Panera Bread 2008 Annual Report Download - page 39

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increase in sales from the prior fiscal year. In addition, average weekly sales for Company-owned bakery-cafes in
fiscal 2007 decreased as compared to the prior year primarily due to the growth of bakery-cafes opened three years
or fewer as a percentage of total bakery-cafes opened, which experience a slower initial ramp-up of average weekly
sales; due to lower average weekly sales for bakery-cafes opened in 2007, which averaged $33,835 for fiscal year
2007 driven by the greater concentration of Company-owned bakery-cafe openings in immature markets; and due to
lower year-over-year sales price increases in our Company-owned bakery-cafes in 2007 as compared to 2006. The
average weekly sales per Company-owned bakery-cafe and the related number of operating weeks for the periods
indicated are as follows:
December 25,
2007
December 26,
2006
Percentage
Change
For the Fiscal Year Ended
Company-owned average weekly sales ................ $37,548 $37,833 ⫺0.8%
Company-owned number of operating weeks ........... 23,834 17,607 35.4%
Franchise royalties and fees in fiscal 2007 increased 9.3 percent to $67.2 million compared to $61.5 million in
fiscal 2006. The components of franchise royalties and fees for the periods indicated are as follows (in thousands):
December 25,
2007
December 26,
2006
For the Fiscal Year Ended
Franchise royalties ........................................ $64,581 $58,686
Franchise fees ........................................... 2,607 2,845
Total ................................................ $67,188 $61,531
The increase in royalty revenue in fiscal 2007 compared to the prior fiscal year can be attributed to the impact
of a full year’s operations of the 85 franchise-operated bakery-cafes opened in 2006, the opening of 80 franchise-
operated bakery-cafes and to a lesser extent the purchase of one bakery-cafe from us in fiscal 2007 and the
1.5 percent increase in comparable franchise-operated bakery-cafe sales in fiscal 2007. Franchise royalties and fees
were also positively impacted by the consolidation of royalties and fees from the 22 Paradise franchise-operated
bakery-cafes acquired on February 1, 2007 and included in our results prospectively from the acquisition date and
partially offset by the sale of 36 bakery-cafes by franchisees to us in fiscal 2007. Franchise-operated bakery-cafes
included in comparable sales increases and not included in comparable sales increases contributed 12.3 percent and
87.7 percent, respectively, of the $131.0 million increase in sales from the prior fiscal year. Further, our franchise
royalties have been negatively impacted by this trend of decreasing average weekly sales experienced in fiscal 2007.
The average weekly sales per franchise-operated bakery-cafe and the related number of operating weeks for the
periods indicated are as follows:
December 25,
2007
December 26,
2006
Percentage
Change
For the Fiscal Year Ended
Franchisee average weekly sales .................... $39,433 $39,894 ⫺1.2%
Franchisee number of operating weeks ............... 34,905 31,220 11.8%
As of December 25, 2007, there were 698 franchise-operated bakery-cafes open and commitments to open
303 additional franchise-operated bakery-cafes. The timetables for opening these bakery-cafes are established in
the various ADAs with franchisees, with the majority then expected to open in the next four to five years. The ADA
requires a franchisee to develop a specified number of bakery-cafes on or before specific dates. If a franchisee fails
to develop bakery-cafes on schedule, we have the right to terminate the ADA and develop Company-owned
locations or develop locations through new area developers in that market. We may exercise one or more alternative
remedies to address defaults by area developers, including not only development defaults, but also defaults in
complying with our operating and brand standards and other covenants under the ADAs and franchise agreements.
Panera may waive compliance with certain requirements under its ADAs and franchise agreement when it
determines that such action is warranted under the particular circumstances.
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