Panera Bread 2011 Annual Report Download - page 12

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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 27, 2011. We lease all but two of our bakery-cafe locations and all of our 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 53 Company-owned bakery-cafes that opened
in fiscal 2011 was approximately $950,000 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 we may repurchase shares 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 2,810,069 shares at a weighted-average price of $86.33 for an aggregate purchase price of
approximately $242.6 million. We have approximately $357.4 million available under the existing $600.0 million repurchase
authorization.
Franchise Operations
Our franchisees, which as of December 27, 2011, operated approximately 52.0 percent of our bakery-cafes, are comprised of 40
franchise groups with an average of approximately 20 bakery-cafes per group. We are selective in granting franchises, and applicants
must meet specific criteria in order to gain consideration for a franchise. Generally, our franchisees must be well-capitalized to
open bakery-cafes, meet a negotiated development schedule, and have a proven track record as a multi-unit restaurant operator.
Additional qualifications include minimum net worth and liquidity requirements, infrastructure and resources to meet our
development schedule, and a commitment to the development of our brand. If these qualifications are not met, we may still consider
granting a franchise depending on the market and the particular circumstances.
As of December 27, 2011, we had 801 franchise-operated bakery-cafes open, all located in the United States, and we have received
commitments to open 195 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 of these
bakery-cafes to open in the next four to five years. The ADAs require a franchisee to develop a specified number of bakery-cafes
on or before specific 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 area developers, 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 our ADAs and franchise agreements if we determine such action is warranted under the particular
circumstances.
The revenues we receive from a typical ADA include a franchise fee of $35,000 per bakery-cafe (of which we generally receive
$5,000 at the signing of the ADA and $30,000 at or before the bakery-cafe opening) and continuing royalties, which are generally
4 percent to 5 percent of net sales per bakery-cafe. Franchise royalties and fees in fiscal 2011 were $92.8 million, or 5.1 percent
of our total revenues. Our franchise-operated bakery-cafes follow the same protocol for in-store operating standards, product
quality, menu, site selection, and bakery-cafe construction as Company-owned bakery-cafes. Generally, franchisees are required
to purchase all of their fresh dough and other products from us or sources approved by us. Our fresh dough facility system supplies
fresh dough and other products to substantially all franchise-operated bakery-cafes. We do not generally finance franchisee
construction or ADA payments. From time to time and on a limited basis, we may provide certain development or real estate
services to franchisees in exchange for a payment equal to the total costs of the services plus an additional fee. As of December 27,
2011, we did not hold an equity interest in any of our franchise-operated bakery-cafes.