Panera Bread 2010 Annual Report Download - page 11

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to a maximum of 2.6 percent of net sales. The national advertising fund and marketing administration contributions
received from our franchise-operated bakery-cafes are consolidated in our financial statements with amounts
contributed by us.
We have established and may in the future establish local and/or regional advertising associations covering
specific geographic regions for the purpose of promoting and advertising the bakery-cafes located in that
geographic market. If we establish an advertising association in a specific market, the franchise group in that
market must participate in the association, including making contributions in accordance with the advertising
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 $250.0 million credit
facility. During fiscal 2010 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 bakery-cafe 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. This process is designed to ensure we have the appropriate size
bakery-cafe and deploy capital 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 was approximately 4,600 square feet as of December 28, 2010. 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 maintenance, 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 or changes in
external indices. 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 42 Company-owned
bakery-cafes that opened in fiscal 2010 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.
On November 17, 2009, our Board of Directors approved a three year share repurchase authorization of up to
$600.0 million of our Class A common stock, pursuant to which share repurchases may be effected from time to
time on the open market or in privately negotiated transactions and may be made under a Rule 10b5-1 plan.
Repurchased shares may be retired immediately and resume the status of authorized but unissued shares or may be
held by us as treasury stock. This repurchase authorization is reviewed quarterly by our Board of Directors and may
be modified, suspended, or discontinued at any time. Since the repurchase authorization was approved, we have
repurchased 1,932,969 shares at a weighted-average price of $78.50 for an aggregate purchase price of approx-
imately $152.0 million. We have approximately $448.0 million available under the existing $600.0 million
repurchase authorization.
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