In the last few parts of this series, we discussed same-store sales. It’s one of the key drivers for restaurants like Panera Bread (PNRA).
Along with growing sales at existing locations, a company can also grow revenue by opening new stores. The stores can be operated by the company or by the franchisee.
Total units as of the fourth quarter
As of the fourth quarter, Panera Bread’s total number of restaurant units grew to 1,880—compared to 1,777 restaurants in 4Q13. Out of this total, 925 restaurants are company-operated. Panera Bread had 955 franchised restaurants. According to management, unit growth was critical for Panera Bread’s revenue growth.
This model is unlike Chipotle Mexican Grill (CMG). Chipotle only operates company-owned restaurants. Burger King (BKW) is moving towards a complete franchise model. Dunkin’ Brands (DNKN) mainly operates franchised restaurants.
During the fourth quarter alone, Panera Bread opened 22 new company-operated restaurants and 13 new franchised restaurants.
If you’re concerned about company-specific risk when considering the restaurant industry for investment purposes, you may want to consider ETFs like the Consumer Discretionary Select Sector SPDR Fund (XLY). It holds over 37% of retail stocks. XLY holds several restaurants—including McDonald’s (MCD), Starbucks (SBUX), and Darden Restaurants (DRI).