of WAVE TV, an NBC
affiliate, from 1987 through January 1997. Mr. Langford currently serves on
the Executive Board of the Sales Advisory Council of the Television Bureau of
Advertising and as Chairman of the fifth district of the American Advertising
Federation.

Charles W. Schnatter has served as a director of the Company since August
1996. Mr. Schnatter has served as General Counsel and Secretary of PJI since
1991 and has been a director and a Senior Vice President of PJI since 1993.
From 1988 to 1991, Mr. Schnatter was an attorney with Greenebaum Doll &
McDonald PLLC. Mr. Schnatter has been a franchisee of PJI since 1989.

The Company's Certificate of Incorporation divides the Board of Directors
into three classes, with regular three year staggered terms and initial terms
of one, two and three years for each of Class I, Class II and Class III
directors, respectively. Accordingly, Messrs. Fleishman and Hart will hold
office until the annual meeting of stockholders to be held in 1998, Messrs.
Keener, Sherman and Stephens will hold office until the 1999 annual meeting
and Messrs. Langford and Mr. Schnatter will hold office until the 2000 annual
meeting.

CERTAIN KEY EMPLOYEES

Robert W. Curtis has served as Senior Operations Director--Alabama of the
Company or certain predecessors since January 1993. From May 1992 through
December 1992, Mr. Curtis was a franchise consultant for PJI. From 1984
through 1992, Mr. Curtis was employed by Domino's Pizza, Inc., where his most
recent position was area supervisor.

Stephen M. Saunders has served as Operations Director--Virginia of the
Company or certain predecessors since 1995. From 1993 to 1995, Mr. Saunders
was a supervisor and restaurant manager for certain predecessors of the
Company. From 1987 to 1993, Mr. Saunders was a restaurant manager at Domino's
Pizza, Inc.

James C. Bradshaw has served as Operations Director--East Texas of the
Company or a predecessor since September 1994. From 1986 to 1994, Mr. Bradshaw
was employed by Domino's Pizza, Inc., where his most recent position was area
supervisor.

Stephen E. Reed has served as Operations Director--Ohio of the Company or a
predecessor since March 1995. From 1993 through March 1995, Mr. Reed was a
franchise consultant for PJI. Prior to 1993, Mr. Reed was a franchisee of
Freshens Yogurt.

J. David Walker has served as Controller since October 1996. From 1992
through October 1996, Mr. Walker was with Ernst & Young LLP, where his most
recent position was Supervising Senior. Mr. Walker is a licensed Certified
Public Accountant.

31
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

Executive Committee. The members of the Executive Committee are Messrs.
Sherman and Stephens. To the extent permitted under the Delaware General
Corporation Law, the Board of Directors has delegated all of its powers to the
Executive Committee.

Compensation Committee. The members of the Compensation Committee are
Messrs. Sherman, Fleishman, Hart and Langford, all of whom are non-employee
directors. The Compensation Committee makes recommendations to the full Board
of Directors concerning compensation and benefits for executive officers of
the Company.

Audit Committee. The members of the Audit Committee are Messrs. Sherman,
Hart, Keener and Schnatter, all of whom are non-employee directors. The Audit
Committee, among other things, makes recommendations concerning the engagement
of independent auditors, reviews the results and scope of the annual audit and
other services provided by the Company's independent auditors and reviews the
adequacy of the Company's internal accounting controls.

COMPENSATION OF DIRECTORS

Directors are reimbursed for reasonable out-of-pocket expenses incurred in
attending Board and Committee meetings. Directors who are employees of the
Company do not receive additional compensation for services rendered as a
director.

Directors not employed by the Company are eligible to participate Non-
Employee Directors 1996 Stock Incentive Plan (the "Directors Plan"). The
Directors Plan provided for an initial grant of options to purchase shares of
Common Stock (the "Initial Grant Date"). Each non-employee director received
options to purchase 12,000 shares on the Initial Grant Date (the "Initial
Grants"). Each new non-employee director will be granted options to purchase
12,000 shares of Common Stock on the date of his or her election. The Company
will thereafter annually issue, beginning on the first anniversary of the
Initial Grant Date, to each of the Company's non-employee directors, options
to purchase 4,000 shares of Common Stock. Initial grants of options to
purchase Common Stock were at an exercise price equal to the IPO price of
$12.50 per share. Thereafter, all options will be granted at the fair market
value of the Common Stock on the date of grant. A total of 160,000 shares are
reserved for issuance under the Directors Plan. All options granted under the
Directors Plan will become exercisable in four equal annual installments,
beginning on the first anniversary of such option's date of grant.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the annual and long-
term compensation paid, earned or accrued by the Company's Chief Executive
Officer and its other executive officers for services rendered in all
capacities to the Company for the years indicated.

32
<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING STOCK
NAME AND PRINCIPAL OPTIONS
POSITION YEAR SALARY(1) BONUS (NO. OF SHARES)
- ------------------ ---- --------- ------- ----------------
<S> <C> <C> <C> <C>
Douglas S. Stephens 1996 $80,000 $47,250 62,500
President and Chief 1995 75,000 36,000
Executive Officer 1994 55,900 40,000
D. Ross Davison(2) 1996 37,500 7,500 27,500
Chief Financial Officer
and Treasurer
James S. Riekel(2) 1996 10,000 5,000 20,000
Vice President and Chief
Operating Officer
</TABLE>
- --------
(1) Perquisites and other personal benefits paid to each named executive
officer were less than 10% of the officer's annual salary and bonus.
(2) Represents partial-year compensation. Mr. Davison first became an
executive officer of the Company in July 1996. Mr. Riekel first became an
executive officer of the Company in October 1996.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information as to stock options granted to
the named executive officers during the 1996 fiscal year.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
NO. OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES EXERCISE EXPIRATION -------------------
NAME GRANTED(1) IN 1996 PRICE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas S. Stephens..... 62,500 23.5% $12.50 10/24/06 $491,324 $1,245,111
D. Ross Davison......... 27,500 10.3 12.50 10/24/06 216,183 547,849
James S. Riekel......... 20,000 7.5 12.50 10/24/06 157,224 398,436
</TABLE>
- --------
(1) All options were awarded under the 1996 Stock Ownership Incentive Plan,
have a term of ten years and vest immediately in the event of a change in
control of the Company. These options become exercisable in four equal
annual installments beginning October 24, 1997, the first anniversary of
the grant date; provided, however, the stock options shall vest in the
event of a change in control of the Company.
(2) These columns illustrate hypothetical appreciation in value of the stock
options and are not a forecast of future appreciation. The amounts shown
are pre-tax and assume the options will be held throughout the entire ten-
year term.

33
<PAGE>

AGGREGATE OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

Set forth below is information with respect to unexercised stock options
held by the named executive officers at the end of the Company's 1996 fiscal
year. None of the options held by named executive officers vested during 1996;
therefore there were no exercises.

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Douglas S. Stephens......... -- 62,500 -- $414,063
D. Ross Davison............. -- 27,500 -- 182,188
James S. Riekel............. -- 20,000 -- 132,500
</TABLE>
- --------
(1) Based on the difference between the option exercise price and the last
reported sale price of the Common Stock ($19.13) as reported on the Nasdaq
National Market on December 27, 1996, the last trading day of the
Company's 1996 fiscal year.

Ross Davison serves as Vice President, Chief Financial Officer and Treasurer
pursuant to a two-year Employment Agreement with the Company dated June 28,
1996 (the "Employment Agreement"). Under the terms of the Employment
Agreement, Mr. Davison is paid an annual salary of not less than $75,000, and
is guaranteed a bonus of at least $15,000 during the first twelve months of
employment. Pursuant to the Employment Agreement, Mr. Davison was granted
options to purchase 27,500 shares of the Company's Common Stock at an exercise
price of $12.50, equal to the IPO price. Mr. Davison's stock options shall
vest upon his death or disability.

EMPLOYEE AWARDS GRANTED

Pursuant to the Company's 1996 Stock Ownership Incentive Plan (the "1996
Plan"), certain executive officers of the Company received options upon
completion of the IPO. Mr. Stephens, Chief Executive Officer, President and
Director, was granted options to purchase 62,500 shares of Common Stock. Mr.
Davison, Vice President--Chief Financial Officer and Treasurer, received
options to purchase 27,500 shares of Common Stock. Mr. Riekel, Vice
President--Operations, received options to purchase 20,000 shares of Common
Stock. All options to purchase Common Stock under the 1996 Plan are granted at
an exercise price equal to the fair market value of the Common Stock on the
date the option is granted. The initial grants of options to purchase shares
of Common Stock were granted at an exercise price equal to the IPO price and
will become exercisable in four equal annual installments, beginning on the
first anniversary of the grant date.

1996 STOCK OWNERSHIP INCENTIVE PLAN

The 1996 Plan provides for the granting of any of the following awards
("Employee Awards") to eligible employees of the Company and its subsidiaries:
(i) stock options which do not constitute "incentive stock options" within the
meaning of section 422 of the Internal Revenue Code of 1986, as amended ("non-
qualified stock options"); (ii) incentive stock options; (iii) restricted
shares; and (iv) performance units. The 1996 Plan is intended to provide
incentives and rewards for employees to support the implementation of the
Company's business plan and to associate the interests of employees with those
of the Company's stockholders.

The 1996 Plan is administered by a committee composed of two or more
directors or the entire Board (the "Committee"). In administering the 1996
Plan, the Committee will determine, among other things: (i) individuals to
whom grants of Employee Awards will be made; (ii) the type and size of
Employee Awards; (iii) the terms of an Employee Award including, but not
limited to, a vesting schedule, exercise price, restriction or performance
criteria; and (iv) the length of any relevant performance, restriction or
option period. The Committee may also construe, interpret and correct defects,
omissions and inconsistencies in the 1996 Plan.

34
<PAGE>

The Common Stock subject to the 1996 Plan will be authorized but unissued
shares or previously acquired shares. The 1996 Plan provides that 600,000
shares of Common Stock will be available for grant of Employee Awards, and the
total number of shares of Common Stock with respect to which stock options may
be granted to any individual over the term of the 1996 Plan may not exceed 40%
of the total shares authorized for the 1996 Plan. The total number of shares
of Common Stock available for awards of restricted stock is 20% of the total
shares authorized under the 1996 Plan. Pursuant to the 1996 Plan, the number
and kind of shares to which Employee Awards are subject may be appropriately
adjusted in the event of certain changes in capitalization of the Company,
including stock dividends and splits, reclassification, recapitalization,
reorganizations, mergers, consolidations, spin-offs, split-ups, combinations
or exchange of shares and certain distributions and repurchases of shares.

Stock Options. The Committee may grant stock options to eligible individuals
in the form of an incentive stock option or a non-qualified stock option. The
exercise period for any stock option will be determined by the Committee at
the time of grant, but may not exceed ten years from the date of grant (five
years in the case of an incentive stock option granted to a "Ten-Percent
Stockholder" as defined in the 1996 Plan). The exercise price per share of
Common Stock covered by a stock option may not be less than 100% of the fair
market value of a share of Common Stock on the date of grant (110% in the case
of an incentive stock option granted to a Ten-Percent Stockholder). The
exercise price is payable, at the Committee's discretion, in cash, in shares
of already owned Common Stock, any combination of cash and shares, or such
other consideration as the Board of Directors deems reasonable. Stock options
will become exercisable in installments as determined by the Committee and as
set forth in the optionee's option agreement. Each option grant may be
exercised in whole, at any time, or in part, from time to time, after the
option becomes exercisable.

If a participant's employment terminates for any reason other than for
cause, unless the Committee in its sole discretion determines otherwise,
outstanding stock options, to the extent they are then exercisable, may be
exercised within 90 days after the date of termination (but in no event beyond
the stated term of the option); provided, however, Mr. Davison's options will
automatically vest in full and be exercisable at any time within one year
following the date of his death or disability (but in no event beyond the
stated term of his option). In the event of termination for cause, all
options, whether or not exercisable, will terminate.

Restricted Stock. Subject to the limitations of the 1996 Plan, the Committee
may grant restricted stock to eligible individuals. Restricted stock awards
are shares of Common Stock that are subject to restrictions on transfer or
other incidents of ownership where the restrictions lapse based solely on
continued employment with the Company for specified periods or based upon the
attainment of specified performance standards in either case, as the Committee
may determine. The Committee will determine all terms and conditions pursuant
to which restrictions upon restricted stock will lapse. At the discretion of
the Committee, certificates representing shares of restricted stock will be
deposited with the Company until the restriction period ends. Grantees of
restricted stock will have all the rights of a stockholder with respect to the
restricted stock and may receive dividends, unless the Committee determines
otherwise. Dividends may, at the discretion of the Committee, be deferred
until the restriction period ends and may bear interest if the Committee so
determines.

If a grantee's employment terminates by reason of death or disability prior
to the expiration of the restriction period applicable to any restricted
shares then held by the grantee, all restrictions pertaining to such shares
immediately lapse. Upon termination for any other reason, all restricted
shares are forfeited.

Performance Units. The Committee may grant performance units to eligible
individuals. Each performance unit will specify the performance goals, the
performance period and the number of performance units granted. The
performance period will be not less than one year, nor more than five years,
as determined by the Committee. Performance goals are those objectives
established by the Committee which may be expressed in terms of earnings per
share, price of the Common Stock, pre-tax profit, net earnings, return on
equity or assets, revenues or any combination of the above. Performance goals
may relate to the performance of the Company, a subsidiary, a division or
other operating unit of the Company. Performance goals may be established as a
range of goals if the Committee so desires.

35
<PAGE>

If the Committee determines that the performance goals have been met, the
grantee will be entitled to the appropriate payment with respect thereto. At
the option of the Committee, payment may be made solely in shares of Common
Stock, solely in cash, or a combination of cash and shares of Common Stock.

Change in Control. Generally, in the event of a "change in control" (as
defined in the 1996 Plan) of the Company, all outstanding stock options become
fully vested and immediately exercisable in their entirety. In addition, if
provided in an optionee's agreement, the optionee will be permitted to sell
the option to the Company generally for an amount equal to the excess of (x)
the fair market value over (y) the per share exercise price for such shares
under the stock option. In addition, all restrictions on restricted stock
lapse upon a change in control and outstanding performance units become fully
vested and payable in an amount equal to the greater of (i) the maximum amount
payable under the performance unit multiplied by a percentage equal to the
percentage that would have been earned assuming the rate at which the
performance goals have been achieved as of the date of the change in control
would have continued until the end of the performance cycle or (ii) the
maximum amount payable multiplied by the percentage of the performance cycle
completed at the time of the change in control.

Amendments and Termination. The Board may at any time terminate and, from
time to time, may amend or modify the 1996 Plan; provided, however, that no
amendment may impair the rights of a participant with respect to outstanding
Employee Awards without the participant's consent. Any such action of the
Board may be taken without the approval of the Company's stockholders, but
only to the extent that such stockholder approval is not required by
applicable law or regulation. The 1996 Plan will terminate in August 2006.

CERTAIN TRANSACTIONS

REORGANIZATION

Merger. The Company was formed to acquire the business and operations of the
Company's predecessors in the Reorganization, which occurred on October 30,
1996. Pursuant to an Agreement dated June 10, 1996, as amended July 10, 1996,
and related Plan of Merger, the stockholders of the Company's predecessors
received shares of Common Stock of the Company in the proportion determined by
the respective boards of directors of each of the Company's predecessors
through arm's length negotiations. The factors considered by each of the
Company's predecessors in determining the exchange ratio included revenues,
financial condition and results of operations, and past and projected earnings
for each predecessor. An aggregate of 3,000,000 shares of Common Stock were
issued to the stockholders of the Company's predecessors in the
Reorganization.

Indemnification Agreement. The Company's predecessors and each of their
stockholders entered into an Indemnification Agreement (the "Indemnification
Agreement") pursuant to which the stockholders of the Company's predecessors
made customary representations and warranties to the Company with respect to
the business, assets, financial condition and operations of the Company's
predecessors. In addition, the stockholders of the Company's predecessors
indemnified the Company for a period of 18 months from October 30, 1996,
against breaches of such representations and warranties as well as other
breaches of the Indemnification Agreement, or breaches of the June 10, 1996
Agreement (as amended July 10, 1996) or the Plan of Merger. The stockholders
of the Company's predecessors established an escrow account in support of such
indemnities, which is funded with an aggregate of $100,000 in cash and 300,000
shares of Common Stock received in the Reorganization. In general, the
Indemnification Agreement provides the sole remedy for claims brought in
connection with the Reorganization, and the aggregate amount of the claims is
limited to the cash and shares deposited in the escrow account.

Undistributed S Corporation Earnings. Following the closing of the IPO, the
Company made distributions to stockholders of the Company's predecessors,
which include certain officers, directors and 5% stockholders of the Company,
in the aggregate amount of approximately $2.0 million with respect to
Undistributed S Corporation Earnings. Such distributions were paid from a
portion of the net proceeds of the IPO.

