Panera Bread 2009 Annual Report Download - page 15

are valid or we are liable. Additionally, defending against such claims or litigation can be costly and the results
uncertain.
The continuing adverse economic conditions could adversely affect our business and financial results
and have a material adverse effect on our liquidity and capital resources.
As widely reported, the U.S. economy continues to experience adverse economic conditions and uncertainty
about economic stability. While there are signs that conditions may be improving, there is no certainty that this trend
will continue or that credit and financial markets and confidence in economic conditions will not deteriorate again.
Our customers may make fewer discretionary purchases as a result of job losses, foreclosures, bankruptcies,
reduced access to credit and falling home prices. Because a key point in our business strategy is maintaining our
transaction count and margin growth, any significant decrease in customer traffic or average profit per transaction
will negatively impact our financial performance as reduced revenues create downward pressure on margins.
Financial difficulties experienced by our suppliers could result in product delays or shortages. Additionally, it is
unknown when the broader national economy will improve. An economy that continues to deteriorate or fails to
improve could 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 our credit facility, or otherwise negatively impact
our business and financial results.
We may not be able to continue to convince 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 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 consump-
tion 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 2009, outbreaks of E. coli in certain beef food products caused consumers to avoid
certain products. In addition, outbreaks of salmonella in certain peanuts and peanut butter products, jalapenos and
spinach caused consumers to avoid such products. 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 confidential and proprietary information is very important
to our business and competitive position. Our primary trademarks, Panera», Panera Bread», Saint Louis Bread
Co.», Paradise Bakery & Café», Via Panera», and the 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.
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