Panera Bread 2014 Annual Report Download - page 16

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ability to further borrow up to $250 million under a credit facility. During fiscal 2014 we had no borrowings outstanding under
the credit facility.
Our capital requirements, including development costs related to the opening or acquisition of additional Company-owned bakery-
cafes and fresh dough facilities, maintenance and remodel expenditures, and investments in technology infrastructure to support
ongoing strategic initiatives have been and will continue to be significant. However, we believe that cash provided by our operations,
our term loan borrowings, and available borrowings under our credit facility will be sufficient to fund our capital requirements
for the foreseeable future.
We believe the best use of our capital is to invest in our core business, either through the development of new bakery-cafes, the
enhancement of the guest experience in existing bakery-cafes, or through the acquisition of existing bakery-cafes from our
franchisees or other similar restaurant or bakery-cafe concepts.
In evaluating potential new bakery-cafe locations, we study the surrounding trade area and demographics and publicly available
information on competitors. Based on this review and the use of proprietary, predictive modeling, we estimate projected sales
and a targeted return on investment. We also employ a disciplined capital expenditure process in which we focus on occupancy
and development costs in relation to the market. This process is designed to ensure we have an appropriate size bakery-cafe and
deploy capital in the right market to generate desired returns.
Our concept has proved successful in different types of locations, such as in-line or end-cap locations in strip or power centers,
regional malls, and free-standing units. The average Company-owned bakery-cafe size was approximately 4,500 square feet as
of December 30, 2014. We lease nearly all of our bakery-cafe locations and all of our fresh dough facilities. 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 an aggregate of 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 an aggregate of 20 years. Lease
terms generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other
operating costs. Many bakery-cafe leases provide for contingent rental (i.e., percentage rent) payments based on sales in excess
of specified amounts. Certain of our lease agreements provide for scheduled rent increases during the lease term or for rental
payments commencing at a date other than the date of initial occupancy.
The average construction, equipment, furniture and fixtures, and signage cost excluding capitalized development overhead for the
65 Company-owned bakery-cafes that opened in fiscal 2014 was approximately $1.4 million per bakery-cafe.
We have acquired bakery-cafes from certain franchisees during the past three fiscal years. In April 2013, we acquired one bakery-
cafe from a Florida franchisee for a purchase price of approximately $2.7 million. In March 2012, we acquired 16 bakery-cafes
from a North Carolina franchisee for a purchase price of approximately $48.0 million.
We have also returned cash to shareholders in the form of share repurchases under our publicly announced share repurchase
authorizations. During fiscal 2014, we repurchased 941,878 shares of our Class A common stock for an aggregate purchase price
of approximately $154.1 million. During fiscal 2013, we repurchased 1,992,050 shares of our Class A common stock for an
aggregate purchase price of approximately $332.1 million. During fiscal 2012, we repurchased 158,700 shares of our Class A
common stock for an aggregate purchase price of approximately $25.0 million.
Franchise Operations
Our franchisees, which as of December 30, 2014, operated approximately 51 percent of our bakery-cafes, are comprised of 35
franchise groups with an average of approximately 27 bakery-cafes per group. We are selective in granting franchises, and
applicants must meet specific criteria in order to gain consideration for a franchise. Generally, our franchisees must be well-
capitalized to open bakery-cafes, meet a negotiated development schedule, and have a proven track record as a multi-unit restaurant
operator. Additional qualifications include minimum net worth and liquidity requirements, infrastructure and resources to meet
our development schedule, and a commitment to the development of our brand. If all of these qualifications are not met, we may
still consider granting a franchise depending on the market and the particular circumstances.
As of December 30, 2014, we had 955 franchise-operated bakery-cafes operating throughout the United States and in Ontario,
Canada, and we have received commitments to open 106 additional franchise-operated bakery-cafes. The timetables for opening
these bakery-cafes are generally established in our Area Development Agreements, or ADAs, with franchisees, which provide for
the majority of these planned bakery-cafes to open in the next four to five years. The ADAs require a franchisee to develop a
specified number of bakery-cafes on or before specified dates. If a franchisee fails to develop bakery-cafes on schedule, 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 area developers, including not only development defaults,
but also defaults in complying with our operating and brand standards and other covenants under the ADAs and franchise