C A S E 8 Panera Bread CompanyASSIGNMENT QUESTIONS1. What is Panera Bread’s strategy? Which of the fi ve generic competitive strategies discussed in Chapter 5 most closely fi t the competitive approach that Panera Bread is taking? What type of competitive advantage is Panera Bread trying to achieve?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?3. What is your appraisal of Panera Bread’s’s fi nancial performance based on the data in case Exhibits 1, 2 and8? How well is the company doing fi nancially? Use the fi nancial 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 fi nancial performance.4. Based on the information in case Exhibit 9, which rival restaurant chains appear to be Panera’s closest rivals?5. What strategic issues and problems does Panera Bread management need to address?6. What does Panera Bread need to do to strengthen its competitive position and business prospects vis-à-visother restaurant chain rivals?

In 1993, AU Bon Pain Company purchased the Saint Louis Bread Company. In 1995, top management at Au Bon Pain instituted a comprehensive overhaul of the newly-acquired Saint Louis Bread locations. The overhaul included altering the menu and the dining atmosphere. The vision was to create a specialty cafe anchored by an authentic, fresh-dough artisan bakery and upscale quick-service menu selections. This acquisition proved successful for Au Bon Pain. Between 1993 and 1997, average unit volumes at the revamped locations increased by 75% and over 100 additional locations were opened. In 1997, the bakery-cafes were renamed Panera bread in markets outside of St Louis. The Panera business plan had worked well and management concluded it had broad market appeal and could be rolled out nationwide. The management team quickly realized the potential of Panera Bread to flourish into one of the leading fast-casual restaurant chains in the nation. With this realization came the need for a more focused management team and greater financial resources. It was not in their best interest to continue with both Au Bon Pain and Panera Bread. In 1998, they went exclusively with Panera Bread and sold their Au Bon Pain bakery-cafe division. After the sales transaction to ABP Corporation was complete, the new Panera Bread Company was

restructured and had 180 St Louis Bread and Panera Bread bakery-cafes and a debt-free balance sheet.

Over the next 8 years a combination of company owned and franchised bakery-cafes opened, for a total of 850 additional locations. Exhibit 1 shows their success between 2002 and 2006. Their financial stats remained strong, with a continuous increase in revenue and net income. Panera's strategic intent was to make great bread broadly available to consumers across the United States. They have plans to open 170-180 cafe locations in 2007 and to have nearly 2,000 Panera Bread bakery-cafes open by the end of 2010. Management was confident that their attractive menu and the dining ambience provided significant growth opportunity, despite the fiercely competitive nature of the restaurant industry.

1. What is Panera Bread's Strategy and what type of competitive advantage are they trying to achieve?

Panera Bread's distinctive menu, signature cafe design, inviting ambience, operating systems, and unit location strategy has allowed it to compete successfully in five submarkets in the food-away-from home industry. Those submarkets are breakfast, lunch, daytime "chill out," light evening fare for eat-in or take-out and take-home bread. Panera's competitive advantage comes in part from their well balanced approach. They count on their Product, Environment, and Great Service (PEGS) to deliver their success. This synergy has worked well for them. The have taken a broad approach to their customer's experience. They don't focus on just the quality of the food, or just the warm and inviting atmosphere of the cafe or just the friendly customer service. They are truly committed to constantly providing all three in harmony, taking the full experience into account. In regards to increasing their evening sales, they tried to succeed by "being better than the guys across the street" and making the experience of dining at Panera so attractive that customers would be willing to pass up their typical fast-casual restaurant and go to a nearby by Panera Bread bakery-cafe instead.

Panera used a three pronged business approach. Franchising had been a key component of the company's efforts to broaden its market penetration, but not its only approach. Panera Bread had organized its business around company-owned bakery-cafe operations, the franchise operations, and fresh dough operations.

Another competitive advantage Panera Bread has is it's ingredients. Their signature product, artisan bread, is made from four ingredients - water, natural yeast, flour and salt. Preservatives and chemicals are not added to the mixture. They use the highest quality

ingredients and the bread is baked fresh everyday. At the fresh dough facilities, no freezing of the dough and no partial baking is done, each bakery-cafe does all the baking itself. Panera knows what it's good at and has used that as their foundation. Their menu was designed to provide target customers with products built on the company's bakery expertise. They specialized in fresh baked goods, made-to-order sandwiches on freshly baked bread, soups, salads, custom roasted coffees, and other cafe beverages. They offer over 20 varieties of bread.

Unlike some if its competitors, Panera is in tune with its customer's changing preferences. They are responsive to the various seasons of the year, offering seasonal menu rotations, referred to as "Celebrations." Offering something new and fresh is a great way to sustain your regular customers and to bring in new customers. Panera is wise in their introduction of new menu items. Prior to system wide rollouts, new items are developed in test kitchens and then introduced to a limited number of bakery-cafe locations to determine customer response and verify that preparation and operating procedures resulted in product consistency and high quality standards.

