Panera Bread 2012 Annual Report Download - page 22

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sales tax collection policies. If we are unable to resolve these challenges favorably, we could incur additional tax liability, including
interest and penalties. If material, payment of such additional amounts upon final adjudication, or resolution of any disputes, could
have a material impact on our consolidated financial position and results of operations.
A regional or global health pandemic could severely affect our business.
A health pandemic is a disease outbreak that spreads rapidly and widely by infection and affects many individuals in an area or
population at the same time. If a regional or global health pandemic occurs, depending upon its duration, location, and severity,
our business could be severely affected. Generally, we are viewed by our customers as an “everyday oasis”, a friendly, all day
destination where people can gather with family, friends, and business colleagues. Customers might avoid public gathering places
in the event of a health pandemic, and local, regional, or national governments might limit or ban public gatherings to halt or delay
the spread of disease. A regional or global health pandemic might also adversely impact our business by disrupting or delaying
production and delivery of ingredients and products in our supply chain and by causing staffing shortages in our bakery-cafes.
The impact of a health pandemic might be disproportionately greater on us than on other companies that depend less on the
gathering of people for the sale of their products.
Regional factors could negatively impact our consolidated results of operations.
There are several states in which we, our franchisees, or both own and operate a significant number of bakery-cafes. As a result,
the economic conditions, state and local laws, government regulations, and weather conditions affecting those particular states,
or a geographic region generally, may have a material impact upon our consolidated results of operations.
Failure to meet market expectations for our financial performance would likely adversely affect the market price of our
stock.
The public trading of our stock is based in large part on market expectations that our business would continue to grow and that
we would achieve certain levels of financial performance. Should we fail to meet market expectations going forward, particularly
with respect to comparable net bakery-cafe sales revenues, operating margins, and diluted earnings per share, the market price of
our stock would likely decline.
The effect of recent changes to healthcare laws in the United States may significantly increase our healthcare costs and
negatively impact our financial results.
We offer eligible full-time and part-time U.S. employees the opportunity to enroll in healthcare coverage subsidized by us. For
various reasons, many of our eligible employees currently choose not to participate in our healthcare plans. However, changes to
the U.S. healthcare laws that become effective in 2014 may lead some eligible employees who currently do not participate in our
healthcare plans to enroll for coverage. Such changes in the law include the imposition of a penalty on an individual who does
not obtain healthcare coverage and provisions making certain individuals who can obtain employer coverage ineligible for
healthcare premium tax subsidies that would otherwise be available in connection with the purchase of coverage through an
exchange. If a significant number of eligible employees who do not currently participate in our healthcare plans, or who currently
participate in our lower cost limited coverage plan, choose to enroll once the changes in law are effective, our healthcare costs
may increase significantly and negatively impact our financial results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The average size of a Company-owned bakery-cafe as of December 25, 2012 was approximately 4,500 square feet. The square
footage of each of our fresh dough facilities is provided below. We lease nearly all of our bakery-cafe locations, fresh dough
facilities, and support centers. The reasonably assured lease term for most bakery-cafe and support center leases is the initial non-
cancelable lease term plus one renewal option period, which generally equates to 15 years. The reasonably assured lease term for
most fresh dough facility leases is the initial non-cancelable lease term plus one to two renewal periods, which generally equates
to 20 years. Lease terms generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance,
and other operating costs. Certain bakery-cafe leases provide for contingent rental (i.e. percentage rent) payments based on sales
in excess of specified amounts or changes in external indices, scheduled rent increases during the lease terms, and/or rental payments
commencing at a date other than the date of initial occupancy. See Note 2 to the consolidated financial statements for further
information on our accounting for leases.