Panera Bread 2012 Annual Report Download - page 20

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financial and management resources, we may suffer from adverse publicity that could harm our brand, regardless of whether the
allegations are valid or whether we are liable. Moreover, we are subject to the same risks of adverse publicity resulting from
allegations even if the claim involves one of our franchisees. A judgment significantly in excess of our insurance coverage for any
claims could materially and adversely affect our consolidated financial condition or results of operations. Additionally, publicity
about these claims may harm our reputation or prospects and adversely affect our results.
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 are essential 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 to
defend against, 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.
We rely heavily on information technology and any material failure, interruption, or security breach in our systems could
adversely affect our business.
We rely heavily on information technology systems across our operations, including for the order and delivery of fresh dough
from our fresh dough facilities, point-of-sale processing in our bakery-cafes, gift and loyalty cards, online business, and various
other processes and transactions, including the storage of employee and customer information. Our ability to effectively manage
our business and coordinate the production, distribution, and sale of our products depends significantly on the reliability and
capacity of these systems. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement
systems, or a breach in security of these systems could cause delays in product sales and reduced efficiency of our operations, and
significant capital investments could be required to remediate the problem. Additionally, if a person is able to circumvent the
security measures intended to protect our employee or customer private data, he or she could destroy or steal valuable information
or disrupt our operations, which could significantly harm our reputation or result in litigation against us or the imposition of
penalties.
We expect to increase investments in our systems in fiscal 2013 to provide greater access for customers, increase operational
capabilities, and improve our core enterprise systems.
Operational excellence and the continued improvement of our customer experience are among our highest priorities. As a result,
we expect to make increased investments during fiscal 2013 in technology infrastructure, and the labor necessary to support this
technology, in areas designed to positively impact the way in which our customers interact with us, including through the ordering
process, food production and finally through the delivery of food to the customer. Our inability to accurately predict the costs of
such initiatives or our failure to generate revenue and corresponding profits from such activities and investments could negatively
impact our financial results.
We periodically acquire existing bakery-cafes from our franchisees or ownership interests in other restaurant or bakery-
cafe concepts, which could adversely affect our consolidated results of operations.
Periodically, we have acquired existing bakery-cafes from our franchisees either by negotiated agreement or exercise of our rights
of first refusal under the franchise and area development agreements. Any acquisition that we undertake involves risk, including:
• our ability to successfully achieve anticipated synergies, accurately assess contingent and other liabilities as well as
potential profitability;