1) Panera Bread has experienced strong revenue and net income growth over the past several years, with revenues increasing by over 100% and net income doubling from 2002 to 2006.
2) Profit margins have remained relatively steady at around 10-15%, indicating good cost control as the company has grown.
3) Financial ratios such as return on assets, return on equity, and times interest earned all indicate good performance and no significant financial risks.
In summary, Panera Bread's financial performance over this period has been very good, with consistent revenue and profit growth while maintaining healthy profit margins and financial ratios. This
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Panera
1. Group 5: Matt Liberty, Joe Piscitelli,
Jeff Frechette, Jonathan Nadeau, Nick Kania
2.
3. 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!
4. 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.
5. 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?
6. 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
7. 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”
8. 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
9. 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
10. 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
11. 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
12. 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
13. 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
14. 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
15. 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
16. 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
17. 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?
18. 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.
19. Weaknesses
The prices on their menu during dinner. I don't 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.
20. 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 Chili's packed on a Friday night.
21. Threats
Their are many other restaurants in the sector of
dining. If they don't 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.
22. 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.
27. Question 4
Based on the information in case Exhibit 9, which
rival restaurant chains appear to be Panera’s
closest rivals?
28. Strategic Map
Fast-Casual Dining
Low
Price/Quality
Au Applebee’
Bon
Pain
s
Chili’s
Chipolte
Panera
Bread
High
Few Locations Many Locations
Geographic Coverage
29. Question 5
What strategic issues and problems does Panera
Bread management need to address?
30. 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.
31. 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.
32. 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.
33. 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.
34. 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.
35. Question 6
What does Panera Bread need to do to strengthen
its competitive position and business prospects vis-
à-vis other restaurant chain rivals?
36. Strategic Map
Fast-Casual Dining
Low
Price/Quality
Au Applebee’
Bon
Pain
s
Chili’s
Chipolte
Panera
Bread
High
Few Locations Many Locations
Geographic Coverage
37. 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
39. 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
40. 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
41. 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
42. 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
43. 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
44. 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.
45. 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
46. 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
47. 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
48. 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
49. 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.