In addition to seasonal items, Panera has answered its health conscious consumers' needs. They have introduced whole grain breads and switched to the use of natural, antibiotic-free chicken in all of its chicken-related sandwiches and salads. They also added light entrees to jump-start dinner appeal and egg soufflés to expand their breakfast offerings and help boost morning-hour sales.

Panera saw a customer need for more catering options and expanded into this market. Now customers could experience the high quality Panera products at the convience of their own location, whether it be in the workplace, schools, parties or gatherings held in the home. This opportunity would help increase breakfast, lunch and dinner sales, as well as grow customer awareness.

Early on Panera's marketing strategy was more of a passive approach. They relied heavily on customer loyalty and word of mouth to develop their brand awareness. In 2006, Panera stepped up its marketing strategy. One element aimed at raising the quality of awareness about Panera by hammering the theme "food you crave, food you can trust." With this theme they looked to market Panera as a neighborhood gathering place . Also, instead of the hard-sell, in-your-face approach, Panera aimed at a softer touch, allowing its new customers to "discover" Panera. Panera also looked to increase its evening sales by capturing its existing lunch customers.

Panera Bread's franchising strategy was to enter into franchise agreements that required the franchise developer to open a number of units, typically 15 bakery-cafes in six years. To protect the company and ensure success, applicants had to meet eight stringent criteria to gain consideration for a Panera Bread franchise. A franchise fee of $35,000 per location and continuing royalties of 4-5% on sales was typically included in the franchise agreement. Dough products had to be purchased from approved sources by Panera Bread. The franchise segment of the company proved to be beneficial for both company as a whole and the franchise developer. Panera's surveys of its franchises indicated high satisfaction with the Panera Bread concept, the overall support received from Panera Bread, and the company's leadership. The biggest franchise issue was the desire for more territory. As of mid-2006, Panera did not yet have any international franchise development agreements. However they were considering entering into franchise agreements in Canada, specifically Toronto and Vancouver.

In terms of site selection, Panera did its due diligence before selecting or approving future site locations. They studied the surrounding trade area, demographic information within that area, and information on competitors. They developed projections of sales and ROI for candidate sites. In terms of cafe environment, Panera has a winning approach to making their locations warm, inviting and comfortable. They strive to be community gathering places. They provide a distinctive and engaging environment by using fixtures and materials complementary to the neighborhood location. Recently they have introduced a new G2 cafe design which incorporates higher-quality furniture, cozier seating areas and groupings, a brighter more open display case, and in some locations a fireplace. Based on the climate and geographical location some bakery-cafes also offer outdoor seating. Panera's free Wi-Fi is a competitive advantage. I personally choose to go to Panera because of this. Their competitors offer wireless internet but at a cost. Free Wi-Fi meets the needs of a sophisticated and diverse customer base. I think the extra perks like this help Panera develop such a strong customer loyalty. I also appreciate the real china and stainless silverware over paper plates and plastic utensils.

Panera is committed to their community. Operation Dough-Nation is a program that allows Panera the opportunity to give back to the community. At the end of each business day, any unsold loaves of bread are either delivered to or picked up by a local homeless shelter or food bank. This is a great gesture and shows Panera's commitment to being a positive influence in their local communities.

bakery cafe chain supply - pricing threat - value of item line -

The restaurant business was labor-intensive, extremely competitive, and risky. Industry members pursued differentiation strategies of one variety or another to set themselves apart from rivals. Many restaurants had fairly short lives; there were multiples causes for a restaurant's failure. They range from the following: a lack of enthusiasm for the menu or dining experience, inconsistent food quality, poor service, a bad location, meal prices that patrons deemed too high, and superior completion by rivals with comparable menu offerings. Fortunately, Panera has processes in place to help fight against each of these deal breakers.

2. What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its business situation?

Strengths:

Very successful acquisition of the Saint Louis Bread Company in 1993

Panera was widely recognized as the nationwide leader in specialty bread

In 2003, they scored the highest level of customer loyalty among quick-casual restaurants

In 2004, customers ranked Panera highest among quick-service restaurants in all categories - environment, meal, service, and cost

Strong financial statements show continuous increase in revenue and net income from 2002 through 2006

Their management team is confident that their business plan will provide significant growth opportunity

Panera Bread has a diversified Board of Directors

Their made to order menu items give the customer the option to have exactly what they want and how they want it

Global opportunities - expanding to Canadian locations

Young professionals don't want to cook, don't want to pay a high price and want an inviting atmosphere, they are drawn to Panera because it can offer them these things

Well suited for groups to gather - business lunch meetings, bible study groups, etc.

Weaknesses:

There are operational restrictions on franchise operations

It is very costly for franchisees because of the franchise fee and royalties, on top of the cost of equipment, inventory, and business space

Staffing and funding required to open new locations - growing pains

Supplier contracts - less bargaining power for Panera

Opportunities:

Health conscious consumers are steering away from McDonalds and looking for healthy alternative "fast-food"

Young professionals don't want to cook, don't want to pay a high price and want an inviting atmosphere, they are drawn to Panera because it can offer them these things elder generation...

