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To Joe and other concerned investors:

Here is some information from a former insider in bullet point format for easy consumption-

1. You should not worry about their cash flow position. 95% of their new store development is franchise driven (ie. other people's money). Let's hope they learn a lesson from Boston Market.

2. Speaking of Boston Market (BM). There is tremendous upside for "Panera Bread" if BM falls. There would be a surplus of available and similar real estate for these guys. I hope they realize this and are analyzing BM's portfolio.

3. There is mixed reviews about the sale of the manufacturing facility in Mexico, MO. First, they took a loss on an $8,000,000 facility that is less than 2 years old. Second, according to Peter Lynch, ABP's (and thus Panera's) delineation from the rest of the industry was its ability to successfully vertically integrate. It has always be thought that ABP's core competence was manufacturing. In less than five years, they will be exposed like every other restaurant to the profit objectives of their suppliers.

4. The concept has always been well received by the customer. I would be the first to agree that the changes to the concept in design, menu, and focus was exceptional. But.... they are starting to lose focus on executing the fundamentals during this rapid expansion program. Chicago, Detroit, and Atlanta has suffered. The original entrepreneurial style has lost to the micro-management exhibited by every other branded burger chain. The "team" will tell you that once francising kicks in the entrepreneurial style will be back into focus. I hope that is the case. Obviously Dunkin Donuts have yet to deliver on that philosophy.

5. Some turmoil still exists in senior rank. Too many chefs theory. Rumors still hover about spinning off the ABP division. This poses both benefits and disadvantages. Benefit: Greater focus on cash cow! Disadvantages: 1. All of the infrastructure is embedded in ABP. Panera has been totally focused on growth, and I know from experience that they have yet invested a dime in their own infrastructure. Examples abound. 2. The sale of ABP would put a greater focus on the top senior mngt turmoil. 3. Panera would no longer be able to harness the skill sets in Boston. (ie. Finance, Accounting, Real Estate, Construction, MIS, and HR {NOT!} ).

In conclusion, the concept has tremendous potential. Currently the team has a less than stellar track record to execute. I hope have been some help to all.


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