Panera Bread 2012 Annual Report Download - page 11

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of our overall guest experience by investing in technology to impact the ordering process, food production and the delivery of
food to the customer. To develop a strong connection with our customers, our bakery-cafes are staffed by engaging associates who
are skilled at and passionate about their jobs. Additionally, we believe high-quality restaurant management is critical to our long-
term success and, as such, we provide detailed operations manuals and hands-on training to each of our associates. We train our
associates both in small group and individual settings. Our systems have been created to educate our associates so each one is well
prepared to respond to a customer’s questions and create a better dining experience. Furthermore, we believe our commitment to
maintaining staffing levels and competitive compensation for our associates is fundamental to our current and future success.
We believe in providing bakery-cafe operators the opportunity to share in the success of the bakery-cafe. Through our Joint Venture
Program, selected general managers and multi-unit managers may participate in a bonus program, which is based upon a percentage
of the store profit of the bakery-cafes they operate, generally over a period of five years (subject to annual minimums and
maximums). We believe the program’s multi-year approach improves operator quality, management retention, and creates team
stability, which generally results in a higher level of consistency and customer service for a particular bakery-cafe. It also leads
to stronger associate engagement and customer loyalty. Currently, approximately fifty percent of our Company-owned bakery-
cafe operators participate in the Joint Venture Program. We believe this program is a fundamental underpinning of our low rate
of management turnover and operational improvements.
Marketing
We are committed to improving the customer experience in ways we believe few in our industry have done. We use our scale to
execute a broader marketing strategy, not simply to build name recognition and awareness, but also to build deeper relationships
with our customers who we believe will help promote our brand.
To reach our target customer group, we advertise through a mix of mediums, including radio, billboards, social networking, and
the internet. In addition, we market through a national cable television campaign as a way to reach a broader audience. We expect
to continue to increase media impressions as we strive to build deeper relationships with our customers. We believe that additional
marketing will help us improve and increase recognition of the Panera brand and competitive differentiation. Our MyPanera
customer loyalty program allows our customers to earn rewards based on registration in the program and purchases from our
bakery-cafes. We believe MyPanera has allowed us to build deeper relationships with our customers by enhancing their experience
with us through receipt of rewards and enticing them to return to our bakery-cafes. Further, MyPanera offers Panera valuable
insight into the preferences of our customers to help further refine our marketing message and menu design. At the end of fiscal
2012, the MyPanera program had over 12.9 million members.
Our franchise agreements generally require our franchisees to contribute to advertising expenses. During the first quarter of fiscal
2012, our franchise-operated bakery-cafes contributed 1.2 percent of their net sales to a national advertising fund, paid us a
marketing administration fee of 0.4 percent of their net sales, and were required to spend 2.0 percent of their net sales on advertising
in their respective local markets. For the remainder of fiscal 2012, our franchise-operated bakery-cafes contributed 1.6 percent of
their net sales to a national advertising fund, paid us a marketing administration fee of 0.4 percent of their net sales, and were
required to spend 1.6 percent of their net sales on advertising in their respective local markets. Under the terms of our franchise
agreements, we have the ability to increase national advertising fund contributions from current levels up to a maximum of
2.6 percent of net sales. The national advertising fund and marketing administration contributions from our franchise-operated
bakery-cafes are consolidated in our financial statements with amounts contributed by us. We contributed the same net sales
percentages from Company-owned bakery-cafes towards the national advertising fund and marketing administration fee.
We have established and may in the future establish local and/or regional advertising associations covering specific geographic
regions for the purpose of promoting and advertising the bakery-cafes located in that geographic market. If we establish an
advertising association in a specific market, the franchise group in that market must participate in the association, including making
contributions in accordance with the advertising association bylaws. Franchise contributions to the advertising association are
credited towards the franchise groups’ required local advertising spending.
Capital Resources and Deployment of Capital
Our primary capital resource is cash generated by operations. We also have access to a $250.0 million credit facility. During fiscal
2012 we had no borrowings outstanding.
Our capital requirements, including development costs related to the opening or acquisition of additional Company-owned bakery-
cafes and fresh dough facilities and maintenance and remodel expenditures, have been and will continue to be significant. However,
we believe our cash flow from operations and available borrowings under our existing credit facility will be sufficient to fund our
capital requirements for the foreseeable future.