Global opportunities - expanding outside of North America - European market

Introduce more organic items and items with a higher protein content - nuts and lean meat

Threats:

Climate - if wheat crops, lettuce, tomatoes, etc. are damaged by severe weather their prices will increase - this increase will result in Panera increasing customer prices or taking a loss to

their net income

Inflation rates - an increase causes the general price level of products (and services) to rise which decreases the purchasing power of the dollar

Changes in unemployment levels and wage rates can negatively impact the industry

Restaurant industry is extremely competitive

Potential of over saturating the market

Panera Bread's strengths out number it's weaknesses and there is a balance between opportunities and threats. I would say overall, this is a fairly attractive business situation. I would recommend that the carefully consider increasing their cafe-bakery locations at the rate they are proposing. I would suggest stepping back a little and allowing more of a demand to build.

3. What is your appraisal of Panera Bread's financial performance based on the data in Case Exhibits 1, 2, and 8?

Exhibits 1 and 2 -

Exhibit 8 - in 2005 you can start to see the effect of increased ingredient prices on the fresh dough operations. In 2006, this increase is more evident and a greater impact is shown.

4. What are the strategic issues and problems that Panera Bread's management needs to address?

I think Panera Bread needs to do more media advertisement. This will help gain consumers' awareness for their products, which in return will allow them to gain additional market share. I think they are relying too heavily on word of mouth.

5. What does Panera Bread need to do to strengthen its competitive position and business prospects vis-a-vis other restaurant chain rivals?

I think their current position is setting them up for success and that they just need to be aware of their growth rate. They don't want to get ahead of themselves and stretch themselves too thin. They currently have a strong competitive position. Their business model has proved successful for them and they don't need to stray far from what has been working for them in the past. I would suggest staying on top of their suppliers and revisiting any single source supplier contracts. That is one of the few areas where there is some potential for improvement.

PAPER 2

Panera Bread is a company of small beginnings, starting out as a chain of small scale bakery-cafes along the east coast to having over 1,200 locations in over 40 states. Panera is a company that strives to project an inviting atmosphere in all of its establishments. Panera’s stores are mostly located in suburban areas with heir target customers being urban workers and suburban dwellers.

“A loaf of bread in every arm” is the mission statement of Panera Bread. Panera Bread bakes more bread each day than any bakery-cafe in the country. Panera’s menu spans from muffins and bagels to soups and salads to a variety of sandwiches. Panera Bread prides itself on providing the highest quality of food that customer enjoy.

Panera’s competitors include restaurants in the fast-casual restaurant market such as Applebee’s, Baja Fresh and Fuddruckers. Panera Bread also has to compete with common fast food restaurants such as McDonald’s and Wendy’s. Although, competition is fierce in these markets, Panera has been able to differentiate itself from other competitors.

One of the main problems that Panera Bread is facing is their pricing strategy. With the state of the economy today, it definitely affects the consumer’s ability to eat at places like Panera Bread, especially when there are less expensive options available. These competitors, most of which are in the fast food industry, offer less expensive food items, although they may be of a lesser quality, they still pose a major threat.

Fast food restaurants such as McDonalds may operate differently, however they have a strong presence in suburban areas, which is where Panera is primarily located. There is approximately one Panera location for every ten McDonald’s. Also, full service restaurants such as Applebee‘s, are beginning to offer lower priced menu options. For example, Applebee’s recently began offering 2 for $20 deals where customers can get an appetizer and two entrees for $20. Deals like these may start to lure Panera’s customers to other establishments.

Customers at Panera are expected to stand in line, place their order, wait for the food and take it to their table. They are also expected to clean their table when they are done, all for the price of a sit down dinner. On average a customer at Panera can expect to pay around $10 for a sandwich and a beverage. For the same price or just a few dollars more, consumers can get a full service experience at a

restaurant like Applebee’s. Although, the food may be great, will customers continue to pay these types of prices for limited services?

Described in Newsweek as “the Applebee’s of fast food”, Panera Bread has not altered there pricing to stay competitive in this industry. Instead, Panera uses market segmentation and focuses on the customers who can afford their prices. As the CEO, Ron Shaich, stated when asked about the 8.1% unemployment rate, “We prefer to focus on the 92% of the country who still have jobs”. Even though the majority of their target market segment may be still employed, people are scaling back due to the fear of possibly losing their job in the near future. This can pose a major threat to their future success.

One of the main causes of Panera‘s higher menu prices is the cost of the quality ingredients that they use in their food. The quality of Panera’s food is part of their marketing strategy. The company attempts to grow sales through providing an enjoyable dining experience rather than attracting customers on price. Their marketing objective is to grow their customer base with menu development strategies.