36
<PAGE>

Stockholder Loans. From time to time prior to the Reorganization, Michael M.
Fleishman, Frank O. Keener, Stephen P. Langford, Richard F. Sherman, Douglas
S. Stephens, Jack A. Laughery, Martin T. Hart and Michael J. Grisanti, who
were all stockholders of certain of the Company's predecessors, and who are
officers, directors and/or 5% stockholders of the Company, have advanced funds
to the Company's predecessors. Such stockholder loans were repaid with a
portion of the proceeds of the IPO. On October 30, 1996, the Company's
predecessors repaid obligations to the following persons in the following
amounts: Messrs. Fleishman, $169,073; Grisanti, $188,250; Hart, $188,250;
Keener, $174,117; Langford, $166,352; Laughery, $188,250; Sherman, $355,297;
and Stephens, $137,047.

Registration Rights Agreement. The Company granted certain registration
rights to the stockholders of the Company's predecessors, who received shares
of Common Stock of the Company in connection with the Reorganization. The
Company also granted certain registration rights to PJI in connection with the
warrant issued to PJI to purchase 225,000 shares of Common Stock. See
"Description of Capital Stock--Registration Rights Agreements."

Guarantees. From time to time, certain of the Company's predecessors have
borrowed funds from banks. These borrowings, which were guaranteed by the
stockholders of certain of the Company's predecessors based on their
proportionate ownership in each predecessor, totaled $2.0 million at October
30, 1996. Such guarantees were released in connection with the repayment of
the outstanding loans with a portion of the proceeds from the IPO. The former
stockholders of certain of the Company's predecessors include the following
officers, directors and/or 5% stockholders of the Company: Messrs. Fleishman,
Grisanti, Hart, Keener, Langford, Laughery, Sherman and Stephens.

PJI Warrant. In connection with the Company's IPO, the Company issued a
warrant to PJI to purchase 225,000 shares of Common Stock at $11.25 per share.
The warrant was issued in consideration for, among other things, the rights to
enter into development agreements for the California Counties; the Vancouver,
Canada area; Puerto Rico; as well as the waiver of PJI's $3,000 per market
transfer fee with respect to the restaurants acquired in the Reorganization as
well as any other Papa John's restaurants acquired by the Company within
twelve months from the closing of the IPO. The Company expects to pay all
standard development and franchise fees in connection with opening restaurants
in these territories. The warrant will be exercisable in whole or in part at
any time within five years from the closing date of the IPO. In addition, the
warrant will be transferable subject to applicable securities laws
restrictions.

Consulting Fees. In connection with the Company's IPO, Messrs. Sherman, Hart
and Fleishman, and Jason T. Fleishman (Mr. Fleishman's son) and Judy H. Keener
(Mr. Keener's wife) received $78,750, $56,250, $51,500, $38,500 and $35,000,
respectively, for consulting services provided with respect to the
structuring, organization and implementation of the IPO. Such payments were
made from a portion of the proceeds of the IPO.

OTHER TRANSACTIONS AND AGREEMENTS

Utah Option Agreement. PJ Utah, LLC ("PJ Utah") holds the development and
franchise rights for Papa John's restaurants in Utah. The Company and PJ Utah
have entered into an option agreement granting the Company the option to
acquire for cash the operations and development rights for the franchised Papa
John's restaurants in Utah. The option is exercisable at any time during 1998.
The purchase price of the option is equal to the aggregate amount invested in
the Papa John's restaurants, operations (including operating losses, if any)
and related matters in Utah by PJ Utah, including interest paid to a third
party and/or its members on any loans, an imputed yield on all equity invested
in PJ Utah equal to the "prime rate," as published in The Wall Street Journal,
plus $10,000 for each store that is open at the time the option is exercised.
The option expires on December 31, 1998. The Company expects, but is not
obligated, to exercise such option in 1998. PJ Utah is owned by the following
officers, directors and/or 5% stockholders of the Company: Messrs. Davison
(2.0%), Fleishman (11.5%), Grisanti (7.75%), Hart (7.75%), Keener (16.75%),
Langford (9.25%), Laughery (10.25%), Riekel (2.0%), Sherman (19.5%) and
Stephens (9.25%).

37
<PAGE>

In connection with the option agreement, the Company provides operational
supervision and managerial services (e.g., payroll, accounting, tax, human
resources and other administrative services) to PJ Utah on a fee-for-service
basis. The cost to PJ Utah for such services is $20,000 per month. The
Company's predecessors began providing such services on August 1, 1996 and
expect to continue to provide such services through December 31, 1998. The
Company believes these fees are comparable to fees that would be charged by
unaffiliated third parties for comparable services.

Right of First Refusal; Management Services (Iowa markets). PJ Iowa, LC ("PJ
Iowa") holds the Papa John's development and franchise rights for Papa John's
restaurants in Iowa, including the Moline and Rock Island, Illinois areas, but
excluding the Council Bluffs area. The Company has obtained a right of first
refusal to acquire such franchise and development rights; however, there is no
agreement or understanding between the Company and PJ Iowa or its stockholders
for the Company to acquire such entity or any of its assets. PJ Iowa is owned
in part by the following officers, directors and/or 5% stockholders of the
Company: Messrs. Grisanti (18.0%), Hart (18.0%), Laughery (21.0%), Riekel
(2.5%) and Sherman (21.0%), The right of first refusal expires in August 2001.
The Company provides operational supervision, managerial and administrative
services to PJ Iowa at a cost of approximately $5,000 per month depending on
the services rendered.

Right of First Refusal; Management Services (Louisiana markets). PJ
Louisiana, Inc. ("PJ Louisiana") holds the Papa John's development and
franchise rights for Baton Rouge, Lafayette and Lake Charles, Louisiana and
the surrounding areas. The Company has obtained a right of first refusal to
acquire such franchise and development rights; however, there is no agreement
or understanding between the Company and PJ Louisiana or its stockholders for
the Company to acquire such entity or any of its assets. PJ Louisiana is owned
in part by Messrs. Curtis (2.375%), Fleishman (18.525%), Keener (18.525%),
Langford (18.525%), Sherman (18.525%), and Stephens (18.525%). The right of
first refusal expires in August 2001. The Company provides operational
supervision, managerial and administrative services to PJ Louisiana at a cost
of approximately $5,000 per month depending on the services rendered.

Other Transactions with PJI. All Papa John's restaurants are required to
purchase a proprietary mix of savory spices and dough from PJI. Franchisees
may purchase other goods from approved suppliers or PJI, which has negotiated
purchasing agreements with most of its suppliers. In addition, all the
equipment, counters and smallwares required to open a Papa John's restaurant
are available from PJI. PJI also provides layout and design services and
recommends subcontractors, signage installers and telephone systems to its
franchises. Although not required to do so, the Company's restaurants purchase
substantially all of its food products, paper products and restaurant
equipment from PJI.

The Company has entered into development agreements with PJI for the right
to construct one or more Papa John's restaurants pursuant to a development
schedule within specified geographic areas. The Company's existing territories
consist of the Birmingham, Alabama area; the Norfolk, Richmond and Virginia
Beach, Virginia areas; East Texas; and the Akron, Ohio area. The Company has
entered into a development agreement for the California Counties. In addition,
PJI has granted the Company the rights to enter into development agreements
for Papa John's restaurants in the Vancouver, Canada area and Puerto Rico.

The Company has entered into two development agreements with respect to its
Alabama territory. At the time of execution of the first Alabama development
agreement, the Company paid a one-time, non-refundable development fee of
$16,700 to PJI. Under the second Alabama development agreement and under the
development agreement for its Texas territory, the Company paid a non-
refundable fee of $3,500 for each of the restaurants covered by development
agreements. Under the Virginia development agreement, the Company paid a
development fee of $84,000. Under the California Counties development
agreement, the Company paid a development fee of $185,000. With respect to the
Company's Vancouver and Puerto Rico territories, the Company will be required
to pay a non-refundable development fee based on the number of restaurants to
be covered by the development agreements.

38
<PAGE>

Under each of the Company's franchise agreements, the Company pays PJI a
royalty fee of 4% of sales, which totaled $673,828 in 1996. Under such
agreements, PJI may increase the royalty fee to 5% of sales after the
agreement has been in effect for between three to five years. In no event may
the royalty fee be increased to an amount greater than the royalty fee
currently in effect for new PJI franchisees. The terms and conditions of the
Company's franchise agreements are the same as PJI's standard franchise
agreements with unaffiliated persons.

The franchise agreements executed under the first Alabama development
agreement and the Ohio development agreement provide for a term of five years.
These franchise agreements renew automatically for an additional five-year
term if the Company is in compliance with the franchise agreement and can
secure the premises for such term. Furthermore, the franchises granted
pursuant to this development agreement may be renewed for four additional
five-year terms, provided that the Company meets certain conditions,
including, but not limited to, agreeing to execute the form of PJI franchise
agreement then being offered to new franchisees. The franchise agreements
executed under the second Alabama development agreement and under the Virginia
and Texas development agreements provide for an initial term of ten years and
can be renewed for additional terms of five to ten years, subject to the same
conditions contained in the franchise agreements described above.

Waiver of Right of First Refusal by PJI and Transfer Fees of PJI. PJI waived
its right of first refusal with regard to the Company's acquisition of the
Iowa and Louisiana markets described above. PJI has also waived its right of
first refusal with respect to certain markets in Michigan, Ohio and South
Carolina, the franchise and development rights of which are also owned by
affiliated franchisees. If the Company does not exercise its right of first
refusal, PJI would still have such right. In addition, PJI waived its $3,000
per restaurant transfer fee with respect to the 44 restaurants acquired in the
Reorganization as well as any other Papa John's restaurants acquired by the
Company until November 1, 1997.

Acquisition of Eight Papa John's Restaurants in the Akron, Ohio Area. On
June 5, 1997, the Company acquired eight Papa John's restaurants from OPD in
the Akron, Ohio area in a transaction that has been accounted for as a pooling
of interests. The OPD stockholders received approximately 278,000 shares of
the Company's Common Stock with piggy-back registration rights for such
shares. The total value of the transaction was approximately $4.6 million
based on a market value of the Company's Common Stock of $16.50 per share. The
number of shares of Common Stock issued in the merger is subject to adjustment
based on the stockholders' equity of OPD as shown on the closing date balance
sheet. Any such adjustment is not expected to be material. The purchase price
was determined through arm's-length negotiations between Company officers and
principal shareholders of OPD. The factors considered in determining the
exchange ratio included the revenues, financial condition and results of
operations of OPD and the recent market prices of the Company's Common Stock.

Charles W. Schnatter, a director of the Company and Senior Vice President,
General Counsel and a director of Papa John's International, Inc., owned 5.0%
of OPD and received approximately 13,900 shares of the Company's Common Stock
in the merger, and his brother, John H. Schnatter, Chairman and Chief
Executive Officer of PJI, owned 12.5% of OPD and received approximately 34,750
shares of the Company's Common Stock in the merger.

39
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth at June 24, 1997 certain information with
respect to beneficial ownership of the Common Stock by: (i) each person known
by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock; (ii) each director and executive officer of the
Company; (iii) each Selling Stockholder; and (iv) all directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES
OWNED PRIOR TO BENEFICIALLY
THE OWNED AFTER THE
OFFERING(1) SHARES TO BE OFFERING(2)
----------------- SOLD IN -----------------
NAME AND ADDRESS NUMBER PERCENT OFFERING NUMBER PERCENT
---------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
D. Ross Davison............ -- * -- -- *
Michael M. Fleishman(3).... 312,930 6.2% 60,000 252,930 4.4%
Michael J. Grisanti(4)..... 218,713 4.3 22,650 196,063 3.4
Martin T. Hart(5).......... 218,711 4.3 30,000 188,711 3.3
Frank O. Keener(6)......... 459,603 9.1 90,000 369,603 6.4
Stephen P. Langford(7)..... 257,164 5.1 50,000 207,164 3.6
Jack A. Laughery(8)........ 285,080 5.7 20,000 265,080 4.6
Patricia J. O'Brien(9)..... 1,000 * 900 100 *
James S. Riekel(4)......... 60,294 1.2 5,000 55,294 1.0
Stephen M. Saunders(4)..... 24,118 * 2,500 21,618 *
Charles W.
Schnatter(10)(11)......... 18,904 * -- 18,904 *
John H. Schnatter(10)(11).. 34,761 * 6,950 27,811 *
Richard F. Sherman(12)..... 542,351 10.8 92,000 450,351 7.8
Douglas S. Stephens(4)..... 292,464 5.8 50,000 242,464 4.2
Roger P. Tennyson(9)(13)... 111,234 2.2 20,000 91,234 1.6
All executive officers and
directors as a group (nine
persons).................. 2,162,421 43.0% 450,000 1,785,421 30.9%
</TABLE>
- --------
*Less than one percent.
(1) In accordance with Securities and Exchange Commission rules, a person is
deemed to have beneficial ownership of any securities as to which such
person, directly or indirectly, has or shares voting power or investment
power and of any securities with respect to which such person has the
right to acquire such voting or investment power within 60 days. Except as
otherwise noted in the accompanying footnotes, the named persons have sole
voting and investment power.
(2) The Company has granted the Underwriters an over-allotment option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase an aggregate of 180,000 shares of Common Stock at the public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. If the Underwriters exercise the option in full,
the Company will sell an additional 180,000 shares, resulting in all
executive officers and directors as a group owning 1,785,421 shares
(29.9%) after the closing of the offering. See "Underwriting."
(3) Includes 20,000 shares held by Mr. Fleishman's wife, and 3,000 shares held
by Mr. Fleishman's wife as custodian for their minor child. The address
for Mr. Fleishman is 3300 National City Tower, Louisville, Kentucky 40202.
(4) The address for Messrs. Grisanti, Riekel, Saunders and Stephens is 9109
Parkway East, Birmingham, Alabama 35206.
(5) Includes an aggregate of 160,880 shares held by family members. The
address for Mr. Hart is 875 Race Street, Denver, Colorado 80206.
(6) The address for Mr. Keener is 300 Deaderick Street, Third Floor,
Nashville, Tennessee 37237.
(7) The address for Mr. Langford is 1115 Mount Auburn Road, Evansville,
Indiana 47720.
(8) The address for Mr. Laughery is 800 Tiffany Blvd., Suite 305, Rocky Mount,
North Carolina 27804.
(9) The address for Ms. O'Brien is 3300 National City Tower, Louisville,
Kentucky 40202.

40
<PAGE>

(10) Subject to final adjustment based on stockholders' equity of OPD on the
closing date balance sheet.
(11) The address for Messrs. Schnatter is 11492 Bluegrass Parkway, Suite 175,
Louisville, Kentucky 40299. Excludes 225,000 shares of Common Stock
beneficially owned by PJI pursuant to a presently exercisable warrant.
Charles W. Schnatter and John H. Schnatter each disclaims beneficial
ownership of the securities underlying such warrant.
(12) Includes 418,327 shares held by Mr. Sherman, as trustee of the Richard
Sherman Trust, and 72,352 shares held by his family members. The address
for Mr. Sherman and the Trust is 202 Schooner Lane, Duck Key, Florida
33050.
(13) The address for Mr. Tennyson is 8750 Staghorn Road, Indianapolis, Indiana
46260.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's Certificate of Incorporation provides that the authorized
capital stock of the Company consists of 20,000,000 shares of Common Stock,
par value $.01 per share, and 1,000,000 shares of Preferred Stock, par value
$1.00 per share. Upon completion of this offering, 5,783,084 shares of Common
Stock will be issued and outstanding (5,963,084 shares if the Underwriters'
over-allotment option is exercised in full), and no shares of Preferred Stock
will be issued or outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share owned of
record on all matters voted upon by stockholders. Subject to the requirements
(including preferential rights) of any Preferred Stock outstanding, holders of
Common Stock are entitled to receive dividends if, as and when declared by the
Board out of funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share equally and ratably in the assets of the Company, if any, remaining
after the payment of all liabilities of the Company and the liquidation
preferences of any outstanding Preferred Stock. Holders of the Common Stock
have no preemptive rights, no cumulative voting rights and no rights to
convert their Common Stock into any other securities, and there are no
redemption or sinking fund provisions with respect to the Common Stock.
National City Bank acts as the transfer agent and registrar for the Common
Stock.

PREFERRED STOCK

The Board has the authority to issue the authorized shares of Preferred
Stock in one or more series and to fix the designations, powers, preferences,
rights, qualifications, limitations and restrictions of all shares of each
such series, including, without limitation, dividend rates, conversion rights,
voting rights, redemption and sinking fund provisions, liquidation preferences
and the number of shares constituting each such series, without any further
vote or action by the stockholders. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to
holders of Common Stock or adversely affect the rights and powers, including
voting rights, of the holders of Common Stock. The issuance of Preferred Stock
also could have the effect of delaying, deterring or preventing a change in
control of the Company without further action by the stockholders.

CERTAIN CORPORATE GOVERNANCE MATTERS

The Company's Certificate of Incorporation and the By-laws provide that the
Board is divided into three classes. Two classes of directors consist of two
directors each and one class consists of three directors, with the term of
office of the first class to expire at the 1998 annual meeting of
stockholders, the term of office of the second class to expire at the 1999
annual meeting of stockholders, and the term of office of the third class,
elected at the 1997 annual meeting, to expire at the 2000 annual meeting of
stockholders. At each succeeding annual meeting of stockholders, directors
will be elected to a three-year term of office.

