Panera Bread 2003 Annual Report Download - page 7

For the Ñscal year ended
December 27, December 28, December 29,
2003 2002 2001
System-wide:
Beginning of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 478 369 262
Bakery-cafes opened ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131 115 109
Bakery-cafes closed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7) (6) (2)
End of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 602 478 369
(1) In January 2002, the Company purchased the area development rights and three operating bakery-cafes
in the Jacksonville, Florida market from its franchisee. During Ñscal 2003, the Company acquired 15
operating bakery-cafes and the area development rights in the Louisville/Lexington, Kentucky; Dallas,
Texas; Toledo, Ohio; and Ann Arbor, Michigan markets from franchisees.
CONCEPT AND STRATEGY
The Company's concept focuses on the ""Specialty Bread/Bakery-Cafe'' category. Its artisan breads,
which are breads made with all natural ingredients and a craftsman's attention to quality and detail, and
overall award-winning bakery expertise are at the heart of the concept's menu. The concept is designed to
deliver against the key consumer trends of today, speciÑcally the need for a responsive and more special dining
experience than that oÅered by traditional fast food. The Company's goal is to make Panera Bread a nationally
dominant brand name. Its menu, prototype, operating systems, design and real estate strategy allow it to
compete successfully in several sub-businesses: breakfast, lunch, PM ""chill out,'' lunch in the evening, and
take home bread. On a system-wide basis, annualized average unit volume increased 0.7% to $1,852,000 for
the Ñfty-two weeks ended December 27, 2003 compared to $1,840,000 for the Ñfty-two weeks ended
December 28, 2002.
The distinctive nature of the Company's menu oÅerings (centered around the fresh artisan bread
products), the quality of its bakery-cafe operations, the Company's signature cafe design, and the prime
locations of its cafes are integral to the Company's success. The Company believes its concept has signiÑcant
growth potential, which it hopes to realize through a combination of Company and franchise eÅorts.
Franchising is a key component of the Company's success. Utilization of franchise operating partners has
enabled the Company to grow more rapidly because of the added resources and capabilities they provide to
implement the concepts and strategy developed by Panera. As of December 27, 2003, there were 429
franchised bakery-cafes operating and signed commitments to open an additional 409 bakery-cafes.
There were 173 wholly or majority-owned Company bakery-cafes operating at December 27, 2003. In
order to beneÑt from the advantages of local market ownership interest in Company bakery-cafes, the
Company entered into an agreement in 2001 with its former president as a minority interest owner to develop
and manage up to 50 bakery-cafes in the Northern Virginia and Central Pennsylvania markets. Under this
agreement, there were 27 bakery-cafes operating in these markets at December 27, 2003. After October 2006,
the Company and the minority interest owner each have rights which could, if exercised, permit/require the
Company to purchase the bakery-cafes at contractually determined values based on multiples of cash Öows.
The Company believes that providing bakery-cafe operators the opportunity to participate in the success
of the bakery-cafe will enable the Company to attract and retain experienced and highly motivated personnel,
which will result in a better customer experience. The Company developed a program and began implementa-
tion in certain markets in 2003 to allow unit general managers and multi-unit managers to own a minority
interest in a bakery-cafe. Prior to full implementation of the program, the Company modiÑed the program
from an ownership structure to a multi-year bonus structure, which will allow operators to participate in the
success of a bakery-cafe. The Company expects to continue implementation of this bonus structure where
appropriate as an alternative to its traditional Company-owned or franchised bakery-cafes to facilitate the
development and operation of bakery-cafes.
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