Panera Bread 2013 Annual Report Download - page 35

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27
Development Agreements, or ADAs, with franchisees, which provide for the majority of these bakery-cafes to open in the next
four to five years. An ADA requires a franchisee to develop a specified number of bakery-cafes by specified dates. If a franchisee
fails to develop bakery-cafes on the schedule set forth in the ADA, we have the right to terminate the ADA and develop Company-
owned locations or develop locations through new franchisees in that market. We may exercise one or more alternative remedies
to address defaults by franchisees, including not only development defaults, but also defaults in complying with our operating and
brand standards and other covenants included in the ADAs and franchise agreements. We may waive compliance with certain
requirements under its ADAs and franchise agreements if we determine that such action is warranted under the particular
circumstances.
Fresh dough and other product sales to franchisees
The following table summarizes fresh dough and other product sales to franchisees for the periods indicated (dollars in thousands):
For the fiscal year ended
December 31,
2013
December 25,
2012
December 27,
2011
% Change
in 2013
% Change
in 2012
Fresh dough and other product sales to
franchisees. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163,453 $ 148,701 $ 136,288 9.9% 9.1%
The increase in fresh dough and other product sales to franchisees in fiscal 2013 compared to the prior fiscal year was primarily
due to the impact of the additional week in fiscal 2013, which contributed fresh dough and other product sales to franchisees of
approximately $2.8 million, the 2.0 percent increase in franchise-operated comparable net bakery-cafe sales, which reflects a
comparative 53 week period in fiscal 2012, and the opening of 70 franchise-operated cafes.
The increase in fresh dough and other product sales to franchisees in fiscal 2012 was primarily due to the 5.0 percent increase in
franchise-operated comparable net bakery-cafe sales, the opening of 64 franchise-operated cafes, and an increase in sales of fresh
produce to franchisees, partially offset by our purchase of 16 franchise-operated bakery-cafes and the closure of six franchise-
operated bakery-cafes.
Costs and Expenses
The cost of food and paper products includes the costs associated with the fresh dough and other product operations that sell fresh
dough and other products to Company-owned bakery-cafes, as well as the cost of food and paper products supplied by third-party
vendors and distributors. The costs associated with the fresh dough and other product operations that sell fresh dough and other
products to the franchise-operated bakery-cafes are excluded from the cost of food and paper products and are shown separately
as fresh dough and other product cost of sales to franchisees in the Consolidated Statements of Comprehensive Income.
The following table summarizes cost of food and paper products for the periods indicated (dollars in thousands):
For the fiscal year ended
December 31,
2013
December 25,
2012
December 27,
2011
% Change
in 2013
% Change
in 2012
Cost of food and paper products . . . . . . . . . . . $ 625,622 $ 552,580 $ 470,398 13.2% 17.5%
As a percent of bakery-cafe sales, net. . . . . . . 29.7% 29.4% 29.5%
The increase in the cost of food and paper products in fiscal 2013 as a percentage of net bakery-cafe sales was primarily due to a
shift in product mix towards higher ingredient cost products, partially offset by improved leverage of our fresh dough manufacturing
costs due to additional bakery-cafe openings. In fiscal 2013, there was an average of 74.2 bakery-cafes per fresh dough facility
compared to an average of 69.2 bakery-cafes in fiscal 2012.
The decrease in the cost of food and paper products in fiscal 2012 as a percentage of net bakery-cafe sales was primarily due to
improved leverage of our fresh dough manufacturing costs due to additional bakery-cafe openings and improved leverage from
higher comparable net bakery-cafe sales. In fiscal 2012, there was an average of 69.2 bakery-cafes per fresh dough facility
compared to an average of 64.2 bakery-cafes in fiscal 2011.