Panera Bread 2014 Annual Report Download - page 15

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Squash Ravioli and the Turkey Sausage, Egg White, & Spinach Breakfast Power Sandwich. Our popular Steak & White Cheddar
Panini returned to our menu in the final celebration of the year, along with the new Shrimp Caesar Salad and Mitten Cookie.
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. As a result, we are concentrating efforts and
resources on our Panera 2.0 initiative, a strategic initiative intended to enhance the experience for both our dine-in and to-go guests.
This enhanced guest experience is enabled by technology and operational improvements designed to keep up with high transaction
volumes and to deliver unrestrained production demand. Panera 2.0 is part of a broader set of initiatives designed to make Panera
a better competitive alternative and to enable expanded growth through not only Panera 2.0 but also through innovation in operations,
food, and marketing, utilization of delivery hubs, and our investments in technology to create the capabilities needed to support
these initiatives.
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 launched 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 2014, approximately 19 million customers were enrolled in MyPanera, and during fiscal 2014, 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. In fiscal 2014, our franchise-
operated bakery-cafes contributed 2.6 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 0.8 percent of their net sales on advertising in their respective
markets. 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.
Capital Resources and Deployment of Capital
We finance our activities through cash flow generated through operations and term loan borrowings. As of December 30, 2014,
our long-term debt totaled $100 million, consisting of our term loan agreement entered into on June 11, 2014. We also have the