Panera Bread 2007 Annual Report Download - page 13

under construction, and the area development rights from a franchisee in certain markets in California. In
October 2006, we acquired 12 bakery-cafes, as well as one bakery-cafe still under construction, and the area
development rights from a franchisee in certain markets in Iowa, Nebraska and South Dakota. In September
2006, we acquired one bakery-cafe in Pennsylvania from a franchisee. In November 2005, we acquired
21 bakery-cafes, as well as two bakery-cafes still under construction, and the area development rights from a
franchisee in certain markets in Indiana.
(2) In February 2007, we acquired 51 percent of the outstanding capital stock of Paradise Bakery & Café, Inc.,
which then owned and operated 22 bakery-cafes and franchised 22 bakery-cafes, principally in certain markets
in Arizona and Colorado.
(3) In June 2007, we sold one bakery-cafe and the area development rights for certain markets in Southern
California to a new area developer.
(4) Bakery-cafes at December 25, 2007 include 63 system-wide Paradise bakery-cafes (31 company-owned and
32 franchise-operated bakery-cafes).
CONCEPT AND STRATEGY
Panera’s restaurant concept focuses on the “Specialty Bread/Bakery-Cafe” category. Panera’s artisan breads,
which are breads made with all natural ingredients, a craftsman’s attention to quality and detail, and overall award-
winning bakery expertise, are at the heart of the menu. The concept is designed to deliver against consumer desire
for a more responsive and special dining experience than that offered by traditional fast food restaurants. Panera’s
goal is to maintain recognition of Panera as a leading brand. Panera’s menu, prototype, operating systems, design,
and real estate strategy allow us to compete successfully in several segments of the restaurant business: breakfast,
lunch, PM “chill out,” dinner, or the evening daypart, and take home bread, through both on-premise sales and Via
Panera»catering.
The distinctive nature of Panera’s menu offerings (centered around fresh artisan bread products), the quality of
Panera’s bakery-cafe operations, Panera’s signature bakery-cafe design, and the bakery-cafe locations are integral
to Panera’s success. We believe Panera’s concept has significant growth potential, which Panera hopes to realize
through a combination of Company and franchisee efforts. Franchising is a key component of Panera’s success.
Utilization of franchising has enabled Panera 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 25, 2007,
there were 666 Panera franchised bakery-cafes operating and signed commitments to open an additional 293 Panera
franchised bakery-cafes.
Panera believes providing bakery-cafe operators the opportunity to participate in the success of the bakery-
cafe enables Panera to attract and retain experienced and highly motivated personnel, referred to as associates,
which results in a better customer experience. As a result, Panera’s compensation, subject to annual minimums,
provides some general managers and multi-unit managers compensation based upon a percentage of the cash flows
of the bakery-cafe they operate and participation in a multi-year bonus structure also based on bakery-cafe cash
flow. This compensation structure is referred to as the Joint Venture Program.
Paradise’s concept focuses on broad and diverse products and services that appeal to retail consumers who visit
shopping malls, downtown and village office and shopping districts, and other areas where Paradise bakery-cafes
are located. Paradise believes its competitive advantages are the high quality of its freshly prepared food products
and the exceptional service provided by its associates.
MENU
The menu is designed to provide Panera’s target customers with products that build on the strength of Panera’s
bakery expertise. The key menu groups are fresh baked goods, including a variety of freshly baked bagels, breads,
muffins, scones, rolls, and sweet goods, made-to-order sandwiches on freshly baked breads, hearty, unique soups,
salads, and custom roasted coffees and cafe beverages such as hot or cold espresso and cappuccino drinks. Panera’s
concept emphasizes the sophisticated specialty and artisan breads that support each daypart and Panera’s take-home
bread and Via Panera»businesses. In January 2008, our Crispani»hand-crafted pizza product line is being removed
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