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Table of Contents I. II. III. IV. V. VI. VII.

Company Vision and Mission Statement SWOT Analysis The Five Forces Model of Competition Thinking Strategically about the Company's Situation Analyzing a Company's Resource and Competitive Position Financial Analysis Recommendations

I. Vision and Mission Statement 1. Vision Raising Quality of awareness about Panera by continuing to feature the caliber a nd appeal of its breads and baked goods, by hammering the theme “food you crave, f ood you can trust” and by enhancing appeal of its bakery-cafes as a neighborhood g athering place. Open more cafes’ and have nearly 2,000 Panera Bread Cafe s open by 2010. Raise awareness and boost trail of dining at Panera Bread at multiple meal times (breakfast, lunch, “chill out” times and dinner). To offer a more authentic and aesthetically pleasing dining experiences to urban workers and suburban dwellers. Increase perception of Panera Bread as a viable evening meal option and to drive early trails of Panera for dinner (particularly among existing Panera lunch cus tomers). i. Analysis Panera Bread presents a vision that is cohesive with the needs and dynam ics of the industry that they are in. They want to increase their company by op ening up in new locations and have set specific goals and timeliness in achievin g this. They are also trying to reach out to consumers of two major categories which are urban workers and suburban dwellers. They are doing this by providing

 

fast food that is healthy and tasty in a more aesthetically pleasing environmen t. They also want to become the dominant restaurant in the specialty bakery-caf e segment and by doing so they will have to establish themselves as the dominant brand in that industry. 2. Mission Statement “To provide a premium specialty bakery and café experience to urban workers and subu rban dwellers.” ” i. Analysis By looking at the mission statement, I have noted that they want the cafe locati ons to not only be a place where people come to gain sustenance but also for it to provide the consumer with an experience. It also tells me that they want to provide this experience to a niche market that is urban workers and suburban dwe llers. Lastly what I can tell by looking at their mission statement is that the y are premium in their product offering. So in saying this I think that they fo llow two types of Porters Strategies which are Product Differentiator and Niche Strategy.

II.

SWOT

1. Strengths ii. Product Brand The Panera Bread brand has value that is perceived through their aesthetically p leasing environment and presentation of their foods. Their brand also boasts sp ecialty bread that is made with no preservatives. Variety They compete in five sub-market categories, trying to target different needs by consumers. They target, breakfast, lunch, daytime “chill out”, light evening fare, for eat-in or take-out and take home bread. Quality Using natural products and ingredients, they avoid any preservatives and guarant ee that their bread is made fresh everyday and delivered to each cafe. They als o employ trained chefs that help produce the dough and final bread products. Award Winning Scored the highest level of customer loyalty among casual restaurants in the Mid west and Northeast regions of the United States in all categories, which include d environmental, meal, service, and cost. In 2005, for the fourth consecutive year, Panera Bread was rated among the best of 121 competitors in Sandleman and Associates national customer satisfaction su rvey of more than 62,000 consumers. They also won “best of” awards in nearly every market across 36 states. Presentation Their products and environment are targeted to be aesthetically pleasing to thei r consumers. The introduction of the G2 bakery where they concentrate more of p roviding a warm and home-like experience offers cafes with fireplaces well lit b akery counters and comfortable couches and atmosphere. Free Wi-Fi Internet Free wireless internet is offered at all their locations which attracts consumer s who want to use the time to eat and do work at the cafes. iii. Human Resources

