Panera Bread Company
Dan McLindon
Kyle McDaniel
Jeremy Smiley
Tom Anderson
Ray Moorman
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
Key Question for Panera Bread
• Is the plan of expansion and reliance on
franchise partners the right strategy for
Panera Bread to grow at the rate they want
to?
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
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
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
PEST Analysis for Panera
Threats/Opportunities
Ranking
(1-5)
Restaurant business
extremely competitive
Threat
4
Sales at food service
locations in US trend upward
Opportunity
3
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 markets
Opportunity – untapped markets
1
3
Consumers loyal when
satisfied with experience
Opportunity
5
Category
Issue
Political
None
Economic
Social
Technological
None
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
Overview of the Industry - Demand
• Growth Rate
– 925,000 food service locations in the U.S.
– Are customers hungry for more?
Sales
$511b
Food Dollars Spent in
Segment
500
47.5%
50
400
$308b
40
300
30
200
25%
20
100
10
0
0
1996
2006
1955
2006
Overview of the Industry - Demand
• 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?
• Panera is a representative in the “fast-casual” food
category
• 85% of individuals aware a Panera Bread was nearby
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
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
Industry Overview (Supply)
Porter’s five forces:
Threat of
substitute products
HIGH
Bargaining power
of suppliers
LOW
Rivalry among
existing competitors
Threat of
new entrants
LOW
Bargaining power
of buyers
HIGH
Porter’s Five Forces
Factor
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
Industry Overview (Supply)
Factor
Threat of substitute products
• Full range of alternatives; eat at home, fast-food,
formal dining out
•Substitute products offer lower prices and
convenience.
•The majority of meals are eaten at home – 76%
Bargaining power of suppliers
• Panera is not limited by sourcing from a single
supplier
• Several suppliers are available for each ingredient
Bargaining power of buyers
• Switching costs are non-existent for consumers
with varied options
Ranking (1-5)
5
1
4
Industry Overview (Supply)
Factor
Rivalry among existing competitors
• Consumer preferences are constantly being
targeted and adapted to by competitors
• Competition is competing for $1 bn in daily sales
Threat of new entrants
• Substitute products offer lower prices and
convenience.
•The majority of meals are eaten at home – 76%
Ranking (1-5)
5
1
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
Typical Competitors within the Fast-Casual Arena
Competitors
# of Locations
Select Financials
Key Menu Items
Atlanta Bread Company
160 bakery cafes in
27 states
Privately held
Fresh-baked breads,
salads, sandwiches,
soups, pastas, desserts
Au Bon Pain
190 bakery-cafes in
23 states and 222
locations
internationally
$245M in sales in 2005
Baked goods, soups,
salads, sandwiches,
wraps
Bruegger’s
260 bakery-cafes in
17 states
$155M in revenues in
2005
Bagels, muffins,
sandwiches, soups,
salads
California Pizza Kitchen
190+ locations in 27
states and 5 other
countries
2005 revenues of
$480M
Hearth-baked pizzas,
salads, pastas, soups,
sandwiches, desserts,
appetizers, beverages
Jason’s Deli
150 locations in 20
states
Privately held
Sandwiches, salad bar,
soups, potatoes, desserts,
catering, box lunches
What is the competition doing?
• Most Fast-food and full-service restaurants are
also responding to consumer preference.
– New offerings
– Seasonal menus
– New themes and differentiation strategies
• Competitors are going after Panera’s potential
first time customers
– Strategic attempts to capture the offerings that
entice customers to try the “fast-casual” offerings
Competition beyond commercial eateries
• Bars that offer food, hotels with restaurants,
vending, etc. are all forms of competition.
– Only 67% of total food service sales spent at
commercial eating places
• Home cooked meals are competition. 76% of
meals are eaten at home.
Competitors and strategy
High Food Quality
Full Service
Applebee’s
Chili’s
Slower dining
experience
Fast Casual
Panera
Chipotle
Brugger’s
QSR
Wendy’s
McDonalds
Quick dining
experience
Lower Food Quality
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.