As indicated in the case, Panera manufactures its own fresh dough, which is produced and delivered daily in facilities all over the country. Although this is a very costly process, management at Panera sees this as a competitive advantage. Also, Panera obtains ingredients for their dough and other products from multiple suppliers. Due to the rising cost of ingredients, it is likely that Panera’s menu prices will increase.

To effectively analyze cost in relation to price, more information is needed on the cost of producing all items on Panera’s menu. How much of the price is affected by cost is a major factor. Management needs to look at ways of offering lower priced foods without having an major financial impact on the company‘s profit margin.

One option that Panera can implement is lower priced menu options. This can be done in various ways to ensure the quality is not compromised. Panera could offer lower priced, smaller portions for the lunch menu. For example, in addition to offering a whole sandwich, Panera can offer half sandwich at a lesser price. This would also tie in with marketing to health conscious people because they would be getting healthier sized portions of food. Panera would also become more competitive with fast food restaurants such as McDonald’s that have everyday low-priced value option on their menu.

Although, this may be a good way to bring in a new customer base, there is also a downside. Introducing lower priced menu items may

jeopardize Panera’s current competitive advantage. Panera has grown over the years by staying committed to what they believe in, which is providing a great dining experience. However, by offering a value menu, this may be seen to some customers as a step down, which could result in decreased sales.

Another option is for Panera to transform into a full service dining establishment. Essentially they would operate more like Applebee’s where customers are waited on and served. This would also allow them the opportunity expand their menu, especially for dinner since this is a slow period for them. They would even be able to introduce some higher priced menu items which would be more aligned with other full service restaurants. The current layout of the restaurant is setup very similar to a full service restaurant, so there would be minimal structural changes necessary.

There are some negative aspects to this option that have to be explored. The main issue that would have to be examined is the increased cost. Going full service entails hiring additional staff to serve customers. Also, although minimal, there would have to be some structural changes made at each locations to enable Panera to become more conducive to a full service establishment

Another issue that has to be considered with going full service is the additional competition. There are lists of full service restaurants that Panera would have to compete with, which may have a negative impact on sales. Their existing customer base may also not be very accepting of a full service option and this may ultimately result in Panera losing revenue.

I think the best option for Panera Bread is to offer lower priced options as a part of their menu. This is the most cost effective way for them to address the issues that consumers have with their prices. This would also allow them to perhaps gain new customers with these lower priced items. Also, offering lower price menu options would have the least financial impact. This can be done by offering coupons or having specials on certain days of the week.

Panera can also offer a customer rewards card which is a very popular trend. Customers would gain points for frequenting the restaurant and after gaining so many points, they would be entitled to a free entrée. This would be a great opportunity to increase customer loyalty.

Panera Bread is a successful company that has stood behind their commitment of providing “crave-able food that people trust”.

Although, with the current state of the economy change is necessary, Panera Bread can make changes to their strategy without jeopardizing quality.

References

Donnelly, J. H., Jr., & Peter, J. P. Marketing management: Knowledge and skills. (9th ed.) (2009). Boston, NY: McGraw-Hill Irwin.

Panera Bread Company Information Retrieved October 10,2009 from Panera Bread official website http://www.panerabread.com/about/company/

Julie Jargon (2009) Slicing the Bread But Not the Prices Retrieved October 10, 2009 from The Wall Street Journal

http://online.wsj.com/article/SB125055615200338805.html?ru=MKTW&mod=MKTW

Michael Arndt (2009) Panera Bread’s Apple Strategy Retrieved October 10, 2009 from BusinessWeek

http://www.businessweek.com/the_thread/brandnewday/archives/2009/03/panera_ bread_is.html

Market Scan (2007) Panera Bread in The Oven Retrieved October 10, 2009 from Forbes.com

http://www.forbes.com/2007/10/24/panera-bread-update-markets- equity- cx_ml_1024markets36.html

PAPER 3

Running head: PANERA BREAD CASETitle: Panera Bread StrategyRon JohnsonMarch 1, 2009Southwestern College Professional Studies AbstractThis case study is about Panera Bread Company and its strategy it wishes to employ to become the best brand name of fresh bread in the United States. Panera Bread’s use of a broad differentiation strategy has helped their profitability and growth and rivals have found it hard to compete with the competitiveness of Panera Bread. A SWOT analysis will reveal the competitive advantage Panera Bread has and why this company is in an attractive situation and what Panera Bread must do to strengthen its competitive advantage against rival chains.

Panera Bread StrategyNeighborhoods and cities all around the country are enjoying a tradition of freshly baked artisan breads from Panera Bread bakery-cafes. A driving force behind Panera Bread was to create “a premium specialty bakery and café experience to urban workers and suburban dwellers” (Thompson, Strickland, & Gamble, 2008, pC-87). Heading into 2007, Panera Bread Company’s market presence was expanding rather swiftly. “Between January 1999 and December 2006, close to 850 additional Panera Bread backery-cafés were opened, some company owned and some franchised. Panera Bread reported sales of $829 million and a net income of $58.8 million in 2006. Sales at franchised-operated Panera Bread bakery cafés totaled $1.2 billion in 2006” (Thompson, Strickland, & Gamble, 2008, pC-87). Panera Bread’s strategy was and still is to make great bread and to make it broadly available. Part of that strategy is to make there cafés a home away from home, where people are comfortable and relaxed. What competitive strategy did Panera Bread use to grow its business?

