Panera Bread 2011 Annual Report Download - page 18

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Furthermore, our consolidated results of operations include revenues derived from royalties on sales from, and revenues from
sales by our fresh dough facilities to, franchise-operated bakery-cafes. As a result, our growth expectations and revenues could
be negatively impacted by a material downturn in sales at and to franchise-operated bakery-cafes or if one or more key franchisees
becomes insolvent and unable to pay us royalties.
Although we have been able to successfully manage our growth to date, we may experience difficulties doing so in the
future.
Our growth strategy includes selectively opening bakery-cafes in urban trade areas where we may have little operating experience.
Accordingly, there can be no assurance that a bakery-cafe opened in such trade areas will have similar operating results, including
average weekly net sales, as our existing bakery-cafes. New markets may not perform as expected or may take longer to reach
planned operating levels, if at all. Operating results or overall bakery-cafe performance in these urban trade areas could vary as a
result of higher construction, occupancy, or general operating costs, a lack of familiarity with our brand which may require us to
build local brand awareness, differing demographics, consumer tastes, and spending patterns, and variable competitive
environments. Additional expenses attributable to costs of delivery from our fresh dough facilities may exceed our expectations
in areas not currently served by those facilities.
Our growth strategy also includes opening bakery-cafes in existing markets to increase the penetration rate of our bakery-cafes
in those markets. There can be no assurance we will be successful in operating bakery-cafes profitably in new markets or further
penetrating existing markets.
We may not be successful in implementing important strategic initiatives, which may have an adverse impact on our
business and consolidated financial results.
Our business depends upon our ability to continue to grow and evolve through various important strategic initiatives. There can
be no assurance that we will be able to implement these important strategic initiatives, which could in turn adversely affect our
business. These strategic initiatives include:
• introducing desirable new menu items and improving existing items consistent with customer tastes and expectations;
• balancing unit growth while meeting target returns on invested capital for locations;
• increasing same store sales and gross profit per transaction through investments in areas such as category management,
catering, and technology in an effort to increase overall traffic and transaction count; and
• increasing brand awareness through greater investment in multi-channel marketing and advertising, including national
television advertising.
Our failure or inability to protect our trademarks or other proprietary rights could adversely affect our business and
competitive position.
We believe that our intellectual property and confidential and proprietary information is very important to our business and
competitive position. Our primary trademarks, Panera®, Panera Bread®, Saint Louis Bread Co.®, Panera Catering®, You Pick Two®,
Paradise Bakery®, Paradise Bakery & Café®, the Mother Bread® design, and MyPanera® along with other trademarks, copyrights,
service marks, trade secrets, confidential and proprietary information, and other intellectual property rights, are key components
of our operating and marketing strategies. Although we have taken steps to protect our brand, intellectual property, and confidential
and proprietary information, these steps may not be adequate. Unauthorized usage or imitation by others could harm our image,
brand, or competitive position and, if we commence litigation to enforce our rights, cause us to incur significant legal fees.
We are not aware of any assertions that our trademarks or menu offerings infringe upon the proprietary rights of third parties, but
third parties may claim infringement by us in the future. Any such claim, whether or not it has merit, could be time-consuming,
result in costly litigation, cause delays in marketing or introducing new menu items in the future, or require us to enter into royalty
or licensing agreements. As a result, any such claim could have a material adverse effect on our business, consolidated financial
condition and results of operations.
We try to ensure that our franchisees maintain and protect our brand and our confidential and proprietary information. However,
since our franchisees are independent third parties that we do not control, if they do not operate their bakery-cafes in a manner
consistent with their agreements with us, our brand and reputation or the value of our confidential and proprietary information
could be harmed. If this occurs, our business and operating results could be adversely affected.