Panera Bread 2009 Annual Report Download - page 17

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•securing required governmental approvals and permits and complying with applicable zoning, land use and
environmental regulations; and
•general economic conditions.
Our growth strategy in part depends on continued development by our franchisees. If our franchisees do
not continue to successfully finance and open new bakery-cafes, our business could be adversely affected.
Our growth strategy includes continued development of bakery-cafes through franchising. At December 29,
2009, approximately 57.6 percent of our bakery-cafes were operated by franchisees (795 franchise-operated
bakery-cafes out of a total of 1,380 bakery-cafes system-wide). The opening and success of bakery-cafes by
franchisees depends on a number of factors, including those identified above, as well as the availability of suitable
franchise candidates and the financial and other resources of our franchisees such as our franchisees’ ability to
receive financing from banks and other financial institutions, which may become more challenging in the current
economic environment.
Additionally, our results of operations include revenues derived from royalties on sales from, and revenues
from sales by our fresh dough facilities to, franchise-operated bakery-cafes. As a result, our growth expectations and
revenue could be negatively impacted by a material downturn in sales at and to franchise-operated bakery-cafes or if
one or more key franchisees becomes insolvent and unable to pay us our royalties.
Although we have been able to successfully manage our growth to date, we may experience difficulties
doing so in the future.
Our growth strategy includes opening bakery-cafes in new markets where we may have little or no operating
experience. Accordingly, there can be no assurance that a bakery-cafe opened in a new market will have similar
operating results, including average store sales, as our existing bakery-cafes. Bakery-cafes opened in new markets
may not perform as expected or may take longer to reach planned operating levels, if at all. Operating results or overall
bakery-cafe performance could vary as a result of higher construction, occupancy or general operating costs, a lack of
familiarity with our brand which may require us to build local brand awareness, differing demographics, consumer
tastes and spending patterns, and variable competitive environments. Additional expenses attributable to costs of
delivery from our fresh dough facilities may exceed our expectations in areas not currently served by those facilities.
Our growth strategy also includes opening bakery-cafes in existing markets to increase the penetration rate of
our bakery-cafes in those markets. There can be no assurance we will be successful in operating bakery-cafes
profitably in new markets or further penetrating existing markets.
We operate in Canada and may expand into other foreign markets and therefore, we may be exposed to
uncertainties and risks that could negatively impact our results of operations.
We expanded our operations into Canadian markets by opening two franchise-operated bakery-cafes in the
fourth quarter of 2008 and a third franchise-operated bakery-cafe at the beginning of the first quarter of 2009. Our
expansion into Canada has made us subject to Canadian economic conditions, particularly currency exchange rate
fluctuations, and political factors, either of which could have a material adverse effect on our financial condition
and results of operations if our Canadian operations continue to expand. In addition, if we expand into other foreign
markets, we will be subject to other foreign economic conditions and political factors including, but not limited to,
taxation, inflation, currency fluctuations, increased regulations and quotas, tariffs and other protectionist measures.
Further, we may be exposed to new forms of competition not present in our domestic markets, as well as subject to
potentially different demographic tastes and preferences for our products.
If we fail to comply with governmental laws or regulations or if these laws or regulations change, our
business could suffer.
In connection with the operation of our business, we are subject to extensive federal, state, local and foreign
laws and regulations, including those related to:
•franchise relationships;
•building construction and zoning requirements;
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