Contents
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The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
Internal Analysis – Markets Served
• Competing in 5 submarkets
1. Breakfast
2. Lunch
3. “Chill out”
4. Light evening
5. Take home bread
•
•
•
Differentiate with wide variety of
menu options and café ambience
Management goal to make Panera
a nationally recognized name brand
High penetration in St. Louis,
Columbus, Jacksonville, Omaha,
Cincinnati, Pittsburgh, Washington
DC
Low/Untapped Markets
New York City, Philadelphia,
Green Bay, Atlantic City,
Toronto
Salt Lake City, LA, Northern
California, Seattle, Phoenix,
Tucson, Vancouver,
Albuquerque, Spokane
Miami, Dallas, Houston, San
Antonio, Memphis, New
Orleans, Shreveport, Baton
Rouge, Little Rock
Internal Analysis – Core Competencies
Core Competency
Diverse Menu
Description
• Lots of variety, constantly
experimenting
• Options for all meals and times of
day
• High quality food at reasonable
price
Strong
Brand/Customer
Loyalty
• JD Power and Associates
satisfaction award for QSR in
Midwest and Northeast
• “Best Of” awards in nearly all mkts
in 36 states
Strong
Relationship with
Existing Franchise
Partners
• Employee training and certifications
• Assistance with site selection and
marketing
•High satisfaction with concept and
support received
Identifying Where
to Locate New
Stores
• Proprietary software built to
analyze data on attractiveness of new
locations
• Find attractive places to serve urban
and suburban populations
Strong
Brand/Customer
Loyalty
Diverse
Menu
Core
Competencies
Identifying Where
to Locate new
Stores
Strong
Relationships with
Existing Franchise
Partners
Red – Easy for competitors to develop
Yellow – Possible for competitors to
develop
Green – Very difficult for competitors to
develop
Internal Analysis – Growth Initiative
• Expanding number of
locations at a rapid pace
• Heavy reliance on franchise
partners
• Targeting 17% increase per
year in number of locations
by 2010
• No international locations
but considering expansion
into Canada
• Is this aggressive growth
strategy prudent in the
highly competitive and
mature QSR industry?
Year
Number of
new
locations
Total
Locations
Percent
Increase
1993
0
20
N/A
1999
160
180
800%
2006
155
1027
15%
2010
973
2000
(forecasted)
(forecasted)
49%
Internal Analysis - Franchises
•
•
Strong franchise network with strict
requirements to entry
New partners to commit to 15 cafes
over 6 years
– Average startup cost $1 million to
$2.25 million per location ($15
million to $33.75 million for 15)
– Majority of franchise partner
financed by debt (highly leveraged)
•
Can Panera find enough new
franchise partners to meet growth
targets?
– Strong franchise partners are critical
to preserve consistent quality and
atmosphere at Panera restaurants
– Bad partner can damage strong
customer loyalty Panera has built
– Panera does have out as it can elect
to buy out any franchisee for a
predetermined price
2006
42 franchise groups in 54
markets
34 states
Agreed to open additional 423 locations
Still leaves 550 locations
to meet 2000 by 2010
Either by new franchise
partners or corporate
Biggest issue existing partners have is
desire for more locations
Internal Analysis – Supply Chain
• 17 regional fresh dough facilities (16 corporate, 1 franchise)
– Service both company and franchise cafes
– Manufactures over 50 different products
– Dough distributed via 140 trucks, each truck delivering to 6 cafes on
average
– Panera corporate recognizes profit on dough sold to franchise
locations
– Fresh dough making considered competitive advantage by
management as it helped with consistency and efficiency
– With rapid plans for expansion is this advantage in jeopardy as trips
are already exceeding optimal 300 mile trip?
• Sweet goods provided by Dawn Food Products in a cost-plus agreement
– Finished onsite by bakers, but single source for sweet goods improves
ability to deliver consistent products
Contents
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7.
8.
9.
The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
SWOT Analysis for Panera Bread
Strengths
•Strong/Loyal Customer Base in NE &
Midwest
•Menu Options/ Variety
•Able to provide healthy options to
customers
•Analysis of market
Opportunities
•130m consumers daily
•Grow number of customers that consider
Panera as a dinner option
•Get existing customers to come at
different times of the day (ex – breakfast
crowd to come for dinner)
Weaknesses
•No presence in large markets (south &
west)
•Want customers to “discover” Panera
•Decentralized Distribution – each café
placed orders
•Rely on franchise partners as key to
growth – very tough standards
Threats
•Multiple types of competition – fast
food, sit down restaurant, eat at home,
QSR, fast casual
•Differentiation?? What makes Panera’s
different than competitors
•76% of meals eaten at home
Contents
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9.
The Key Question
Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations
Recommendations
1.
Work with franchisees to acquire Corner Bakery Café??? (Franchisee
locations are more profitable and provide higher ROI)
2. Expedite expansion in Canada or International (Europe)??
3. Vertically integrate and acquire Dawn Food Products Inc.
4. Limit growth in existing markets and begin to focus on expansion into South
and West
– Offer existing franchisees opportunity to enter markets first
– If limited interest open corporate stores to see if concept works before
opening up new markets to new franchise partners