Employee Selection and Training: Panera employs and trains specialty chefs that facilitate every aspect of the production on the fresh-dough bread process. • Progressive Management Team: Top management at Panera bread instituted research initiatives to see what consumers wanted out of a bakery-cafe. This initiative by leadership is what started the direction that resulted in Panera Bread. iv. Consumer Involvement in Initiatives ii. Test kitchens produced different meals and then presented it to a segmen t of their cafes to test whether consumers took to the new product or not. v. Fresh Catering • Workplaces, schools and parties can order fresh bread and sandwiches vi. Revenues and Margins Margins are maintained at a positive. Their sales and franchises grow every yea r. They have a net profit that grows every year and they are debt free. ii. Weaknesses 1. Transportation Costs ▪ Transportation costs can be up to 27% of the cost of each unit of sale. They ha ve to deliver fresh bread daily to different locations, some trucks travel 500 m iles total in delivering to different locations. 2. Product Costs ▪ The costs of their products are higher than other fast food chains as they produ ce all their bread fresh. 3. Dinner Menu ▪ It is hard to sell their low cost sit-down experience to those who want to grab dinner. Initiatives in this market need more attention. 4. Location ▪ Panera has no presence in several US markets that are fertile ground for many re staurants. Some of these areas include New York City, Atlantic City, Washington DC, and a number of other large markets. If Panera was to venture into these mar kets they could potentially expand their business. iii. Opportunities 1. Technology ▪ Website Marketing and ordering: One of their goals is to achieve a dinner consu mer base. They can do this by providing online ordering so that they can expedi te their ordering time and avoid waiting times at cafes. 2. Market growth ▪ Expansion of Geographical Location: Panera also has the opportunity to expand i nto other U. S. markets, such as New York City, Atlantic City and other large me tropolitan areas. ▪ Expanding their product line to include current trends such as organic foods, or dietary meals would expand their market as well. 3. Investments ▪ Panera Bread could invest some of their resources in buying other smaller bakery -cafes and use them as innovative testing environments for potential integration of new ideas and even old ideas that generate revenues. ▪ Investing more resources in Catering, and exploring the expansion of their compa ny ▪ Capitalize on the nations move towards healthy meals and organic products. ▪ Moving globally and extending their operations to other markets internationally that share similar cultural and consumer trends as the USA and their sub regions . iv. Threats 1. Fluctuation in Economy: Consumers will spend less for a fast food produ ct during down turns in the economy. 2. Entrance Barriers: The entry barriers are low and the products and ambie nt experience that Panera Bread offers can easily be duplicated by new rivals. 3. Competition ▪ Apple-bees: A direct external threat to the company. They have twice as many s

tore locations as Panera bread.

III. The Five Forces Model of Competition a. Rivalry Among Competing Sellers i. One of Panera's major competitors holds similar prices for their meals. You can purchase a meal at Apple-bees and Panera bread for roughly 10 dollars. ii. Consumers are willing to try new products in this industry and if you do not stay innovative, Panera could lose sales to new rivals. iii. Rivals offer similar products in their respective locations, and the mod el and experience that Panera Bread provides can be easily duplicated, hence low entry barriers. iv. Competitive force is strong to moderate. b. Threat of Substitute Products i. During down turns in the economy, buyers will substitute Panera Bread wi th a cheaper alternative, such as McDonald's or Wendy's. ii. Restaurants in the same industry that are moving to organic menus and me als in lieu of the trend in consumer health consciousness. iii. New rivals will offer products that could potentially be substitute prod ucts; this could draw consumers away into these new locations. iv. Low entry barriers to attaining substitute product by competitors. v. Competitive force is strong to moderate. c. Potential New Entrants i. Entrance barriers into the specialty bakery-cafe industry are low. They offer products that can easily be adopted by larger restaurant companies and al so can be developed by new entrants into the industry. ii. Lower costing fast food services decided to enter this segment by offeri ng the more aesthetic and ambient experience that Panera offers. iii. So the competitive force is strong. d. Power of Buyers i. Buyers can alternate between low cost restaurants if they are not satisf ied with the quality or do not perceive that they are paying the right price for what they are getting. ii. Products are standardized for the most part which provide low switching costs for buyers. iii. Competitive force is strong due to the high based customer focused strat egy that needs to be employed in order to make the consumer happy and make them stay or attract new consumers. e. Supplier i. Panera has numerous supplier resources for the ingredients that they nee d and can alternate between the best suited for each location. ii. Competitive forces from the suppliers are low due to this. iii. Panera makes their own dough for the breads so there is very low suppli er pressure when it relates to their bread dough. IV. Conclusions a. Looking at the five forces of competition and how it relates to Panera B read, we can note that there are low entry barriers and strong competitive force s for customers that want to use substitute products that are offered by new ent rants into the market as well as large restaurant chains. This brings to the at tention the fact that Panera bread has to stay innovative in their menu offering s and base their menus on consumer needs and trends. They however have weak com

petitive forces when it comes to their suppliers because they deliver to their “co mpany owned” bakery-cafes, and their franchised bakery cafes daily. They make the ir own bread from scratch and have a large database of suppliers for the resourc es that they need to make the bread. My overall impression through my competitiv e analysis shows that Panera needs to concentrate on their consumers and their n eeds, they also have to look in eating trends in society and continue to be inno vative and ahead of their competitors.

