Panera Bread 2008 Annual Report Download - page 3

First, we must remain committed to strengthening our competitive position (even as most competitors diminish
theirs with smaller portions, cut backs in quality and reductions in staffing). If there is ever a time to drive
competitive advantage, it is now. Panera does not define value the same way that other companies do. While other
companies are heavily discounting to lure customers back, we believe the opportunity lies in offering a better “total
experience” to our guests. So while the rest of the industry competes to offer the cheapest $3.99 salad, we will focus
on delivering a $12.00 salad for $5.99 to $7.99. That is value the Panera way and it gets to the core of our value
proposition.
Second, we will continue to search for new ways to generate new transactions to offset any modest falloff we
may experience. Our successful rollout of our breakfast sandwiches is a good example of such an effort.
Third, in the midst of this economic crisis, we will continue to build bakery-cafes we expect to be highly
productive. While many competitors are closing stores and pulling back on development in the face of the recession,
we will continue to build new bakery-cafes. Real estate is priced on a spot market basis but locked in for 10, 15 or
more years. Indeed some of the most successful bakery-cafes in the history of Panera have been built during prior
recessions and I fully expect some of our best bakery-cafes will be built during this “economic collapse” as well.
Finally, we will use this recession to strengthen our organizational capabilities. Many people working for other
restaurant concepts and in retail have been ground down by the uncertainty that comes with store closures and staff
cutbacks. As a result, they are flocking to strong companies like Panera. In fact, in almost 30 years in business, I
have never seen better candidates apply to our company. This is the time to strengthen our organization with people
who will be real assets to Panera well into the future.
With that said, I realize that a company’s long-term success (and my credibility as a CEO) is built by delivering
results year-over-year, quarter-by-quarter. So, what is our plan for 2009?
My answer is more of the same. In 2009, our team will once again be intensely focused on growing gross profit
dollars per bakery-cafe by improving gross profit dollars per transaction and holding transaction falloff to a
minimum, driving operating leverage and using our capital smartly, all while putting in place the drivers of long-
term earnings growth with particular emphasis on impacting competitive advantage. To that end, we are confident
we can deliver on our earnings per share target of 15% to 22% growth for 2009.
And how are we going to do that?
To increase gross profit growth and further improve margins, we plan to test add-on initiatives like You Pick
Four
TM
, breakfast bakery bundles, bulk baked goods and bread as a gift. We also intend to use our strength at
purchasing to limit cost inflation.
To hold transaction falloff to a minimum, we plan to focus on integrated marketing programs similar to our
early 2009 breakfast re-launch. We intend to continue to use radio to explain Panera’s points of difference, launch
our first formal test of TV and pilot a new loyalty program. We also intend to bring new energy to our retail bread
program and catering. You will see us focus on differentiation through innovative salads utilizing new procedures to
further improve lettuce quality, the testing of a new way to make Panini’s fresh to order, materially improved
renditions of several Panera classics, and ever-improving operations, speed of service and accuracy.
To use our capital smartly, you can expect to see continued discipline designed to ensure the capital we deploy
delivers an acceptable return. You will also see us testing a smaller unit that offers the potential for a material
reduction in our investment per bakery-cafe.
Let me conclude with this observation. Panera is a powerful concept. Our industry-leading average weekly
sales and the fact that over $1.5 billion in stockholder value has been created over the last decade speak to that fact.
Most importantly, every survey we see indicates the Panera concept continues to resonate strongly with our guests.
That is why, in 2009, we are committed to using our size and scale to enhance the Panera experience for our guests
and using the recession as an opportunity to leap frog competitors by improving our competitive position. We are
also committed to maintaining your confidence in us by delivering earnings per share growth in 2009 consistent
with our targeted range of 15% to 22%.