Panera Bread 2011 Annual Report Download - page 68

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Lease Guarantees
As of December 27, 2011, the Company guaranteed operating leases of 25 franchisee or affiliate bakery-cafes, which the Company
accounted for in accordance with the accounting requirements for guarantees. These leases have terms expiring on various dates
from January 31, 2012 to December 31, 2023 and have a potential amount of future rental payments of approximately $23.6 million
as of December 27, 2011. The obligation from these leases will generally continue to decrease over time as these operating leases
expire. The Company has not recorded a liability for certain of these guarantees as they arose prior to the implementation of the
accounting requirements for guarantees and, unless modified, are exempt from its requirements. The Company has not recorded
a liability for those guarantees issued after the effective date of the accounting requirements because the fair value of each such
lease guarantee was determined by the Company to be insignificant based on analysis of the facts and circumstances of each such
lease and each such franchisee’s performance, and the Company did not believe it was probable it would be required to perform
under any guarantees at the time the guarantees were issued. The Company has not had to make any payments related to any of
these guaranteed leases. Applicable franchisees or affiliates continue to have primary liability for these operating leases. As of
December 27, 2011, future commitments under these leases were as follows (in thousands):
Fiscal Years
2012
$ 3,253
2013
3,211
2014
3,080
2015
2,292
2016
1,896
Thereafter
9,896
Total
$ 23,628
Employee Commitments
The Company has executed Confidential and Proprietary Information and Non-Competition Agreements (“Non-Compete
Agreements”) with certain employees. These Non-Compete Agreements contain a provision whereby employees would be due a
certain number of weeks of their salary if their employment was terminated by the Company as specified in the Non-Compete
Agreement. The Company has not recorded a liability for these amounts potentially due employees. Rather, the Company will
record a liability for these amounts when an amount becomes due to an employee in accordance with the appropriate authoritative
literature. As of December 27, 2011, the total amount potentially owed employees under these Non-Compete Agreements was
$16.5 million.
Related Party Credit Agreement
On September 10, 2008, the Company’s Canadian subsidiary, Panera Bread ULC, as lender, entered into a Cdn. $3.5 million
secured revolving credit facility agreement and franchise agreements with Millennium Bread Inc., (“Millennium”), as borrower,
and certain of Millennium’s present and future subsidiaries (the “Franchisee Guarantors”), pursuant to which Millennium would
operate three Panera Bread bakery-cafes in Ontario, Canada. On April 7, 2009, Millennium requested a Cdn. $3.5 million advance
under the credit agreement for payment of the costs to develop the bakery-cafes, which was included in other accounts receivable
in the Consolidated Balance Sheets as of December 29, 2009. The proceeds from the credit facility were used by Millennium to
pay costs to develop and construct the Franchisee Guarantors bakery-cafes and for their day-to-day operating requirements. On
March 31, 2010, the credit facility was terminated through a separate transaction with Millennium, as described in Note 4.