41
<PAGE>

The Company's Certificate of Incorporation and the By-laws provide that: (i)
the number of directors of the Company will be fixed by resolution of the
Board, but in no event will be less than three nor more than 15 directors;
(ii) the directors of the Company in office from time to time will fill any
vacancy or newly created directorship on the Board, with any new director to
serve in the class of directors to which he or she is so elected; (iii)
directors of the Company may be removed only for cause by the holders of at
least a majority of the Company's voting stock; (iv) stockholder action can be
taken only at an annual or special meeting of stockholders and not by written
consent in lieu of a meeting; and (v) except as described below, special
meetings of stockholders may be called only by the Chairman of the Board, the
President of the Company or by a majority of the total number of directors of
the Company, and the business permitted to be conducted at any such meeting is
limited to that stated in the notice of the special meeting. The By-laws also
require that stockholders desiring to bring any business before an annual
meeting of stockholders deliver written notice thereof to the Secretary of the
Company not fewer than 60 days nor more than 90 days in advance of the annual
meeting of stockholders; provided, however, if the date of the meeting is not
furnished to stockholders in a notice, or is not publicly disclosed by the
Company, more than 70 days prior to the meeting, notice by the stockholder, to
be timely, must be delivered to the President or Secretary of the Company not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made.

The By-laws also provide that stockholders desiring to nominate persons for
election as directors must make their nominations in writing to the President
of the Company not fewer than 60 days nor more than 90 days prior to the
scheduled date for the annual meeting; provided, however, if fewer than 70
days notice or prior public disclosure of the scheduled date for the annual
meeting is given or made, notice by the stockholders, to be timely, must be
delivered to the President or Secretary of the Company not later than the
close of business on the tenth day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made.

Under applicable provisions of the Delaware General Corporation Law, the
approval of a Delaware corporation's board of directors, in addition to
stockholder approval, is required to adopt any amendment to the corporation's
certificate of incorporation, but a corporation's by-laws may be amended
either by action of its stockholders or, if the corporation's certificate of
incorporation so provides, its board of directors. The Certificate of
Incorporation and By-laws provide that the provisions summarized above may not
be amended by the stockholders, nor may any provision inconsistent therewith
be adopted by the stockholders, without the affirmative vote of the holders of
at least 85% of the Company's voting stock, voting together as a single class.

The foregoing provisions of the Certificate of Incorporation and By-laws may
discourage or make more difficult the acquisition of control of the Company by
means of a tender offer, open market purchase, proxy contest or otherwise.
These provisions may have the effect of discouraging certain types of coercive
takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of the Company first to negotiate with the Company.
The Company's management believes that the foregoing measures provide benefits
to the Company and its stockholders by enhancing the Company's ability to
negotiate with the proponent of any unfriendly or unsolicited proposal to take
over or restructure the Company and that such benefits outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals could result in an improvement of their terms.

The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
the corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless:
(i) before such person became an interested stockholder, the board of
directors of the corporation approved either the transaction in which the
interested stockholder became an interested stockholder or the business
combination; (ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation

42
<PAGE>

outstanding at the time such transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or (iii) following the transaction in which such person
became an interested stockholder, the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the public announcement or notification (as required by Section 203)
of a transaction which is one of certain extraordinary transactions involving
the corporation, is with or by a person who either has not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors,
and is approved or not opposed by a majority of the board of directors then in
office.

REGISTRATION RIGHTS AGREEMENTS

The Company has granted certain registration rights to the stockholders of
the Company's predecessors and former stockholders of OPD who will hold after
the offering an aggregate of 2,513,084 shares of Common Stock of the Company,
and to PJI with respect to the 225,000 shares of Common Stock covered by the
warrant issued to PJI, for the registration of shares of Common Stock owned by
such stockholders in a registration statement filed by the Company under the
Securities Act of 1933. The Company will pay the fees and expenses of the
registrations, while such stockholders and PJI will pay all underwriting
discounts and commissions. These registration rights expire in October 2001
and are subject to certain conditions and limitations, including the right of
underwriters to limit the number of shares owned by such stockholders and PJI
included in such registration.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
5,783,084 shares of Common Stock (5,963,084 shares if the Underwriters' over-
allotment option is exercised in full). The 1,200,000 shares sold in this
offering (1,425,000 shares if the Underwriters' over-allotment option is
exercised in full), along with the 2,070,000 shares sold in the IPO, will be
freely tradable without restriction or further registration under the
Securities Act, unless held by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act. The remaining 2,513,084 shares
outstanding are "restricted securities" as that term is defined under Rule 144
and were issued by the Company in private transactions in reliance upon one or
more exemptions under the Securities Act. Such restricted securities may be
resold in a public distribution only if registered under the Securities Act
(which registration is contemplated with respect to all of such restricted
securities as described below) or pursuant to an exemption therefrom,
including Rule 144. The Company, its directors and certain stockholders of the
Company have agreed that they will not sell or otherwise dispose of any shares
of Common Stock, any options to purchase Common Stock or any securities
convertible or exchangeable for shares of Common Stock for a period of 120
days after the date of this Prospectus without the prior written consent of
Montgomery Securities, except for (i) up to 350,000 shares which may be issued
in connection with acquisitions and (ii) shares issued pursuant to the
exercise of options granted under the Directors Plan or the 1996 Plan.

In general, under Rule 144, a person (or persons whose shares are
aggregated), including an affiliate of the Company, who has beneficially owned
restricted securities for at least one year is entitled to sell within any
three month period a number of shares that does not exceed the greater of the
average weekly trading volume during the four calendar weeks preceding such
sale or 1% of the then outstanding shares of the Common Stock, provided
certain manner of sale and notice requirements and requirements as to the
availability of current public information about the Company are satisfied. In
addition, affiliates of the Company must comply with the restrictions and
requirements of Rule 144, other than the holding period, to sell shares of
Common Stock. A person who is deemed not to have been an "affiliate" of the
Company at any time during the 90 days preceding a sale by such person, and
who has beneficially owned such shares for at least two years, would be
entitled to sell such shares without regard to the volume limitations
described above.

43
<PAGE>

UNDERWRITING

The underwriters named below, represented by Montgomery Securities and Alex.
Brown & Sons Incorporated (the "Representatives"), have severally agreed,
subject to the terms and conditions contained in the underwriting agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholders and
the Underwriters, to purchase from the Company and the Selling Stockholders
the number of shares of Common Stock indicated below opposite their respective
names at the price less the underwriting discount set forth on the cover page
of this Prospectus. The Underwriting Agreement provides that the obligations
of the Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of such shares if they purchase
any.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Montgomery Securities........................................... 600,000
Alex. Brown & Sons Incorporated................................. 600,000
---------
Total....................................................... 1,200,000
=========
</TABLE>

The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose initially to offer the shares of Common Stock to
the public on the terms set forth on the cover page of this Prospectus. The
Underwriters may allow to selected dealers a concession of not more than
$ per share, and the Underwriters may allow to selected dealers, and such
dealers may reallow, a concession of not more than $ per share to certain
other dealers. After the offering, the public offering price and other selling
terms may be changed by the Representatives. The Common Stock is offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject an order in whole or in part.

The Company and the Selling Stockholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 180,000 additional shares of Common
Stock to cover over-allotments, if any, at the same price per share as the
initial 1,200,000 shares to be purchased by the Underwriters. To the extent
that the Underwriters exercise this option, the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares
in approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act of 1933, as amended, or will contribute to payments the
Underwriters may be required to make in respect thereof.

The stockholders of the Company's predecessors, the former stockholders of
OPD, the executive officers and directors of the Company and PJI have agreed
that, for a period of 120 days from the date of this Prospectus, they will not
offer, sell or otherwise dispose of any shares of their Common Stock or
options to acquire shares of Common Stock without the prior written consent of
Montgomery Securities. The Company has agreed not to sell any shares of Common
Stock for a period of 120 days from the date of this Prospectus without the
prior written consent of Montgomery Securities, except for (i) up to 350,000
shares which may be issued in connection with acquisitions and (ii) shares
issued pursuant to the exercise of options granted under the Directors Plan or
the 1996 Plan.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market. Such transactions may include stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. A stabilizing bid
means the placing of any bid or effecting any purchase for the purpose of
pegging, fixing or maintaining the price of the Common Stock. A syndicate
covering transaction means the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to reduce a short
position created in connection with the offering. A penalty bid means an
arrangement that permits the Underwriters to reclaim a selling concession from
a syndicate member in connection with the offering when shares of Common Stock
sold by the syndicate member are purchased in syndicate covering transactions.
Such transactions may be effected on the Nasdaq National Market, in the over-
the-counter market, or otherwise.

44
<PAGE>

In connection with this offering, the Underwriters may engage in passive
market making transactions in the Common Stock on the Nasdaq National Market
immediately prior to the commencement of sales in this offering, in accordance
with Rule 103 of Regulation M under the Exchange Act. Passive market making
consists of displaying bids on the Nasdaq National Market limited by the bid
prices of independent market makers and purchases limited by such prices and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market makers
average daily trading volume in the Common Stock during a specified prior
period and must be discontinued when such limit is reached. Passive market
making may stabilize the market price of the Common Stock at a level above
that which might otherwise prevail and, if commenced, may be discontinued at
any time.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Greenebaum Doll & McDonald PLLC, Louisville, Kentucky,
and for the Underwriters by Locke Purnell Rain Harrell (A Professional
Corporation), Dallas, Texas. Mr. Fleishman, whose professional service
corporation is a member of Greenebaum Doll & McDonald PLLC, is a director of
the Company and beneficially owns 312,930 shares of Common Stock of the
Company. A member of Greenebaum Doll & McDonald PLLC who participated in the
preparation of this prospectus beneficially owns 5,000 shares of the Common
Stock of the Company.

EXPERTS

The consolidated financial statements of the Company and its Subsidiary as
of December 31, 1995 and December 29, 1996, the financial statements of OPD as
of December 24, 1995 and December 29, 1996, and the supplemental consolidated
financial statements of PJ America, Inc. and Subsidiaries as of December 31,
1995 and December 29, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein,
and are included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed through the Electronic Data Gathering, Analysis and
Retrieval system with the SEC in Washington, D.C., a Registration Statement on
Form S-1 (the "Registration Statement," which includes all amendments,
exhibits and schedules thereto) pursuant to the Securities Act, and the rules
and regulations promulgated thereunder, with respect to this offering. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted from this Prospectus in accordance with the rules
and regulations of the SEC, and to which reference is hereby made.

The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith,
is required to file proxy statements, reports and other information with the
SEC. The Registration Statement, as well as any such report, proxy statement
and other information filed by the Company with the SEC, may be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the SEC: Northeast Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048; and Midwest Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such filings may also be obtained from the SEC
through the Internet at http://www.sec.gov.

Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC, reference is made to such exhibit or other
filing for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.

45
<PAGE>

The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent accounting firm. The Company
also intends to furnish such other reports as it may determine or as may be
required by law.

----------------

PJI IS NOT IN ANY WAY PARTICIPATING IN, APPROVING OR ENDORSING THIS OFFERING
OF SECURITIES, OR ANY REPRESENTATIONS MADE IN CONNECTION WITH THE OFFERING.
THE GRANT BY PJI OF ANY FRANCHISE OR OTHER RIGHTS TO THE COMPANY IS NOT
INTENDED AS, AND SHOULD NOT BE INTERPRETED AS, AN EXPRESS OR IMPLIED APPROVAL,
ENDORSEMENT OR ADOPTION OF ANY STATEMENT REGARDING ACTUAL OR PROJECTED
FINANCIAL OR OTHER PERFORMANCE WHICH MAY BE CONTAINED IN THE PROSPECTUS.
EXCEPT AS INDICATED IN THE PROSPECTUS, ALL INFORMATION CONTAINED IN THIS
PROSPECTUS HAS BEEN PREPARED BY, AND IS THE SOLE RESPONSIBILITY OF, THE
COMPANY.

ANY REVIEW BY PJI OF THE PROSPECTUS OR THE INFORMATION INCLUDED IN THE
REGISTRATION STATEMENT HAS BEEN CONDUCTED SOLELY FOR THE BENEFIT OF PJI TO
DETERMINE CONFORMANCE WITH PJI'S INTERNAL POLICIES, AND NOT TO BENEFIT OR
PROTECT ANY OTHER PERSON. NO INVESTOR SHOULD INTERPRET SUCH REVIEW BY PJI AND
DISPLAY OF ANY PJI LOGOS, TRADEMARKS OR SERVICE MARKS HEREIN AS AN APPROVAL,
ENDORSEMENT, ACCEPTANCE OR ADOPTION OF ANY REPRESENTATION, WARRANTY, STATEMENT
OR PROJECTION CONTAINED IN THE MATERIALS REVIEWED.

THE ENFORCEMENT OR WAIVER OF ANY OBLIGATION OF THE COMPANY UNDER ANY
AGREEMENT BETWEEN THE COMPANY OR ITS AFFILIATES AND PJI OR PJI'S AFFILIATES IS
A MATTER OF PJI OR PJI'S AFFILIATES SOLE DISCRETION. EXCEPT AS SET FORTH IN
THIS PROSPECTUS, NO INVESTOR SHOULD RELY ON ANY REPRESENTATION, ASSUMPTION OR
BELIEF THAT PJI OR PJI'S AFFILIATES WILL WAIVE ITS RIGHTS OR ENFORCE OR WAIVE
PARTICULAR OBLIGATIONS OF THE COMPANY UNDER SUCH AGREEMENTS.

46
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PJ AMERICA, INC. AND SUBSIDIARY
Report of Independent Auditors.......................................... F-2
Consolidated Balance Sheets as of December 31, 1995, December 29, 1996
and March 30, 1997 (Unaudited)......................................... F-3
Consolidated Statements of Income for the Years Ended December 25, 1994,
December 31, 1995, and December 29, 1996 and the Three Months Ended
March 29, 1996 and March 30, 1997 (Unaudited).......................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 25, 1994, December 31, 1995, and December 29, 1996 and the
Three Months Ended March 30, 1997 (Unaudited).......................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 25,
1994, December 31, 1995, and the Three Months Ended March 29, 1996 and
March 30, 1997 (Unaudited)............................................. F-6
Notes to Consolidated Financial Statements.............................. F-7
OHIO PIZZA DELIVERY CO.
Report of Independent Auditors.......................................... F-16
Balance Sheets as of December 24, 1995, December 29, 1996 and March 30,
1997 (Unaudited)....................................................... F-17
Statements of Income for the Years Ended December 24, 1995 and December
29, 1996 and the Three Months Ended March 29, 1996 and March 30, 1997
(Unaudited)............................................................ F-18
Statements of Stockholders' Equity for the Years Ended December 24,
1995, and December 29, 1996 and the Three Months Ended March 29, 1996
and March 30, 1997 (Unaudited)......................................... F-19
Statements of Cash Flows for the Years Ended December 24, 1995 and
December 29, 1996 and the Three Months Ended March 29, 1996 and March
30, 1997 (Unaudited)................................................... F-20
Notes to Financial Statements........................................... F-21
PJ AMERICA, INC. AND SUBSIDIARIES SUPPLEMENTAL CONSOLIDATED FINANCIAL
STATEMENTS
Report of Independent Auditors.......................................... F-24
Supplemental Consolidated Balance Sheets as of December 31, 1995,
December 29, 1996 and March 30, 1997 (Unaudited)....................... F-25
Supplemental Consolidated Statements of Income for the Years Ended
December 31, 1995 and December 29, 1996 and the Three Months Ended
March 29, 1996 and March 30, 1997 (Unaudited).......................... F-26
Supplemental Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1995 and December 29, 1996 and the Three
Months Ended March 30, 1997 (Unaudited)................................ F-27
Supplemental Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and December 29, 1996 and the Three Months Ended
March 29, 1996 and March 30, 1997 (Unaudited).......................... F-28
Notes to Supplemental Consolidated Financial Statements................. F-29
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
PJ America, Inc.

