Panera Bread 2015 Annual Report Download - page 19

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• simplifying our operating procedures to facilitate the operation of high volume bakery-cafes; and
• investing in technology designed to drive demand and increase transaction counts and frequency in our bakery-cafes.
Customer preferences and traffic could be adversely impacted by health concerns about certain food products, reports of
food-borne illnesses or food safety issues, any of which could result in a decrease in demand for our products.
Customer preferences and traffic could be adversely impacted by health concerns or negative publicity about the consumption of
particular food products, which could cause a decline in demand for those products and adversely impact our sales. Additionally,
regardless of the source or cause, reports of food-borne illnesses or other food safety issues (including food tampering or
contamination) in the food service industry could cause customers to shift their preferences, result in negative publicity regarding
restaurants generally and adversely impact our sales. For example, recent outbreaks of E. coli in certain beef products or produce
and outbreaks of salmonella in cantaloupes, jalapeños and spinach caused consumers to avoid these products. These problems,
other food-borne illnesses (such as norovirus, hepatitis A or trichinosis), and injuries caused by food tampering have in the past,
and could in the future, require us to temporarily close bakery-cafes. The occurrence of food-borne illnesses or food safety issues
could also adversely affect the price and availability of affected ingredients, resulting in higher costs and a decrease in customer
traffic to our bakery-cafes. Furthermore, any instances of food contamination, whether or not at our bakery-cafes, could subject
us or our suppliers to a food recall pursuant to the United States Food and Drug Administration's recently enacted Food Safety
Modernization Act.
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 75 percent of our bakery-cafe sales are by
credit or debit card. Additionally, as we continue to evolve our e-commerce initiatives 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
or other catastrophic events. Due to these scenarios we cannot provide assurance that we will be successful in preventing such
breaches or data loss.
We also maintain certain personal information regarding our employees directly and through third party vendors. If a third party
is able to circumvent the security measures intended by us or our vendors to protect our customer or employee private data, he or
she could destroy or steal information or disrupt our operations, which could significantly harm our reputation and/or result in
litigation against us or the imposition of penalties.
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