There are a number of ways that companies employ competitive strategies and that can depend on a number of things. Panera Bread’s competitive strategy approach is geared more to a broad differentiation strategy, where the products and services they offer are somewhat different than their rivals and it appeals to a large spectrum of buyers. In this case Panera Bread has set itself apart from its rivals by offering specialty type foods that are outside the norm. The bakery menu offers pastries and sweets, granola parfait, baked egg soufflés, breakfast sandwiches and of course, freshly baked breads to include bagels. They also have a café menu that offers hand tossed salads, sandwiches, drinks, and soups. To top things off, they even offer a kids menu, so Panera Bread caters to the entire family. Panera Bread Company went as far as starting a catering program to extend its market reach (Thompson, Strickland, & Gamble, 2008, pC-92). “Everyone enjoys choices, especially when they're fresh, fun and spontaneous. Right now at Panera Bread, there are plenty of tempting selections to captivate, tantalize and energize your bread-lover's soul as we celebrate the delicious rewards of the baker's craft” (Panera Bread, 2009). What competitive edge does Panera Bread have if any?

Panera is attempting to achieve a longer lasting, more profitable competitive advantage by their capability to offer unique or specialty type items. Also, their commitment to put there all into everything they offer their customers. For example, Panera offers 4 different flavors of coffee, dark and light roast, hazelnut, and decaf. What is important is the work they put into making the coffee. “We believe that coffee is sacred. And that making it requires the utmost attention —from the bean to the cup. So we roast our coffee beans in small

batches — allowing us to make adjustments along the way to bring out the best in every bean. And when we brew it, we keep it at just the right temperature so it’s not too weak or bitter” (Panera Bread). Panera’s ability to offer a more unique product and experience will help them be able to sustain their competitive advantage. What are the strengths, weaknesses, opportunities, and threats (SWOT) analysis involved with Panera Bread?

A company’s profitability and competitive well-being are affected by both internal and external origins. Threats that can harm Panera Bread Company are their competitive rivals who attempt to copy and employ some of the same standards and who may one day offer the same products and services. Panera Bread is in a very attractive situation. The company reached an all time high according to published reports from the company’s press release department on February 8, 2007, where the company’s revenue was just over $282 million in 2002 and nearly $829 million in 2006 (Thompson, Strickland, & Gamble, 2008, pC-86). Does Panera Bread Company have any core or distinctive competencies?

Panera provides its customers with unique food and a unique experience. It offers a bakery and café menu and let’s not leave out the kids menu. They offer four types of coffee that they give special attention to when and how they make it for their customers. Panera Bread even goes the extra mile by having wifi connectivity in 1200 of its business locations for business men and women and college students’ just to help give the extra feel of being home. Panera Bread’s distinctive menu, signature café design, inviting ambience, operating systems, and unit location strategy allowed it to compete successfully in five submarkets of the food-away-from-home industry: breakfast, lunch, daytime chill out (the time between breakfast and lunch and between lunch and dinner when customers visited its bakery-cafés to take a break from their daily activities), light evening fare for eat-in or take-out, and take-home bread” (Thompson, Strickland, & Gamble, 2008, pC-87 and C-88). What can Panera Bread Company do to strengthen its competitive position and business prospects?

One way Panera Bread can strengthen its competitive advantage is to continue to make it self available around the country- even more than it has. One way is to have more franchised-operated bakery-cafés. It was referenced earlier with the financial data reports that franchised-operated bakery-cafés totaled $1.2 billion in sales in 2006 (Thompson, Strickland, & Gamble, 2008, p-C-86). Panera Bread counts on its product environment and great service to deliver its success. If it continues to offer great customer service, unique products and an overall escape for people of all ages, Panera Bread can keep its competitive advantage. Conclusion

Panera Bread provides a specialty bakery and café experience to people all across the United States. Panera’s marketing strategy was to compete heavily; not on the basis of price, but on providing a unique dining experience that none of its rivals can match. That is one reason Panera Bread has been able to grow and prosper, the company and its franchises. By using a broad differentiation strategy, Panera Bread has been successful at maintaining a broad customer base. If there are any threats to this company, they are from external forces because they have adapted to the market and continue to win over their consumers. Panera Bread Company should not have a problem with maintaining there competitive advantage.

ReferencesThompson, A. A., Strickland, A. I., & Gamble, J. E. (2008). Crafting & executing strategy: Thequest for competitive advantage: concepts and cases (16th ed.). Boston, Massachusetts:McGraw-Hill/Irwin. Panera Bread Company. (1999-2009). Our menu offers. Retrieved February 27, 2009 from:http://www.panerabread.com/menu/bakery/

PAPER 4Panera Bread Company

0. INTRODUCTION

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. 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 restaurant category for one-, five- and ten-year returns to shareholders. Today, there are more than 1160 Panera Bread bakery-cafés in 40 states delivering fresh, authentic artisan bread on a national scale.

