Panera Bread 2014 Annual Report Download - page 21

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• increasing brand awareness through greater investment in marketing and advertising, including increased national
television advertising and digital advertising and continued leveraging of our MyPanera® loyalty program;
• investing in labor and the related management tools to meet the demands necessary to maximize throughput and capacity
in our bakery-cafes;
• simplifying our operating procedures to facilitate the operation of a high volume bakery-cafe; and
• investing in technology designed to drive demand and increase transaction counts and frequency in our bakery-cafes.
Disruptions or supply issues in our fresh dough facilities could adversely affect our business and consolidated results of
operations.
We operate 22 Company-owned fresh dough facilities, which service substantially all of our Company-owned and franchise-
operated bakery-cafes. Our fresh dough and other product distribution system delivers fresh dough and other products daily to
the bakery-cafes through a leased fleet of temperature controlled vehicles. The optimal maximum distribution range is
approximately 300 miles; although, when necessary, the distribution range may reach up to 500 miles. As a result, any prolonged
disruption in the operations of, or distribution from any of our fresh dough facilities, including due to weather conditions, technical
or labor difficulties, or destruction of, or damage to the vehicle fleet or facilities, could result in a shortage of fresh dough and
other products at our bakery-cafes, and, depending on its extent and duration, have a material adverse effect on our business and
consolidated results of operations.
Additionally, given that we rely on trucks for the delivery of items from our fresh dough facilities, any increased costs and
distribution issues related to fuel could also materially adversely impact our business and consolidated results of operations.
Our Franklin, Massachusetts fresh dough facility manufactures and supplies through its distributors all of the cream cheese and
tuna used in most of our Company-owned and franchise-operated bakery-cafes in the United States. Additionally, we distribute
a number of fresh produce products provided from our suppliers through our fresh dough facility system. Although we believe
we have adopted adequate quality assurance and other procedures to seek to ensure the production and distribution of quality
products and ingredients, we may be subject to allegations regarding quality, health, or other similar concerns that could have a
negative impact on our operations, whether or not the allegations are valid or we are liable. Additionally, defending against such
claims or litigation could be costly and the results uncertain.
Security breaches of confidential customer information or personal employee information may adversely affect our
business.
Each year, we engage in millions of transactions with our customers. Approximately 70% of our bakery-cafe sales are by credit
or debit card. Additionally, as we continue to evolve our Panera 2.0 initiative we expect our credit card transactions, specifically
online and mobile, to increase. In connection with credit card sales, including online and through mobile applications, we and
our franchisees transmit confidential credit card information by way of secure private retail networks. Although we use private
networks, third parties may have the technology or know-how to breach the security of the customer information transmitted in
connection with credit card sales; we and our franchisees' security measures and those of our technology vendors may not effectively
prohibit others from obtaining improper access to this information. If a third party is able to circumvent these security measures,
information could be stolen or destroyed potentially causing a disruption of our operations. Significant capital investments and
other expenditures could be required to remedy the problem and prevent future breaches, including costs associated with additional
security technologies, personnel, experts and credit monitoring services for those whose data has been breached. These costs,
which could be material, could adversely impact our results of operations in the period in which they are incurred and may not
meaningfully limit the success of future attempts to breach our information technology systems. Media or other reports of existing
or perceived security vulnerabilities in our systems or those of our third party business partners or service providers, regardless
if a breach has been attempted or has occurred, can also adversely impact our brand and reputation and materially impact our
business.
Like many other retail companies and because of the prominence of our brand, we have experienced frequent attempts to
compromise our information technology systems, none of which have resulted in a material breach. Additionally, the techniques
and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets
of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period
of time. While we continue to make significant investment in physical and technological security measures, employee training,
and third party services, designed to anticipate cyber-attacks and prevent breaches, our information technology networks and
infrastructure or those of our third party vendors and other service providers could be vulnerable to damage, disruptions, shutdowns,
or breaches of confidential information due to criminal conduct, employee error or malfeasance, utility failures, natural disasters