Panera Bread 2010 Annual Report Download - page 10

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New product rollouts are integrated into periodic or seasonal menu rotations, referred to as “Celebrations”.
Examples of products we introduced in fiscal 2010 include the Mediterranean Salmon Salad, Salmon Club, and
Salmon Caesar, which were launched in the first Celebration of 2010. The Cuban Chicken Panini, All Natural Steak
Chili with Cornbread Crumbles, and Asiago Bagel Breakfast Sandwich were also added to help build on the success
of those products. Additionally, we introduced a Strawberry and Cream Scone, Apple Crunch Muffin, Seasonal Iced
Cookies, and a Mint Crinkle Cookie.
We believe our menu innovation is one reason our value scores with customers remain so strong. Zagat’s 2010
consumer-generated National Restaurants Chains Survey for eating on-the-go rates us number one among chain
restaurants with fewer than 5,000 locations in the following categories: Most Popular, Best Salad, and Best
Facilities while ranking us second in Healthy Options, Best Value, and Best Breakfast Sandwich.
OPERATIONAL EXCELLENCE
We believe that operational excellence is the most important element of Panera Warmth and that without strong
execution and operational skills, it is difficult to build and maintain a strong relationship with our customers. To
develop a strong connection with our customers, we need energized associates who are skilled at and love their jobs.
Additionally, we believe high-quality restaurant management is critical to our long-term success and, as such, we
provide detailed operations manuals and hands-on training to each of our associates. We train our associates both in
small group and individual settings. Our systems have been created to educate our associates so each one is well
prepared to respond to a customer’s questions and create a better dining experience. Furthermore, we believe our
commitment to maintaining staffing levels and competitive compensation for our associates is fundamental to our
current and future success.
We believe in providing bakery-cafe operators the opportunity to share in the success of the bakery-cafe.
Through our Joint Venture Program, we provide selected general managers and multi-unit managers with a multi-
year bonus program (subject to annual minimums and maximums), which is based upon a percentage of the cash
flows of the bakery-cafes they operate. The program’s five-year period improves operator quality, management
retention, and creates team stability, generally resulting in a higher level of consistency and customer service for
that bakery-cafe. It also leads to stronger associate engagement and customer loyalty. Currently, approximately fifty
percent of our Company-owned bakery-cafe operators participate in the Joint Venture Program. We believe this
program is a fundamental underpinning of our low management turnover and operational improvements.
MARKETING
We are committed to improving the customer experience in ways we believe few in our industry have done. We
use our scale to execute a broader marketing strategy, not simply to build name recognition and awareness, but also
to build deeper relationships with our customers who we believe will help promote our brand.
To reach our target customer group, we use a mix of the following mediums: radio, billboards, social
networking, television, and in-store sampling days. We expect to continue to increase media impressions as we
strive to build deeper relationships with our customers. We believe marketing represents an opportunity for us to
further leverage our scale with our customers and create additional competitive advantage. In fiscal 2010, we
completed the rollout of our MyPanera customer loyalty program through which our customers earn rewards based
on registration in the program and purchases from our bakery-cafes. We believe MyPanera will allow us to build
deeper relationships with our customers by enhancing their experience with us through receipt of rewards and
enticing them to return to our bakery-cafes.
Our franchise agreements generally require our franchisees to pay us advertising fees. In the first two quarters
of fiscal 2010, our franchise-operated bakery-cafes contributed 0.7 percent of their net sales to a national advertising
fund, paid us a marketing administration fee of 0.4 percent of their net sales, and were required to spend 2.0 percent
of their net sales on advertising in their respective local markets. As of June 30, 2010, the first day of our fiscal third
quarter, franchisee contributions to the national advertising fund were increased to 1.2 percent of their net sales to
support a continued increase in marketing activities. We contributed the same net sales percentages from Company-
owned bakery-cafes towards the national advertising fund and marketing administration fee. Under the terms of our
franchise agreements, we have the ability to increase national advertising fund contributions from current levels up
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