We have audited the accompanying consolidated balance sheets of PJ America,
Inc. and Subsidiary as of December 31, 1995 and December 29, 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for the years ended December 25, 1994, December 31, 1995 and December
29, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PJ America,
Inc. and Subsidiary, at December 31, 1995 and December 29, 1996, and the
consolidated results of their operations and their cash flows for the years
ended December 25, 1994, December 31, 1995 and December 29, 1996, in
conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Birmingham, Alabama
February 4, 1997

F-2
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER MARCH 30,
1995 29, 1996 1997
------------ ----------- -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $ 224,379 $ 3,660,843 $ 3,897,002
Accounts receivable..................... 24,010 20,624 39,131
Inventories............................. 58,288 189,078 224,149
Advances to related parties............. 132,725 119,773 97,150
Prepaid expenses and other.............. 5,183 186,294 115,329
Investments............................. -- 12,057,972 12,286,300
Deferred income taxes................... -- 104,203 104,203
---------- ----------- -----------
Total current assets.................. 444,585 16,338,787 16,763,264
Net property and equipment................ 1,820,828 5,244,050 5,957,937
Deferred franchise and development costs,
net of accumulated amortization of
$17,424 in 1995, $91,420 in 1996 and
$101,995 in 1997......................... 225,194 706,795 741,221
Other assets.............................. -- 83,689 85,389
---------- ----------- -----------
Total assets.......................... $2,490,607 $22,373,321 $23,547,811
========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable........................ $ 8,481 $ 153,376 $ 143,199
Accrued expenses........................ 343,656 1,571,225 2,028,178
Current maturities of bank debt......... 148,887 -- --
Notes payable to stockholders........... 742,846 -- --
---------- ----------- -----------
Total current liabilities............. 1,243,870 1,724,601 2,171,377
Note payable to bank, less current
maturities............................... 174,138 -- --
Deferred income taxes..................... -- 71,180 71,180
Stockholders' equity:
Preferred stock ($1.00 par value per
share; authorized 1,000,000 shares, no
shares issued and outstanding)......... -- -- --
Common stock ($.01 par value per share;
authorized 20,000,000 shares; issued
and outstanding shares of 1,109.5 in
1995 and 4,755,000 in 1996 and 1997)... 3,085 47,550 47,550
Additional paid-in capital.............. 446,260 20,031,411 20,031,411
Retained earnings....................... 623,254 498,579 1,226,293
---------- ----------- -----------
Total stockholders' equity............ 1,072,599 20,577,540 21,305,254
---------- ----------- -----------
Total liabilities and stockholders'
equity .............................. $2,490,607 $22,373,321 $23,547,811
========== =========== ===========
</TABLE>

(See accompanying notes)

F-3
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------------------- -----------------------
DECEMBER DECEMBER
DECEMBER 25, 31, 29, MARCH 29, MARCH 30,
1994 1995 1996 1996 1997
------------ ----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Restaurant sales........ $6,414,651 $10,456,893 $16,845,711 $2,997,341 $8,769,605
Restaurant operating
expenses:
Cost of sales......... 2,097,613 3,511,245 5,536,846 1,005,598 2,776,776
Salaries and benefits. 1,676,627 2,646,602 4,243,285 760,616 2,235,447
Other operating
expenses............. 1,481,175 2,392,575 3,922,091 677,287 2,058,681
Depreciation and
amortization......... 172,230 274,875 465,193 84,164 252,554
---------- ----------- ----------- ---------- ----------
5,427,645 8,825,297 14,167,415 2,527,665 7,323,458
---------- ----------- ----------- ---------- ----------
Restaurant operating
income................. 987,006 1,631,596 2,678,296 469,676 1,446,147
General and
administrative
expenses............... 433,222 557,143 1,016,291 180,788 464,522
---------- ----------- ----------- ---------- ----------
Operating income........ 553,784 1,074,453 1,662,005 288,888 981,625
Other (expense) income.. (21,921) (65,604) 7,795 (17,382) 155,428
---------- ----------- ----------- ---------- ----------
Income before income
taxes.................. 531,863 1,008,849 1,669,800 271,506 1,137,053
Income tax expense...... -- -- 228,340 -- 409,339
---------- ----------- ----------- ---------- ----------
Net income.............. $ 531,863 $ 1,008,849 $ 1,441,460 $ 271,506 $ 727,714
========== =========== =========== ========== ==========
Net income per share.... $ 0.15
==========
Weighted average shares
outstanding............ 4,881,687
==========
Pro forma income data
(unaudited) (Note 4)
Historical income before
income taxes........... $ 1,008,849 $ 1,669,800 $ 271,506
Pro forma income tax
expense................ 368,230 591,713 99,100
----------- ----------- ----------
Pro forma net income.... $ 640,619 $ 1,078,087 $ 172,406
=========== =========== ==========
Pro forma net income per
share.................. $ 0.36 $ 0.47 $ 0.10
=========== =========== ==========
Weighted average shares
outstanding............ 1,796,689 2,289,667 1,763,820
=========== =========== ==========
</TABLE>

(See accompanying notes)

F-4
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TOTAL
SHARES PAID-IN RETAINED STOCKHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS EQUITY
----------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 26,
1993................... 100 $28,500 $ 383,415 $ 23,438 $ 435,353
Net income............ -- -- -- 531,863 531,863
Reverse stock split... -- (27,500) 27,500 -- --
S corporation
distributions........ -- -- -- (8,662) (8,662)
Capital contributions:
Incorporation of
Textra Cheese...... 1 1,000 -- -- 1,000
Issue additional
shares to officer.. 8.5 85 35,345 -- 35,430
----------- ------- ----------- ----------- -----------
Balance, December 25,
1994................... 109.5 $ 2,085 $ 446,260 $ 546,639 $ 994,984
Net income............ -- -- -- 1,008,849 1,008,849
S corporation
distributions........ -- -- -- (932,234) (932,234)
Incorporation of Twice
the Cheese........... 1,000 1,000 -- -- 1,000
----------- ------- ----------- ----------- -----------
Balance, December 31,
1995................... 1,109.5 3,085 446,260 623,254 1,072,599
Net income............ -- -- -- 1,441,460 1,441,460
S Corporation
distributions........ -- -- -- (3,398,312) (3,398,312)
Stock splits and
changes in par value
and authorized
shares............... 1,768,890.5 14,615 (14,615) -- --
Issuance of common
stock (net of
issuance costs)...... 1,755,000 17,550 19,224,691 -- 19,242,241
Acquisition of
Virginia group....... 1,230,000 12,300 290,700 1,832,177 2,135,177
Issuance of warrant to
PJI.................. -- -- 84,375 -- 84,375
----------- ------- ----------- ----------- -----------
Balance, December 29,
1996................... 4,755,000 47,550 20,031,411 498,579 20,577,540
Unaudited:
Net income............ -- -- -- 727,714 727,714
----------- ------- ----------- ----------- -----------
Balance, March 30, 1997. 4,755,000 $47,550 $20,031,411 $ 1,226,293 $21,305,254
=========== ======= =========== =========== ===========
</TABLE>

(See accompanying notes)

F-5
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
-------------------------------------- -----------------------
DECEMBER 25, DECEMBER 31, DECEMBER 29, MARCH 29, MARCH 30,
1994 1995 1996 1996 1997
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.............. $ 531,863 $1,008,849 $ 1,441,460 $ 271,506 $ 727,714
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization......... 172,230 274,875 465,193 84,164 252,554
Deferred income taxes. -- -- (33,023) -- --
Changes in operating
assets and
liabilities:
Accounts receivable. (7,357) (9,869) 59,370 (8,429) (18,507)
Inventories......... (29,851) 57 (63,128) (16,287) (35,071)
Advances to related
parties............ -- (132,725) 28,693 (4,036) 22,623
Prepaid expenses and
other.............. 27,370 2,307 63,224 (31,260) 70,965
Accounts payable.... 1,143 5,353 (18,225) (8,481) (10,177)
Accrued expenses.... 99,312 113,866 843,335 41,088 54,534
Income taxes
payable............ -- -- -- -- 402,418
Other assets............ -- -- (5,737) 73,276 (1,700)
Deferred franchise and
development costs...... (75,771) (104,147) (90,000) (15,000) (45,000)
--------- ---------- ------------ --------- -----------
Net cash provided by
operating activities... 718,939 1,158,566 2,691,162 386,541 1,420,353
INVESTING ACTIVITIES:
Purchases of property
and equipment.......... (738,660) (797,513) (1,106,954) (71,167) (955,866)
Other................... (8,961) 596 -- -- --
Purchases of
investments............ -- -- (12,057,972) -- (228,328)
Purchase of Virginia
Group, net of cash
acquired............... -- -- 985,170 -- --
--------- ---------- ------------ --------- -----------
Net cash used in
investing activities... (747,621) (796,917) (12,179,756) (71,167) (1,184,194)
FINANCING ACTIVITIES:
Proceeds from bank
borrowings............. -- 450,000 1,000,000 -- --
Proceeds from issuance
of common stock........ -- -- 19,242,241 -- --
Payments on bank
borrowings............. -- (126,975) (2,423,025) (35,871) --
Issuance of (payments
on) stockholder notes.. 127,200 315,646 (1,495,846) (10,803) --
Distributions paid...... (8,662) (932,234) (3,398,312) (57,918) --
Capital contributions... 36,430 1,000 -- -- --
--------- ---------- ------------ --------- -----------
Net cash provided (used)
by financing
activities............. 154,968 (292,563) 12,925,058 (104,592) --
--------- ---------- ------------ --------- -----------
Net increase in cash and
cash equivalents....... 126,286 69,086 3,436,464 210,782 236,159
Cash and cash
equivalents at
beginning of period.... 29,007 155,293 224,379 224,379 3,660,843
--------- ---------- ------------ --------- -----------
Cash and cash
equivalents at end of
period................. $ 155,293 $ 224,379 $ 3,660,843 $ 435,161 $ 3,897,002
========= ========== ============ ========= ===========
</TABLE>

(See accompanying notes)

F-6
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS, AND REORGANIZATION

Basis of Presentation

The accompanying consolidated financial statements include the accounts of
PJ America, Inc. and its wholly-owned subsidiary, PJ Cheese, Inc. (the
"Company"). All significant inter-company transactions between the
consolidated companies have been eliminated. Prior to the Company's initial
public offering (the "Offering") and reorganization, the Company's financial
statements represented the combined financial position, results of operations
and cash flows of Extra Cheese, Inc. (Extra Cheese), Textra Cheese Corp.
(Textra) and Twice the Cheese, Inc. (Twice), collectively referred to herein
as the "Alabama Group." Those financial statements excluded the combined
financial position of PJVA, Inc. and PJV, Inc., collectively referred to as
the "Virginia Group" prior to their acquisition on October 30, 1996 (See Note
5).

The accompanying unaudited consolidated interim financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring accruals, considered necessary for
a fair presentation have been included. Operating results for the three months
ended March 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 28, 1997.

Extra Cheese, Textra, and Twice operated as S corporations through October
30, 1996, when their S corporation elections were terminated. As a result,
they were not subject to federal or state income tax before October 30, 1996.

Pro forma information for the years ended December 31, 1995 and December 29,
1996 have been presented as if the Company had been treated as a C corporation
rather than an S corporation, with an assumed effective income tax rate of
36.5%.

DESCRIPTION OF BUSINESS

The Company operates pizza delivery and carry-out restaurants under the
trademark "Papa John's" in Birmingham, Alabama and the surrounding area;
Norfolk, Richmond, and Virginia Beach, Virginia and surrounding areas; and in
East Texas. At December 29, 1996, the Company operated 46 restaurants. In
addition to the areas the Company currently has restaurants, the Company also
holds franchise and development rights for Ventura, Kern, San Luis Obispo and
Santa Barbara counties in California; Vancouver, Canada and the surrounding
area; and Puerto Rico.

REORGANIZATION

The Company was formed in August, 1996 to succeed to the businesses of five
Papa John's International, Inc. (PJI) franchisees. Extra Cheese entered into
an Agreement dated June 10, 1996, as amended on July 10, 1996, and a Plan of
Merger with Twice, Textra, PJVA, Inc. and PJV, Inc., pursuant to which all
such corporations agreed to be merged into PJ Cheese, Inc. (PJ Cheese), a
wholly-owned subsidiary of Extra Cheese, in exchange for shares of common
stock of Extra Cheese. On October 30, 1996, concurrent with the completion of
the Offering (i) all such corporations merged into PJ Cheese; (ii) Extra
Cheese contributed to PJ Cheese all of the assets of Extra Cheese relating to
its restaurants, with PJ Cheese assuming all of Extra Cheese's liabilities
relating thereto; and (iii) Extra Cheese merged into the Company with the
stockholders of Extra Cheese receiving an aggregate of 3,000,000 shares of
common stock of the Company (the "Reorganization"). Accordingly, the Company
is the parent of PJ Cheese, and PJ Cheese owns all of the Papa John's
restaurants which were owned by Extra Cheese, Textra, Twice, PJVA, Inc. and
PJV, Inc. (collectively, the "Predecessor Companies").

F-7
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Reorganization was an exchange of non-monetary assets by stockholders
and has been accounted for at historical cost.

2. SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Company's fiscal year ends on the last Sunday in December of each year.
The 1996 and 1994 fiscal years consisted of 52 weeks. The 1995 fiscal year
consisted of 53 weeks.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of
three months or less at date of purchase. These investments are carried at
cost, which approximates fair value.

Inventories

Inventories consist of food products, paper goods and supplies and are
stated at the lower of cost, determined under the first-in, first-out (FIFO)
method, or market. Virtually all of the Company's food products and supplies
are purchased from PJI.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets, which
range from three to seven years for restaurant and other equipment, and up to
20 years for buildings and improvements. Leasehold improvements are amortized
over the terms of the respective leases, including the first renewal period
(generally five to ten years). Normal repair and maintenance costs are
expensed as incurred.

Investments

The Company determines the appropriate classification of investment
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. All investment securities held by the Company have been
classified as held-to-maturity. Held-to-maturity investment securities are
stated at amortized cost with any amortization of premiums and accretion of
discounts included in interest income.

Development and Franchise Fees

Development fees paid by the Company to PJI for the right to open a certain
number of restaurants in a geographic area are deferred and amortized to
expense on a pro rata basis as each restaurant is opened. Franchise fees are
generally paid when each restaurant is opened and are deferred and amortized.
Deferred development and franchise fees are amortized over a 20 year period
using the straight-line method beginning with the opening of each restaurant.

Advertising and Related Costs

F-8
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are expensed as incurred and were approximately $347,000 in 1994, $583,000 in
1995 and $1 million in 1996, and are included in other operating expenses in
the consolidated statements of income.

Stock-Based Compensation

The Company follows the provisions of Accounting Principles Board Opinion
(APB) No. 25 for its stock-based compensation awards (see Note 13).

Income Taxes

On October 29, 1996, the Predecessor Companies terminated their status as S
corporations and the Company became subject to federal and state income taxes.
Concurrently, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," and accordingly, there was no
cumulative effect of adopting SFAS No. 109, and prior year financial
statements were not restated. In accordance with the provisions of SFAS No.
109, deferred income taxes reflect the temporary tax consequences on future
years of differences between the tax and financial statement basis of assets
and liabilities.

Pre-Opening Costs

Pre-opening costs, which represent certain expenses incurred before a
restaurant opens, are expensed as incurred.

Net Income Per Share

Net income per share information is not presented because such data is not
meaningful (See Notes 4 and 5).

Accounting Changes

Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of." The adoption of SFAS 121 had no impact on the Company.

3. INITIAL PUBLIC OFFERING

The Company completed the offering of its common stock on October 30, 1996,
pursuant to which the Company sold 1,755,000 shares of its common stock,
including 135,000 shares exercised to cover underwriter over-allotments, at an
initial public offering price of $12.50 per share. Net proceeds from the
Offering (after deducting the underwriting discount of $1.5 million and
expenses of $1.2 million) were $19.2 million. Such proceeds were partially
used to fully retire the outstanding balance owed to banks and shareholders,
pay S Corporation distributions, and for general corporate purposes.

4. PRO FORMA INFORMATION (UNAUDITED)

The Company terminated its status as an S corporation on October 29, 1996.
Pro forma income taxes have been presented to reflect a provision for federal,
state, and local income taxes at an assumed effective rate of 36.5% prior to
the Reorganization.

Pro forma net income per share is based on the weighted averaged number of
shares of common stock and common stock equivalents outstanding during the
period. The pro forma net income per share amounts were calculated assuming
that the number of shares of common stock in the Offering necessary to
generate sufficient proceeds to fund the payment of the Company's
undistributed S corporation earnings. A summary of the

F-9
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
components of the weighted average shares of common stock and equivalents
outstanding during the years ended December 31, 1995 and December 29, 1996 is
as follows:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Total number of common shares outstanding throughout the
period................................................. 1,770,000 1,770,000
Weighted average number of common shares issued in
connection with the Offering........................... -- 492,116
Shares issuable upon net exercise of outstanding stock
options................................................ -- 26,498
Adjustment to reflect shares issued to pay S corporation
distributions.......................................... 26,689 1,053
--------- ---------
Total weighted average shares and equivalents
outstanding............................................ 1,796,689 2,289,667
========= =========
</TABLE>

5. ACQUISITION OF VIRGINIA GROUP--PRO FORMA INFORMATION (UNAUDITED)

Concurrent with the Reorganization, the Company acquired PJVA, Inc. and PJV,
Inc. (See Note 1). The acquisition was accounted for at historical cost, with
the shareholders of PJVA, Inc. and PJV, Inc. receiving an aggregate of
1,230,000 shares of common stock of the Company.

The following represents the unaudited pro forma results of operations for
the years ended December 31, 1995 and December 29, 1996 as if the
Reorganization occurred at the beginning of the Company's fiscal year. Pro
forma net income reflects an assumed corporate income tax rate of 36.5% prior
to the Reorganization.