1. STRATEGIC CHALLENGE

Panera Bread’s major problem is its development in North America and the disparity of its implementation in general. The company has many cafés all around the United States, in major cities such as St Louis, Los Angeles, Philadelphia, Dallas… but big cities such as New York city, Phoenix, San Antonio, New Orleans,… do not have any Panera Bread Cafés.

The strategic challenge for Panera Bread is to develop the implementation of the company all around North America before going to the international market. With its own characteristics and a good development, Panera Bread will be a major actor on the bakery-café market and will compete with big companies such as Starbucks or Subway.

2.COMPETITION ANALYSIS

Core Competence

-The company’s fresh-dough-making capability for fresh baked and quality goods served in a comfortable environment.

SWOT

Strengths:

-Panera Bread is well-known for the quality of its products, it provides warm and baked food that people trust.-The comfortable environment of the cafés is also a major strength for the company, customers really like to hang out in Panera Bread café and spend their breakfast or lunch time in a peaceful and smooth environment.-Customer satisfaction and their tendency to share their positive experiences with friends and neighbours.-Company’s fresh-dough-making capability provide a competitive advantage by ensuring a daily quality and dough-making efficiency.-Panera Bread growth strategy: opening both owned-company and franchise locations.

Concerns:

-Lack of Panera Bread’s locations in many states in the U.S and in North America in general.

-Panera Bread’s weak marketing, a lot of people do not know their innovative products.

Opportunities:

-Higher quality quick dinning experience than the traditional fast food restaurant -Fast casual restaurant market is a growing market-Panera Bread is in the trend, its food correspond to the actual trend of heart-healthy, organic, low calorie food.-The catering market to increase lunch and dinner sales.

Challenges:

-Important competition and major competitors such as Subway or Starbucks on the market which have restaurants in North America and all around the world. -Business itself is really hard, labor intensive, extremely competitive and risky. - People only come in the restaurant once a day (for breakfast or lunch but not for both) Panera Bread will have to find new ways to attract them.-The company will always have to be really innovative to always follow the trend of the market and stay focus on the customers needs. -The company must have to continue to develop itself all around the U.S and in North America.

PEST

Political and Legal:

-Political and legal factors were not addressed in the Panera Bread Company case study but Panera Bread company like the other fast food companies and restaurants takes into account the political and legal environment and depend on employment laws and tax policy for their products and employees.

Economical:

-Fast casual restaurant sector is growing up and the market is at the moment favourable for Panera Bread development and implementation -Increase of the demand for fast casual restaurants in the United States

Social and Cultural:

-Health consciousness of the customers -Need of a new offer adapted to consumer’s taste (vegetarian, low-calorie) and to their expectations ( happy-hours, children’s menus, innovative or trendy dishes,…)-Comfortable environment where customers like to stay and not fast food environment where consumers eat in 20 minutes and then leave

Technological:

-Panera Bread’s fresh-dough manufactures which provides fresh dough everyday to its cafés and so ensure the quality and the fresher of its products.

Porter’s Five Competitive Forces

Potential new entrants:

-Even tough the competition is pretty tough and the threat of potential new entrants is high in the market, Panera Bread is doing very well because it offers a quality product which is in the trend. -Restaurant market is easy to penetrate with an innovative product.

Threat of substitute products:

-In general, the threat is high in the fast casual restaurant industry with similar products proposed by different companies.- Panera Bread is offering an innovative product which differentiate the company to its close competitors. -The quality of its products (thanks to its fresh-dough) also differentiate Panera Bread to its competitors.

Bargaining power of buyers :

-Franchisee power is low, they are dependant of Panera Bread supply for the fresh-dough for example and they can also be bought by the company after five years.-Customer’s power is high, they decide and impulse the trend, they share their good experience with other customers.

Bargaining power of suppliers:

-Suppliers power is also low, Panera Bread Company only depend on them for the supply of their “raw material”.-You can find a lot of alternative suppliers

Rivalry among competitors:

-The competitors are numerous and diverse.-The competition on the market is hard, rivals compete aggressively. -Panera’s marketing is a bit weak but the level of advertising expense is important for every big company in that sector.

PAPER 5

Panera Bread: A Case Study Misti Walker

Panera Bread: A Case Study 1

StrategyPanera Bread’s strategy is “to provide a premium specialty bakery and café experience to urban workers and suburban dwellers.” This strategy is most closely aligned with a broad differentiation strategy, or being unique in ways that a broad range of consumers find appealing. Prior to taking the Panera concept nationwide, the owners performed cross-country market research and concluded that consumers could get excited about a quick, high quality dining experience. The concept is a mix between fast food and casual dining, or fast casual. By choosing this strategy, Panera is attempting to achieve competitive advantage in the unique offerings it provides, offerings that rivals don’t have and can’t afford to match. In this case, delicious handcrafted bread arriving fresh daily, served in an inviting atmosphere is the company’s competitive advantage and core competency.

