Panera Bread 2015 Annual Report Download - page 21

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of which could adversely affect our business.
Our ability to increase our revenues and operating profits could be adversely affected if we are unable to execute our
bakery-cafe growth strategy or achieve sufficient returns on invested capital in bakery-cafe locations.
Our bakery-cafe growth strategy primarily consists of new market development and further penetration of existing markets, both
by us and our franchisees, including the selection of sites which will achieve targeted returns on invested capital. The success of
this strategy depends on numerous factors that are not completely controlled by us or involve risks that may impact the development,
or timing of development, of our bakery-cafes. Our ability to grow the number of bakery-cafes successfully will depend on a
number of factors, including:
• obstacles to hiring and training qualified operating personnel in the local market;
• identification and availability of suitable locations for new bakery-cafes on acceptable terms, including costs and
appropriate delivery distances from our fresh dough facilities;
• increased competition for restaurant sites from newer and increasing number of concepts in the fast casual segment;
• variations in the number and timing of bakery-cafe openings as compared to our construction schedule;
• management of the costs of construction of bakery-cafes, particularly factors outside our control, such as the timing of
delivery of a leased location by the landlord;
• our ability to negotiate favorable economic and business terms;
• our ability to secure required governmental approvals and permits and comply with applicable zoning, land use, and
environmental regulations; and
• shortages of construction materials and labor.
Our bakery-cafe growth strategy also includes continued development of bakery-cafes through franchising. At December 29,
2015, approximately 54 percent of our bakery-cafes were operated by franchisees (1,071 franchise-operated bakery-cafes out of
a total of 1,972 bakery-cafes system-wide). The opening and successful operation of bakery-cafes by franchisees depends on a
number of factors, including those identified above, as well as the availability of suitable franchise candidates and the financial
and other resources of our franchisees such as our franchisees’ ability to receive financing from banks and other financial institutions,
which may become more challenging in the current economic environment.
As noted above, identifying and securing an adequate supply of suitable new bakery-cafe sites presents significant challenges
because of the intense competition for those sites in our target markets, and increasing development and leasing costs. This may
be especially true as we continue to expand into more urban locations. Further, any restrictions or limitations of credit markets
may require developers to delay or be unable to finance new projects. Delays or failures in opening new restaurants due to any
of the reasons set forth above could materially and adversely affect our growth strategy and our expected results.
Our success in part depends on the success of our franchisees business.
Our success depends in part on the operations of our franchisees. While we provide training and support to, and monitor the
operations of, our franchisees, the product quality and service they deliver may be diminished by any number of factors beyond
our control, including financial pressures and their own business operations, such as employment related matters. We strive to
provide our customers with the same experience at Company-owned bakery-cafes and franchise-operated bakery-cafes. Our
customers may attribute to us problems which originate with one of our franchisees, particularly those affecting the quality of the
service experience, food safety, litigation or compliance with laws and regulations, thus damaging our reputation and brand value
and potentially adversely affecting our results of operations.
Furthermore, our consolidated results of operations include revenues derived from royalties on sales from, and revenues from
sales by our fresh dough facilities to, franchise-operated bakery-cafes. As a result, our growth expectations and revenues could
be negatively impacted by a material downturn in sales at and to franchise-operated bakery-cafes or if one or more key franchisees
becomes insolvent and unable to pay us royalties.