Panera Bread Company’s Growth Strategy
Among the crowded field of casual, quick-service restaurants in America, the distinctive blend of genuine artisan bread and a warm, comfortable atmosphere has given Panera Bread Company a golden opportunity to capture market share and reward shareholders through well-planned growth. With the objective of opening approximately 1,000 more bakery-cafes in the next three years, Panera Bread Company must make prudent strategy decisions about new store locations, supply-chain management and expanded offerings, all the while continuing its above-average earnings per share growth of at least 25 percent per year. With 170 stores in the development pipeline in 2007 and several hundred more to reach its goal, Panera Bread Company faces a task many companies have failed at time and time again, resulting in massive debt, contraction and contributing to the flame-out of a once promising brand and stock investment. The decisions surrounding how to expand should be based on analysis and evaluation of the successful operations and financial performance thus far. Specifically, the plausible proposition of growing franchisee-owned stores in contrast to company-owned stores is a driver and key success factor for Panera Bread Company. We discuss these trends and recommend expansion at a sensible pace by encouraging franchisee stores in untapped markets, and continuing the success of product offerings and the focus on quality control through wise supply-chain management. This company thrives on first-time customers and word of mouth to continue its growth. “The company’s marketing research indicated that 57 percent of consumers who have “ever tried” dining at Panera Bread had been customers in the past 30 days” (C-169). Panera Bread has accomplished a distinctive position in the restaurant industry, making it possible to market to a growing customer pool that desire better quality foods. The growth potential for Panera Bread in the next three years is in the domestic urban and dense suburban markets. According to management’s own research, it is possible to have a successful bakery-café with a customer pool of 160,000 people. This seems to be consistent with the experience of Applebee’s, one of Panera Bread’s chief rivals. As well, management is properly focused on adding offerings, such as baked goods, or presenting existing offerings as options for any-time dining. Their preference is to avoid in-your-face or hard-selling marketing approaches. They’d rather allow their current customer base to “gently collide” with the brand and let them “discover” Panera Bread. Therefore they [customers] convert themselves into loyal customers (C169-170).
Above all, Panera Bread Company’s sustainable competitive advantage is the quality of its dough-making and baked breads for sandwiches and an array of tasty fare. The bread is prepared and mixed with all natural ingredients in which no chemicals or preservatives are added. In addition to this, their process does not involve freezing or partial cooking before distribution to the stores. Panera Bread has strategically located the production and distribution of their fresh dough through temperature-controlled vehicles within 300 miles of a group of stores. “Panera has invested about $52 million in a network of 17 regional fresh dough facilities (16 company-owned and one franchise-operated) to supply fresh dough daily to both company-owned and franchised bakery-cafés” (C-172). This process ensures the freshness and enhances the quality of their products for consumers. As a retailer, you would not expect Panera Bread to manufacture its own bread dough, but this unusual twist -- as in, backward vertical integration – differentiates the company from other bakery-cafes in the quick-service sector of the restaurant industry. Furthermore, the dough plants are a means to reduce operating costs to stores which would...
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