Panera Bread 2004 Annual Report Download - page 23

cafe sales for the fifty-two weeks ended December 25, 2004. The average weekly sales per franchise-operated bakery-cafe and the
related number of operating weeks for the fifty-two weeks ended December 25, 2004 and December 27, 2003 are as follows:
For the Fifty-Two Weeks Ended
December 25,
2004
December 27,
2003
Franchisee average weekly sales .......................................................................................................... $ 36,171 $ 35,777
Franchisee number of operating weeks ................................................................................................ 24,303 19,872
As of December 25, 2004, there were 515 franchised bakery-cafes open and commitments to open 406 additional franchised
bakery-cafes. The Company expects these bakery-cafes to open according to the timetables established in the various ADAs with
franchisees, with the majority opening in the next four to five years. In 2005, the Company expects to open 80 to 90 new franchise
bakery-cafes. The ADA requires a franchisee to develop a specified number of bakery-cafes on or before specific dates. If a franchisee
fails to develop bakery-cafes on schedule, the Company has the right to terminate the ADA and develop Company-owned locations or
develop locations through new area developers in that market.
Fresh dough facility sales to franchisees increased 18.0% to $72.6 million for the fifty-two weeks ended December 25, 2004 from
$61.5 million for the fifty-two weeks ended December 27, 2003. The increase was primarily driven by the increased number of
franchise bakery-cafes opened described previously partially offset by a decrease in average fresh dough sales per bakery-cafe to
franchisees due to a change in the mix of product sold by franchisees.
Costs and Expenses
The cost of food and paper products includes the costs associated with the fresh dough operations that sell fresh dough products to
Company-owned bakery-cafes as well as the cost of food and paper products supplied by third party vendors and distributors. The
costs associated with the fresh dough operations that sell fresh dough products to the franchised bakery-cafes are excluded and are
shown separately as fresh dough cost of sales to franchisees in the Consolidated Statements of Operations. The cost of food and paper
products increased to 28.1% of bakery-cafe sales for the fifty-two weeks ended December 25, 2004 compared to 27.8% (as restated)
of bakery-cafe sales for the fifty-two weeks ended December 27, 2003. This increase in the cost of food and paper products as a
percentage of bakery-cafe sales is primarily due to higher commodity costs, including higher fuel costs, which averaged $2.06 per
gallon in 2004 compared to $1.71 in 2003, and higher fresh dough facility operational costs related to lease and related leasehold
improvement accounting as described in Note 3 to the Consolidated Financial Statements, partially offset by improved leveraging of
fresh dough manufacturing and distribution costs the Company achieves as more bakery-cafes are opened. For the fifty-two weeks
ended December 25, 2004, there was an average of 39.2 bakery-cafes per fresh dough facility compared to an average of 32.7 for the
fifty-two weeks ended December 27, 2003.
Labor expense was $110.8 million, or 30.6% of bakery-cafe sales, for the fifty-two weeks ended December 25, 2004 compared to
$81.2 million, or 30.5% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003. The labor expense as a percentage of
bakery-cafe sales increased between the fifty-two weeks ended December 25, 2004 and the fifty-two weeks ended December 27, 2003
primarily as a result of start-up inefficiencies related to the increase in Company bakery-cafe openings in 2004 compared to 2003 and
higher benefit costs partially offset by leveraging these costs over higher sales volumes.
Occupancy costs were $26.7 million, or 7.4% of bakery-cafe sales, for the fifty-two weeks ended December 25, 2004 compared to
$19.0 million (as restated), or 7.1% (as restated) of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003. The
occupancy cost as a percentage of bakery-cafe sales increased for the fifty-two weeks ended December 25, 2004 primarily due to
higher rent cost related to lease accounting as described in Note 3 to the Consolidated Financial Statements.
Other bakery-cafe operating expenses, which include advertising, retail field overhead, utilities, and other bakery-cafe expenses,
were $51.0 million, or 14.1% of bakery-cafe sales, for the fifty-two weeks ended December 25, 2004 compared to $36.8 million, or
13.8% of bakery-cafe sales, for the fifty-two weeks ended December 27, 2003. The increase in other bakery-cafe operating expenses
as a percentage of bakery-cafe sales for the fifty-two weeks ended December 25, 2004 is primarily due to increased organizational
costs for field management, including recruiting, training, and advertising, associated with new markets that do not yet have multi-unit
leverage.
For the fifty-two weeks ended December 25, 2004, fresh dough facility cost of sales to franchisees was $65.6 million, or 90.4% of
fresh dough facility sales to franchisees, compared to $55.0 million, or 89.3% of fresh dough facility sales to franchisees, for the fifty-
17