Panera Bread 2008 Annual Report Download - page 17

consequences of the financial crisis and a broader global economic downturn are currently unknown; any one or all
of them could potentially have a material adverse effect on our liquidity and capital resources, including our ability
to raise additional capital if needed, the ability of banks to honor draws on Panera’s credit facility, or otherwise
negatively impact our business and financial results.
We may not be successful in convincing our customers of the benefits of paying our prices for
higher-quality food.
Our success depends in large part on our continued ability to convince customers that food made with higher-
quality ingredients, including antibiotic-free chicken and our artisan breads, is worth the prices they will pay at our
bakery-cafes relative to lower prices offered by some of our competitors, particularly those in the quick-service
segment. Our inability to educate customers about the quality of our food or our customers rejection of our pricing
approach could require us to change our pricing, marketing or promotional strategies, which could materially and
adversely affect our results or the brand identity that we have tried to create.
Customer preferences and traffic could be negatively impacted by health concerns about the
consumption of certain products.
Customer preferences and traffic could be impacted by health concerns about the consumption of particular
food products and could cause a decline in our sales. Negative publicity about ingredients, poor food quality,
food-borne illness, injury, health concerns, allergens or nutritional content could cause customers to shift their
preferences. For example, in 2008, outbreaks of e. coli relating to certain food items, such as jalapenos and spinach,
caused consumers to avoid certain products. More recently, outbreaks of salmonella relating to certain peanuts and
peanut butter products caused consumers to avoid such products. Asian and European countries have also
experienced outbreaks of avian flu. These problems, other food-borne illnesses (such as hepatitis A, trichinosis
or salmonella) and injuries caused by food tampering have in the past, and could in the future, adversely affect the
price and availability of affected ingredients and cause customers to shift their preferences, particularly if we choose
to pass any higher ingredient costs along to consumers. Negative publicity concerning particular food products may
adversely affect demand for our products and could cause an increase in our food costs as a result of potentially
irregular supply of such products and a decrease in customer traffic to our bakery-cafes.
Our failure or inability to protect our brand, trademarks or other proprietary rights could adversely
affect our business and competitive position.
We believe that our brand, intellectual property and our confidential and proprietary information is very
important to our business and our competitive position. Our primary trademarks, Panera», Panera Bread», Saint
Louis Bread Co.», Paradise Bakery & Café», Via Panera», and Mother Bread design, along with other trademarks,
copyrights, service marks, trade secrets, confidential and proprietary information and other intellectual property
rights, are key components of our operating and marketing strategies. Although we have taken steps to protect our
brand, intellectual property and confidential and proprietary information, these steps may not be adequate.
Unauthorized usage or imitation by others could harm our image, brand or competitive position and, if we
commence litigation to enforce our rights, cause us to incur significant legal fees.
We are not aware of any assertions that our trademarks or menu offerings infringe upon the proprietary rights
of third parties, but third parties may claim infringement by us in the future. Any such claim, whether or not it has
merit, could be time-consuming, result in costly litigation, cause delays in introducing new menu items in the future
or require us to enter into royalty or licensing agreements. As a result, any such claim could have a material adverse
effect on our business, results of operations and financial condition.
We try to ensure that our franchisees maintain and protect our brand and our confidential and proprietary
information. However, since our franchisees are independent third parties that we do not control, if they do not
operate their bakery-cafes in a manner consistent with their agreements with us, our brand and reputation or the
value of our confidential and proprietary information could be harmed. If this occurs, our business and operating
results could be adversely affected.
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