PANERA BREAD COMPANY

Case Study of a Successful Bakery-Cafe Chain

Panera Bread Company Overview

Origin 1981 Au Bon Pain Company founded by Louis Kane and Ron Shaich.

Growth on US East Coast & Internationally 1980’s and 90’s – stores opened in malls, airports, shopping centers.

Acquisition of Saint Louis Bread Co. 1993 – mgt team studied fast food restaurants which led to overhaul of Saint Louis Bread Companies

Sold Au Bon Pain bakery-café division 1999 – sold for $73m to ABP Corp. Renamed to Panera Bread Company

Panera Bread Company Overview

Strategic Intent “Make great bread broadly available to

consumers across the United States”

2003 - TNS Intersearch Study •Scored the highest level of customer loyalty among QSR’s

2004 - J.D. Power & Associates Restaurant Satisfaction Study of 55,000 Customers

•Ranked Panera highest among QSR’s in Midwest & NE in all categories •Included environment, meal, service, and cost

2005 – Sandleman & Associates National Customer Satisfaction Survey of 62,000 customers

•For 4th straight year, Panera was the best among 121 competitors•Also won “Best of” awards in nearly every market across 36 states

Strategies

Panera sells hand made specialty artisan bread that are baked at café.

The dough for is prepared at dough factory then distributed to the bakery-café to reduce cost of production and keep the quality constant.

the cafés have cozy atmosphere for family and friends hangout.

Focuses more on market analysis. The menu is reviewed frequently and customer review about the menu is taken regular basis

Marketing strategy is based on demand pull strategy. And most of the promotion is word of mouth.

Strategies

Intensive focus on franchising. Trying to cover market through franchise. Strong relationship with franchisee

Healthy food. (whole grain breads and other low fat items)

Offers seasonal menu. New items are invented in test kitchen

and then tested at some cafes to check customer acceptance and consistent quality.

Products

All bakery items are prepared fresh daily and are used to make their signature sandwiches

Seasonal menu items contribute to the overall fresh quality that is expected from Panera

Products – Bakery Menu

Pastries & Sweets Brownies, cookies, cakes, muffins, scones, rolls

Freshly baked breads Artisan and Specialty

Baked egg soufflés Use only fresh eggs and the best ingredients

Bagels & Spreads Signature bagels and flavorful spreads

Breakfast sandwiches ALL NEW -- grilled with freshly baked Ciabatta

breadSource: Panera Bread

Products – Café Menu

Hand tossed salads Over eight different varieties available

Sandwiches Hot Panini, signature sandwiches, and cafe sandwiches

Drinks Frozen, iced, hot or espresso drinks

Soups Range from chicken noodle soup to vegetarian options

and other seasonal items Panera Kids menu

Grilled cheese, peanut butter and jelly or a simple kids deli sandwich served with a squeezable yogurt

Source: Panera Bread

Services

Via Panera Catering Coordinator Help determine appropriate order quantities,

coordinate delivery and arrive ready to serve with paper plates, bowls, utensils and napkins

Day-End Dough-Nation Unsold bakery products packaged at the end of each

day and donated to local food banks and charities donating over $12 million in product last year alone

SCRIP fund raising program Allows non-profit organizations to purchase gift cards

at 9% discount and then resell the card at full priceSource: Panera Bread

Target Market

Suburban dwellers Health conscious

Panera provides a comfortable and enjoyable dining

experience. By offering high speed Internet in every cafe,

they are encouraging all types of people to come in.

Financial Ratios

ANALYSIS

Overview of the Industry Growth Rate

925,000 food service locations in the U.S. Are customers hungry for more?

Overview of the Industry US restaurant industry growing at 5% annually Where is the growth coming from?

$974 per person in 1994 spent on food away from home

Growth potential in suburban markets? 85% of individuals aware a Panera Bread has

dined there at least once (trial) 57% of those did so in the last 30 days (repeat) 81% willing to try Panera other times of the day

Industry Analysis

Very labor intensive industry. Full range of alternatives. -This means high threat of substitute product. Panera get their dough supply from their dough

facilities, still for other ingredient they need other suppliers.

- It shows that bargaining power of supplier is little bit reduced for the supply of dough.

-Because of availability of substitute and intense competition switching cost of customer is low.

Competition

Industry members pursued differentiation strategies of one variety of another, seeking to set themselves apart from rivals via

-Pricing -Food quality -Menu theme -Signature menu selection -Dining ambience and atmosphere. -Service

-Location

Competitors

Panera Bread competes against all the large fast food & casual dining companies such as McDonald’s, Burger King, and Wendy’s as well as cafes such as Starbucks, applebee’s, chili’s, Chipotle. Indirect competitors include fast food and sit down dining venues.

CompetitorsHigh Food Quality

Quick dining experience

Full Service Applebee’sChili’s

Lower Food Quality

Slower dining experience

Fast CasualPaneraChipotleBrugger’s

QSRWendy’s McDonalds

Analysis: Panera is in a highly competitive area. QSR and full service aren’t competitors with each other. Fast Casual is positioned between the two and competes with both.

Porter’s five forces:

Rivalry among existing competitors

Threat of substitute products

HIGH

Bargaining powerof buyers

HIGH

Threat of new entrants

LOW

Bargaining power of suppliers

LOW

Porter’s Five ForcesFactor Analysis Impact

Threat of substitute products

• Substitute products are easily accessible (eat at home, convenient stores)• Economic downturn limits disposable income – substitute products become more appealing.

HIGH

Bargaining power of suppliers

• Panera has multiple options to source each ingredient they use. LOW

Bargaining power of buyers

• Economic downturn’s affect on consumer eating behaviors – cheaper meal at home.• Over 21 direct competitors/alternative eating establishments of Panera.

HIGH

Competitive rivalry

• Differentiation and constant menu changes to appeal to consumer preferences. •Many competitors in industry.

INTENSE

Threat of new entrants

• High investment threshold to enter market LOW

PEST Analysis for PaneraCategory Issue Threats/Opportunities

Political None

Economic Restaurant business extremely competitive

Threat

Due to recession in US economy, sales at food service locations is in downward trend

Threat

Social Increasing level of health consciousness (ex. Good carbohydrates)

Neither -- most restaurants react quickly to changing consumer tastes. Level playing field.

Consumers prone to try new establishments

Threat – existing marketsOpportunity – untapped markets

Consumers loyal when satisfied with experience

Opportunity

Technological

None

SWOTStrengths

•Good Franchise policy•Reliable Franchisee•Good market analysis policy and technique. •High customer loyalty•Decoration•Good financial position•Number of available suppliers

Weaknesses•No presence in large markets (south & west)•Rely on franchise partners as key to growth•Sales of company owned stores are lower than Franchisee•Self service, while the price level is more than fast food chain

Opportunities•Get existing customers to come at different times of the day (ex – breakfast crowd to come for dinner)•Can tap into Canada and European market through franchisee•Can tap into the south and western region in USA•Introduce sweet items like pastries, parfaits, sundaes for mid day menu•The company can take up long term loan as they have strong financial history and have no debt.

Threats•Multiple types of competition – fast food, sit down restaurant, eat at home, QSR, fast casual •Economic recession of USA•Competition from fast casual cum bar cafes•Risk of transportation of dough to bakery-cafe

Recommendation

As there may be recession in US economy, further coverage in US market is not advisable. Instead Panera can enter Canadian and European market through franchise.

Introduce sweet items like pastries, parfaits, sundaes for mid day menu

Introduce full service.