Panera Bread 2003 Annual Report Download - page 2

SOWHY ARE WESUCCESSFUL?
Extraordinary Customer Satisfaction
The strength of the Panera Bread concept, and the
ability of our bakery-cafes to execute for our guests,
can be seen in our first-place rankings in several key
consumer studies in 2003:
• We were ranked the number one concept in
customer satisfaction among 118 chains in a survey
of over 70,000 consumers conducted by Sandelman
& Associates. As I write this letter, we have learned
that the 2004 study again placed Panera Bread as
the customer satisfaction leader in the industry.
• Restaurants and Institutions’ annual Choice in Chains
survey of 3,000 consumers indicated that we were
number one in the industry in food quality and
number one in the sandwich/bakery category in
customer satisfaction.
• The Wall Street Journal reported in July on the results
of a study by TNS Intersearch, which demonstrated
that Panera Bread enjoyed the highest consumer
loyalty of any concept in the restaurant industry.
DEAR STOCKHOLDERS:
For Panera Bread, 2003 was another year of extraordinary success.The combination of the highest-quality food, born of our
commitment to artisan bread, coupled with our uniquely engaging dining environment and our very special people, enabled
us to excite the more than145 million guests who visited Panera during the year. As a result, we were able to produce record
numbers, with company bakery-cafe sales of $265.9 million, franchise bakery-cafe sales of $711.0 million and diluted earnings
per share (EPS), before accounting change, showing a 38% improvement.These accomplishments place Panera Bread as the
undisputed leader in the specialty foods/bakery-cafe category with extraordinary opportunity for continued expansion.
Extraordinary Customer Satisfaction Leads to
Exceptional Unit-Level Performance
The experience that guests enjoy at Panera Bread
bakery-cafes led to industry-leading average unit
volumes (AUVs), which we consider to be the best
metric of the enduring strength of our business
model. In 2003, Panera Bread system-wide AUVs were
$1.85 million, the highest among all publicly reported
retail volumes in the restaurant industry, exclusive of
casual dining.This is even more remarkable when you
consider that we were able to sustain this level of
sales while executing on one of the most aggressive
development and market penetration strategies in
our industry. Additionally, these high levels of sales
are relatively consistent across the 35 states in which
we operate, confirming the concept’s broad appeal
and relevancy to the consumer. Most important, the
strong average unit volumes drove cash-on-cash
return on investment above 50%.
Exceptional Unit-Level Performance
Fuels Unit Growth
Exceptional unit-level performance fueled new unit
growth, allowing us to expand the number of Panera
Bread bakery-cafes by 26% in 2003. A total of 131
new bakery-cafes opened last year; 11 more than
initially targeted. At the end of fiscal 2003, there were
602 bakery-cafes in our system, 173 of which were
company owned and 429 of which were franchised.
Our exceptional bakery-cafe performance allows us
to be optimistic about the potential for future
growth. As a result, we recently raised our new
bakery-cafe target for 2004 to between 140 and 150
new bakery-cafes (45 to 55 company bakery-cafes
and 95 franchised bakery-cafes).This will result in
approximately 750 bakery-cafes system-wide