Running head: BUSINESS PLAN

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BUSINESS PLAN

Abstract

This business plan synthesizes a variety of expert sources and original analysis to describe and

evaluate the operations and strategies of Panera Bread, a publicly traded restaurant founded in

Boston in 1981. The paper details the company’s offering, marketing strategy, financial status,

and the state of the larger restaurant industry. The business plan then analyzes Panera’s strengths,

weaknesses, opportunities and threats in the context of the current economic climate.

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INTRODUCTION

Panera Bread is a retail bakery-cafe founded in Boston in 1981, and

headquartered in Saint Louis, Missouri. The company began as a small cookie shop and café,

and soon acquired enough wealth to expand to new locations and become a publicly traded

company under the symbol PNRA. The company is the supplier of its own restaurant chain and

franchises established in targeted locations in United States and Canada. Panera Bread’s main

business concept is to sell fresh bread and sandwiches, along with soups, salads and specialty

beverages, to consumers willing to spend more money for better quality of food. Today there

are nearly 1,450 Panera Bread locations in 40 states and Ontario, Canada (“Panera Bread,”

2011).

BUSINESS PLAN

MARKET RESEARCH AND MARKETING PLAN

Panera Bread relies on a number of product, service and environment-based strategies for

success. One of the strategies Panera Bread relies on is creating a perception of their product as

premium quality, thanks largely to their fresh-baked artisan breads. They then price their product

accordingly, allowing for higher price points on sandwiches and drinks than Starbucks or Corner

Bakery. Panera Bread also differentiates itself from Starbucks and other competitors by taking a

different approach to attracting its customers through a cozier eating experience. Panera Bread

designers decorate their interiors with vivid colors and fireplaces that seem suitable for business

or personal conversations. The overall impression is distinctly welcoming.

While Panera Bread’s signature offering is fresh-baked artisanal bread, the rising costs of

flour and other ingredients mean that beverages currently generate more revenues than baked

goods, according to the company’s latest financial statements (”Panera bread,” 2011). Panera

Bread mitigates some of the impact by reviewing and revising its menu regularly. This allows it

to both serve more economical, seasonally available products and maintain a novelty, which

ensures repeat business.

Panera Bread also provides free wireless internet service to attract business consumers

who use laptops, smart phones, and other wireless devices heavily. These multiple strategies

allow Panera Bread to provide offerings that are valuable to a diverse customer base. It attracts

individuals and groups for socializing or business. Young adults and baby boomers alike, who

are looking for a welcoming place to eat healthy, high quality goods, use free wireless internet,

and meet with friends or associates in convenient locations are all part of a broad customer base.

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Editor Michael Arndt reported in his publication, Bloomberg Businessweek, that Panera

Bread has also been strategically and aggressively expanding despite declining sales caused by

the recent economic crisis, business shutdowns, and consumer cutbacks (2009).

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PANERA IN CONTEXT: THE RESTAURANT INDUSTRY

Despite the large number of competitors in the restaurant industry, Panera Bread has

developed a valuable brand, which has demonstrated its profitability even in time of economic

crisis. While the recent recession has caused a sharp drop in consumer spending, increased the

number of restaurant closures and negatively affected revenue forecasts, Panera Bread has

continued growing, partly by taking advantage of deeply discounted leases to open new

locations (Gregory, 2009). In contrast, restaurant closures by early 2010 amounted to 5,204 and

independent restaurants have been particularly impacted (Brandau, 2010). The forecast for 2011

indicates improvement in this industry is likely and anticipates many newcomers will enter the

marketplace. Last year, the restaurant industry had average daily sales one billion dollars, and

for 2011, the estimated daily revenue is expected to surge to $1.7 billion (National Restaurant

Association, 2011). This forecast estimates an increase that almost doubles the previous years,

with forecasted annual sales of $604 billion for 2011 (National Restaurant Association, 2011).