V. Thinking Strategically about the Company’s Situation 1. What are the Industry s Dominant Economic Features? i. Economic Fluctuations: The economy has being taking a downturn worldwid e and with more and more layoffs and pay cuts. Panera will have to see if consu mers are willing to pay a higher cost for a better experience and atmosphere. ii. 47.5% of consumer’s food dollars are spent in the restaurant industry. iii. Sales at commercial eating places averaged about $1 billion daily. iv. USA restaurant industry was growing at 5 percent annually. v. Sales at 925,000 food service locations were forecast for 2006 to be abo ut $511 billion. vi. The profitability of a restaurant location ranged from exceptional to go od to average to marginal to money losing. 2. What Factors Are Driving Industry Change and What Impacts Will They Have ? i. Healthy Eating: Consumers are becoming more health conscious and are lo oking to vegetarian and organic foods, this can have a positive effect on Panera if they try to embrace this consumer trend and work that into their menus. ii. Dining Ambiance and atmosphere: besides the food items that consumers a re buying at these restaurants, they also want to experience a comfortable setti ng to enjoy their meals. iii. Innovation: by rotating menu items, they can keep consumers. One thing that was noticed in this case was that consumers will get bored of the same pro duct if there are alternative or substitute products offered by competitors. iv. In a nutshell, one can note that the needs and eating trends of consumer s were the highest industry driving factor in this particular industry. 3. What Market Positions Do Rivals Occupy—Who Is Strongly Positioned and Who Is Not? Strongly Positioned: i. Applebee’s: They own twice as many locations as Panera and offer alcoholic beverages which accounted for 12% of their sales. They also offer a wide variet y of food items. They are the strongest competitor for Panera Bread in terms of market share and sales. ii. Chili s Grill and Bar: Is a full service restaurant and offers more ite ms on their menu. They also cover almost every state except one. They are stro ngly positioned to invest in consumer needs based on their capital investment in each location. iii. Starbucks: They do not offer many food items right now, especially hot food, if they do decide to move in this direction they can capitalize on their a lready huge market share. Not Strongly Positioned i. Corner Bakery: They do not have enough market shares as yet. They avera ge about the same price but do not offer free Wi-Fi. They are very similar to Pa nera Bread but do not have as many locations in the different hubs as Panera Bre ad. ii. Nothing but Noodles: They own considerably low amount of stores in that

 

 

segment and do not have enough of a presence amongst all the states as some of t he other restaurants in that industry. 4. What Strategic Moves Are Rivals Likely to Make Next? i. With the move to organic and “low carb” eating habits of the consumers, riva ls will most likely move to offer these kind of products in their menus. They wi ll also try and promote and market themselves in this way. ii. Rivals might introduce online ordering to fill orders that target worker s and schools that do not have large break times. iii. Rivals will try to introduce innovative menu offerings that could lower the entity and perceived value of Panera Bread. iv. As the catering business is a growing segment in this industry, we can n ote that rivals might capitalize on this and move fast and invest more in this s egment. 5. What Are the Key Success Factors for Future Competitive Success (KSF)? i. Panera provides an experience that is ambient and aesthetically warm and pleasing to those who dine there. They also provide free Wi-Fi at all their lo cations. They offer seasonal products and also cater to the needs of their con sumers tastes. Their fresh made bread that is of high quality is also a key to them being successful as a company. They need to stay competitive in being inno vative and also allowing themselves to adjust to consumer needs and trends in ea ting habits. They need to incorporate more dietary information on their product s to cater to the growing health conscious consumer. They also need to expand i n cities that they are not so prominent. They have fewer locations in more popu lated cities which if changed can deem very profitable for the company. 6. Does the Outlook for the Industry Present an Attractive Opportunity i. The restaurant industry is constantly growing. And with the dual-income family where time is not a luxury, the fast food industry can see growth in tho se seeking a quick meal that can be both healthy and provide a good atmosphere. Forecasts for the end of the 2006 year predict that sales will grow to $511 bil lion dollars.

V.

