Michelle Herndon (2012)
Case Number and Title
Case 32: Panera Bread Company (2010): Still Rising Fortunes? CURRENT SITUATION
Panera Bread’s intention is “to make Panera Bread a nationally recognized brand name and to be the dominant restaurant operator in the specialty bakery-café segment.” Panera experienced competition from many numerous sources in its trade areas. Their competition was with specialty food, casual dining and quick service cafes, bakeries, and restaurant retailers, including national, regional, and locally owned. The competitive factors included location, environment, customer service, price, and quality of products. Panera learned from its competitors, none of its competitors had yet figured out the formula to Panera’s success.
Panera’s total systemwide (both company and franchisee) revenues rose from $350.8 million n 2000 to $1,353.5 million in 2009. The share price has risen over 1,600% from $3.88 a share on December 31, 1999 to $67.95 a share on December 28, 2009. As of December 29, 2009, the company-owned bakery-café segment consisted of 585 company-owned bakery-cafes, all located in the United States. There were 795 franchise-operated bakery-cafes open throughout the United States and in Ontario, Canada. 57.6% of the company’s bakery-cafes were owned by franchises comprised of 48 franchise groups. Panera had 23 fresh dough facilities, 21 of which were company-owned, including a limited production facility that was co-located with one of the company’s franchised bakery-cafes in Ontario, Canada. In 2009, there was an average of 62.5 bakery-cafes per fresh dough facility compared to an average of 62.0 in fiscal 2008. In fiscal 2009, franchise-operated bakery-café contributed 0.7% of their sales to a company-run national advertising fund, and fiscal 2010, the company increased the contribution rate to the national advertising fund to 1.1% of sales.
Panera’s mission statement is: “A Loaf of Bread in Every Arm.”
Objectives include but are not limited to: high density urban feeding, welcoming atmosphere of coffee shops, quick service of fast food, fresh-baked artisan breads, “Panera Warmth” (totality of the experience the customer could take home to share with friends and family), superior customer service, long term growth, increasing store profit, increasing transaction and gross profit per transaction, achieve targeted returns on invested capital, improving operations, speed of service, and accuracy, improving its products, limiting cost inflation in efforts to drive gross profit per transaction, and expanding into new markets.
Panera has the strategy of positioning itself as a fast casual restaurant. Panera uses strategies that have proven success. “Concept Essence” is a focus on artisan breads, quality products and warm, friendly, and comfortable environment. Panera maintains customer interest by regularly reviewing and updating its menu offerings to satisfy changing customer preferences. They anticipate and react to changes in food and supply costs through increased menu prices to improve margins. Panera provides fast casual food service qualities by the casual atmosphere of coffee shops, quality food of sandwich shops and quick service of fast food shops. They also operate in three business segments: company-owned, bakery-café operations, franchise operations, and fresh dough operations. The growth strategy focuses on growing store profit, increasing transactions and gross profit per transaction, using its capital smartly and putting in place drivers for concept differentiation and competitive advantage. Panera executes its strategies with efficiency and precision. Another strategy that Panera provides is free wifi access to its customers, while its competitors may charge for wifi access. Howard Gordon, a former Cheesecake Factory executive and now restaurant industry consultant, states that “Panera has always been...
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