PANERA BREAD SWOT ANALYSIS

Panera Bread’s current strategy is to provide fresh bread to consumers throughout the

United States while carefully entering foreign markets, beginning with Canada. Their

competitors include coffee shops, bakeries and casual full-service eateries, such as Starbucks,

Corner Bakery and McDonald's. Further, Panera Bread is threatened by the entry of many new

restaurant concepts into the marketplace. For this reason, Panera Bread has a large menu with

BUSINESS PLAN

different types of items that attract consumers looking for better food. The menu is revised often

to keep the customers attracted to Panera Bread’s innovative cuisine ideas (Hitt, Ireland, &

Hoskisson, 2007) and amenities like free wireless help keep the chain attractive to consumers.

Panera Bread food is considered pricy but the organization strives to demonstrate to its

customers that it is worth paying for premium ingredients, fresh product and skilled

craftsmanship. Panera’s marketing equates bread with art, which helps sell consumers on higher

prices. Therefore, one of the significant weaknesses of Panera Bread’s process is that they keep

their produce for 12-14 days meaning their food is often less than fresh (Arndt, 2009). To

provide fresher produce in its meals, Panera Bread made the decision to contract with local

producers to cut the twelve days of produce delivery to just one day (Arndt, 2009). Panera

Bread is promoting healthy choices in their menu by including fresh fruits, vegetables, fresh

bread, and chicken raised without antibiotics. Panera Bread offers food appropriate throughout

the day, but primarily attracts customers and sees its highest revenue at lunch. Panera Bread has

not been successful it convincing customers to try it for dinner. However, given the food’s

fresh, healthful qualities and the increasingly busy schedules of consumers, there is potential for

the company to be successful marketing certain products, particularly fresh-tossed salads and

breads to accompany dinner if not replace it entirely.

PANERA BREAD – “PAY WHAT YOU WANT”

The Panera Bread “Pay What You Want” (PWYW) program was created by CEO Ronald

Shaich. His idea was to create an environment that allowed people to pay for services not just

based on their value, but on the customer’s budget, subjective assessment of value and

convenience. The PWYW program allows customers to pay what they want for the food.

There is a suggested retail price posted for each item, but customers can pay anywhere from

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0.01$ to $100.00. Anything the customer pays over the suggested amount goes into the charity

jar. Mr. Shaich new this idea was based on taking a chance on society's’ willingness to give and

he was right. Approximately 70% of customers pay the recommended amount, 15% pay less or

even nothing, and 15% pay more. The success of the program, Mr. Shaich says, is due to

placing the jar by the register saying “charity.” The customers know that the additional amount

is going to charity to help people who normally would not be able to afford to eat at a place like

Panera Bread.

The strength of this program is its uniqueness. No other restaurant has anything close to

this program. Most people are generous and caring and when given the opportunity with

someone they trust, they will give willingly. The weakness of this program is that it relies on

customers’ ability and desire to give above and beyond suggested retail amount. If economic

times become more difficult and more people are unemployed, Panera’s revenues may drop

even further than a traditional retailer that has the protection of set pricing. The opportunity is

having the ability to spread this program to other cities and states. As the program reaches the

area, it peaks everyone’s interest to get involved. Then the cycle starts all over again with 15%

of customers paying significantly more for their food. Lastly, the threat would be customers

getting acclimatized to the program and losing interest in its social-benefit aspect. Customers

might either stop going to eat at Panera altogether, or calculate that having already paid a

surplus for their food, they are entitled to start paying less or nothing. If Panera Bread loses this

customer base or the customer base loses its disposable income, it would be a significant

hardship to rebuild.

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FINANCIAL OVERVIEW

Panera Bread sales have been increasing steadily based on its expansion to new locations

in target market in United States.

Panera Bread is benefiting from the price of the meals as seen in the profit of the

company, which is operating debt free in the highly competitive market like the restaurant

industry.

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Panera Bread is debt free with high equity in comparison with its debt. The total

equity/debt ratio is not available for Panera Bread has no debt with a debt value per share of

19.97. The total amount of cash that Panera Bread holds is $229.30million (”Panera Bread,”

2011).

