Panera Bread 2009 Annual Report Download - page 10

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association bylaws. Franchise contributions to the advertising association are credited towards the franchise groups’
required local advertising spending.
CAPITAL RESOURCES AND DEPLOYMENT OF CAPITAL
Our primary capital resource is cash generated by operations. We also have access to a $250 million credit
facility on which, as of December 29, 2009, we had no borrowings outstanding.
Our on-going capital requirements, which may include maintenance and remodel expenditures, development
costs for opening new bakery-cafes and fresh dough facilities, and the acquisition of additional bakery-cafes, will
continue to be significant. However, we believe our cash flow from operations and available borrowings under our
existing credit facility will be sufficient to fund our capital requirements for the foreseeable future.
In evaluating potential new locations, we study the surrounding trade area, demographic information within
the most recent year, and publicly available information on competitors. Based on this analysis, including the
utilization of proprietary, predictive modeling, we estimate projected sales and a targeted return on investment. We
also employ a disciplined capital expenditure process where we focus on occupancy and development costs in
relation to the market, designed to ensure we have the right size bakery-cafe and costs in the right market.
Our concept has proven successful in a number of different types of locations, such as in-line or end-cap
locations in strip or power centers, regional malls, drive-through and free-standing units. The average Company-
owned bakery-cafe size is approximately 4,600 square feet as of December 29, 2009. We lease all of our bakery-cafe
locations and fresh dough facilities. Lease terms for our bakery-cafes and fresh dough facilities are generally
10 years with renewal options at most locations, and generally require us to pay a proportionate share of real estate
taxes, insurance, common area, and other operating costs. Many bakery-cafe leases provide for contingent rental
(i.e. percentage rent) payments based on sales in excess of specified amounts. Certain of our lease agreements
provide for scheduled rent increases during the lease term or for rental payments commencing at a date other than
the date of initial occupancy.
The average construction, equipment, furniture and fixtures, and signage cost for the 30 Company-owned
bakery-cafes opened in fiscal 2009 was approximately $750,000 per bakery-cafe, net of landlord allowances and
excluding capitalized development overhead.
We believe the best use of our capital is to invest in our core business, either through the development of new
bakery-cafes or through the acquisition of existing bakery-cafes from our franchisees or other similar restaurant or
bakery-cafe concepts, such as our acquisition of Paradise Bakery & Café, Inc.
We may from time to time return capital to our shareholders. On November 17, 2009, our Board of Directors
approved a three year share repurchase program of up to $600 million of our Class A common stock. The
repurchases will be effected from time to time on the open market or in privately negotiated transactions and we
may make such repurchases under a Rule 10b5-1 Plan. This repurchase program is reviewed quarterly by our Board
of Directors and may be modified, suspended or discontinued at any time.
FRANCHISE OPERATIONS
Our franchisees, which as of December 29, 2009 made up approximately 57.6 percent of our bakery-cafes, are
comprised of 48 franchise groups. We are selective in granting franchises, and applicants must meet specific criteria
in order to gain consideration for a franchise. Generally, our franchisees must be well-capitalized to open bakery-
cafes, meet a negotiated development schedule, and have a proven track record as multi-unit restaurant operators.
Additional qualifications include minimum net worth and liquidity requirements, infrastructure and resources to
meet our development schedule, and a commitment to the development of our brand. If these qualifications are not
met, we may still consider granting a franchise, depending on the market and the particular circumstances.
As of December 29, 2009, we had 795 franchise-operated bakery-cafes open throughout the United States and
in Ontario, Canada and we have received commitments to open 240 additional franchise-operated bakery-cafes.
The timetables for opening these bakery-cafes are established in the various Area Development Agreements,
referred to as ADAs, with franchisees, which provide for the majority scheduled to open in the next four to five
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