Panera Bread 2014 Annual Report Download - page 17

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agreements. We may waive compliance with certain requirements under our ADAs and franchise agreements if we determine
such action is warranted under the particular circumstances.
Pursuant to a typical ADA, we receive a franchise fee of $35,000 per bakery-cafe (of which we generally receive $5,000 at the
signing of the ADA and $30,000 at or before the bakery-cafe opening) and continuing royalties, which are generally five percent
of net sales per bakery-cafe. Franchise royalties and fees in fiscal 2014 were $123.7 million, or 4.9 percent of our total revenues.
Our franchise-operated bakery-cafes follow the same protocol for in-store operating standards, product quality, menu, site selection,
and bakery-cafe construction as Company-owned bakery-cafes. Generally, franchisees are required to purchase all of their fresh
dough and other products from us or sources approved by us. Our fresh dough facility system supplies fresh dough and other
products to substantially all franchise-operated bakery-cafes. We do not generally finance franchisee construction or ADA
payments. From time to time and on a limited basis, we may provide certain development or real estate services to franchisees
in exchange for a payment equal to the total costs of the services plus an additional fee. We also provide to our franchise-operated
bakery-cafes, for a fee, limited information technology services and access to information technology infrastructure supporting
operational initiatives. As of December 30, 2014, we did not hold an equity interest in any of our franchise-operated bakery-cafes.
Bakery-Cafe Supply Chain
We believe our fresh dough facility system and supply chain function provide us with a competitive advantage. We have a unique
supply-chain operation in which our regional fresh dough facilities supply dough for our fresh bread on a daily basis, along with
tuna, cream cheese, and certain produce to substantially all of our Company-owned and franchise-operated bakery-cafes. As of
December 30, 2014, we had 24 fresh dough facilities, 22 of which were Company-owned, including one located in Ontario, Canada,
to support the 15 bakery-cafes located within that market.
Fresh dough is the key to our high-quality, artisan bread, and fresh produce is essential to our high-quality salads and sandwiches.
We distribute fresh dough and produce through a leased fleet of temperature controlled trucks operated by our associates. As of
December 30, 2014, we leased 224 trucks. The optimal maximum distribution range is approximately 300 miles; however, when
necessary, the distribution ranges may be up to 500 miles.
Our bakers bake through the night, shaping, scoring, and finishing the dough by hand to bring our customers fresh-baked loaves,
bagels, and sweet goods every morning. In addition, our bakers bake high volume products throughout the day to continue to
deliver abundant amounts of the highest quality and freshest bread possible. We believe our fresh dough facilities have helped us
and will continue to help us to maintain consistent food quality at our bakery-cafes.
We focus our growth in areas we believe allow us to continue to gain efficiencies through leveraging the fixed cost of the fresh
dough facility structure. There are opportunities we may not be able to currently address with our traditional fresh dough facility
structure. As a result, we may be required to construct additional fresh dough facilities or utilize alternative manufacturing and
distribution processes consistent with our quality standards to address these needs.
Our supply chain management system is intended to provide bakery-cafes with high-quality food from reliable sources. We are
committed to having a positive impact on the food system by sourcing responsibly raised livestock and poultry, as well as high-
quality ingredients without artificial additives, including added MSG and artificial trans fats.
We contract externally for the manufacture of the remaining baked goods in the bakery-cafes, referred to as sweet goods. Sweet
goods products are completed at each bakery-cafe by our professionally trained bakers. Completion includes finishing with fresh
toppings and other ingredients and baking to established artisan standards utilizing unique recipes.
We use independent distributors to distribute our proprietary sweet goods products and other materials to bakery-cafes. With the
exception of products supplied directly by the fresh dough facilities, virtually all other food products and supplies for our bakery-
cafes, including paper goods, coffee, and smallwares, are contracted by us and delivered by vendors to an independent distributor
for delivery to the bakery-cafes. We maintain a list of approved suppliers and distributors from which we and our franchisees
must select. We leverage our size and scale to improve the quality of our ingredients, improve purchasing efficiency, and negotiate
purchase agreements, which includes purchasing commodities under agreements with terms generally ranging from one month
to one year, usually at a fixed price, with most of our approved suppliers to achieve cost reduction for both us and our customers.
Management Information Systems
We believe technology is a differentiator in the restaurant business. We are committed to being a leader in technology that makes
a difference to our customers by providing a greater degree of access and convenience. As a result, we are concentrating efforts
and resources on our Panera 2.0 initiative, which is intended to enhance the experience for both our dine-in and to-go guests. The
enhanced guest experience is enabled by technology, including the convenience of digital ordering and Rapid Pick-Up, and