Case # 5 Panera Bread Company
1. What is Panera Bread’s strategy? Which of the four generic competitive strategies discussed in Chapter 3 most closely fit the competitive approach that Panera Bread is taking? What specific kind of competitive advantage is Panera Bread trying to achieve?
Driving concept: to provide a premium specialty bakery and café experience to urban workers and suburban dwellers.
Generic: Broad differentiation strategy.
Competitive advantage: striving to build a competitive advantage based on the triple combination of Product, Environment, and Great Service (PEGS).
2. What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its situation? Strengths:
Attractive & appealing menu
Bread-baking expertise (a core competence) – artisan breads are Panera’s signature product. •
Nationwide leader in the bakery-café segment
High ratings in customer satisfaction studies
Good brand name
Fresh dough operations & sales to franchised stores
Initial success in catering
Good franchisees – higher sales in franchised stores compared to company-owned •
Financial strength of the company – able to grow without taking on too much debt
A less well-known brand name than some rivals (Applebee’s, Starbucks) •
Sales at franchised stores higher than company-owned stores – Why?
Rivals begin to imitate menu offerings/or dining ambience – easy to copy? •
Competition from other chains
Saturate the market – will it become harder to find attractive locations for new stores and slow company’s growth
Open more outlets – untapped growth potential in a number of suburban markets (see Exhibit 3) •
3. What is your appraisal of Panera Bread’s financial performance based on the data in case Exhibits 1, 2 and 8? How well is the company doing financially? Use the financial ratios in Table 5.1 of Chapter 5 as a guide in doing the calculations needed to arrive at an analysis based answer to your assessment of Panera’s recent financial performance.
Strong CAGR in a number of important areas – total revenues, royalties, fresh dough sales, net income and EPS.
Declines in G & A expense a desirable trend – some erosion in operating profit margins bears watching (not a desirable trend). Declines in liquidity (as measured by current ratio and working capital numbers) and a fluctuating but still acceptable ROE also warrant attention.
Overall, the data indicate that Panera is growing quite rapidly and is performing well, although not spectacularly. While there are some areas of concern, the areas of weakness as of 2006 are from alarming.
CAGR 2006 2005
Franchise royalties & fees
Fresh dough sales to franchises
Earnings Per Share
Net cash provided by operating activities
CAGR – Compound Average Growth Rate
General & Administrative expenses as a % of total revenue
Operating profit as a % of total revenues (operating profit margin)
Net income as a % of stockholders’ equity ((ROE)
4. What strategic issues and problems does Panera Bread management need to address?
What to do to correct Panera Bread’s narrowing profit margins •
What more to do, if anything, to try to boost Panera’s traffic counts at its stores during dinner hours. •
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