Panera Bread Company-Case Analysis

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CASE STUDY:
Panera Bread Company

GM 691 Strategic Management Seminar for Leaders

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Prepared by
Iryna Zaytseva
Introduction
Panera Bread Company is one of the businesses in the US Food Indusrty / bakery-cafe chain. Since its start , it has grown significantly and has acquired a name for producing quality natural foods though in the initial periods. It has been more than 10 years , since this company was formed. PB started with a modest 50 million USD investment in 1999 and the year 2006 saw a growth of 17 in business with earnings reaching up to $5 million. Since then, slowly but steadily , it has gained a substantial amount of market share in the natural food segment and has been the market leader in this category. Panera Bread Company (PB) began as Au Bon Pain Company in 1981 operating on the east coast of the USA. In 1993 Au Bon Pain Company purchased St. Louis Bread Company, which was comprised of 20 bakery-cafes in the St. Louis area. From the years 1993 to 1997, the bakery-cafe names changed to Panera Bread. In 1999, Au Bon Pain Company sold all business units except for Panera and the company was renamed Panera Bread Company. Since the companies restructuring Panera Bread Company has become one of Business Week’s “100 Hot Growth Companies.” Panera’s ability to increase sales of franchises has enabled Panera to grow rapidly. This company does not sell single-unit franchises but rather sells franchise agreements of generally 15 stores in 6 years. Panera has strict criteria that must be met to buy a franchise including a certain amount of capital that is required. PB depends on increased sales of franchises and increased revenues in same store sales to continue at its large growth rate. So, Panera Bread Company has recognized large scale growth in recent years and is now on pace for large growth rates in the future. In 2006 PB owned 1,027 franchise operated and company-owned bakery-cafes in 36 states, which clearly demonstrates the company’s strategic intent “to make great bread broadly available to consumers across the USA” (textbook, C-85).

Evaluating the Business Environment
The fast food restaurants have been hit hard by the rising health concerns the United States have been experiencing recently. This consumer trend has benefited Panera significantly because it offers what most consumers believe to be a higher quality product at a slightly higher cost. Fast food chains are attempting to cater to the health conscious consumer by creating more health efficient products. However, companies such as Panera Bread have a vivid advantage in this competition. On the other side, now when most fast food restaurants have seen the consumer trend for healthier food, competition has grown due to fast food chains changing their menus to comply with the needs of the consumers, which will naturally increase competition for Panera Bread. Industry Overview

Panera Bread Company operates in the very competitive fast food restaurant industry where it competes against all the large fast food companies such as McDonald’s, Atlanta Bread Company, Applebee’s etc. as well as cafes such as Starbucks and New World Restaurant Group Inc. Panera Bread Company is one of the younger companies in the industry, which means that room for growth is still abundant. Panera Bread differentiates itself from the normal fast food chain by offering a bakery and deli style sandwiches. The company managed to find its distinctive niche in the restaurant industry enabling it to market to a growing costumer pool that wants better quality and healthier food. Competition in the market share

According to the National Restaurant Association there are about 1 million food locations in the USA (textbook, C-96) that proves the US restaurant business being extremely competitive and thus involving much risk. I will concentrate on two big chains competing with PB - McDonald’s and Starbucks...
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