Panera Bread 2013 Annual Report Download - page 11

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Operational Excellence
We believe that operational excellence is the most important element of Panera Warmth and without strong execution and operational
skills, it is difficult to build and maintain a strong relationship with our customers. We have made and continue to make significant
investments to enhance our in-bakery-cafe foundational capabilities and to improve the quality of a customer's visit through
enhancements in technology, equipment, and processes that should enable a better guest experience. To develop a strong connection
with our customers, our bakery-cafes are staffed by skilled and engaging associates. 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 investing in staffing levels necessary to service growth in revenues, along with
maintaining competitive compensation for our associates, is fundamental to our 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 and 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 45 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 brand 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. During
the first quarter of fiscal 2014, we will launch a national advertising campaign, with a greater focus in television, to increase media
impressions as we strive to build deeper relationships with our customers. We believe our shift to a greater emphasis on national
advertising will help us improve and increase recognition of our 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 their receipt of rewards and enticing them to return to our bakery-cafes. Further, MyPanera offers us
valuable insight into the preferences of our customers to help us further refine our marketing message and menu design. At the
end of fiscal 2013, approximately 16 million customers were enrolled in MyPanera, and during fiscal 2013, approximately 50
percent of our transactions in our bakery-cafes were attached to a MyPanera loyalty program card.
Our franchise agreements generally require our franchisees to contribute to advertising expenses. For fiscal 2013, our franchise-
operated bakery-cafes contributed 1.8 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
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. In support of the commencement of our national advertising
campaign, in fiscal 2014, the national advertising fund contribution percentage will increase to the maximum of 2.6 percent of
net sales but the marketing administration fee of 0.4 percent of net sales will remain unchanged. To balance the increase in the
national advertising fund contribution percentage, the percent of net sales required to be spent on advertising in their respective
markets will decrease to 0.8 percent of net sales in fiscal 2014. 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 is required to participate in and to contribute to the
association, in accordance with the advertising association bylaws. Franchise contributions to the advertising association are
credited towards the franchise groups’ required local advertising spending.