Panera Bread 2011 Annual Report Download - page 16

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Disruptions or supply issues in our fresh dough facilities could adversely affect our business and consolidated results of
operations.
We operate 22 fresh dough facilities, which service substantially all of our Company-owned and franchise-operated bakery-cafes
in the United States and Ontario, Canada. Our fresh dough and other product distribution system delivers fresh dough and other
products daily to the bakery-cafes through a leased fleet of temperature controlled vehicles. The optimal maximum distribution
range is approximately 300 miles; although, when necessary, the distribution range may reach up to 500 miles. As a result, any
prolonged disruption in the operations of or distribution from any of our fresh dough facilities, whether due to weather conditions,
technical or labor difficulties, destruction, or damage to the vehicle fleet or facility or other reasons, could cause a shortage of
fresh dough and other products at our bakery-cafes. Such a shortage of fresh dough and other products could, depending on the
extent and duration, have a material adverse effect on our business and consolidated results of operations.
Additionally, while fuel costs remained relatively constant in 2011 and 2010, given the historical volatility of these costs, increased
costs and distribution issues related to fuel and utilities could also materially impact our business and consolidated results of
operations, including efficiencies in distribution from our fresh dough facilities to our bakery-cafes.
Our Franklin, Massachusetts fresh dough facility manufactures and supplies through its distributors all of the cream cheese and
tuna used in most of our Company-owned and franchise-operated bakery-cafes in the United States. Although we believe we have
adopted adequate quality assurance and other procedures to ensure the production and distribution of quality products and
ingredients, we may be subject to allegations regarding quality, health, or other similar concerns that could have a negative impact
on our operations, whether or not the allegations are valid or we are liable. Additionally, defending against such claims or litigation
could be costly and the results uncertain.
Economic conditions in the United States and globally could adversely affect our business and financial results and have
a material adverse effect on our liquidity and capital resources as well as that of our suppliers.
As our business depends upon discretionary consumer spending, our financial results may be impacted by the broader global
economic conditions and their impact on consumer spending. Our customers may make fewer discretionary purchases as a result
of job losses, foreclosures, bankruptcies, reduced access to credit and falling home prices. Because a key point in our business
strategy is maintaining our transaction counts, average check amount and margin growth, any significant decrease in customer
traffic or average profit per transaction resulting from fewer purchases from our customers or our customers trading down to lower
priced products on our menu will negatively impact our financial performance. Financial difficulties experienced by our suppliers
could result in product delays or shortages. Although there has been some improvement in certain economic indicators, the level
of consumer spending across the United States is not where it was prior to the global recession. A stagnant economy or a renewed
decline in consumer spending could have a material adverse effect on our liquidity and capital resources including our ability to
raise additional capital if needed, the willingness of banks to renew our credit facility upon its expiration on March 7, 2013 or
honor our draws thereunder, or otherwise negatively impact our business and financial results.
We may not be able to continue to convince our customers of the benefits of paying our prices for higher-quality food.
Our success depends in large part on our continued ability to convince customers that food made with higher-quality ingredients,
including antibiotic-free chicken and turkey, nitrate-free proteins, and our artisan breads, is worth the prices at our bakery-cafes
relative to lower prices offered by some of our competitors, particularly those in the quick-service segment. Our inability to
successfully educate customers about the quality of our food or our customers’ rejection of our pricing approach could require us
to change our pricing, marketing, or promotional strategies, which could materially and adversely affect our consolidated financial
results or the brand identity that we have tried to create.