Panera Bread 2004 Annual Report Download - page 10

developed by Panera. As of December 25, 2004, there were 515 franchised bakery-cafes operating and signed commitments to open
an additional 406 bakery-cafes.
The Company believes that providing bakery-cafe operators the opportunity to participate in the success of the bakery-cafe enables
the Company to attract and retain experienced and highly motivated personnel, which will result in a better customer experience. As a
result, the Company developed a program and began implementation in certain markets in 2003 to allow unit general managers and
multi-unit managers to participate in the success of a bakery-cafe through a multi-year bonus structure. 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.
MENU
The menu is designed to provide the Company’s target customers with products which build on the strength of the Company’s
bakery expertise. The key menu groups are fresh baked goods, made-to-order sandwiches and salads, soups, and cafe beverages.
Included within these menu groups are a variety of freshly baked bagels, breads, muffins, scones, rolls, and sweet goods; made-to-
order sandwiches; hearty, unique soups; custom roasted coffees and cafe beverages such as hot or cold espresso and cappuccino
drinks. The Company’s concept emphasizes the sophisticated specialty and artisan breads that support a take-home bread business.
The Company regularly reviews and revises its menu offerings to satisfy changing customer preferences. New menu items are
developed in test kitchens and then introduced in a limited number of the Company’s bakery-cafes to determine customer response
and verify that preparation and operating procedures maintain product consistency, high quality standards, and profitability. If
successful, they are then introduced in the rest of the Company’s bakery-cafes and franchise bakery-cafes.
MARKETING
The Company believes it competes on the basis of providing an entire experience rather than by price only. Pricing is structured so
customers perceive good value with high quality food at reasonable prices to encourage frequent visits. The Company measures its
average check per transaction. The total average check per transaction at the Company-owned bakery-cafes opened eighteen months
or longer at December 25, 2004 was $6.97. Breakfast average check per transaction was $5.26, lunch average check per transaction
was $7.99, PM “chill out” average check per transaction was $7.03, and lunch in the evening average check per transaction was $7.79.
The Company attempts to increase its per location sales through menu development, product merchandising, and promotions at every
day prices and by sponsorship of local community charitable events.
Franchised bakery-cafes contribute to the Company 0.4% of their sales to a national advertising fund and 0.4% of their sales as a
marketing administration fee and are required to spend 2.0% of their sales in their local markets on advertising. The Company
contributes similar amounts from Company-owned bakery-cafes towards the national advertising fund and marketing administration.
The national advertising fund and marketing administration contributions received from franchised bakery-cafes are consolidated with
Company amounts in the Company’s financial statements. Liabilities for unexpended funds are included in accrued expenses in the
consolidated balance sheets. The Company’s contributions to the national advertising fund and marketing administration as well as its
own media costs are recorded as part of other operating expenses in the consolidated statements of operations. The Company may
utilize external media when deemed appropriate and cost effective in specific markets.
SITE SELECTION AND BAKERY-CAFE ENVIRONMENT
The bakery-cafe concept relies on a substantial volume of repeat business. In evaluating a potential location, the Company studies
the surrounding trade area, demographic information within that area and information on breakfast and lunch competitors. Based on
analysis of this information including utilization of predictive modeling using proprietary software, the Company determines projected
sales and return on investment. The Panera concept has proven successful in a number of different types of real estate (i.e., in-line or
end-cap locations in strip or power centers, regional malls, and free-standing).
The Company designs each bakery-cafe to provide a differentiated environment, using in many cases fixtures and materials
complementary to the neighborhood location of the bakery-cafe. Many locations incorporate the warmth of a fireplace and cozy
seating areas and groupings which facilitate utilization as a gathering spot. The design visually reinforces the distinctive difference
between the Company’s bakery-cafes and other bakery-cafes serving breakfast and lunch. Many of the Company’s cafes also feature
outdoor cafe seating and free wifi internet access. In addition, the Company began its “Via Panera” catering business in 2004. The
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