Panera Bread 2010 Annual Report Download - page 39

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$1.5 million in fiscal 2008. The components of franchise royalties and fees for the periods indicated are as follows
(in thousands):
December 29,
2009
December 30,
2008
For the Fiscal Year Ended
Franchise royalties ........................................ $77,119 $72,565
Franchise fees ........................................... 1,248 2,235
Total ................................................ $78,367 $74,800
The increase in franchise royalty and fee revenues in fiscal 2009 compared to the prior fiscal year was
attributed to the opening of 39 new franchise-operated bakery-cafes and, to a lesser extent, the 2.0 percent increase
in comparable franchise-operated net bakery-cafe sales in fiscal 2009, which included the additional week of sales
in fiscal 2008, partially offset by the closure of seven franchise-operated bakery-cafes. The average weekly net sales
per franchise-operated bakery-cafe and the related number of operating weeks for the periods indicated are as
follows:
December 29,
2009
December 30,
2008
Percentage
Change
For the Fiscal Year Ended
Franchise average weekly net sales .................. $40,566 $40,126 1.1%
Franchise number of operating weeks ................ 40,436 38,449 5.2%
As of December 29, 2009, there were 795 franchise-operated bakery-cafes open and 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 to
open in the next four to five years. An ADA requires a franchisee to develop a specified number of bakery-cafes by
specified dates. If a franchisee fails to develop bakery-cafes on schedule, we have the right to terminate the ADA
and develop Company-owned locations or develop locations through new franchisees in that market. We may
exercise one or more alternative remedies to address defaults by franchisees, including not only development
defaults, but also defaults in complying with our operating and brand standards and other covenants under the ADAs
and franchise agreements. We may waive compliance with certain requirements under its ADAs and franchise
agreements if we determine that such action is warranted under the particular circumstances.
Fresh dough and other product sales to franchisees in fiscal 2009 increased 3.5 percent to $121.9 million
compared to $117.8 million in fiscal 2008, which included the impact from the additional week of fresh dough and
other product sales to franchisees of approximately $2.2 million in fiscal 2008. The increase in fresh dough and
other product sales to franchisees was primarily driven by the previously described increased number of franchise-
operated bakery-cafes opened since the prior fiscal year and due to the year-over-year roll in of increases in our sales
prices of dough products to franchisees taken in the second half of fiscal 2008, partially offset by the closure of
seven franchise-operated bakery-cafes.
Costs and Expenses
The cost of food and paper products includes the costs associated with the fresh dough operations that sell fresh
dough and other products to Company-owned bakery-cafes, as well as the cost of food and paper products supplied
by third-party vendors and distributors. The costs associated with the fresh dough operations that sell fresh dough
and other products to franchise-operated bakery-cafes are excluded and are shown separately as fresh dough and
other product cost of sales to franchisees in the Consolidated Statements of Operations.
The cost of food and paper products was $337.6 million, or 29.3 percent of net bakery-cafe sales in fiscal 2009
compared to $332.7 million, or 30.1 percent of net bakery-cafe sales, in fiscal 2008. This decrease in the cost of food
and paper products as a percentage of net bakery-cafe sales was principally due to decreases in certain commodity
costs, including wheat and fuel, category management initiatives such as product mix management and pricing
strategy; cost savings in procurement; and improved leverage of our fresh dough manufacturing costs due to
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