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Running Head: Panera Bread company Analysis
Panera Bread Company
Josiah Maroko
Metropolitan State University
Panera Bread company Analysis
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Abstract
Panera Bread Company is a leader in the easy casual restaurant industry with multiple
cafe-bakeries located in 36 states, of the United States. Panera operates under the banner of
Panera and Saint Louis Bread Company. Almost 400 of its 1,027 bakeries are companyoperated and the remainders are franchisees.
Panera Bread’s core competencies are in their market niche, offering a premium specialty
bakery and café experience to urban workers and suburban dwellers. Penera’s focus is offering
their customers a quick service meal and a more aesthetically pleasing dining experience than
offered by traditional fast food restaurants. By providing top-notch service, they knew customers
would pass up their competitors in outlets of other easy casual restaurants to dine at the nearest
Panera Bread.
SWOT, and financial analysis conducted indicate that the company is doing well even
though profitability is slowing down and has the potential to rapidly expand. Looking at house
the company markets itself and how it function among its competitors there is a discrepancy
there fore a clear definition of their strategy in necessary.
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What is Panera Bread's strategy? Which of the five generic competitive strategies discussed in
Chapter 5 most closely fit the competitive approach that Panera Bread is taking? What type of
competitive advantage is Panera Bread trying to achieve
Panera Bread’s strategy is to provide a premium specialty bakery and cafe experience
to urban workers and suburban dwellers This strategy is most closely aligned with a
broad differentiation strategy, or being unique in ways that a broad range of consumers
find appealing. Prior to taking the Panera concept nationwide, the owners performed
cross-country market research and concluded that consumers could get excited about a
quick, high quality dining experience. The concept was, and still, a mix between fast food and
casual dining, revering Applebee’s. By choosing this strategy, Panera is attempting to achieve
competitive advantage in the unique offerings it provides, offerings that rivals don’t have
and can’t afford to match. It is common in the restaurant business for one to utilize a
differentiation strategy. Most companies seek to set themselves apart from competition by
pricing, unique menus, food quality. In this case, delicious handcrafted bread arriving fresh daily,
served in an inviting atmosphere is the company’s competitive advantage and core
competency.
Panera partakes in a very unique strategy consisting of running bakery-cafes through a
food away from home industry. Panera focuses on conducting a focused differentiation strategy
by offering a unique product selection, attractive styling, and unusually good value for the
money (Thompson, A, Strickland, A, & Gamble, A. 2010). Panera aims to serve customers who
feel the joy of consuming fresh baked breads, love the smell of home baked foods, and enjoy the
communal, warm atmosphere at a high quality food and reasonably price bakery-cafe.
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What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its
situation? Does the company have any core competencies or distinctive competencies?
Porters Five Forces
Competition in the industry
The restaurant business is a very competitive. There are constantly new entrants to worry
about as well as companies that are already established that are trying to capture a bigger market
share. Panera competes on many levels including fast casual dining and specialty foods. Panera’s
main competitors include Applebee’s, McDonald’s, Starbucks Coffee and Subway. However
there are hundreds of restaurants that compete with Panera on a national, regional, and local level
that has a negative impact on the Panera’s revenue and market share.
Potential of new entrants into industry
The threat of new entrants is high because barriers to entry are low. People are always
looking for a new and different place to eat and because of this demand new restaurants open
daily. In addition many restaurants do not stay in business for very long due to bad menus,
dining experience, food quality and service
Power of suppliers
Panera’s suppliers have a relatively low bargaining power because they implement a lot
of controls to keep their bargaining power low. Panera has an advantage in terms of suppliers
because the make their own bread in 17 fresh dough facilities and own 140 trucks to deliver the
dough anywhere from 300 to 500 miles to stores. This vertical integration has made Panera
capable of controlling the quality of its signature product, their bread. The bread is delivered
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daily so if for any reason the bread cannot make it to the store sales and brand reputation can
suffer (Thompson, A, Strickland, A, & Gamble, A. 2010).
Power of customers
Power of the customer is relatively high for Panera. The restaurant must stay in tune to
customer preferences or the customers will easily eat at another restaurant. The food industry is
highly competitive and in addition there are low switching costs for consumers and consumers
have access to quality and nutrition information.
Threat of substitute products
Food is a basic need and nothing can substitute that. Since there are no major substitutes
the threat is relatively low in this category. However, there are substitutes to Panera’s ambience
and the food they offer. Panera has developed an atmosphere that encourages people to hold
meetings or get work done at the restaurant. A substitute to this could be to have the meeting in
the office or meet in other places such as Starbucks, or caribou coffee. For the food one can
abstain from eating out.
