In this FDD Talk 2015 post, you’ll learn the following:

• Section I – Background information on the Panera Bread franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Panera Bread franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Panera Bread’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• 2014 average net sales for the 814 company-owned Panera Bread Bakery-Cafes open during the entire fiscal year ending December 30, 2014

• 2014 average net sales for the 878 franchised Panera Bread Bakery-Cafes open during the entire fiscal year ending December 30, 2014

• 2014 average net sales for the 814 company-owned and 878 franchised Panera Bread Bakery-Cafes open during the entire fiscal year ending December 30, 2014

• 2014 average gross revenues, discounts, net sales, cost of sales, gross profit, labor, operating expenses, advertising expenses, fixed expenses, occupancy expenses, net profit, depreciation and amortization, and EBITDA for the 814 company-owned Panera Bread Bakery-Cafes open during the entire fiscal year ending December 30, 2014

Section I – Background Information

Panera Bread Company is closing in on 2,000 bakery-cafes. The Missouri-based company, which has more than 1,900 locations, is on pace to break the milestone in 2015 while introducing initiatives that are bringing in more customers.

Fast Company, in its March 2015 issue, placed Panera Bread at the top of its list of The World’s Top 10 Most Innovative Companies of 2015 in Food; the chain was No. 27 overall on the list of The World’s 50 Most Innovative Companies. The chain was recognized for innovations in technology, staffing and cafe layout that help diners better interact with the cafes. The changes have resulted in higher traffic and increased sales.

Panera Bread was founded in 1981 by Louis Kane and Ron Schaich as Au Bon Pain Co. in Forney, Texas. The company prospered over the years and in 1993 purchased Saint Louis Bread Company, a St. Louis, Missouri, chain of 20 bakery-cafes founded by Ken Rosenthal in 1987. The acquisition led to a restructuring of the Saint Louis Bread Company brand as Panera Bread.

Au Bon Pain Co. sold all of its business units with the exception of Panera Bread in 1999, changed its name to Panera Bread, and relocated to Richmond Heights, Missouri.

The company bought a majority stake in Paradise Bakery & Cafe in 2007 and purchased the remainder of the company in 2009. Panera Bread relocated to Sunset Hills, Missouri, in 2010.

Panera Bread bakery-cafes focus heavily on bread and related products such as pastries and other sweets, but also market breakfast foods, soups, sandwiches, paninis, salads and more. Locations can be found in 45 states, the District of Columbia, and the Canadian province of Ontario, operating under the names of Panera Bread, Saint Louis Bread Company or Paradise Bakery & Cafe.

Food Policy Leads to Banned Ingredients

In May 2015, Panera announced that it would drop or reformulate 168 of its 465 ingredients as part of its commitment to serve clean ingredients. For example, hydrogenated soy protein is one of the nixed ingredients in both the brand’s Greek salad dressing and its chicken noodle soup, and cellulose gel and artificial flavors were targeted in the poppyseed dressing.

The changes are part of the chain’s Food Policy, released in June 2014. The policy is a formal articulation of values that include a commitment to use clean ingredients without artificial additives, provide transparency in menu items, and have a positive impact on the food system. It has announced progress on continued reduction of the use of antibiotics in farm animals and reduction of confinement for these animals.

Test Bakery Facility Experiments With Change

The chain announced a new test bakery facility in May 2014. The bakery, located in New Haven, Connecticut, tests new products as well as experiments with old favorites and tries out staffing models. Panera Bread is trying to determine how product changes and new staffing models could affect individual bakery-cafes.

Digital Upgrades Introduced

Panera Bread in April 2014 released Panera 2.0, a comprehensive set of technologies for consumers, featuring online ordering and payment, advanced ordering, fast-lane kiosks to reduce wait time, and customized ordering to remember menu favorites and ease ordering, especially when linked to the MyPanera Loyalty program and a credit card.

Apple Pay integration was added in September 2014 to give customers the opportunity for simple, secure transactions from the iPhone 6, iPhone 6 Plus and Apple Watch. Touch ID will help streamline the order process. Apple Pay was integrated into the Panera Bread iOS App.

New Executives Appointed

Drew Madsen became president of Panera Bread Company, effective May 11, 2015. He will oversee the core cafe business, while Chairman and CEO Ron Schaich focuses on company-wide strategy, growth and innovation. Madsen most recently was president and chief operating officer of Darden Restaurants Inc.

Ken Koziol joined Panera as executive vice president on April 27, 2015, having most recently served as executive vice president at McDonald’s.

Anomaly Is New Lead Creative Agency

New York-based Anomaly became Panera Bread’s lead creative agency in September 2014. The agency will cover areas from brand positioning to creative strategy and development.

Section II – Estimated Costs

• Please click here for detailed estimates of Panera Bread franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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