Panera Bread 2006 Annual Report Download - page 8

The distinctive nature of our menu offerings (centered around the fresh artisan bread products), the quality of
our bakery-cafe operations, our signature cafe design, and the locations of our cafes are integral to our success. We
believe our concept has significant growth potential, which we hope to realize through a combination of Company
and franchisee efforts. Franchising is a key component of our success. Utilization of franchising has enabled us to
grow more rapidly because of the added resources and capabilities franchisees provide to implement the concepts
and strategy developed by Panera Bread. As of December 26, 2006, there were 636 franchised bakery-cafes
operating and signed commitments to open an additional 359 franchised bakery-cafes.
We believe providing bakery-cafe operators the opportunity to participate in the success of the bakery-cafe
enables us to attract and retain experienced and highly motivated personnel, referred to as associates, which results
in a better customer experience. As a result, our compensation, subject to annual minimums, provides general
managers and multi-unit managers compensation based upon a percentage of the cash flows of the units they
operate and participation in a multi-year bonus structure also based on unit cash flow. This compensation structure
is referred to as the JV program.
MENU
The menu is designed to provide our target customers with products which build on the strength of our bakery
expertise. The key menu groups are fresh baked goods, made-to-order sandwiches on freshly baked breads,
Crispani»hand-crafted pizza, soups, salads, 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; a variety of
Crispani»hand-crafted pizzas; hearty, unique soups; custom roasted coffees and cafe beverages such as hot or cold
espresso and cappuccino drinks. Our concept emphasizes the sophisticated specialty and artisan breads that support
each daypart and a take-home bread business.
We regularly review and revise our menu offerings to satisfy changing customer preferences. Product
development is focused on providing food that customers crave and trust. New menu items are developed in test
kitchens and then introduced in a limited number of the bakery-cafes to determine customer response and verify that
preparation and operating procedures maintain product consistency and high quality standards. If successful, they
are then rolled out system-wide. New product rollouts are integrated into periodic or seasonal menu rotations, which
we refer to as “Celebrations.” Examples of products introduced in 2006 include Crispani»hand-crafted pizza,
Panera Kids
TM
Meals with New White Whole Grain Bread, Chicken Olivada Sandwich, Turkey Romesco Sandwich,
Turkey Caprese Sandwich, Mediterranean Veggie Sandwich, Lemon Artichoke Panini, California Mission Chicken
Salad, Roasted Garlic & Tomato Soup, Vegetarian Spring Pea & Asparagus Soup, Tuscan Vegetable & Ditalini
Soup, Vegetarian Roasted Red Pepper & Lentil Soup, Vegetarian Butternut Squash Soup, and Roasted Turkey
Noodle Soup.
Beginning in the third quarter of fiscal 2006, we introduced our Crispani»hand-crafted pizza in the evening
daypart. The Crispani»crust is a unique and delicious flatbread with just a hint of olive oil. We use many savory
toppings including roasted crimini mushrooms and fresh shiitakes, Organic Muir Glen»tomatoes, roasted garlic,
and many kinds of cheeses. Our toppings are grown and produced responsibly. We offer several Crispani»hand-
crafted pizzas at our bakery-cafes including, among others, BBQ Chicken, Pepperoni, Roasted Wild Mushroom,
Sweet Sausage and Roasted Peppers, Three Cheese, and Tomato and Fresh Basil. Crispani»hand-crafted pizzas are
offered at our bakery-cafes during dinner, which is our evening daypart. Our overall initiative was to increase our
traffic and sales during the evening daypart is another of our major initiatives in 2006 with Crispani»hand-crafted
pizzas being an entree into this daypart initiative. Our evening daypart initiative required additional equipment and
labor in our bakery-cafes and our brand of marketing, which is tailored to each area market. Depending on the area,
we utilized sampling of new product, print ads, coupons, and/or television to market our evening daypart.
MARKETING
We believe we compete 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.
We perform extensive market research, including utilizing focus groups, to determine customer food and drink
3