Panera Bread 2005 Annual Report Download - page 14

Download and view the complete annual report

Please find page 14 of the 2005 Panera Bread annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 72

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

8
Although we have been able to successfully manage and plan our growth to date, we may experience difficulties doing so in the
future.
Our growth strategy includes opening bakery-cafes in new markets where we may have little or no operating experience.
Accordingly, there can be no assurance that a bakery-cafe opened in a new market will have similar operating results, including
average store sales, as our existing bakery-cafes. Bakery-cafes opened in new markets may not perform as expected or may take
longer to reach planned operating levels, if at all. Operating results or overall bakery-cafe performance could vary as a result of higher
construction, occupancy or general operating costs, a lack of familiarity with our brand which may require us to build brand
awareness, differing demographics, consumer tastes and spending patterns, and variable competitive environments. Additional
expenses attributable to costs of delivery from our fresh dough facilities may exceed our expectations in areas not currently served by
those facilities.
Our growth strategy also includes opening bakery-cafes in existing markets to increase the penetration rate of our bakery-cafes in
those markets. However, this strategy could result in a sales decline in some of our existing bakery-cafes if customers choose to
patronize a new location over an existing location. There can be no assurance that we will be successful in operating bakery-cafes
profitably in new markets or further penetrating existing markets.
Our growth strategy depends on continued development by our franchisees. If our franchisees do not continue to successfully
open new bakery-cafes, our business could be adversely affected.
Our growth strategy also includes continued development of bakery-cafes through franchising. At December 27, 2005,
approximately 65% of our bakery-cafes were operated by franchisees (566 franchise-operated units out of a total of 877 units system
wide). The opening and success of bakery-cafes by franchisees depends on a number of factors, including those identified above as
well as the availability of suitable franchise candidates and the financial and other resources of our franchisees.
Additionally, our results of operations include revenues derived from royalties on sales from, and revenues from sales by our fresh
dough facilities to, each franchise-operated bakery-cafe. As a result, our growth expectations and revenue could be negatively
impacted by a material downturn in sales at and to franchise-operated bakery-cafes or if one or more key franchisees became insolvent
or otherwise refused to pay us our royalties.
If we fail to comply with governmental regulations or if these regulations change, our business could suffer.
We must comply with extensive federal, state and local laws in connection with the operation of our business, including those
related to:
• franchise relationships;
• building construction and zoning requirements;
• environmental matters;
• the preparation and sale of food; and
• employment.
Our bakery-cafes and fresh dough facilities are licensed and subject to regulation under state and local laws, including business,
health, fire and safety codes.
Various federal and state labor laws govern our operations and our relationship with our employees, including minimum wage,
overtime, accommodation and working conditions, benefits, citizenship requirements, insurance matters, workers’ compensation,
disability laws such as the federal Americans with Disabilities Act, child labor laws and anti-discrimination laws.
While we believe we operate in substantial compliance with these laws, they are complex and vary from location to location,
which complicates monitoring and compliance. As a result, regulatory risks are inherent in our operation. Although we believe that
compliance with these laws has not had a material effect on our operations to date, there can be no assurance that we will not
experience material difficulties or failures with respect to compliance in the future. Our failure to comply with these laws could result
in required renovations to our facilities, litigation, fines, penalties, judgments or other sanctions including the temporary suspension of
bakery-cafe or fresh dough facility operations or a delay in construction or opening of a bakery-cafe, any of which could adversely
affect our business, operations and our reputation.