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category . The company 's goal has been to make Panera Bread a nationally dominant brand name . Toward that end , the Focus has been primarily on expansion into additional suburban markets , Going from 66 to 485 cafes in just 4 years . After full examination , I Have come to the conclusion that Panera should focus on : Increasing its existing market share through offering financing for Franchisees . Maintaining equity in the franchisees . Purchase its largest supplier bakeries and require exclusive use of Those bakeries by franchisees . Reduce its executive management layer . Evaluation of Current Objectives and Current Strategy Panera 's current strategy is to increase new unit growth through a Combination of owned , franchised , and joint-venture operated stores . Panera also regularly reviews it menu offerings to satisfy changing Customer preferences within its target groups . They also wish to create New strategies and initiatives . Current Strengths and Weaknesses
The Panera Bread® legacy began in 1981 as Au Bon Pain Co., Inc. Founded by Louis Kane and Ron Shaich, the company prospered along the east coast of the United States and internationally throughout the 1980s and 1990s and became the dominant operator within the bakery-cafe category. In 1993, Au Bon Pain Co., Inc. purchased Saint Louis Bread Company®, a chain of 20 bakery-cafes located in the St. Louis area. The company then managed a comprehensive re-staging of Saint Louis Bread Co. Between 1993 and 1997 average unit volumes increased by 75%. Ultimately the concept's name was changed to Panera Bread. By 1997, it was clear that Panera Bread had the potential to become one of the leading brands in the nation. In order for Panera Bread to reach its potential, it would require all of the company's financial and management resources. In May 1999, all of Au Bon Pain Co., Inc.'s business units were sold, with the exception of Panera Bread, and the company was renamed Panera Bread. Since those transactions were completed, the company's stock has grown thirteen-fold and over $1 billion in shareholder value has been created. Panera Bread has been recognized as one of Business Week's "100 Hot Growth Companies." As reported by The Wall St. Journal's Shareholder Scorecard in 2006, Panera Bread was recognized as the top performer in the restaurant category for one-, five- and ten-year returns to shareholders. In 2007, Panera Bread purchased a majority stake in Paradise Bakery & Café®, a Phoenix-based concept with over 70 locations in 10 states (predominantly in the west and southwest). The Company purchased the balance of Paradise in June 2009. In May 2010, Ron Shaich transitioned to the role of Executive Chairman of the Board and Bill Moreton, who had previously served as the company’s Executive Vice President and Co-Chief Operating Officer, was named Chief Executive Officer and President and to the Board of Directors. As of December 28, 2010, there are 1,453 bakery-cafes in 40 states and in Ontario Canada operating under the Panera Bread®, Saint Louis Bread Co.®
Purpose: • Mission:
They are bakers of bread. Their main purpose is to produce and serve fresh breads daily.
A loaf of bread in every mouth. (ref: www.panerabread.com)
Panera believes that key to leading an organization is to understand the long term trends at play and getting the organization ready to respond to it. So far, selling high-quality, high-priced fast food has worked just fine for Panera.
They have an aggressive growth strategy to open as many stores as possible each year.
Panera Bread intends to be a nationally recognized brand name and the dominant restaurant operator in the specialty bakery-café segment. Structure: Panera Bread Company owns the majority of their bakery-café locations but does franchise to certain individuals who meet specific and strict qualifications. Company owned locations account for about 67 per cent of all locations. Culture: Panera Bread has a commitment to providing crave-able food that people trust, served in a warm, community gathering place by associates who make their guests feel comfortable.
The Panera case states that their target market is “urban workers and suburban dwellers looking for a quick-service meal and a more aesthetically pleasing dining experience than that offered by traditional fast food restaurants”. By this statement it could be said that Panera has a very broad target market because they are really focusing on anyone looking for a fast quality meal. Also, with the growth of their catering program their target market can be expanded to workplaces and schools, which are places that could often use their services.