SWOT AnalysisStrengths - Repeat customers, learning curve, word-of-mouth, fresh, quality food, rapid market penetration, economies of scale, customer service, good atmosphere Weaknesses - leased land, off-site dough preparation and delivery, many untapped markets, no sustainable competitive advantage, unclear strategic direction, unfavorable financial trends Opportunities – catering, national focus on health, dinner crowd, global sales Threats – bad economy, high gas prices, highly competitive industry

FinancialsNet profit margin Return on stockholder’s equity Debt to Equity Ratio Current Ratio 2006 .071 14.8% .365 1.16 2005 .081 16.5% .381 1.18 2004 .081 15.9% .345 1.05 2003 .084 15.8% .239 1.58 2002 .076 14% .215 1.83

Return on Sales (by business segment) 2006 Company stores 18.5% 2005 19.6% 2004 19.8% 2003 20.7% 2

Franchises Dough Combined

88.0% 9.9% 23.3%

87.7% 9.0% 24.5%

88.0% 6.7% 24.6%

88.7% 7.0% 25.8%

The franchise business segment is showing above average returns on sales. This is due to the fact that the start-up costs tied to the franchise segment are not reflected in the company’s 10-K reports.

CompetitorsPanera Bread’s closest rivals include: Atlanta Bread Company, Au Bon Pain, Chipotle, and Starbucks. These restaurants are also in the fast-casual dining segment of the industry. Like Starbucks, Panera Bread hopes to convey a casual, friendly atmosphere for people to “chill out” and enjoy the Wi-Fi and good times with friends. While these are the closest rivals, Panera must also compete with casual dining restaurants, fastfood places and any number of other locally-owned establishments.

Recommended ActionIn order to compete effectively in this highly-competitive industry, management needs to define a clear-cut strategy that addresses the company’s distinctive competence – it’s wholesome, delicious artisan crafted bread products. The name of the company is Panera Bread, the bread is its distinctive competence, and the company should promote it as such. Given the industry’s competitiveness and the fickleness of its consumers, management can strengthen its competitive position by providing a superior product at the best value to consumers. Already Panera is competitively priced but many external events might curb the company’s profitability. By implementing a best cost provider strategy, the company would be somewhat shielded from downturns in the economy. Further, the company’s profitability is trending downward. To address this issue and attain best cost provider status, management should consider eliminating the fresh dough segment of the company, and instead bring the bread making into each store. This will reduce the risk of higher gas prices eating into the profit margin. It will also aid in the goal of creating an inviting environment for its guests. Who doesn’t love the smell of fresh bread? And kids would love to watch the bread artisans practice their trade. Finally, research has shown that once a person has visited a Panera bakery-café, they are more likely to return and tell their friends about their visit. Panera is a

relatively young company that has experienced high growth in the past few years. Management needs to raise awareness of the brand and the rest will take care of itself. To achieve this goal with limited cost, the company should increase its marketing budget and share the associated cost with its franchises. The marketing campaign should focus on the competitive advantage of the company, value, nutrition, and warmth.

PAPER 6\

Overview

Panera Bread is ready for an epochal change in American eating habits. The company is a leader in the quick-casual restaurant business with more than 1,027 bakery-cafes in 36 states. Its locations, which operate under the Panera and Saint Louis Bread Company banners, offer made-to-order sandwiches built using a variety of artisan breads, including Asiago cheese bread, focaccia, and its classic sourdough bread. Its menu also features soups, salads, and gourmet coffees. In addition, Panera sells its bread, bagels, and pastries to go. Almost 400 of its locations are company-operated, while the rest are run by franchisees. Panera Bread's is trying to provide premium specialty bakery and café experience to urban workers and suburban dwellers. They want to make the experience of dining at Panera so attractive that customers would be willing to pass by the outlets of other fast-casual restaurants competitors to dine at a near-by Panera Bread. They have strong competition through-out the whole fast-food/restaurant business. Two main competitors that they have are Starbucks and Einstein Bagels. They are a proven company that is always looking for ways to move forward, and advance their business.1. What is Panera Bread's strategy? What type of competitive advantage is Panera Bread trying to achieve? Panera Bread's strategy is to provide premium specialty bakery and café experience to urban workers and suburban dwellers. Panera is trying to be "better than the guys across the street." They are trying to make the experience of dining at Panera so attractive that customers would be willing to pass by the outlets of other fast-casual restaurants competitors to dine at a near-by Panera Bread.

