Panera

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Panera

  1. 1. Group 5: Matt Liberty, Joe Piscitelli,Jeff Frechette, Jonathan Nadeau, Nick Kania
  2. 2. Context Au Bon Pain Company  Founded by: Louis Kane, Ron Saich 1981 Malls, shopping centers, etc. 1993: Purchased St. Louis Bread Co.  20 additional locations 94-95: Market Research concluded a need for:  Quick, Quality dining. Fresh and Fast!
  3. 3. Context By 1997  Sales volume had increased by 75%  Renamed 100+ Stores Panera Bread 1998- Ron Saich  Sold Au Bon Pain Brand for $73 Million  (still in operation today)  Went all in on Panera Model  180 Locations, Debt Free.
  4. 4. Question 1 What is Panera Bread’s strategy? Which of the five generic competitive strategies in Chapter 5 most closely fit the competitive approach that Panera Bread is taking? What types of competitive advantages is Panera Bread trying to achieve?
  5. 5. Panera Bread’s Strategy To provide a premium specialty bakery and café experience to urban workers and suburban dwellers (their target market) Strategic Intent: To make great bread broadly available to consumers across the United States  155 new stores in 2006  170-180 new stores in 2006  Goal was to have nearly 2,000 stores by the end of 2010
  6. 6. Panera Bread’s Strategy Strategic vision was to create a specialty café anchored by an authentic, fresh-dough artisan bakery and upscale quick-service menu selections PEGS – “Product, Environment, and Great Service that we count on to deliver success.” Management’s long-term objective and strategic intent:  Make Panera Bread a nationally recognized brand name  To be the dominant restaurant operator in the specialty bakery-café segment “Being better than the guys across the street”
  7. 7. Panera Bread’s Growth Strategy Expand the number of PB locations by 17% annually through 2010 and to achieve EPS growth of 25% annually Capitalize on market potential by opening both company-owned and franchised owned Panera Bread locations  Market Penetration
  8. 8. Panera Bread’s Franchise Strategy Franchise agreements required the franchise developer to open a number of stores, usually 15 bakery-café’s in six years Franchise candidates had to be well capitalized, have a proven track record as excellent multi-unit restaurant operators, and agree to meet an aggressive development schedule  Applicants had to meet eight criteria to gain consideration
  9. 9. Panera Bread’s Franchise Strategy Panera helped out franchises in numerous ways  Market analysis  Site selection assistance  Lease review  Design services and new store opening assistance  A comprehensive 10-week initial training program  A training program for hourly employees, managers, and baker certification  Continuing education classes
  10. 10. Panera Bread’s Marketing Strategy To compete on the basis of providing an entire dining experience rather than by attracting customers on the basis of price only  High quality foods at reasonable prices Used focus groups to determine customer food and drink preferences as well as price points Grow sales at existing Panera Bread locations High proportion of trial customers to repeat
  11. 11. Panera Bread’s Marketing Strategy “Food you crave, food you can trust” To raise awareness and boost trial of dining at Panera Bread at multiple meal times Let customers “discover” Panera Bread and then convert them into loyal customers To increase perception of Panera Bread as a viable evening meal option
  12. 12. Panera Bread’s Menu Strategy Designed to provide target customers with products built on the company’s bakery expertise Regularly reviewed and revised “Celebrations” Adapting to customer wants Catering program  Catering was generating an additional $80 million in sales by the end of 2005
  13. 13. Which Competitive Strategy? Broad Differentiation To compete on the basis of providing an entire dining experience  “Panera Warmth”  Distinctive and engaging environments  G2 cafe design  Alluring and hospitable atmosphere  Free Wi-Fi  Real China and stainless silverware  Regular changes in menu offerings  Adapting to consumer wants
  14. 14. Competitive Advantage Reputation  Panera Bread was widely recognized as the nationwide leader in the specialty bread segment  TNS Intersearch survey  J.D. power and Associates  Sandleman & Associates  Awards Management had concluded the Panera Bread format had broad market appeal and could be rolled out nationwide
  15. 15. Competitive Advantage Fresh dough-making capability  Consistent quality and efficiency  More economical to concentrate the dough-making operations in a few facilities dedicated to that function Dining atmosphere  Free Wi-Fi  G2 Cafe Competing successfully in five submarkets Considerable willingness of customers to try dining at other parts of the day
  16. 16. Question 2 What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its situation? Does the company have any core competencies or distinctive competencies?
