Case: Panera Bread Company Panera Breads key strategy is to provide a premium specialty bakery and caf experience

to urban workers and suburban dwellers by serving artisan sourdough breads made with craftsmans attention to quality and details. Their competitive strategy is to offer distinctive menu, signature caf design, inviting ambience, effective location strategy to tackle successfully in five submarkets of the food-away-from-home industry including breakfast, lunch, daytime chill out, light evening fare for eat-in and take-out, and take-home bread. Their goal is to make Panera Bread a naturally recognized brand name and to be the dominant restaurant operator in the specialty bakery-caf segment. A SWOT analysis of Panera Bread will provide some insights into the companys overall situations by analyzing their core competencies, liabilities, as well as future opportunities and external threats. Panera Bread aims to be the best-cost provider by offering the entire dining experience. Rather than competing on price alone, they portray themselves as being good value for mass consumers who are value conscious and looking for great products and reasonable prices. In addition, they are very receptive to changes in consumers preferences and strive to offer upscale and distinctive menu items. For example, Panera Bread differentiated themselves from their fast-food competitors by introducing a new line of artisan sweet goods made with gourmet European butter, fresh fruit toppings, and appealing filling in 2005. To keep their menu items interesting, Panera Bread changes their soup lineup seasonally and focuses on providing food that the customers would crave and trust to be tasty. SWOT Analysis Strengths: Bread baking expertise and famous recipe are their main core competencies. They are well known for delivering fresh, authentic artisan bread. Panera Bread owns 17 fresh dough making facilities and 140 trucks to deliver the dough anywhere from 300 t0 500 miles. This vertical integration of making the bread dough themselves daily, the company is able to controls the quality of their signature product and do not have to depend on outside suppliers for their signature item. The company has strong relationship with great franchisees which is the key factor for their growth. In addition, all of their franchisees are experienced multi-unit restaurant operators and well capitalized with net worth of $7.5 million and liquid assets of $3 million. Distinctive and interesting menu Panera Bread offers upscale quality food and reasonable prices. In addition, it has also added many new

healthy menu items, which are appealing to health conscious consumers. In order to stay relevant and interesting, Panera Bread adds new items to their menu five times a year. They have an effective trail process where the new items would be developed in test kitchens and offer to selected bakery-cafes for trail run. Then they would use the collected responses to determine whether they should roll out the new menu items nationwide. This new product rollouts process is integrated into Panera Breads Celebrations where new items are added periodically. The company has strong financial position a lot of cash with no longterm debts.

Weaknesses: Panera Breads brand is not as well known as their competitors such as McDonalds, Subway, and Starbucks. They do not have as many locations/outlets to serve the population in many markets. They are in highly competitive market and competing with fast casual restaurant chains as well as full service restaurants. Opportunities They still have many opportunities for expansion into low penetration markets and untapped markets. They should consider possible international expansion to gain global presence. Offer more low carbohydrate and low fat menu items to target health conscious consumers. Put more emphasis on creating brand awareness for its healthy menu options and ingredients. Threats Panera Breads rivals are their biggest threats in this highly competitive environment. Threat of new entries is considered to be quite high because setting up a local restaurant does not require a lot of capital. In addition, consumers are always looking for new things to try and new restaurants to dine at. To determine whether they should be pursuing the plan of aggressive expansion to other markets, we have to look at Panera Breads financial performance (Exhibit 1).

Exhibit 1:

They did extremely well in year 2003 and EBT grew 46.70% and net income 43.99% from year 2002. From year 2003 to 2005, we see a steady growth from the companys financial performance. However, in year 2006, the gross profit margin slightly declined from 37.28% in year 2005 to 34.51% in year 2006. This suggested the increase in their operating expenses in proportion to revenue. However, their overall financial performance is still considered very strong with a lot of cash and no long-term debts. Staying relevant is also a constant challenge in the restaurant business. Panera must always be ready to adapt and respond to changes in the consumer trends. Panera Breads top competitors rank among the top fast food chains and fast casual dining and specialty foods such as McDonalds, Subway, Au bon Pain, Starbucks, and Applebees. Top fast food chains: McDonalds and Subway Compete based on convenience and price. Less focused on providing good dining experience and customer service. Often use paper plates and plastic utensils. Fast casual chains: Starbucks and Applebees Offer quality food at higher price. Big emphasis on ensuring pleasant in-store atmospheres to serve as a communitys hang out spots. Use real china and stainless silverware. Most places have outdoor dining space and equipped with free Wi-Fi Internet access. Since it is in the nature of consumers to always look for new places to eat out, Panera Bread must strive to keep their customers to come back to them - by introducing new item menus often to sustain the interest of regular customers, being adaptive and responsive to changes in consumers preferences and seasons of the year. This strategy will also help keep our new entrants into the market. Moreover, the consumer trends now are more focused on healthier eating. Hence, Panera Bread should offer more varieties in terms of healthy options such as different types of salads, lean meat, lower calorie sweet goods, and healthier bread options. Because consumers have

already associated Panera Bread brand with being healthier, they have an advantage over some of their rivals such as McDonalds. McDonalds tried to introduce a healthier image of McDonalds Caf and healthier food options but it was not quite well received in the U.S. In addition, Panera Bread should not compete by lowering its prices. Instead they should aim to set themselves apart from fast-food restaurant chains by delivering superior quality and offering healthy menu items. The new G2 caf design will help them attract more customers who want to relax or hang out with friends during the daytime. With the treats of new entry and challenges constantly posed by their rivals, Panera Bread to be more aggressive in their expansion strategy. They aim to expand the number of Panera Bread locations by 17 percent annually through 2010. Since Panera Bread has a lot of cash with no long-term debts, they have an advantage over their rivals despite the economic downturn. With recession, the price of real estate and development has fallen down; they should capitalize on this opportunity and expand more aggressively. As more locations are added, their operating costs should also come down as a result of the economy of scale. In order for them to expand at 17 percent annually, Panera Bread will need to attract more qualified franchisee groups. Franchising has always been the key component of their efforts to broaden marketing penetration. However, applicants for franchises must meet eight stringent criteria in order to be considered for a Panera Bread franchise. In order to attract more franchisees and speed up the expansion plan, they should reconsider to lessen the strictness of their criteria while still maintaining high standards. In addition to the bakery-caf business, Panera Bread introduced a catering program called Panera Catering in year 2004. By end of year 2005, this new sub-business had already generated an additional $80 million in sales for Panera Bread. They should put more focus on catering to expand their national brand and generate more profits by targeting corporations and schools. Panera Bread prides itself for using all natural ingredients such as the all-natural antibiotic-free chicken. Hence, they should increase public awareness of this fact to help attract health conscious customers as well as strengthen its brand image.