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Restaurant sales................................. $23,099,050 $30,264,352
Restaurant operating expenses:
Cost of sales.................................. 7,827,113 10,115,854
Salaries and benefits.......................... 5,794,983 7,460,499
Other operating expenses....................... 5,742,900 7,468,389
Depreciation and amortization.................. 656,632 905,178
----------- -----------
20,021,628 25,949,920
----------- -----------
Restaurant operating income...................... 3,077,422 4,314,432
General and administrative expenses.............. 1,042,714 1,633,812
----------- -----------
Operating income................................. 2,034,708 2,680,620
Other expense, net............................... 221,466 127,305
----------- -----------
Income before income taxes....................... 1,813,242 2,553,315
Pro forma income tax expense..................... 661,833 912,514
----------- -----------
Pro forma net income............................. $ 1,151,409 $ 1,640,801
=========== ===========
Pro forma net income per share................... $ 0.37 $ 0.48
=========== ===========
Weighted average shares outstanding.............. 3,111,828 3,429,896
=========== ===========
</TABLE>

The pro forma information is not indicative of the results of operations
that actually would have been obtained if the transactions had occurred at the
beginning of the Company's fiscal year. Additionally, the pro forma
information is not intended to be a projection of future results.

F-10
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. INVESTMENTS

A summary of the Company's held-to-maturity securities as of December 29,
1996 follows:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Government
securities............... $ 8,980,113 $ -- $(1,849) $ 8,978,264
Municipal bonds........... 3,077,859 2,686 (665) 3,079,880
----------- ------ ------- -----------
Total..................... $12,057,972 $2,686 $(2,514) $12,058,144
=========== ====== ======= ===========
</TABLE>

All investment securities have a contractual maturity of one year or less.

7. NET PROPERTY AND EQUIPMENT

Net property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Land........................................... $ 114,079 $ 114,079
Building and improvements...................... 567,794 1,235,075
Leasehold improvements......................... 267,266 2,247,597
Restaurant equipment........................... 1,163,859 3,676,972
Other.......................................... 246,138 31,465
---------- -----------
2,359,136 7,305,188
Less accumulated depreciation.................. (538,308) (2,061,138)
---------- -----------
Net property and equipment..................... $1,820,828 $ 5,244,050
========== ===========
</TABLE>

8. ACCRUED EXPENSES

Accrued expenses consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Salaries and wages.............................. $ 79,979 $ 376,492
Taxes, other than income........................ 93,585 260,503
Advertising and royalties....................... 55,593 179,915
Reserve for relocation.......................... -- 116,002
Accrued Offering expenses....................... -- 276,256
Other........................................... 114,499 362,057
-------- ----------
$343,656 $1,571,225
======== ==========
</TABLE>

F-11
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. NOTE PAYABLE TO BANK

Note payable to bank consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to bank............................ $ 323,025 $ --
Less current maturities of bank debt............ (148,887) --
--------- -----
$ 174,138 $ --
========= =====
</TABLE>

Note payable to bank with interest rates of 8.9% and 8.0% in 1995 and 1996,
respectively, were retired during 1996 with proceeds from the Offering. The
interest payments on the notes payable were approximately $36,000 and $7,000
in 1995 and 1996, respectively (none in 1994).

10. INCOME TAXES

Concurrent with the Reorganization on October 30, 1996, the Predecessor
Companies (See Note 1) terminated their status as S corporations. Accordingly,
the Company is now subject to federal and state income taxes. At the date of
termination of S corporation status, the Company recorded a net deferred tax
asset and corresponding credit to income tax expense for cumulative temporary
differences between the tax basis and the reported amounts of the Company's
assets and liabilities in the consolidated financial statements. These
differences consisted primarily of deferred expenses and accumulated
depreciation on property and equipment. At the date of termination of S
corporation status, the net differences equaled approximately $109,000,
resulting in a net deferred tax asset and corresponding credit to income tax
expense of approximately $40,000.

Additionally, in connection with the termination of the Predecessor
Companies' S corporation status, distributions were made to their stockholders
of approximately $2.0 million, representing substantially all undistributed S
corporation earnings (as determined for tax reporting purposes) at the time of
termination. Prior to the termination of the Company's S corporation status,
distributions paid to stockholders in 1996 were approximately $1.4 million.

A summary of income tax expense for 1996 is as follows:

<TABLE>
<S> <C>
Current
Federal....................................................... $241,340
State and local............................................... 20,023
Deferred (federal and state).................................... 6,934
Deferred tax credit resulting from change in tax status......... (39,957)
--------
Income tax expense.............................................. $228,340
========
</TABLE>

Net deferred tax assets are comprised of the following at December 29, 1996:

<TABLE>
<S> <C>
Deferred tax assets--miscellaneous reserves and accruals........ $104,203
Deferred tax liabilities--accelerated depreciation.............. 71,180
--------
Net deferred tax assets......................................... $ 33,023
========
</TABLE>

F-12
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The reconciliation of income tax computed at the U.S. federal statutory rate
to income tax expense for the year ended December 29, 1996 is as follows:

<TABLE>
<S> <C>
Income tax expense at U.S. federal statutory rate (attributable
to income before income taxes from operations for the period
October 30, 1996 through December 29, 1996)................... $264,408
State and local income taxes--net.............................. 13,187
Tax exempt interest income..................................... (9,978)
Deferred tax credit resulting from change in tax status........ (39,957)
Other.......................................................... 680
--------
Income tax expense............................................. $228,340
========
</TABLE>

Income tax payments amounted to $225,000 in 1996.

11. RELATED PARTY TRANSACTIONS

Franchisor

Under the terms of area development agreements between the Company and PJI,
the Company paid development fees ranging from $1,700 to $5,000 per
restaurant. Franchise fees ranging from $10,000 to $15,000 have been paid as
each new restaurant was opened. Royalties in the amount of 4% of restaurant
sales are paid monthly to PJI, and a monthly contribution of 0.50% to 0.75% of
sales is paid to the Marketing fund of PJI. The Company is required to buy
certain proprietary food products from PJI's commissary subsidiary and have
elected to buy substantially all other food products, supplies, marketing
materials and equipment from PJI or its subsidiaries.

The Company's franchise and development agreements with PJI contain certain
requirements regarding the number of units to be opened in the future. Should
the Company fail to comply with the required development schedule or with the
requirements of the agreements for restaurants within areas covered by the
development agreements, PJI has the right to terminate the exclusive nature of
the Company franchises. The franchise agreements also provide PJI with
significant rights regarding the business and operations of the Company.

In connection with the Company's Offering, the Company issued a warrant to
PJ USA (a subsidiary of PJI) to purchase 225,000 shares of common stock at
$11.25 per share. The warrant was issued in consideration for, among other
things, the rights to enter into development agreements for certain counties
in California; Vancouver, Canada and the surrounding area; and Puerto Rico.
The Company expects to pay all standard development and franchise fees in
connection with operating restaurants in these territories. The warrant is
exercisable in whole or in part at any time until October 30, 2001. The
portion of the warrant discount attributable to the granting of the various
development rights, approximately $84,000, has been capitalized into deferred
franchise and development costs.

Affiliate Markets

Certain officers and directors of the Company own equity interests in other
entities that franchise Papa John's restaurants. The Company also provides
management and operational supervision services to three related entities; PJ
Utah, LLC, PJ Louisiana, Inc., and PJ Iowa, LLC. Currently, the Company
receives monthly management fees of $20,000 from PJ Utah, $5,000 from PJ
Louisiana, and $5,000 from PJ Iowa. During 1996, the Company received $100,000
from PJ Utah, $20,000 from PJ Louisiana, and $10,000 from PJ Iowa. Management
fee income is netted against general and administrative expenses in the
consolidated statements of income.

F-13
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

PJ Utah, LLC holds the development and franchise rights for Papa John's
restaurants in Utah. The Company and PJ Utah, LLC have entered into an option
agreement granting the Company the option to acquire for cash the operations
and development rights for the franchised Papa John's restaurants in Utah. The
option is exercisable at any time during 1998, but expires December 31, 1998.
The purchase price of the option is equal to the aggregate amount invested in
the Papa John's restaurants, operations (including operating losses, if any)
and related matters in Utah by PJ Utah, LLC, including interest paid to a
third party and/or its members on any loans, an imputed yield on all equity
invested in PJ Utah, LLC equal to the "prime rate," as published in The Wall
Street Journal, plus $10,000 for each store that is open at the time the
option is exercised. The Company expects, but is not obligated, to exercise
such option in 1998.

The Company has obtained a right of first refusal to acquire franchise and
development rights for PJ Louisiana, Inc. and PJ Iowa, L.C. However, there is
no agreement or understanding between the Company and these entities or
stockholders to acquire such entities or their assets.

Stockholders

Notes payable to stockholders were due on demand and carried interest at
7.0%. The notes payable were fully paid at the closing of the Offering.
Interest expense related to these notes was approximately $34,000 in 1994,
$47,000 in 1995 and $39,000 in 1996. Interest payments were approximately
$18,000 in 1994, $4,000 in 1995 and $98,000 in 1996.

In connection with the Company's Offering, certain officers, directors and
former employees received approximately $250,000 for consulting services
provided to the Company with respect to the structuring, organization and
implementation of the Offering.

12. LEASES

The Company leases office and retail space under operating leases with terms
generally ranging from three to five years and providing for at least one
renewal. Certain leases further provide that the lease payments may be
increased annually based on the Consumer Price Index. Future minimum lease
payments are as follows:

<TABLE>
<S> <C>
1997................................... $ 512,160
1998................................... 459,385
1999................................... 307,210
2000................................... 214,505
2001................................... 101,046
Thereafter............................. 44,038
----------
$1,638,344
==========
</TABLE>

Rent expense was approximately $96,000 in 1994, $150,000 in 1995, and
$271,000 in 1996.

13. STOCK OPTIONS

In August, 1996, the Company adopted the 1996 Stock Ownership Incentive Plan
(the "1996 Plan") and a Non-Employee Directors 1996 Stock Incentive Plan (the
"Director's Plan"). The 1996 Plan reserves 600,000 shares of common stock for
future issuance, for either stock options, performance units, or restricted
stock (which is limited to 120,000 of the total 600,000 shares reserved). All
options granted pursuant to the 1996 Plan must have an exercise price equal to
at least 100% of the fair market value of the underlying shares on the date of
grant, and incentive stock options granted to any employee owning more than
10.0% of the combined voting power of all classes of stock must be granted at
an exercise price at least equal to 110 % of such fair market value. A
compensation committee established by the Board of Directors selects employees
to receive awards under the 1996 Plan and determines terms, conditions, and
limitations applicable to each award. On October 24,

F-14
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
1996, the Company granted 266,500 stock options under the 1996 Plan, which had
an exercise price of $12.50, the market price of the Company's stock on the
date of grant. Options granted to date under the 1996 Plan will become
exercisable in four equal annual installments, beginning on the first
anniversary of such option's date of grant.

The Director's Plan reserves 160,000 shares of common stock for future
issuance. Each non-employee director received options to purchase 12,000
shares on the initial grant date (the "Initial Grants"). Each new non-employee
director will be granted options to purchase 12,000 shares of common stock on
the date of his or her election. The Company will thereafter annually issue,
beginning on the first anniversary of the initial grant date, to each of the
Company's non-employee directors, options to purchase 4,000 shares of common
stock. Thereafter, all options will be granted at the fair market value of the
common stock on the date of grant. All options granted under the Director's
Plan will become exercisable in four equal annual installments, beginning on
the first anniversary of such option's date of grant. On October 24, 1996, the
Company granted 72,000 stock options under the Director's Plan, which had an
exercise price of $12.50, the market price of the Company's common stock at
the date of the grant.

The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for the 1996 Plan and the
Director's Plan (the "Plans"). Accordingly, no compensation cost has been
recognized for its Plans. Had compensation cost for the Company's plans been
determined based on the fair value at the grant date consistent with the
method prescribed in SFAS No. 123, Accounting for Stock-Based Compensation,
the Company's pro forma net income (as adjusted for pro forma income tax
expense-see Note 4) and earnings per share would have been reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
1996
----------
<C> <S> <C>
Pro forma net income As reported........................ $1,078,087
As adjusted for SFAS No. 123....... 1,021,782
Primary earnings per share As reported........................ $ 0.47
As adjusted for SFAS No. 123....... 0.45
</TABLE>

The weighted average fair value of the stock options granted during the year
was $5.63. The fair value of each stock option award is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: expected volatility of 49.1%, risk-free interest
rate of 6.0%, and an expected life of 4 years.

As of December 29, 1996, 333,500 and 88,000 shares were available for future
issuance under the 1996 Plan and Director's Plan, respectively.

F-15
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Ohio Pizza Delivery Co.

We have audited the accompanying balance sheets of Ohio Pizza Delivery Co.
as of December 24, 1995 and December 29, 1996, and the related statements of
income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ohio Pizza Delivery Co. at
December 24, 1995 and December 29, 1996, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Birmingham, Alabama
April 4, 1997

F-16
<PAGE>

OHIO PIZZA DELIVERY CO.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 24, DECEMBER 29, MARCH 30,
1995 1996 1997
------------ ------------ ----------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 282,363 $ 415,070 $ 431,262
Accounts receivable.................... 2,297 6,891 4,657
Inventories............................ 33,898 39,656 32,928
Prepaid expenses and other............. 18,309 34,673 34,166
---------- ---------- ----------
Total current assets................. 336,867 496,290 503,013
Net property and equipment............... 761,226 692,336 679,214
Deferred franchise and development costs,
net of accumulated amortization of
$2,072 in 1995, $4,733 in 1996 and
$7,096 in 1997.......................... 39,234 51,573 49,210
---------- ---------- ----------
Total assets......................... $1,137,327 $1,240,199 $1,231,437
========== ========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable....................... $ 160,877 $ 35,613 $ 29,551
Accrued expenses....................... 158,741 194,287 182,782
Notes payable.......................... 5,000 70,000 --
---------- ---------- ----------
Total current liabilities............ 324,618 299,900 212,333
Stockholders' equity:
Common stock (no par value per share;
authorized 750 shares; 100 issued and
outstanding).......................... -- -- --
Additional paid-in capital............. 100 100 100
Retained earnings...................... 812,609 940,199 1,019,004
---------- ---------- ----------
Total stockholders' equity........... 812,709 940,299 1,019,104
---------- ---------- ----------
Total liabilities and stockholders'
equity.............................. $1,137,327 $1,240,199 $1,231,437
========== ========== ==========
</TABLE>

(See accompanying notes)

F-17
<PAGE>

OHIO PIZZA DELIVERY CO., INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------- ----------------------
DECEMBER 24, DECEMBER 29, MARCH 29, MARCH 30,
1995 1996 1996 1997
------------ ------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Restaurant sales............ $6,287,083 $7,703,943 $1,917,531 $1,836,163
Restaurant operating
expenses:
Cost of sales............. 2,119,217 2,527,257 640,961 595,863
Salaries and benefits..... 1,511,188 1,869,013 465,488 480,195
Other operating expenses.. 1,426,652 1,911,002 444,294 421,398
Depreciation and
amortization............. 118,560 162,124 37,647 40,000
---------- ---------- ---------- ----------
5,175,617 6,469,396 1,588,390 1,537,456
---------- ---------- ---------- ----------
Restaurant operating income. 1,111,466 1,234,547 329,141 298,707
General and administrative
expenses................... 330,266 386,027 97,313 99,955
---------- ---------- ---------- ----------
Operating income............ 781,200 848,520 231,828 198,752
Other (expense) income...... (11,667) 2,785 -- --
---------- ---------- ---------- ----------
Income before income taxes.. 769,533 851,305 231,828 198,752
Income tax expense.......... 9,213 21,964 6,165 4,947
---------- ---------- ---------- ----------
Net income.................. $ 760,320 $ 829,341 $ 225,663 $ 193,805
========== ========== ========== ==========
Pro forma income data
(unaudited) (Note 1):
Historical income before
income taxes............... $ 769,533 $ 851,305 $ 231,828 $ 198,752
Pro forma income tax
expense.................... 315,509 349,035 95,050 81,488
---------- ---------- ---------- ----------
Pro forma net income........ $ 454,024 $ 502,270 $ 136,778 $ 117,264
========== ========== ========== ==========
</TABLE>

(See accompanying notes)

F-18
<PAGE>

OHIO PIZZA DELIVERY CO.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------- ADDITIONAL TOTAL
SHARES PAID-IN RETAINED STOCKHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 25, 1994.. 100 $-- $100 $ 473,540 $ 473,640
Net income................ -- -- -- 760,320 760,320
S corporation
distributions............ -- -- -- (421,251) (421,251)
--- ---- ---- ---------- ----------
Balance, December 24, 1995.. 100 -- 100 812,609 812,709
Net income................ -- -- -- 829,341 829,341
S corporation
distributions............ -- -- -- (701,751) (701,751)
--- ---- ---- ---------- ----------
Balance, December 29, 1996.. 100 -- 100 940,199 940,299
Unaudited:
Net income................ -- -- -- 193,805 193,805
S corporation
distributions............ -- -- -- (115,000) (115,000)
--- ---- ---- ---------- ----------
Balance, March 30, 1997..... 100 $-- $100 $1,019,004 $1,019,104
=== ==== ==== ========== ==========
</TABLE>

(See accompanying notes)

F-19
<PAGE>

OHIO PIZZA DELIVERY CO.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------- ----------------------
DECEMBER 24, DECEMBER 29, MARCH 29, MARCH 30,
1995 1996 1996 1997
------------ ------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................... $760,320 $829,341 $225,663 $193,805
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization.............. 118,560 162,124 37,647 40,000
Changes in operating assets
and liabilities:
Accounts receivable...... 4,154 (4,594) 379 2,234
Inventories.............. (5,776) (5,758) (5,507) 6,728
Prepaid expenses and
other................... (15,202) (16,364) (834) 507
Accounts payable......... 148,849 (125,264) (98,355) (6,062)
Accrued expenses......... (260,097) 35,546 (43,056) (11,505)
Deferred franchise and
development costs........... (14,900) (15,000) -- --
-------- -------- -------- --------
Net cash provided by
operating activities........ 735,908 860,031 115,937 225,707
INVESTING ACTIVITIES:
Purchases of property and
equipment................... (281,031) (173,058) (92,888) (24,515)
Writedown of property and
equipment................... -- 75,016 -- --
Other........................ 43,880 7,469 -- --
-------- -------- -------- --------
Net cash used in investing
activities.................. (237,151) (90,573) (92,888) (24,515)
FINANCING ACTIVITIES:
Proceeds from notes payable.. -- 65,000 120,000 (70,000)
Payments on stockholder
notes....................... (61,750) -- -- --
Distributions paid........... (421,251) (701,751) (45,000) (115,000)
-------- -------- -------- --------
Net cash provided (used) by
financing activities........ (483,001) (636,751) 75,000 (185,000)
-------- -------- -------- --------
Net increase in cash and cash
equivalents................. 15,756 132,707 98,049 16,192
Cash and cash equivalents at
beginning of period......... 266,607 282,363 282,363 415,070
-------- -------- -------- --------
Cash and cash equivalents at
end of period............... $282,363 $415,070 $380,412 $431,262
======== ======== ======== ========
</TABLE>

(See accompanying notes)

F-20
<PAGE>

OHIO PIZZA DELIVERY CO.