  17. 17. Strengths The location of Panera placing them in strip malls and urban neighborhoods. Successful in 5 submarkets such as breakfast, lunch, day time, chill out, light evening fair and take out. The way that they have set up franchising was a strength for them as a corporation.
  18. 18. Weaknesses The prices on their menu during dinner. I dont think they are competitive for their prices during dinner. Other competition may have better choices for dinner and at better prices. Another weakness I think is their fresh dough facilities. They may be better off not only baking the bread at each store but they should also make the dough at each store. This I think would save them money in the long run.
  19. 19. Opportunities I think that Panera could earn more profit at dinner if they lowered their prices and stayed really competitive at this meal time. Since they are the leader in 5 sub markets they can take advantage of this and utilize to their advantage. If they could keep the mark up of their food the same all through out the day and keep a steady flow of customers it would be like having an Applebees or a Chilis packed on a Friday night.
  20. 20. Threats Their are many other restaurants in the sector of dining. If they dont do something about their prices for dinner there are other places that will come in and move ahead of Panera. They also might have to take a look at making their fresh dough at the stores just like they bake the bread at each store. With gas prices going up this could make the cost of operations go up as gas prices get higher.
  21. 21. Question 3 What is your appraisal of Panera Bread’s’s financial performance based on the data in case Exhibits 1, 2 and 8? How well is the company doing financially? Use the financial ratios in Table 4.1 of Chapter 4 as a guide in doing the calculations needed to arrive at an analysis-based answer to your assessment of Panera’s recent financial performance.
  22. 22. Panera Bread Financials Year 2006 2005 2004 2003 2002Revenues:Bakery-café sales $ 666,141,000 $ 499,422,000 $ 362,121,000 $ 265,933,000 $ 212,645,000Franchise royalties & fees $ 61,531,000 $ 54,309,000 $ 44,449,000 $ 36,245,000 $ 27,892,000Fresh dough sales to franchisees $ 101,299,000 $ 86,544,000 $ 72,569,000 $ 61,524,000 $ 41,688,000Total Revenues $ 828,971,000 $ 640,275,000 $ 479,139,000 $ 363,702,000 $ 282,225,000Bakery café expenses:Food & paper products $ 197,182,000 $ 142,675,000 $ 101,832,000 $ 73,885,000 $ 63,370,000Labor $ 204,956,000 $ 151,524,000 $ 110,790,000 $ 81,152,000 $ 63,172,000Occupancy $ 48,602,000 $ 37,389,000 $ 26,730,000 $ 18,981,000 $ 15,408,000Other operating expenses $ 92,176,000 $ 70,003,000 $ 51,044,000 $ 36,804,000 $ 27,971,000Total bakery-café expenses $ 542,916,000 $ 401,591,000 $ 290,396,000 $ 210,822,000 $ 169,921,000Fresh dough costs of sales to franchisees $ 85,618,000 $ 75,036,000 $ 65,627,000 $ 54,967,000 $ 38,432,000Depreciation & amortization $ 44,166,000 $ 33,011,000 $ 25,298,000 $ 18,304,000 $ 13,794,000General & administrative expenses $ 59,306,000 $ 46,301,000 $ 33,338,000 $ 28,140,000 $ 24,986,000Pre-opening expenses $ 6,173,000 $ 3,241,000 $ 2,642,000 $ 1,531,000 $ 1,051,000Total costs & expenses $ 738,179,000 $ 559,180,000 $ 417,301,000 $ 313,764,000 $ 248,184,000Operating Profit $ 90,792,000 $ 81,095,000 $ 61,838,000 $ 49,938,000 $ 34,041,000Interest expense $ 92,000 $ 50,000 $ 18,000 $ 48,000 $ 32,000Other (Income) expense, net $ 1,976,000 $ 1,133,000 $ (1,065,000) $ (1,592,000) $ (467,000)Provision for income taxes $ 33,827,000 $ 29,995,000 $ 22,175,000 $ 17,629,000 $ 12,242,000Net income $ 58,849,000 $ 52,183,000 $ 38,430,000 $ 30,669,000 $ 21,300,000
  23. 23. Panera Bread Financials$900,000,000$800,000,000$700,000,000$600,000,000$500,000,000 2006 2005 2004$400,000,000 2003 2002$300,000,000$200,000,000$100,000,000 $- Bakery-café sales Total Revenues Total bakery-café Total costs & Operating Profit Net income expenses expenses