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Financial Ratios for the Year 2010     Current ratio 1.6  Quick ratio 1.4  Inventory turnover 70.1  Accts recvble turnover 24 daysNumber of days to collect 15 daysDebt to assets 0.2  Debt to equity 0.4  Net Profit Margin* 0.1  Gross profit on sales 0.3  Return on assets* 0.1  Return on equity* 0.2  Earnings per share* $37.29   there are 3000 shares   outstanding    

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Financial summary

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CONCLUSION

Panera Bread is not the leader in its industry but it is generating huge profits despite the

economic difficulties that other restaurants and coffee shops are facing. The high quality of the

freshly-crafted foods, the variety in Panera Bread's menu, comfortable design and attractive

amenities have gained Panera Bread a competitive advantage among its rivals. The company’s

innovative ideas result in a better product and attract new customers every day. This growth

trend is likely to gain momentum in years to come. The growth in revenues from

$1,298,853,000 in 2008 to $1,542,489,000 in 2010, an 18.76% increase strongly suggest

investors will be able to realize this growth in the form of higher stock values and success

through market share growth based both on expansion and a growing customer base in already

established locations.

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References

Arndt, M. (2009, March 19). Panera Bread’s Apple strategy. Bloomberg Newsweek. Retrieved

from http://www.businessweek.com/ the_thread/ brandnewday/ archives/ 2009/ 03/

panera_bread_is.html

Daily Finance. (n.d.) Panera Bread Company stock quote. Retrieved from

http://www.dailyfinance.com/ quotes/ panera-bread-company/ pnra/ nas

Gregory, S. (2009, December 23). How Panera Bread defies the recession. Times. Retrieved

from http://www.time.com/ time/ business/ article/ 0,8599,1949371,00.html

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic focus: Panera Bread Company:

Thriving through internal innovation. In Strategic management: competitiveness and

globalization (7th edition ed., pp. 412-414). 5191 Natorp Boulevard, Mason, OH 45040:

Thomson South-Western.

Leonard, C. (2010, May 18). Non-profit Panera restaurant: Pay what you want at pilot location.

The Huffington Post Inc. doi:580316

National Restaurant Association. (n.d.). Restaurant industry facts at a glance. Retrieved from

http://www.restaurant.org/ research/ facts/

Panera Bread. (n.d.). Retrieved from http://www.panerabread.com

Panera Bread Company. (n.d.). Yahoo finance. Retrieved February 18, 2011, from

http://finance.yahoo.com/ q?s=PNRA

Panera Bread Company form 10-K for 2010 [Editorial]. (2010, February 26). The New York

Times. Retrieved from http://markets.on.nytimes.com//research/ modules/ company_topic/

drawFiling.asp?docKey=136-000095012310018483-

0DQROSNL7E07ES9QKQ0S3DRP8A&docFormat=HTM&formType=10-K

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Panera Bread Company reports fiscal 2010 diluted eps of $3.62. (2011, February 14). Restaurant

News Resource. Retrieved from

http://www.restaurantnewsresource.com//article52238.html

Stevenson, A. (2002, January). Rising dough. Kiplinger’s personal finance, Volume 56(No 1),

71.

Steverman, B. (2010, November 8). How Panera Bread kept rising through the recession.

Bloomberg Business Week. Retrieved from http://www.businessweek.com/ investor/

content/ nov2010/ pi2010118_183529.htm

Brandau, M. (2010, July 20). U.S. restaurant count continues to fall. Nation’s Restaurant News.

Retrieved from http://www.nrn.com/article/us-restaurant-count-continues-fall

Wasserman, S. (2011, February 14). Call volume rises on Panera Bread following upbeat

earnings report. Retrieved from Schaeffer’s Investment Research, Inc. website:

http://www.schaeffersresearch.com/ marketcenters/ optionscenter/ default.aspx?

c=bytefeed&ID=105024&single=true