Swot Analysis • Strengths
• An attractive and appealing menu (see case Exhibit 6)— Panera offers high quality food at a good price (the company delivers good value for the money); moreover, it has menu offerings for the more health/weight-conscious diner • Bread-baking expertise (definitely a core competence)— artisan breads are Panera’s signature product • Panera Bread is the nationwide leader in the bakery-café segment • Panera Bread has high ratings in customer satisfaction studies • A good brand name that management is continuing to strengthen • The fresh dough operations and sales of fresh dough to franchised stores is a source of revenue and profit (see case Exhibit 1 showing that fresh dough cost of sales to franchisees run well below the revenues from fresh dough sales to franchisees) • Initial success in catering—extends the company’s market reach • Has attracted good franchisees—sales at franchised stores run a bit higher than those at company-owned stores (see case Exhibit 2) • The financial strength to fund the company’s growth and expansion (see case Exhibit 1) without burdening the company’s balance sheet unduly with debt
• Fresh baked bread everyday, majority of their bakeries offer free WIFI, and its a healthier option than most fast food places • Customer loyalty is another key to Panera’s success. Studies from the case show that Panera has a high rate of returning customers once Panera has got them in the door. • diverse menu that has been very well received from the public. In fact, their menu is set up not only to provide healthy and fresh choices but also to accommodate five different dinning times throughout
• Weaknesses • A less well-known brand name than some rivals (Applebee’s, Starbucks) • Sales at franchised stores run a bit higher than those at company-owned stores—why is this occurring? Are franchisees better operators? • Panera does not provide a faster pick-up and take-away option (a drive through) like most other quick-service restaurants have. • Since most Panera Bread’s are found in strip shopping centers the locations can be difficult to find for travelers or those unfamiliar with the area. • Because the majority of the food is organic and the bread is fresh everyday the prices are higher than many fast food restaurants
• Opportunities • Open more outlets, both company-owned and franchised— there is untapped growth potential in a number of suburban markets as shown in case Exhibit 3
• Open Panera Bread locations outside the U.S. as market opportunities in the U.S. begin to dry up • Threats • Rivals begin to imitate some of Panera’s menu offerings and/or dining ambience, thus stymieing to some extent Panera’s ability to clearly differentiate itself from rival chains • New rival restaurant chains grab the attention of consumers and draw some patrons away from Panera—in other words, competition from other restaurant chains (either those in the fast-casual segment or other restaurant categories) becomes more intense • Panera Bread begins to saturate the market with outlets, such that it becomes harder to find attractive locations for new stores and the company’s growth slows
Five Forces Analysis: I. Rivalry Among Competitive Sellers The restaurant industry is a very competitive industry. On a typical day US consumers spend a total of $1 billion at eating establishments (Thompson). There are constantly new entrants to worry about as well as companies struggling to make a profit. Panera competes on many levels including fast casual dining and specialty foods (Panera). Panera¶s main competitors include McDonald¶s, Starbucks Coffee and Subway. However there are hundreds of restaurants that compete with Panera on a national, regional, and local level that has a negative impact on the company¶s revenue and market share (Panera). To stay profitable in the highly competitive restaurant industry, Panera regularly reviews and revises their menu
³to sustain the interest of regular customers, satisfy changing customer preferences, and be responsive to various seasons of the year´ (Thompson). Panera develops an advantage in changing their menu over competitors such as McDonald¶s and Subway who do not change their menu frequently and customers often lose interest in their menu offerings. Starbucks Coffee however, does offer seasonal coffee beverages and a la carte food items to stay competitive for similar reasons as Panera. Starbucks and Panera have similar instore atmospheres that make them rivals. Both companies offer an atmosphere that invites patrons to stay for awhile with comfortable chairs, calming music and Wi-Fi. In order to gain a competitive advantage over Starbucks in terms of the atmosphere, Panera introduced meeting rooms at many of its locations to attract large groups of patrons. Panera, in 2004, introduced its catering service Via Panera to further expand the business and gain an advantage over rivals (Thompson). II. Threat of Substitutes In the restaurant and food industry, there are not any substantial substitutes to food because peo In the restaurant and food industry, there are not any substantial