  24. 24. Financial Ratios Year 2006 2005 2004 2003 2002Gross Profit Margin 16% 18% 18% 19% 17%Operating Profit Margin 11% 13% 13% 14% 12%Net Profit Margin 7% 8% 8% 8% 8%Earnings per share $1.88 $1.69 $1.28 $1.02 $0.74ROA 10.86% 11.93% 11.84% 11.96% 10.92%ROE 14.80% 16.46% 15.92% 15.82% 14.06%Current Ratio 1.16 1.18 1.05 1.58 1.83Working Capital $18 million $16 million $2.5 million $26 million $27 millionLong-term debt-to-equity ratio 8.89% 10.67% 11.44% 0.74% 0.17%Times-interest-earned ratio 987 1622 3435 1040 1064
  25. 25. Year 2006 2005 2004 2003 2002 2001 2000Revenues atcompany-operatedstores $666,100,000 $499,400,000 $362,100,000 $265,900,000 $212,600,000 $157,700,000 $125,500,000Revenues atfranchised stores $1,245,500,000 $1,097,200,000 $879,100,000 $711,000,000 $542,600,000 $371,700,000 $199,400,000System-wide storerevenues $1,911,600,000 $1,596,600,000 $1,241,200,000 $976,900,000 $755,200,000 $529,400,000 $324,900,000Avg. annual revenues:company operatedbakery-café $1,967,000 $1,942,000 $1,852,000 $1,830,000 $1,764,000 $1,636,000 $1,473,000Avg. annual revenues:franchised bakery-café $2,074,000 $2,016,000 $1,881,000 $1,860,000 $1,872,000 $1,800,000 $1,707,000Avg. weekly sales,company owned cafes $37,833 $37,348 $35,620 $35,198 $33,924 $31,460 $28,325Avg. weekly sales:franchised cafes $39,894 $38,777 $36,171 $35,777 $35,997 $34,607 $32,832Company-ownedbakery-cafesopen at year-end 391 311 226 173 132 110 90Franchised bakery-cafesopen at year-end 636 566 515 429 346 259 172Total bakery-cafes open 1027 877 741 602 478 369 262
  26. 26. Question 4 Based on the information in case Exhibit 9, which rival restaurant chains appear to be Panera’s closest rivals?
  27. 27. Strategic Map Fast-Casual Dining LowPrice/Quality Au Applebee’ Bon Pain s Chili’s Chipolte Panera Bread High Few Locations Many Locations Geographic Coverage
  28. 28. Question 5 What strategic issues and problems does Panera Bread management need to address?
  29. 29. Strategy The previously discussed strategy is to do the following: 1) Provide premium bakery and café experience 2) Broaden their stores and locations in the United States 3) “PEGS” – Product, Environment, and Great Service 4) Long Term is to make Panera a Generically Nationwide known Brand Name.
  30. 30. Product Offering Issues Panera Management needs to make sure customer and stockholders understand the freshness of their ingredients are the best they can offer. Specially train all the chef’s they hire to achieve the goal mentioned above. Need to have a well trained staff to make sure they can success in the corporate way. Changing the Menu constantly to attract new customer and continue keeping the old customers happy. Customer Feedback is the way to decide the offerings they need to provide on the menu.
  31. 31. High Quality Low Price Issue High Quality, The goal of Panera is to provide Low Cost food to its consumers. As many business men know, this is nearly impossible in almost all business units. This gains new customers, and keeps old customers. Where is the balance between sacrificing cost and sacrificing quality? Marketing this strategy is key to gaining the financial and consumer base.
  32. 32. Marketing Issues In the past, small role in success. What can be done to make this more prominent and profitable? Developing Brand Awareness by Customer Experience 85% of people who know of a Panera in or around their neighborhood have eaten there at least once. Using marketing strategies to express that Panera is an “all day food operation” and not specifically breakfast, lunch, or dinner.
  33. 33. Site Selection and Café Environment Issues Developing a team to decide on the demographics of new locations Free standings units were found to be previously profitable for bakery type locations. Continuing to develop “Panera Warmth” which was the term they used to satisfy the environment of its customers.
  34. 34. Question 6 What does Panera Bread need to do to strengthen its competitive position and business prospects vis- à-vis other restaurant chain rivals?