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

The accompanying statements include the accounts of Ohio Pizza Delivery Co.
(the "Company"). The Company was incorporated in 1991 and began operations in
January 1992. Two individuals and their family members own 80% of the
Company's outstanding common stock.

The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 28, 1997.

Pro forma information for the years ended December 24, 1995 and December 29,
1996 have been presented as if the Company had been treated as a C corporation
rather than an S corporation, with an adjustment to income tax expense to
reflect an assumed effective income tax rate of 41.0%.

Description of Business

The Company operates pizza delivery and carry-out restaurants under the
trademark "Papa John's" in Akron, Ohio, and the surrounding area. At December
29, 1996, the Company operated eight restaurants. The Company is a franchisee
of Papa John's International, Inc. ("PJI").

2. SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Company operates on a 52-53 week fiscal year. The 1996 fiscal year
consisted of 53 weeks and the 1995 fiscal year consisted of 52 weeks.

Use of Estimates

Inventories

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets, which
range from three to seven years for restaurant and other equipment. Leasehold
improvements are amortized over the terms of the respective leases, including
the first renewal period (generally five to ten years). Normal repair and
maintenance costs are expensed as incurred.

Development and Franchise Fees

F-21
<PAGE>

OHIO PIZZA DELIVERY CO.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
fees are generally paid when each restaurant is opened and are deferred and
amortized. Deferred development and franchise fees are amortized over a 20
year period using the straight-line method beginning with the opening of each
restaurant.

Advertising and Related Costs

Advertising and related costs include restaurant activities such as mail
coupons, doorhangers, promotional items, and required contributions to PJI's
production fund (0.50% to 0.75% of restaurant sales) and contributions
required by the franchisor to local market cooperative advertising funds (2%
of sales). Such amounts are expensed as incurred and were approximately
$397,000 in 1995, $516,000 in 1996, and are included in other operating
expenses in the statements of income.

Stock-Based Compensation

The Company follows the provisions of Accounting Principles Board Opinion
(APB) No. 25 for its stock-based compensation awards.

Income Taxes

From November 1991 (inception) through December 25, 1994, the Company was
taxable as a regular C corporation. Effective December 26, 1994, the Company
elected to be taxed under Subchapter S of the Internal Revenue Code. As a
result of the election, federal and state income taxes on the net income of
the Company are payable personally by the stockholders. The statements of
income include a provision for local income taxes for 1995 and 1996.

Pre-Opening Costs

Pre-opening costs, which represent certain expenses incurred before a
restaurant opens, are expensed as incurred.

Accounting Changes

Effective December 25, 1995, the Company adopted Financial Accounting
Standards Board Statement No. 121 (FAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption
of FAS 121 had no impact on the Company.

3. NET PROPERTY AND EQUIPMENT

Net property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 24, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Leasehold improvements.......................... $ 471,856 $ 522,407
Restaurant equipment............................ 555,299 550,986
---------- ----------
1,027,155 1,073,393
Less accumulated depreciation................... (265,929) (381,057)
---------- ----------
Net property and equipment...................... $ 761,226 $ 692,336
========== ==========
</TABLE>

4. ACCRUED EXPENSES

Accrued expenses consists of the following:

<TABLE>
<CAPTION>
DECEMBER 24, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Salaries and wages.............................. $ 60,368 $ 63,613
Advertising and royalties....................... 59,516 85,361
Other........................................... 38,857 45,313
-------- --------
$158,741 $194,287
======== ========
</TABLE>

F-22
<PAGE>

OHIO PIZZA DELIVERY CO.

NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
5. NOTE PAYABLE TO BANK

Note payable to bank consisted of a promissary note with interest rates of
9.0% and 8.75% in 1995 and 1996, respectively, and was retired in January
1997. The promissary note was secured by equipment and Company common stock.
The interest payments on the notes payable were approximately $2,700 and
$9,300 in 1995 and 1996, respectively.

6. RELATED PARTY TRANSACTIONS

Under the terms of area development agreements between the Company and PJI,
the Company paid development fees ranging from $350 to $3,500 per restaurant.
Franchise fees ranging from $1,150 to $15,000 have been paid as each new
restaurant was opened. Royalties in the amount of 4% of restaurant sales are
paid monthly to PJI, and a monthly contribution of 0.50% to 0.75% of sales is
paid to the Marketing fund of PJI. The Company is required to buy certain
proprietary food products from PJI's commissary subsidiary and have elected to
buy substantially all other food products, supplies, marketing materials and
equipment from PJI or its subsidiaries.

The Company's franchise and development agreements with PJI contain certain
requirements regarding the number of units to be opened in the future. The
Company has fulfilled its development agreement with PJI. The franchise
agreements also provide PJI with significant rights regarding the business and
operations of the Company.

7. LEASES

<TABLE>
<S> <C>
1997..................................... $169,064
1998..................................... 152,529
1999..................................... 136,528
2000..................................... 80,032
2001..................................... 39,321
Thereafter............................... 9,723
--------
$587,197
========
</TABLE>

Rent expense was approximately $110,000 in 1995, and $142,000 in 1996.

8. STOCK OPTION

In March, 1995, an employee who is the Operations Director was granted an
option to purchase 5 shares of the Company stock at an exercise price of
$16,500 per share. No compensation expense was recorded as the option was
issued at fair market value as determined by an independent appraisal. The
employee has not exercised the option to acquire Company stock.

9. SHAREHOLDERS AGREEMENT

In April 1992, the shareholders of the Company entered into an agreement
whereby among other things, the transfer or sale of the Company's common stock
was required to be first offered to the Company. Upon the death of a
shareholder, the Company was required to purchase the stock at fair market
value. As a result of this requirement, the Company obtained officers life
insurance for two of their shareholders, who owned 80% of the common stock.

F-23
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
PJ America, Inc.

We have audited the accompanying supplemental consolidated balance sheets of
PJ America, Inc. and Subsidiaries (formed as a result of the consolidation of
PJ America, Inc. and Subsidiary and Ohio Pizza Delivery Co.) as of December
31, 1995 and December 29, 1996, and the related supplemental consolidated
statements of income, stockholders' equity, and cash flows for the years ended
December 31, 1995 and December 29, 1996. These supplemental financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental financial
statements based on our audits.

In our opinion, the supplemental financial statements referred to above
present fairly, in all material respects, the supplemental consolidated
financial position of PJ America, Inc. and Subsidiaries, at December 31, 1995
and December 29, 1996, and the consolidated supplemental results of their
operations and their cash flows for the years ended December 31, 1995 and
December 29, 1996, after giving retroactive effect to the merger of Ohio Pizza
Delivery Co., as described in the notes to the supplemental consolidated
financial statements, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Birmingham, Alabama
June 17, 1997

F-24
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER MARCH 30,
1995 29, 1996 1997
------------ ----------- -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $ 506,742 $ 4,075,913 $ 4,328,264
Accounts receivable..................... 26,307 27,515 43,788
Inventories............................. 92,186 228,734 257,077
Advances to related parties............. 132,725 119,773 97,150
Prepaid expenses and other.............. 23,492 220,967 149,495
Investments............................. -- 12,057,972 12,286,300
Deferred income taxes................... -- 104,203 104,203
---------- ----------- -----------
Total current assets.................. 781,452 16,835,077 17,266,277
Net property and equipment................ 2,582,054 5,936,386 6,637,151
Deferred franchise and development costs,
net of accumulated amortization of
$19,496 in 1995, $96,153 in 1996 and
$109,091 in 1997......................... 264,428 758,368 790,431
Other assets.............................. -- 83,689 85,389
---------- ----------- -----------
Total assets.......................... $3,627,934 $23,613,520 $24,779,248
========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable........................ $ 169,358 $ 188,989 $ 172,750
Accrued expenses........................ 502,397 1,765,512 2,210,960
Current maturities of bank debt......... 153,887 70,000 --
Notes payable to stockholders........... 742,846 -- --
---------- ----------- -----------
Total current liabilities............. 1,568,488 2,024,501 2,383,710
Note payable to bank, less current
maturities............................... 174,138 -- --
Deferred income taxes..................... -- 71,180 71,180
Stockholders' equity:
Preferred stock ($1.00 par value per
share; authorized 1,000,000 shares, no
shares issued and outstanding)......... -- -- --
Common stock ($.01 par value per share;
authorized 20,000,000 shares; issued
and outstanding shares of 1,209.5 in
1995 and 5,033,084 in 1996 and 1997)... 3,085 50,331 50,331
Additional paid-in capital.............. 446,360 20,028,730 20,028,730
Retained earnings....................... 1,435,863 1,438,778 2,245,297
---------- ----------- -----------
Total stockholders' equity............ 1,885,308 21,517,839 22,324,358
---------- ----------- -----------
Total liabilities and stockholders'
equity............................... $3,627,934 $23,613,520 $24,779,248
========== =========== ===========
</TABLE>

(See accompanying notes)

F-25
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------ ------------------------
DECEMBER DECEMBER MARCH 29, MARCH 30,
31, 1995 29, 1996 1996 1997
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Restaurant sales............ $16,743,976 $24,549,654 $4,914,872 $10,605,768
Restaurant operating
expenses:
Cost of sales............. 5,630,462 8,064,103 1,646,559 3,372,639
Salaries and benefits..... 4,157,790 6,112,298 1,226,104 2,715,642
Other operating expenses.. 3,819,227 5,833,093 1,121,581 2,480,079
Depreciation and
amortization............. 393,435 627,317 121,811 292,554
----------- ----------- ---------- -----------
14,000,914 20,636,811 4,116,055 8,860,914
----------- ----------- ---------- -----------
Restaurant operating income. 2,743,062 3,912,843 798,817 1,744,854
General and administrative
expenses................... 887,409 1,402,318 278,101 564,477
----------- ----------- ---------- -----------
Operating income............ 1,855,653 2,510,525 520,716 1,180,377
Other (expense) income...... (77,271) 10,580 (17,382) 155,428
----------- ----------- ---------- -----------
Income before income taxes.. 1,778,382 2,521,105 503,334 1,335,805
Income tax expense.......... 9,213 250,304 6,165 414,286
----------- ----------- ---------- -----------
Net income.................. $ 1,769,169 $ 2,270,801 $ 497,169 $ 921,519
=========== =========== ========== ===========
Pro forma income data
(unaudited) (Note 5)
Historical income before
income taxes............... $ 1,778,382 $ 2,521,105 $ 503,334 $ 1,335,805
Pro forma income tax
expense.................... 683,739 940,748 194,149 490,827
----------- ----------- ---------- -----------
Pro forma net income........ $ 1,094,643 $ 1,580,357 $ 309,185 $ 844,978
=========== =========== ========== ===========
Pro forma net income per
share...................... $ 0.52 $ 0.61 $ 0.15 $ 0.16
=========== =========== ========== ===========
Weighted average shares
outstanding................ 2,120,044 2,609,765 2,087,175 5,191,371
=========== =========== ========== ===========
</TABLE>

(See accompanying notes)

F-26
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL TOTAL
SHARES PAID-IN RETAINED STOCKHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS EQUITY
----------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 25,
1994, as previously
stated................. 109.5 $ 2,085 $ 446,260 $ 546,639 $ 994,984
Merger with Ohio Pizza
Delivery............. 100 -- 100 473,540 473,640
----------- ------- ----------- ----------- -----------
Balance, December 25,
1994, as restated...... 209.5 2,085 446,360 1,020,179 1,468,624
Net income............ -- -- -- 1,769,169 1,769,169
S corporation
distributions........ -- -- -- (1,353,485) (1,353,485)
Incorporation of Twice
the Cheese........... 1,000 1,000 -- -- 1,000
----------- ------- ----------- ----------- -----------
Balance, December 31,
1995................... 1,209.5 3,085 446,360 1,435,863 1,885,308
Net income............ -- -- -- 2,270,801 2,270,801
S corporation
distributions........ -- -- -- (4,100,063) (4,100,063)
Stock splits and
changes in par value
and authorized
shares............... 1,768,890.5 14,615 (14,615) -- --
Change in par value
applicable to the
merger with Ohio
Pizza Delivery....... 277,984 2,781 (2,781) -- --
Issuance of common
stock
(net of issuance
costs)............... 1,755,000 17,550 19,224,691 -- 19,242,241
Acquisition of
Virginia group....... 1,230,000 12,300 290,700 1,832,177 2,135,177
Issuance of warrant to
PJI.................. -- -- 84,375 -- 84,375
----------- ------- ----------- ----------- -----------
Balance, December 29,
1996................... 5,033,084 50,331 20,028,730 1,438,778 21,517,839
Unaudited:
Net income............ -- -- -- 921,519 921,519
S corporation
distributions........ -- -- -- (115,000) (115,000)
----------- ------- ----------- ----------- -----------
Balance, March 30, 1997. 5,033,084 $50,331 $20,028,730 $2,245,297 $22,324,358
=========== ======= =========== =========== ===========
</TABLE>

(See accompanying notes)

F-27
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED THREE MONTHS ENDED
------------------------- -----------------------
DECEMBER 31, DECEMBER MARCH 29, MARCH 30,
1995 29, 1996 1996 1997
------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................. $ 1,769,169 $ 2,270,801 $497,169 $ 921,519
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization............ 393,435 627,317 121,811 292,554
Deferred income taxes.... -- (33,023) -- --
Changes in operating
assets and liabilities:
Accounts receivable.... (5,715) 54,776 (8,050) (16,273)
Inventories............ (5,719) (68,886) (21,794) (28,343)
Advances to related
parties............... (132,725) 28,693 (4,036) 22,623
Prepaid expenses and
other................. (12,895) 46,860 (32,094) 71,472
Accounts payable....... 154,202 (143,489) (106,836) (16,239)
Accrued expenses....... (146,231) 878,881 (1,968) 43,029
Income taxes payable... -- -- -- 402,418
Other assets............... -- (5,737) 73,276 (1,700)
Deferred franchise and
development costs......... (119,047) (105,000) (15,000) (45,000)
----------- ----------- -------- ----------
Net cash provided by
operating activities...... 1,894,474 3,551,193 502,478 1,646,060
INVESTING ACTIVITIES:
Purchases of property and
equipment................. (1,078,544) (1,280,012) (164,055) (980,381)
Purchases of investments... -- (12,057,972) -- (228,328)
Purchase of Virginia Group,
net of cash acquired...... -- 985,170 -- --
Other...................... 44,476 82,485 -- --
----------- ----------- -------- ----------
Net cash used in investing
activities................ (1,034,068) (12,270,329) (164,055) (1,208,709)
FINANCING ACTIVITIES:
Proceeds from bank
borrowings................ 450,000 1,065,000 120,000 --
Proceeds from issuance of
common stock.............. -- 19,242,241 -- --
Payments on bank
borrowings................ (126,975) (2,423,025) (35,871) (70,000)
Issuance of (payments on)
stockholder notes......... 253,896 (1,495,846) (10,803) --
Distributions paid......... (1,353,485) (4,100,063) (102,918) (115,000)
Capital contributions...... 1,000 -- -- --
----------- ----------- -------- ----------
Net cash provided (used) by
financing activities...... (775,564) 12,288,307 (29,592) (185,000)
----------- ----------- -------- ----------
Net increase in cash and
cash equivalents.......... 84,842 3,569,171 308,831 252,351
Cash and cash equivalents
at beginning of period.... 421,900 506,742 506,742 4,075,913
----------- ----------- -------- ----------
Cash and cash equivalents
at end of period.......... $ 506,742 $ 4,075,913 $815,573 $4,328,264
=========== =========== ======== ==========
</TABLE>

(See accompanying notes)

F-28
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

1.BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND REORGANIZATION

Basis of Presentation

The accompanying supplemental consolidated financial statements include the
accounts of PJ America, Inc. and its wholly-owned subsidiaries, PJ Cheese,
Inc. and Ohio Pizza Delivery Co. (the "Company"). All significant inter-
company transactions between the consolidated companies have been eliminated.
Prior to the Company's initial public offering (the "Offering") and
reorganization, the Company's financial statements represented the combined
financial position, results of operations and cash flows of Extra Cheese, Inc.
(Extra Cheese), Textra Cheese Corp. (Textra) and Twice the Cheese, Inc.
(Twice), collectively referred to herein as the "Alabama Group." Those
financial statements excluded the combined financial position of PJVA, Inc.
and PJV, Inc., collectively referred to as the "Virginia Group" prior to their
acquisition on October 30, 1996 (See Note 6). These supplemental consolidated
financial statements have been restated to give retroactive effect to the
merger with Ohio Pizza Delivery Co. (OPD), on June 5, 1997, in a transaction
accounted for as a pooling of interests as if the merger had occurred at the
beginning of fiscal 1995. (See Note 4). These supplemental consolidated
financial statements will become the historical financial statements of the
Company when financial results for the quarter ended June 29, 1997 are issued.