substitutes to food because people have to eat food every day. Food is a basic need and nothing can substitute that. Since there are no major substitutes the threat is relatively low in this category. However, there are substitutes to Panera¶s atmosphere and their coffee selections. Panera has developed an atmosphere that encourages people to hold meetings or get work done at the restaurant. A substitute to this could be to have the meeting in the office or just work from home. Panera has to offer people a reason to come into their restaurant as an alternative to the workplace or their home. The company competes with this substitute by offering a professional calming environment to get their work done without any distractions that may hinder people from working. One of Panera¶s signature menu items is its coffee. Substitutes to coffee are caffeinated beverages and energy
drinks. Instead of going into a Panera for a coffee, one could simply stop by the gas station and pick up an energy drink of caffeinated beverage. Panera has the advantage with this substitute because many people either prefer coffee or prefer energy drinks and stick to their preference so the risk of customers switching to a substitute is low. III. Threat of New Entrants The threat of new entrants is high because barriers to entry are low and the pool of entry candidates is large (Thompson). People are always looking for a new and different place to eat and because of this demand new restaurants open daily. In addition many restaurants do not stay in business for very long due to bad me dining experience, food quality and service (Thompson). Barriers to entry are low because there are little regulations from the government, there are usually no patent or legal protection needed, and there are little technological drawbacks that other industries experience (Hudson). If a person raised enough capital they could easily open up their own restaurant without many restrictions. New eateries also have an advantage over established restaurants because consumers are more likely to give new restaurants a try (Thompson). Consumers are constantly looking for variety in their meals so this gives new restaurants an incentive to open as well as steady business in the beginning of their operations. Panera competes with these new entrants by constantly changing their menu to meet customers¶ diet and seasonal wants. IV. Buyer Bargaining Power Buyer bargaining power is relatively high for Panera. The restaurant must constantly be staying in tune to customer preferences or the customers will easily eat at another restaurant. The food industry is highly competitive and in addition there are low switching costs for consumers and consumers have access to quality and nutrition information. One item that makes the buyers bargaining power high is that there are relatively low switching costs to choose
another restaurant over Panera. Consumers taste preferences change daily and eating at another restaurant other than Panera offers no additional costs other than the food prices. Panera recognizes this changing taste preference and offers a wide enough selection of menu items for customers to enjoy multiple times a week since the average American eats out four times a week (Nutrition). Buyers also have a great amount of power because quality information of the restaurant industry is readily available. 83% of restaurant patrons like nutrition information on the food products (Nutrition). Many restaurants have seen this and are now posting nutrition information because customers are more likely to visit a restaurant that posts the information. Also, in many cities laws have been passed that requires restaurants to post inspection results in a visible spot. This now makes restaurants pay closer attention to the restaurant quality because they may lose business if they do not receive a good inspection. V. Supplier Bargaining Power Panera¶s suppliers have a relatively low bargaining power because they implement a lot of controls to keep their bargaining power low. Panera controls the quality of their main product by making the bread themselves daily. Also, the company contracts with numerous suppliers to keep an individual suppliers bargaining power low. Panera has an advantage in terms of suppliers because the make their own bread in 17 fresh dough facilities and own 140 trucks to deliver the dough anywhere from 300 to 500 miles to stores (Thompson). This vertical integration has made Panera capable of controlling the quality of its signature product, their bread. The bread is delivered daily so if for any reason the bread cannot make it to the store sales and brand reputation can suffer. Panera has numerous suppliers for each ingredient so that it can obtain ingredients from other suppliers when necessary (Thompson). This lowers the risk of a supplier driving up the price for Panera because if one does,
Panera could simply switch to another supplier. Panera also has contracts with suppliers and distributors to control the costs of their supplies
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