Panera Bread 2011 Annual Report Download - page 17

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Customer preferences and traffic could be negatively impacted by health concerns about the consumption of certain
products.
Customer preferences and traffic could be impacted by health concerns about the consumption of particular food products and
could cause a decline in our sales. Negative publicity about ingredients, poor food quality, a production run of items produced in
our fresh dough facilities, food-borne illness, injury, health concerns, allergens, or nutritional content could cause customers to
shift their preferences. For example, past outbreaks of E. coli in certain beef food products caused consumers to avoid certain
products and restaurant chains. In addition, outbreaks of salmonella in certain peanuts and peanut butter products, jalapenos and
spinach caused consumers to avoid such products. These problems, other food-borne illnesses (such as hepatitis A or trichinosis),
and injuries caused by food tampering have in the past, and could in the future, require us to temporarily close bakery-cafes or
adversely affect the price and availability of affected ingredients and cause customers to shift their preferences, particularly if we
choose to pass any higher ingredient costs along to consumers. Negative publicity concerning particular food products may
adversely affect demand for our products and could cause an increase in our food costs as a result of potentially irregular supply
of such products and a decrease in customer traffic to our bakery-cafes.
Our ability to increase our revenues and operating profits could be adversely affected if we are unable to execute our
growth strategy or achieve sufficient returns on invested capital in bakery-cafe locations.
Our growth strategy primarily consists of new market development and further penetration of existing markets, both by us and
our franchisees, including the selection of sites which will achieve targeted returns on invested capital. The success of this strategy
depends on numerous factors that are not completely controlled by us or involve risks that may impact the development, or timing
of development, of our bakery-cafes. Our ability to grow the number of bakery-cafes successfully will depend on a number of
factors, including:
• general economic conditions;
• obstacles to hiring and training qualified operating personnel in the local market;
• identification and availability of suitable locations for new bakery-cafes on acceptable terms, including costs and
appropriate delivery distances from our fresh dough facilities;
• competition for restaurant sites;
• variations in the number and timing of bakery-cafe openings as compared to our construction schedule;
• management of the costs of construction of bakery-cafes, particularly factors outside our control, such as the timing of
delivery of a leased location by the landlord;
• our ability to negotiate favorable economic and business terms;
• securing required governmental approvals and permits and complying with applicable zoning, land use, and environmental
regulations; and
• impact of inclement weather, natural disasters, and other acts of nature.
Our growth strategy also includes continued development of bakery-cafes through franchising. At December 27, 2011,
approximately 52.0 percent of our bakery-cafes were operated by franchisees (801 franchise-operated bakery-cafes out of a total
of 1,541 bakery-cafes system-wide). The opening and successful operation of bakery-cafes by franchisees depends on a number
of factors, including those identified above, as well as the availability of suitable franchise candidates and the financial and other
resources of our franchisees such as our franchisees’ ability to receive financing from banks and other financial institutions, which
may become more challenging in the current economic environment.
Our success in part depends on the success of our franchisees business.
Our success depends in part on the operations of our independent franchisees. While we provide training and support to, and
monitor the operations of, our franchisees, the product quality and service they deliver may be diminished by any number of factors
beyond our control, including financial pressures. We believe customers expect the same quality of products and service from our
franchisees as they do from us and we strive to ensure customers have the same experience whether they visit a Company-owned
or franchise-operated bakery-cafe. Any problems which originate with one of our franchisees, particularly an issue affecting the
quality of the service experience, the safety of our products, or compliance with laws and regulations, may be attributed by
customers to us, thus damaging our reputation and brand value and potentially affecting our results of operations.