OPD operated as an S corporation from January 1, 1995 through June 5, 1997,
when its S corporation election was terminated. As a result, OPD was not
subject to federal or state income taxes before June 5, 1997. However, OPD was
subject to local income taxes.

Pro forma information for the years ended December 31, 1995 and December 29,
1996 have been presented as if the Alabama Group and OPD had been treated as C
corporations rather than S corporations, with assumed effective income tax
rates of 36.5% and 41%, respectively.

Results of operations for the year ended December 25, 1994 have not been
restated and have not been included herein. It is not practical to restate
such results since the financial statements of OPD were not required to be
audited under Rule 3-05 of Regulation S-X and because the Company does not
currently have complete access to all prior accounting records of OPD.

Description of Business

The Company operates pizza delivery and carry-out restaurants under the
trademark "Papa John's" in Birmingham, Alabama and the surrounding area;
Norfolk, Richmond, and Virginia Beach, Virginia and surrounding areas; East
Texas, and Akron, Ohio and the surrounding area. At December 29, 1996, the
Company operated 54 restaurants. In addition to the areas the Company
currently has restaurants, the Company also holds franchise and development
rights for Ventura, Kern, San Luis Obispo and Santa Barbara counties in
California; Vancouver, Canada and the surrounding area; and Puerto Rico.

Reorganization

F-29
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
in exchange for shares of common stock of Extra Cheese. On October 30, 1996,
concurrent with the completion of the Offering (i) all such corporations
merged into PJ Cheese; (ii) Extra Cheese contributed to PJ Cheese all of the
assets of Extra Cheese relating to its restaurants, with PJ Cheese assuming
all of Extra Cheese's liabilities relating thereto; and (iii) Extra Cheese
merged into the Company with the stockholders of Extra Cheese receiving an
aggregate of 3,000,000 shares of common stock of the Company (the
"Reorganization"). Accordingly, the Company is the parent of PJ Cheese, and PJ
Cheese owns all of the Papa John's restaurants which were owned by Extra
Cheese, Textra, Twice, PJVA, Inc. and PJV, Inc. (collectively, the
"Predecessor Companies").

The Reorganization was an exchange of non-monetary assets by stockholders
and has been accounted for at historical cost.

2. SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Company's fiscal year ends on the last Sunday in December of each year.
The 1996 fiscal year consisted of 52 weeks. The 1995 fiscal year consisted of
53 weeks.

Use of Estimates

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of
three months or less at date of purchase. These investments are carried at
cost, which approximates fair value.

Inventories

Inventories consist of food product, paper goods and supplies and are stated
at the lower of cost, determined under the first-in, first-out (FIFO) method,
or market. Virtually all of the Company's food products and supplies are
purchased from PJI.

Property and Equipment

Investments

Development and Franchise Fees

F-30
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
fees are generally paid when each restaurant is opened and are deferred and
amortized. Deferred development and franchise fees are amortized over a 20
year period using the straight-line method beginning with the opening of each
restaurant.

Advertising and Related Costs

Advertising and related costs include restaurant activities such as mail
coupons, doorhangers, promotional items, and required contributions to PJI's
production fund (0.50% to 0.75% of restaurant sales). Such amounts are
expensed as incurred and were approximately $980,000 in 1995 and $1.5 million
in 1996, and are included in other operating expenses in the consolidated
statements of income.

Stock-Based Compensation

The Company follows the provisions of Accounting Principles Board Opinion
(APB) No. 25 for its stock-based compensation awards (see Note 14).

Income Taxes

On October 29, 1996, the Predecessor Companies of PJ America, Inc.
terminated their status as S corporations and the Company became subject to
federal and state income taxes. Concurrently, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," and accordingly, there was no cumulative effect of adopting SFAS No.
109, and prior year financial statements were not restated. In accordance with
the provisions of SFAS No. 109, deferred income taxes reflect the temporary
tax consequences on future years of differences between the tax and financial
statement basis of assets and liabilities.

On June 5, 1997, OPD terminated its status as an S corporation and became
subject to federal and state income taxes. Temporary differences between the
tax and financial statement basis of assets and liabilities are immaterial.
The supplemental consolidated statements of income include a provision for
local income taxes for 1995 and 1996.

Pre-Opening Costs

Pre-opening costs, which represent certain expenses incurred before a
restaurant opens, are expensed as incurred.

Net Income Per Share

Net income per share information is not presented because such data is not
meaningful (See Notes 5 and 6).

Accounting Changes

3. INITIAL PUBLIC OFFERING

The Company completed the offering of its common stock on October 30, 1996,
pursuant to which the Company sold 1,755,000 shares of its common stock,
including 135,000 shares exercised to cover underwriter over-allotments, at an
initial public offering price of $12.50 per share. Net proceeds from the
Offering (after deducting the underwriting discount of $1.5 million and
expenses of $1.2 million) were $19.2 million. Such proceeds were partially
used to fully retire the outstanding balance owed to banks and shareholders,
pay S corporation distributions, and for general corporate purposes.

F-31
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. MERGER WITH OHIO PIZZA DELIVERY CO.

On June 5, 1997, a subsidiary of PJ America, Inc. merged with OPD based in
Akron, Ohio. Pursuant to the Agreement and Plan of Merger, dated as of May 30,
1997, PJAM Acquisition Subsidiary was merged into OPD, with OPD surviving the
merger as a wholly owned subsidiary of PJ America, Inc.

Pursuant to a fixed formula price, the OPD shareholders received
approximately 278,000 shares of the Company's common stock in exchange for
100% of the common stock of OPD. The total value of the transaction was
approximately $4.6 million, based upon the conversion value of $16.50 per
common share agreed upon on May 20, 1997. The number of shares of common stock
issued in the merger is subject to adjustment based upon the actual
stockholders' equity of OPD as shown on the closing balance sheet. Any such
adjustment is not expected to be material.

The transaction is intended to be treated for accounting purposes as a
"pooling of interests", and as such, the historical financial statements of PJ
America, Inc. for 1995 and 1996 have been restated to include the results of
operations of OPD.

5. PRO FORMA INFORMATION (UNAUDITED)

The Company terminated its status as an S corporation on October 29, 1996
(June 5, 1997 for OPD). Pro forma income taxes have been presented to reflect
a provision for federal, state, and local income taxes at an assumed effective
rate of 36.5% (41.0% for OPD).

Pro forma net income per share is based on the weighted averaged number of
shares of common stock and common stock equivalents outstanding during the
period. The pro forma net income per share amounts were calculated assuming
issuance of the number of shares of common stock in the Offering necessary to
generate sufficient proceeds to fund the payment of the Company's
undistributed S corporation earnings. A summary of the components of the
weighted average shares of common stock and equivalents outstanding during the
periods indicated is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 29, MARCH 30,
1995 1996 1996 1997
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Total number of common shares
outstanding throughout the
period......................... 2,048,084 2,048,084 2,048,084 5,033,084
Weighted average number of
common shares issued in
connection with the Offering... -- 492,116 -- --
Shares issuable upon net
exercise of outstanding stock
options........................ -- 26,498 -- 126,687
Adjustment to reflect shares
issued to pay S corporation
distributions.................. 71,960 43,067 39,091 31,600
--------- --------- --------- ---------
Total weighted average shares
and equivalents outstanding.... 2,120,044 2,609,765 2,087,175 5,191,371
========= ========= ========= =========
</TABLE>

6. ACQUISITION OF VIRGINIA GROUP--PRO FORMA INFORMATION (UNAUDITED)

F-32
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following represents the unaudited pro forma results of operations for
the years ended December 31, 1995 and December 29, 1996 as if the
Reorganization and OPD merger had occurred at the beginning of the Company's
fiscal year. Pro forma net income reflects an assumed corporate income tax
rate of 36.5% for the Company, and 41.0% for OPD.

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Restaurant sales................................. $29,386,133 $37,968,295
Restaurant operating expenses:
Cost of sales.................................. 9,946,330 12,643,111
Salaries and benefits.......................... 7,306,171 9,329,512
Other operating expenses....................... 7,169,552 9,379,391
Depreciation and amortization.................. 775,192 1,067,302
----------- -----------
25,197,245 32,419,316
----------- -----------
Restaurant operating income...................... 4,188,888 5,548,979
General and administrative expenses.............. 1,372,980 2,019,839
----------- -----------
Operating income................................. 2,815,908 3,529,140
Other expense, net............................... 233,133 124,520
----------- -----------
Income before income taxes....................... 2,582,775 3,404,620
Pro forma income tax expense..................... 977,342 1,261,549
----------- -----------
Pro forma net income............................. $ 1,605,433 2,143,071
=========== ===========
Pro forma net income per share................... $ 0.47 $ 0.57
=========== ===========
Weighted average shares outstanding.............. 3,435,183 3,749,994
=========== ===========
</TABLE>

7. INVESTMENTS

A summary of the Company's held-to-maturity securities as of December 29,
1996 follows:

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Government
securities............... $ 8,980,113 $ -- $(1,849) $ 8,978,264
Municipal bonds........... 3,077,859 2,686 (665) 3,079,880
----------- ------ ------- -----------
Total................... $12,057,972 $2,686 $(2,514) $12,058,144
=========== ====== ======= ===========
</TABLE>

All investment securities have a contractual maturity of one year or less.

F-33
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. NET PROPERTY AND EQUIPMENT

Net property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Land........................................... $ 114,079 $ 114,079
Building and improvements...................... 567,794 1,235,075
Leasehold improvements......................... 739,122 2,770,004
Restaurant equipment........................... 1,719,158 4,227,958
Other.......................................... 246,138 31,465
---------- -----------
3,386,291 8,378,581
Less accumulated depreciation.................. (804,237) (2,442,195)
---------- -----------
Net property and equipment..................... $2,582,054 $ 5,936,386
========== ===========
</TABLE>

9. ACCRUED EXPENSES

Accrued expenses consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Salaries and wages.............................. $140,347 $ 440,105
Taxes, other than income........................ 93,585 260,503
Advertising and royalties....................... 115,109 265,276
Reserve for relocation.......................... -- 116,002
Accrued Offering expenses....................... -- 276,256
Other........................................... 153,356 407,370
-------- ----------
$502,397 $1,765,512
======== ==========
</TABLE>

10.NOTES PAYABLE TO BANK

Notes payable to bank consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 1996
------------ ------------
<S> <C> <C>
Note payable to bank............................ $ 328,025 $ 70,000
Less current maturities of bank debt............ (153,887) (70,000)
--------- --------
$ 174,138 $ --
========= ========
</TABLE>

Notes payable to bank bears interest at rates between 8.9% and 9.0% in 1995
and 8.0% and 8.75% in 1996, respectively. PJ America, Inc. notes payable were
retired during 1996 with proceeds from the Offering. OPD's note was retired in
January, 1997. The interest payments on the notes payable were approximately
$39,000 and $16,000 in 1995 and 1996, respectively.

11. INCOME TAXES

F-34
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
reported amounts of the Company's assets and liabilities in the consolidated
financial statements. These differences consisted primarily of deferred
expenses and accumulated depreciation on property and equipment. At the date
of termination of S corporation status, the net differences equaled
approximately $109,000, resulting in a net deferred tax asset and
corresponding credit to income tax expense of approximately $40,000.

A summary of income tax expense is as follows:

<TABLE>
<CAPTION>
1995 1996
------ --------
<S> <C> <C>
Current
Federal................. $ -- $241,340
State and local......... 9,213 41,987
Deferred (federal and
state)................... -- 6,934
Deferred tax credit
resulting from change in
tax status............... -- (39,957)
------ --------
Income tax expense........ $9,213 $250,304
====== ========
</TABLE>

Concurrent with the acquisition of OPD (See Note 4), OPD terminated their
status as an S corporation on June 5, 1997. OPD was previously only subject to
local income taxes. The differences between OPD's tax basis and financial
reporting basis was immaterial.

Net deferred tax assets are comprised of the following at December 29, 1996:

The reconciliation of income tax computed at the U.S. federal statutory rate
to income tax expense for the year ended December 29, 1996 is as follows:

<TABLE>
<S> <C>
Income tax expense at U.S. federal statutory rate (attributable
to income before income taxes from operations for the period
while taxed October 30, 1996 through December 29, 1996) ...... $264,408
State and local income taxes--net.............................. 35,151
Tax exempt interest income..................................... (9,978)
Deferred tax credit resulting from change in tax status........ (39,957)
Other.......................................................... 680
--------
Income tax expense............................................. $250,304
========
</TABLE>

Income tax payments amounted to $245,000 and $10,000 in 1996 and 1995,
respectively.

12. RELATED PARTY TRANSACTIONS

Franchisor

Under the terms of area development agreements between the Company and PJI,
the Company paid development fees ranging from $350 to $5,000 per restaurant.
Franchise fees ranging from $1,150 to $15,000 have been paid as each new
restaurant was opened. Royalties in the amount of 4% of restaurant sales are
paid

F-35
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
monthly to PJI, and a monthly contribution of 0.50% to 0.75% of sales is paid
to the Marketing fund of PJI. The Company is required to buy certain
proprietary food products from PJI's commissary subsidiary and have elected to
buy substantially all other food products, supplies, marketing materials and
equipment from PJI or its subsidiaries.

Affiliate Markets

Stockholders

Notes payable to stockholders were due on demand and carried interest at
7.0%. The notes payable were fully paid at the closing of the Offering.
Interest expense related to these notes was approximately $47,000 in 1995 and
$39,000 in 1996. Interest payments were approximately $4,000 in 1995 and
$98,000 in 1996.

F-36
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Company's Offering, certain officers, directors and
former employees received approximately $250,000 for consulting services
provided to the Company with respect to the structuring, organization and
implementation of the Offering.

13. LEASES

<TABLE>
<S> <C>
1997................................... $ 681,224
1998................................... 611,914
1999................................... 443,738
2000................................... 294,537
2001................................... 140,367
Thereafter............................. 53,761
----------
$2,225,541
==========
</TABLE>

Rent expense was approximately $260,000 in 1995 and $413,000 in 1996.

14. STOCK OPTIONS

F-37
<PAGE>

PJ AMERICA, INC. AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
determined based on the fair value at the grant date consistent with the
method prescribed in SFAS No. 123, Accounting for Stock-Based Compensation,
the Company's pro forma net income and pro forma earnings per share (as
adjusted for pro forma income tax expense--see Note 4) would have been reduced
to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996
----------
<C> <S> <C>
Pro forma net income As reported........................ $1,580,357
As adjusted for SFAS No. 123....... 1,524,052
Primary earnings per share As reported........................ $ 0.61
As adjusted for SFAS No. 123....... 0.58
</TABLE>

The weighted average fair value of the stock options granted during 1996 was
$5.63. The fair value of each stock option award is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: expected volatility of 49.1%, risk-free interest
rate of 6.0%, and an expected life of 4 years.

As of December 29, 1996, 333,500 and 88,000 shares were available for future
issuance under the 1996 Plan and Director's Plan, respectively.

In March, 1995, an employee who is the Operations Director of OPD was
granted an option to purchase five shares of OPD at an exercise price of
$16,500 per share. No compensation expense was recorded as the option was
issued at fair market value as determined by an independent appraisal. The
employee has not exercised the option to acquire such stock.

15. SHAREHOLDERS AGREEMENT

In April 1992, the shareholders of OPD entered into an agreement whereby
among other things, the transfer or sale of the OPD's common stock was
required to be first offered to OPD. Upon the death of a shareholder, OPD was
required to purchase the stock at fair market value. As a result of this
requirement, OPD obtained officers life insurance for two of their
shareholders, who owned 80% of the common stock. This agreement and the life
insurance was terminated on June 5, 1997.

