Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of John Glass – Morgan Stanley
John Glass – Morgan Stanley
Following on your last comment about unit growth what are specifically the unit plans for company stores versus franchise stores in 2009 and can you talk about is this a better environment to increase the franchisee percentage of the business given the cost environment, is it a worse time, can your franchisee grow, are they willing to grow at the rate you are growing?
Ronald Shaich
Let me start and say as you saw, as we’re projecting for 2009 we’ll be basically one third, two-thirds company franchise roughly. We expect to again stay at essentially that rate into 2009. So no change in the mix of development, just the normal puts and takes.
Relative to the larger question of development there are many pluses and minuses. I think you can probably see it when you think about the question of franchise financing capacities. Let me start and state that we have generally larger franchisees and they generally have existing material lines of credit with the banks. For those kinds of franchisees I don’t think there’s any issues to their capabilities. They’re operating under existing lines and I think to a person they feel very positive.
I think that the issue for franchisee financing if it exists at all, is with franchises that have under five stores and they don’t have lines in place or they’re considering growing and they have no lines. I think there are potentially issues for them but nothing material. But I think its worth noting that that’s where the action is I think in the stall that we’re seeing or the pullback that we’ve seen relative to franchise financing. I think that where you will see it, which is less of an issue for Panera, is I think there’s almost no money available that we know of for transactional deals. That is to say franchisees buying other franchisees and particularly with any level of debt applied to those deals.
I think that any deals that might have been in the hopper between franchisees will certainly be limited within Panera unless they have very strong cash flow. I would note something else that may impact all this, we’re seeing the development community be at the effect of the credit crunch, and it’s both a negative and a positive. The negative is there’s a slowdown in turning over projects particularly in new centers and that slowdown is caused because these developers are not able to finish their projects or in some cases because of bankruptcies or pullbacks, they’ve lost their large tenants and they’re not prepared to open the center.
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