Analyzing a company’s Resource and Competitive Position

1. How Well Is the Company s Present Strategy Working? i. Raising Quality of awareness – Through my analysis I found that they are d oing a good job of this, by introducing a G2 bakery-cafe that caters to higher e nd buyers that are looking for a place that is home away from home. They are equ ipped with couches a fireplace and pleasant aesthetics in the lighting of the lo cation. ii. Open more cafe s – They are doing well in this respect when it comes to fr anchising cafes but are not moving as fast to open company owned bakery-cafes. iii. Raise awareness and boost trial of dining at Panera Bread at multiple me al times – they are trying out a dinner menu but have not seen growth that was sub stantial however their catering segment is growing fast and attaining good reven ues. iv. Increase perception of Panera Bread as a viable evening meal- I don t see this as a viable move for the company as that market is saturated with those who specialize in evening sit down restaurants. v. Are the Company s Prices and Costs Competitive? i. In their particular industry their prices are competitive. They average

 

 

 

 

about 7 to 12 dollars which is competitive in that industry. New initiatives a nd price breakdown can offer a differentiation from Rivals. vi. Is the Company Competitively Stronger or Weaker than Key Rivals? i. Through my analysis I can note that Panera bread is competitively strong er than most of its rivals. They have room to grow compared to a couple of indus try leaders but have showed gradual and constant growth in the last 5 years. Th ey also have more flexibility of product. vii. What Strategic Issues and Problems Merit Front-Burner Managerial Attenti on i. Their locations are widespread and are not concentrated on locations whe re there is a higher population. For example in St Louis, they have 40 locations with a population of 67,000 consumers and places like Miami where they have 2 l ocations with a population of 1,126,000 consumers. ii. The option of having their breads made from scratch in their baker-cafes would eliminate a huge transportation cost. iii. Opening in newer locations that could offer high sales volumes like New York, New Orleans and even in Canada s Toronto and Vancouver. iv. See why the company is slowing down in terms of company opened cafes as opposed to franchised cafes which are opening at a much rapid pace.

VI.

Financial Analysis 2006 2005 2004 Net profit margin .071 Return on stockholder’s equity Debt to Equity Ratio .365 Current Ratio 1.16 1.18 Return on Sales 2006 Company stores Franchises Dough 9.9% Combined (Segmented) 2005 2004 18.5% 19.6% 88.0% 87.7% 9.0% 6.7% 23.3% 24.5%

2003 .081 14.8% .381 1.05 2003 19.8% 88.0% 7.0% 24.6%

Overall Financial Strength and Ratio Analysis Looking at their ratio analysis we can note that: Sales are increasing by more than $100 million since 2003 but the growth on return on sales has fallen by 1.5%. For the past five years the return on sales and return on assets has bee n stagnant except for 2006. Return on sales fell to 8.8%, while return on assets dropped 1% to 10%. This is due to the slowing growth of net income, with overhead costs increasing significantly from 2004. The company has seen its operating profit margin decrease by 2% since 20 02 due to its operating efficiencies. Panera’s dough facilities have saved the company significant amounts of mo ney, as the cost of dough compared to revenues fell 8% from 2003. Since 2004 Panera has increased its Net Working Capital by $16 million d ue to little to no debt. Shareholders were happy with the company’s performance which reflects in t he EPS which has risen 50% since 2004.

 

2002 .081 16.5% .345 1.58

.084 15.9% .239 1.83

.076 15.8% .215

14%

20.70% 88.7% 25.8%

II. Recommendations One way that Panera Bread could use their Dinner menu forward is to offe r coupons and discounts to their daily customers who come in for other meals. Th is might give them a higher possibility of returning for dinner later on that da y or another day. They can offer online ordering for consumers who are on the go, this way they can have a high turnover rate when it comes to wait times at the locations . They can open more stores in certain areas, by doing so they can cater t o the specific needs of certain communities and neighborhoods like how Starbucks currently does. They can expand their catering business by offering workplaces and schoo ls catering discounts and coupons that can be given away that can be redeemed in -store by individuals. They also can open locations in highly populated areas that have fewer s tores, by doing so their trucks will not have to travel far between different lo cations to deliver dough. Through my analysis I found that with the new innovating, Panera has slo wly moving to become a meal providing high variety bakery-cafe. I think that th ey need to go back to their strong competence of making bread, and try and incor porate that into every meal in a unique way. By promoting it in this way, they w ill not fall into the category of another high end cafe. More marketing on their free Wi-Fi could attract students and after hour workers. Another Key element I think is that they could eliminate their dough mak ing strategy and bring the dough making into each store. This will allow for fe wer waste products and also will eliminate high transporting costs. This will a lso show them in the light of being environmentally friendly due to that one ini tiative. Lastly I think that Panera should Market itself from a company standpoin t and not place so much emphasis on individual franchises marketing themselves. If the company uses that cost to effectively market themselves as a whole, they can be rest assured that customers who visit once might consider coming again ba sed on research.