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? Panera's Resource Strengths and Competitive Assets:• Leading bakery-café nationwide• Award winning sourdough bread• High quality food

• Strong Financial Condition• Loyal customer base• Powerful Strategy• Known brand name

Panera's Resource Weaknesses and Competitive Liabilities :• Low brand awareness in new markets• Limited product line

Panera's Market Opportunities:• Increasing health conscientious among consumers• Few direct competitors• Ample room to expand into new markets• Expanding the product line

External Threats to Panera's Future Well-Being and Profitability:• Due to high profit margins, potential for competitors to enter the market• A shift in buyer needs and tastes• Slowdowns in market growth

Conclusions concerning the attractiveness of Panera Bread's overall situation:

The above SWOT listings for Panera Bread reveal that they have an attractive set of strengths. They also have attractive opportunities that are well suited to its strengths. The one weakness I think Panera should worry about would be limited product line. Panera does offer different product but when compared to the whole fast-food industry they don't have an extensive menu. I don't think any of the threats are too alarming. They company should be able to deal with them if they were to come along. Panera should use their known brand name to help expand into new markets. They could also expand their product line in connection to the increasing health conscientious among consumers. They could offer consumers healthier and more options or food and beverages.

3. What is your appraisal of Panera Bread's financial performance based on the data contained in case Exhibits 1, 2, and 8? How well is the company doing financially? Panera's total revenues have grown from $282,225 million in 2002 to nearly $828,971 million in 2006, equal to a strong compound average growth rate (CAGR) of 30.91%. Franchise royalties and fees are up from $27892 million in 2002 to $61,531 million in 2006, a CAGR of 21.78%. Fresh dough sales to

franchisees have grown from $41,688 million (.15% of total revenues) in 2002 to $101,299 million (.12% of total revenues) in 2006, a CAGR of 24.85%. Net income is up from $21,300 million in 2002 to $58,849 million in 2006, a CAGR of 28.9%. EPS is up from $.71 per diluted share to $1.84 per diluted share, a CAGR of 27.6%. Net cash provided by operating activities rose from $46.3 million in 2002 to $104,895 in 2006, a CAGR of 22.67%. I believe that Panera has grown rapidly over the last four years. They have increased there revenue by 34%4. Which rival restaurant chains appear to be Panera's closest rivals?

Einstein Bagels and Starbucks seem to be Panera's closest rivals. This is because they all sell a similar combination of products. Einstein and Panera's Menu's are quite similar. Both menus for breakfast include; bagels, scones, cinnamon twists, coffee cake, cookies, and muffins. Lunch menus include; soups, salads, and sandwiches. They also both offer hot and cold beverages. Starbucks is more of a rival due to their atmosphere, though they do show similarities in their menus. Both Panera and Starbucks are places where you can pair your coffee with a fresh pastry and enjoy free WiFi access to boot. Both successfully execute the concept of a "third place" i.e., a location other than home and work where you can relax, work, meet and chat.

5. What strategic issues and problems does Panera Bread management need to address?

One strategic issue Panera Bread management needs to address is expansion. If Panera does expand too quickly or too close together, it would mean problems. If these expansion problems, or any other problems for that matter, did come up, Panera could handle some of it with the strong balance sheet. I believe management is smart and knows what locations/areas where Panera would do well. But this will be something to keep an eye on. They also need to address whether to expand their product line. Offering more products will attract customers and help them to compete with their rivals.Another issue management should address could be competition. Competition from other eateries and cafés will be something that could hurt Panera. Again, I believe management is smart and knows what tactics work in this area, but competition is still a factor that could hurt Panera and something to follow. They also need to address whether to correct the company's deficiencies by acquiring a rival company with the missing strengths.The final issue would be location. 40% of Panera's bakery-cafés are located in the Midwest. If a significant amount of these locations suffered serious damage for whatever reason, it'd hurt the company.

Again, the strong balance sheet means the company can handle some difficulties. But if anything major kept the cafés shut or the customers away, Panera wouldn't have much support from the stock market. They could also address whether to expand into foreign markets. This would help Panera's continual growth.

6. What does Panera Bread need to do to strengthen its competitive position and business prospects vis-à-vis other restaurant chain rivals?

The key for Panera's expansion is their bakery-cafés, obviously. Panera will definitely be a company who's helped by a rising organics crowd, which is currently growing at 15%-20% and still makes up only 2% of the whole U.S. food market. Panera has a niche for sure, and that niche will greatly benefit from a larger natural, organic, healthy crowd, which I believe will continue to keep growing. Now, Panera doesn't quite have the ability of Starbucks to have a café on every other block, but they can do some close expansion, more so than other restaurants. I think Panera could have one of their cafés every 15-20 miles from another one, because people go out of their way to get to Panera, just as they do to get to Starbucks. Panera has a great reputation, so as long as they have that, expansion will come relatively easily. I believe Panera could easily operate 4000-5000 bakery-cafés. Remember that they are opening a bakery-café every other day right now and that they are still in only 38 states. With the balance sheet in great shape and the business strongly producing, I certainly see Panera being able to take advantage of opportunities when they come along.

Bibliography

Panera Bread: Rising To The Challenge. David Kretzmann http://seekingalpha.com/article/24944-panera-bread-rising-to-the-challenge