F-38
<PAGE>

[Papa John's employee on PJ AMERICA, INC. [Papa John's restaurant
the telephone] Pizza preparation area
with employees]

[Portion of "Pizza Papa [Large Papa John's pizza] [Portion of Logo]
John's" Logo]

[Preparation area with [Logo] [Person with pizza]
employees]

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson or other person has been authorized to give any infor-
mation or to make any representations other than those contained in this Pro-
spectus in connection with this offering and, if given or made, such informa-
tion or representation must not be relied upon as having been authorized by the
Company or the Selling Stockholders or any Underwriter. This Prospectus does
not constitute an offer to sell or solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is un-
lawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of the Company since such date.

-------------------

TABLE OF CONTENTS

-------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Recent Developments....................................................... 11
Prior S Corporation Status of the Company's Predecessors.................. 11
Use of Proceeds........................................................... 11
Dividend Policy........................................................... 12
Price Range of Common Stock............................................... 12
Capitalization............................................................ 12
Selected Consolidated Financial Data...................................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 23
Management................................................................ 30
Certain Transactions...................................................... 36
Principal and Selling Stockholders........................................ 40
Description of Capital Stock.............................................. 41
Shares Eligible for Future Sale........................................... 43
Underwriting.............................................................. 44
Legal Matters............................................................. 45
Experts................................................................... 45
Available Information..................................................... 45
Index to Financial Statements............................................. F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

1,200,000 SHARES

LOGO

PJ AMERICA, INC.

COMMON STOCK

----------------

PROSPECTUS

----------------

MONTGOMERY SECURITIES

ALEX. BROWN & SONS
incorporated

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated costs and expenses to be borne
by the Company in connection with the offering described in the Registration
Statement.

<TABLE>
<S> <C>
Registration Fee................................................ $ 7,110
Legal Fees and Expenses......................................... 100,000
Accounting Fees and Expenses.................................... 60,000
Printing and Engraving Expenses................................. 120,000
Blue Sky Registration Fees and Expenses......................... 3,000
Transfer Agent's Fees........................................... 10,000
NASD Filing Fee................................................. 2,846
Miscellaneous Expenses.......................................... 97,044
--------
Total....................................................... $400,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

A. Elimination of Certain Liability. Pursuant to Article IX of the
registrant's Certificate of Incorporation ("Article IX"), a director of the
registrant shall not be personally liable to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability: (i) for any breach of the director's duty of loyalty to
the registrant or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to permit further elimination or limitation of
the personal liability of directors, then the liability of a director of the
registrant shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended. Any
repeal or modification of Section A of Article IX shall not adversely affect
any right or protection of a director of the registrant existing at the time
of such repeal or modification.

B. Right to Indemnification. Subject to Section C of Article XI of the
registrant's Certificate of Incorporation, each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director
or officer of the registrant or is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding
is alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the registrant to the
fullest extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
registrant to provide broader indemnification rights than said law permitted
the registrant to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, excise taxes
under the Employee Retirement Income Security Act of 1974, as in effect from
time to time ("ERISA"), penalties and amounts to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith. The
registrant may, by action of its Board of Directors, provide indemnification
to other employees or agents of the registrant with the same scope and effect
as the indemnification of directors and officers pursuant to Article IX.

II-1
<PAGE>

C. Procedure for Indemnification. Any indemnification under Article IX
(unless ordered by a court) shall be made by the registrant only as authorized
in the specific case upon a determination that indemnification is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, as
the same exists or hereafter may be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the registrant to
provide broader indemnification rights then said law permitted the registrant
to provide prior to such amendment). Such determination shall be made: (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who are not parties to such action, suit or proceeding (the "Disinterested
Directors"); or (ii) if such a quorum of Disinterested Directors is not
obtainable, or, even if obtainable, a quorum of Disinterested Directors so
directs, by independent legal counsel and a written opinion; or (iii) by the
stockholders. The majority of Disinterested Directors may, as they deem
appropriate, elect to have the registrant indemnify any other employee, agent
or other person acting for or on behalf of the registrant.

D. Advances for Expenses. Costs, charges and expenses (including attorneys'
fees) incurred by a director or officer of the registrant, or such other
person acting on behalf of the registrant as determined in accordance with
Section C of Article IX, in defending a civil or criminal action, suit or
proceeding, shall be paid by the registrant in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer or other person to repay all amounts
so advanced in the event that it shall ultimately be determined that such
director, officer or other person is not entitled to be indemnified by the
registrant as authorized in Article IX or otherwise.

E. Right of Claimant to Bring Suit. If a claim under Sections B/2 or D/D of
Article IX is not paid in full by the registrant within 30 days after a
written claim has been received by the registrant, the claimant may at any
time thereafter bring suit against the registrant to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the registrant) that the claimant has not met the standard of
conduct which make it permissible under the General Corporation Law of the
State of Delaware for the registrant to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the registrant.
Neither the failure of the registrant (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because the claimant has met the applicable
standards of conduct set forth in the General Corporation Law of the State of
Delaware, nor an actual determination by the registrant (including its Board
of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not met the
applicable standard of conduct.

F. Other Rights; Continuation of Right to Indemnification. The
indemnification and advancement of expenses provided by Article IX shall not
be deemed exclusive of any other rights to which a claimant may be entitled
under any law (common or statutory) by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to any action in another capacity while holding office or
while employed by or acting as agent for the registrant, and shall inure to
the benefit of the estate, heirs, executors and administrators of such person.
All rights to indemnification under Article IX shall be deemed to be a
contract between the registrant and each director and officer of the
registrant who serves or served in such capacity at any time while Article IX
is in effect. Any repeal or modification of Article IX or any repeal or
modification of relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable law shall not in any way diminish
any rights to indemnification of such director, officer or the obligations of
the registrant arising hereunder with respect to any action, suit or
proceeding arising out of, or relating to, any actions, transactions or facts
occurring prior to the final adoption of such modification or repeal. For the
purposes of Article IX, references to "the registrant" include all constituent
corporations absorbed in a consolidation or merger as well as the resulting or
surviving corporation, so that any person who is or was a director or officer
of such a constituent corporation or is or was serving at the request of such
constituent

II-2
<PAGE>

corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article IX of the registrant's Articles
of Incorporation, with respect to the resulting or surviving corporation, as
such person would if such person had served the resulting or surviving
corporation in the same capacity.

G. Insurance. The registrant may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the registrant
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the registrant
would have the power to indemnify such person against such expense, liability
or loss under the General Corporation Law of the State of Delaware.

H. Severability. If any provision or provisions of Article IX shall be held
to be invalid, illegal or unenforceable for any reason whatsoever (1) the
validity, legality and enforceability of the remaining provisions of Article
IX (including, without limitation, each portion of any paragraph of Article IX
containing any such provision held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby and (2) to the fullest extent
possible, the provisions of Article IX of the registrant's Articles of
Incorporation (including, without limitation, each such portion of any
paragraph of Article IX containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On June 5, 1997, 278,084 shares of the Company were issued to the five
stockholders of Ohio Pizza Delivery Co. in connection with the acquisition of
eight Papa John's restaurants in the Akron, Ohio area. Such shares were not
registered under the Securities Act of 1933, as amended, pursuant to the
exemption afford by Section 4(2) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Index to and Description of Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (Commission File No. 333-11253) is hereby
incorporated by reference.
3.2 By-laws. Exhibit 3.2 to the Company's Registration Statement on Form S-1
(Commission File No. 333-11253) is hereby incorporated by reference.
</TABLE>

<TABLE>
<S> <C>
4 Specimen Common Stock Certificate. Exhibit 4 to the Company's Registration
Statement on Form S-1 (Commission File No. 333-11253) is hereby
incorporated by reference.
5* Opinion of Greenebaum Doll & McDonald PLLC as to the legality of the
securities being registered.
10.1 Form of Registration Rights Agreement. Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (Commission File No. 333-11253) is
hereby incorporated by reference.
10.2 Form of 1996 Stock Ownership Incentive Plan. Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (Commission File No. 333-11253) is
hereby incorporated by reference.
10.3 Form of Non-Employee Directors 1996 Stock Incentive Plan. Exhibit 10.3 to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.4 Agreement relating to the Reorganization. Exhibit 10.4 to the Company's
Registration Statement on Form S-1 (Commission File No. 333-11253) is
hereby incorporated by reference.
10.5 Plan of Merger. Exhibit 10.5 to the Company's Registration Statement on
Form S-1 (Commission File No. 333-11253) is hereby incorporated by
reference.
10.6 Indemnification Agreement. Exhibit 10.6 to the Company's Registration
Statement on Form S-1 (Commission File No. 333-11253) is hereby
incorporated by reference.
10.7 Escrow Agreement. Exhibit 10.7 to the Company's Registration Statement on
Form S-1 (Commission File No. 333-11253) is hereby incorporated by
reference.
10.8 Warrant issued to PJI. Exhibit 10.8 to the Company's Registration
Statement on Form S-1 (Commission File No. 333-11253) is hereby
incorporated by reference.
10.9 Agreement between PJI and Extra Cheese, Inc. relating to certain Southern
California counties; Puerto Rico; Vancouver, Canada; consent for IPO from
PJI; the issuance of the warrant; and certain other matters. Exhibit 10.9
to the Company's Registration Statement on Form S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
10.10 Development Agreement relating to the Utah territory. Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.11 Development Agreement relating to the development of an aggregate of ten
restaurants in Birmingham, Tuscaloosa and Auburn, Alabama (the "Alabama
Development Agreement"). Exhibit 10.11 to the Company's Registration
Statement on Form S-1 (Commission File No. 333-11253) is hereby
incorporated by reference.
10.11(a) First Amendment to the Alabama Development Agreement. Exhibit 10.11(a) to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.11(b) Second Amendment to the Alabama Development Agreement. Exhibit 10.11(b) to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.11(c) Third Amendment to the Alabama Development Agreement. Exhibit 10.11(c) to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.12 Form of Franchise Agreement relating to the Birmingham, Tuscaloosa and
Auburn, Alabama restaurants (e.g., Franchise Agreement dated February 18,
1992, by and between Extra Cheese, Inc. and PJI at 2503 McFarland Blvd.
W., Northport, Alabama 35476). Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (Commission File No. 333-11253) is hereby
incorporated by reference.
10.13 Development Agreement relating to the development of an aggregate of four
restaurants in Cullman, Jasper, Sylacauga and Talladega, Alabama. Exhibit
10.13 to the Company's Registration Statement on Form S-1 (Commission File
No. 333-11253) is hereby incorporated by reference.
10.14 Form of Franchise Agreement relating to the Cullman, Jasper, Sylacauga and
Talladega, Alabama restaurants (e.g., Franchise Agreement dated August 14,
1995, by and between Extra Cheese, Inc. and PJI at 680 Highway 78 West,
Jasper, Alabama 35501). Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.15 Development Agreement relating to the development of an aggregate of five
restaurants in Longview, Lufkin and Nacogdoches, Texas. Exhibit 10.15 to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.16 Form of Franchise Agreement relating to the East Texas restaurants (e.g.,
Franchise Agreement dated September 20, 1994, by and between Textra Cheese
Corp. and PJI at 2702 North Street, Nacogdoches, Texas 75961). Exhibit
10.16 to the Company's Registration Statement on Form S-1 (Commission File
No. 333-11253) is hereby incorporated by reference.
10.17 Development Agreement relating to the development of an aggregate of 47
restaurants in Virginia Beach, Richmond and Norfolk, Virginia (the
"Virginia Development Agreement"). Exhibit 10.17 to the Company's
Registration Statement on Form S-1 (Commission File No. 333-11253) is
hereby incorporated by reference.
10.17(a) First Amendment to the Virginia Development Agreement. Exhibit 10.17(a) to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.17(b) Second Amendment to the Virginia Development Agreement. Exhibit 10.17(b)
to the Company's Registration Statement on Form S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
10.17(c) Third Amendment to the Virginia Development Agreement. Exhibit 10.17(c) to
the Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.17(d) Fourth Amendment to the Virginia Development Agreement. Exhibit 10.17(d)
to the Company's Registration Statement on Form S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
10.18 Form of Franchise Agreement relating to the Virginia restaurants (e.g.
Franchise Agreement dated March, 31, 1994, by and between PJVA and PJI at
10054 Robious Road, Richmond, Virginia 23235). Exhibit 10.18 to the
Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.19 PJI's Waiver of Right of First Refusal (certain Utah, Iowa markets and
other markets). Exhibit 10.19 to the Company's Registration Statement on
Form S-1 (Commission File No. 333-11253) is hereby incorporated by
reference.
10.20 The Company's Right of First Refusal relating to certain Iowa territories.
Exhibit 10.20 to the Company's Registration Statement on Form S-1
(Commission File No. 333-11253) is hereby incorporated by reference.
10.21 The Company's Right of First Refusal relating to certain Louisiana
territories. Exhibit 10.21 to the Company's Registration Statement on Form
S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
10.22 Option Agreement relating to the Utah territories. Exhibit 10.22 to the
Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.23 $1,200,000 Commercial Installment Note issued to National City Bank from
PJVA, Inc. and PJV, Inc., and guaranteed by Messrs. Sherman, Laughery,
Hart and Grisanti. Exhibit 10.23 to the Company's Registration Statement
on Form S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.24 $1,000,000 Credit Facility with AmSouth Bank of Alabama guaranteed by
Messrs. Stephens, Langford, Sherman, Fleishman and Keener. Exhibit 10.24
to the Company's Registration Statement on Form S-1 (Commission File No.
333-11253) is hereby incorporated by reference.
10.25 Employment Agreement with Mr. Davison. Exhibit 10.25 to the Company's
Registration Statement on Form S-1 (Commission File No. 333-11253) is
hereby incorporated by reference.
10.26 Agreement between PJI and PJ Utah, LLC relating to development rights to
be granted with respect to the Utah territory. Exhibit 10.26 to the
Company's Registration Statement on Form S-1 (Commission File No. 333-
11253) is hereby incorporated by reference.
10.27 Agreement and Plan of Merger among PJ America, Inc., PJAM Acquisition
Subsidiary, Inc., OPD Co., Roger P. Tennyson, Mary Ann Tennyson, Brian J.
Tennyson, Jeanne K. Tennyson, John H. Schnatter, Charles Schnatter and Dan
Holland dated May 30, 1997. Exhibit 2.1 to the Company's Form 8-K dated
June 19, 1997, is hereby incorporated by reference.
10.28 PJ America, Inc. Registration Rights Agreement dated June 5, 1997 relating
to the Agreement and Plan of Merger (OPD transaction). Exhibit 10.1 to the
Company's Form
8-K dated June 19, 1997, is hereby incorporated by reference.
10.29* Letter dated June 18, 1997, from PJI to the Company relating to the
development rights for the Vancouver, Canada area.
10.30* Development Agreement relating to the development of 37 restaurants in the
Ventura, Kern, San Luis Obispo, Santa Barbara and northwestern Los Angeles
counties of California.
10.31* Letter dated June 26, 1997, from PJI to the Company relating to the
development rights for Puerto Rico.
10.32* Asset Purchase Agreement dated June 26, 1997 by and between Northcoast
Pizza, Inc., North Royalton Pizza, Inc., Louis Akhar and Ohio Pizza
Delivery Co.
21* Subsidiaries of the Registrant.
23.1* Consent of Greenebaum Doll & McDonald PLLC (included in Exhibit 5).
23.2 Consent of Ernst & Young LLP.
24* Power of Attorney (included on Signature Page of the Registration
Statement).
27* Financial Data Schedule (included only in filings under the Electronic
Data Gathering, Analysis, and Retrieval System). Exhibit 27 to the
Company's Form 10-Q dated April 17, 1997, is hereby incorporated by
reference.
</TABLE>
- --------

*Previously Filed

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes:

(1) For the purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(b) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-6
<PAGE>

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

II-7
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, IN THE CITY OF BIRMINGHAM, STATE OF ALABAMA, ON JULY 14, 1997.

PJ America, Inc.

/s/ Douglas S. Stephens
By: ____________________________
Douglas S. Stephens
Chief Executive Officer and
President

IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
* Chairman of the Board July 14, 1997
____________________________________
Richard F. Sherman

/s/ Douglas S. Stephens Chief Executive Officer, July 14, 1997
____________________________________ President and Director
Douglas S. Stephens

/s/ D. Ross Davison Vice President--Chief July 14, 1997
____________________________________ Financial Officer and
D. Ross Davison Treasurer
(Chief Financial and
Accounting Officer)

* Director July 14, 1997
____________________________________
Michael M. Fleishman

* Director July 14, 1997
____________________________________
Martin T. Hart

* Director July 14, 1997
____________________________________
Frank O. Keener

* Director July 14, 1997
____________________________________
Stephen P. Langford

* Director July 14, 1997
____________________________________
Charles W. Schnatter
</TABLE>

/s/ Douglas S. Stephens July 14, 1997
*By: _________________________
Douglas S. Stephens
Attorney-in-fact

II-8

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our reports dated February 4, 1997, with
respect to the consolidated financial statements of PJ America, Inc., our report
dated April 4, 1997 with respect to the financial statements of Ohio Pizza
Delivery Co. and our report dated June 17, 1997 with respect to the supplemental
consolidated financial statements of PJ America, Inc. and Subsidiaries included
in Amendment No. 1 to the Registration Statement (Form S-1) and related
Prospectus of PJ America, Inc. for the registration of 1,380,000 shares of its
common stock.

/s/ Ernst & Young LLP

Birmingham, Alabama
July 9, 1997