  35. 35. Strategic Map Fast-Casual Dining LowPrice/Quality Au Applebee’ Bon Pain s Chili’s Chipolte Panera Bread High Few Locations Many Locations Geographic Coverage
  36. 36. Industry Dining Industry saw $511 Billion in sales 47.5% of consumer spending on food is at Restaurants 5% Growth Annually Despite 76% of meals at home  130 Million Customers daily=Daily sales around $1 Billion Highly competitive, Labor Intensive, Very Risky Adapting to the Market is Essential Competing in a unique market Casual/Fast Food/Specialty Dining
  37. 37. Tactics Seasonal Offerings  Trends in Eating Habits  Vegan, low-carb, Birthdays/Events/Sports Organic.
  38. 38. Tactics Loyalty Programs  Customer Input/Involvement Community Programs Make Customers Identify with the company  Eat Multiple meals  Encourage “Chill out time” patronage  Willingness to try new dishes
  39. 39. Tactics “Pay what you can” Business model experiment  Implemented in 3 Locations (3500 patrons/week)  No prices on menu  Cashier recommends price for meal  60% of people have paid recommended price  20% pay more  20% pay significantly less  Each store has covered it’s own expenses well  Encourages Consumption, Charity, & sense of Community
  40. 40. Recommendations Established Quality Fast Casual Dining  Ambience, Service, Quality Menu, Convenient.  Push Panera more to compete in every meal period Expand Coffee Offerings (seasonal) Focus on expanding Dinner Menu/Service  Aim to compete with Applebee’s/Uno’s  (difficult due to lack of alcoholic beverages 12%+ of each company’s annual sales)  Promote the Family Environment
  41. 41. Value Chain Support Activities Infrastructure  Franchising Rigid Restrictions, Well Structured Market Penetration HRM  90% of our retail management associates are "highly satisfied" with their careers (Panera Bread Retail Satisfaction Survey) Tech  17 Fresh Dough baking and Transportation facilities  Temperature cooled trucks 300-500 mile radius. Procurement  Couples with secondary companies to manage less essential needs
  42. 42. Value Chain Primary Activities Outbound Logistics  Bakery Café Supply Chain a  Average $10 million in profits capped at 27% of retail prices  Well Organized Shipment System  Leased fleet, 300 mile radius.  Contracts with secondary companies for periphery needs Operation’s  Successful, Comprehensive Franchising  Carefully chosen locations for added convenience  Meet consumer’s preferences
  43. 43. Value Chain Primary Activities Inbound Logistics  Bakery Supply Chain- Averages $10,000 Profits 30% growth Sales and Marketing  Relied heavily on word of mouth “Discover Panera”  85% of population aware of a nearby Panera had dined there  Public Image  Food Quality Service  Efficient, responsive, accommodating.
  44. 44. Porter’s Five Forces Buyer Power: High  Many restaurant choices for customers  Forces restaurants to differentiate themselves in order to win the customer Supplier Power: Low  Obtained dough from a variety of suppliers  Numerous suppliers for each ingredient needed and Panera Bread could easily obtain ingredients from another supplier if necessary
  45. 45. Porter’s Five Forces Threat of New Entrants: Low  Entry barriers are extremely high  Reputation  High costs to start a restaurant  Low profit margins Threat of Substitute Products: High  Many restaurants to choose from depending on your preferences
  46. 46. Porter’s Five Forces Rivalry among existing competitors: High  Industry members pursue differentiation strategies to set themselves apart from rivals  Most restaurants are quick to adapt their menu offerings to changing consumer tastes and preferences  Norm at many restaurants to rotate menu selections seasonally and introduce new dishes  Common for a popular restaurant to lose flavor and confront the realities of dwindling clientele, forcing it to reconceive its menu and dining environment or go out of business  Many restaurants have short lives
  47. 47. Porter’s Five Forces Rivalry (cont.)  Panera Bread competed with specialty food, casual dining, and quick-service restaurant retailers  Closest competitors were “fast-casual” restaurants  Atlanta Bread Company  Applebee’s  Chili’s  Starbucks  Fast-casual restaurants provided quick-service dining but were distinguished in several areas
  48. 48. Final Thoughts Well positioned in a competitive industry Caters to a unique niche of the market  Fresh Bakery Cafe Seen Steady Growth since inception, continues to today. Community oriented approach has amplified the Brand’s perception and built a trustworthy relationship with customers.

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