SWOT ANALYSIS
Strengths
The strengths of Panera bread include fresh food and quality food, economies of scale, rapid
market expansion, repeat customers, word-of-mouth marketing, good atmosphere-Ambience,
excellent customer service, fresh dough, free WIFI, and healthy food choice
Weaknesses
The most apparent weakness at Panera is the prices that are higher than many fast food
restaurants. The company is also lacking a clear strategy.
Opportunities
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The company could expand on the options the offer by including more sugar free syrups or for
their blended coffees more flavors in general other than caramel and mocha. Adding a drive thru,
or a car side to go concept, to most of their restaurants can be on benefit for people who don’t
want to dine.
Threats
The company has several threats. The most apparent ones are slower service than fast
food restaurant, impact in sales due to bad economy, and a highly competitive food industry.
In overall, after looking into, the SWOT analysis and porters five forces, panera has a
distinctive competence in their bread-making category. They are also doing well in designing the
stores to have a welcoming atmosphere. Furthermore, the company management is doing great in
steering the company expansion
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 4.1 of Chapter 4 as a guide in doing the calculations needed to arrive at an analysisbased answer to your assessment of Panera's recent financial performance.
The Panera bread company is doing considerably well given its financial status.
Analyzing the company financial ratios over a period of time shines light on how the performing.
The prominent ratios include, Current ratio, net profit margin and debt to equity ratio.
The current ratio is mainly used to give an idea of the company's ability to pay back its
short-term liabilities -debt and payables-with its short-term assets -cash, inventory, receivables-.
The higher the current ratio, the more capable the company is of paying its obligations. Panera’s
current ratio has been decreasing from 2002 to 2006, in exception of 2005. See appendix 1.
Panera’s debt to equity ratio is can also reveal how the company is operating. In a general
since, debt to equity is a measure of a company's financial leverage calculated by dividing its
total liabilities by stockholders' equity. It indicates what proportion of equity and debt the
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company is using to finance its assets. Panera’s debt to equity ratio has been increasing over time
since 2006. Another financial ratio that was used to analyze Panera’s financial strength is the net
profit margin. Panera’s margin has been decreasing as well over the years.
Turning back and analyzing all the segments percentage sales increase/decrease shows
another trend in Panera’s operation. The company has had turbulent sales with the franchised
doing better that company owned stores. When both percentages are combines the trend recedes
to the one of company owned stores but slightly better. See appendix 2.
In conclusion, the financial condition of Panera is not stable to say the lease. Focusing on
the SWOT analysis and taking in consideration can aide this company in deciding how to
manage better to improve the ratios.
Based on the information in case Exhibit 9, which rival restaurant chains appear to be
Panera's closest rivals? Support your answer.
Panera’s closest rivals are Applebee’s neighborhood grill and bar, Chili’s grill and Bar.
Both restaurants have similar menus. They also both have the same about the same number
stores open nationwide. Also looking at it’s the number of stores open diving it by the revenue
provided, they have a similar income.
What strategic issues and problems does Panera Bread management need to address?
Management of Panera bread has a couple of strategic issues that they need to
address In order to compete effectively in this highly competitive industry. First, the company
strategy has seems to be a focused differentiation but in other ways it seems to be a broad
differentiation. Thus management needs to define a clear-cut strategy that addresses the
company’s distinctive competence that is basically the company’s artisan crafted bread products.
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Analysis of the company’s financial status reveals that the company’s profitability is
trending downward. To address this issue, management should consider adding a drive through
or a concept that rivals with the Applebee’s car side to go. This will draw in the customers that
want great food but don’t have enough time to dine in. The company has thrived through word of
mouth, when this addition is integrated the sales will increase
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Works cited
Thompson, A, Strickland, A, & Gamble, A. (2010). Crafting and executing strategy. New York,
NY: McGraw-Hill.
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Appendix 1.
Ration
2006
Current ratio
1.16
Net profit Margin
Debt to Equity
2005
2004
2003
2002
1.18
1.05
1.58
1.83
.071
.081
.081
.084
.076
.365
.381
.345
.239
.215
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Appendix 2
Comparative bakery-café sales percentage increases
Item
2006
2005
2004
2003
2002
Company owned
3.9
7.4
2.9
1.7
4.1
Franchised
4.1
8.0
2.6
(.4)
6.1
Combines
4.1
7.8
2.7
.2
5.5