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Running head: BUSINESS PLAN
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BUSINESS PLAN
Abstract
This business plan synthesizes a variety of expert sources and original analysis to describe and
evaluate the operations and strategies of Panera Bread, a publicly traded restaurant founded in
Boston in 1981. The paper details the company’s offering, marketing strategy, financial status,
and the state of the larger restaurant industry. The business plan then analyzes Panera’s strengths,
weaknesses, opportunities and threats in the context of the current economic climate.
BUSINESS PLAN
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BUSINESS PLAN
INTRODUCTION
Panera Bread is a retail bakery-cafe founded in Boston in 1981, and
headquartered in Saint Louis, Missouri. The company began as a small cookie shop and café,
and soon acquired enough wealth to expand to new locations and become a publicly traded
company under the symbol PNRA. The company is the supplier of its own restaurant chain and
franchises established in targeted locations in United States and Canada. Panera Bread’s main
business concept is to sell fresh bread and sandwiches, along with soups, salads and specialty
beverages, to consumers willing to spend more money for better quality of food. Today there
are nearly 1,450 Panera Bread locations in 40 states and Ontario, Canada (“Panera Bread,”
2011).
BUSINESS PLAN
MARKET RESEARCH AND MARKETING PLAN
Panera Bread relies on a number of product, service and environment-based strategies for
success. One of the strategies Panera Bread relies on is creating a perception of their product as
premium quality, thanks largely to their fresh-baked artisan breads. They then price their product
accordingly, allowing for higher price points on sandwiches and drinks than Starbucks or Corner
Bakery. Panera Bread also differentiates itself from Starbucks and other competitors by taking a
different approach to attracting its customers through a cozier eating experience. Panera Bread
designers decorate their interiors with vivid colors and fireplaces that seem suitable for business
or personal conversations. The overall impression is distinctly welcoming.
While Panera Bread’s signature offering is fresh-baked artisanal bread, the rising costs of
flour and other ingredients mean that beverages currently generate more revenues than baked
goods, according to the company’s latest financial statements (”Panera bread,” 2011). Panera
Bread mitigates some of the impact by reviewing and revising its menu regularly. This allows it
to both serve more economical, seasonally available products and maintain a novelty, which
ensures repeat business.
Panera Bread also provides free wireless internet service to attract business consumers
who use laptops, smart phones, and other wireless devices heavily. These multiple strategies
allow Panera Bread to provide offerings that are valuable to a diverse customer base. It attracts
individuals and groups for socializing or business. Young adults and baby boomers alike, who
are looking for a welcoming place to eat healthy, high quality goods, use free wireless internet,
and meet with friends or associates in convenient locations are all part of a broad customer base.
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Editor Michael Arndt reported in his publication, Bloomberg Businessweek, that Panera
Bread has also been strategically and aggressively expanding despite declining sales caused by
the recent economic crisis, business shutdowns, and consumer cutbacks (2009).
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BUSINESS PLAN
PANERA IN CONTEXT: THE RESTAURANT INDUSTRY
Despite the large number of competitors in the restaurant industry, Panera Bread has
developed a valuable brand, which has demonstrated its profitability even in time of economic
crisis. While the recent recession has caused a sharp drop in consumer spending, increased the
number of restaurant closures and negatively affected revenue forecasts, Panera Bread has
continued growing, partly by taking advantage of deeply discounted leases to open new
locations (Gregory, 2009). In contrast, restaurant closures by early 2010 amounted to 5,204 and
independent restaurants have been particularly impacted (Brandau, 2010). The forecast for 2011
indicates improvement in this industry is likely and anticipates many newcomers will enter the
marketplace. Last year, the restaurant industry had average daily sales one billion dollars, and
for 2011, the estimated daily revenue is expected to surge to $1.7 billion (National Restaurant
Association, 2011). This forecast estimates an increase that almost doubles the previous years,
with forecasted annual sales of $604 billion for 2011 (National Restaurant Association, 2011).
PANERA BREAD SWOT ANALYSIS
Panera Bread’s current strategy is to provide fresh bread to consumers throughout the
United States while carefully entering foreign markets, beginning with Canada. Their
competitors include coffee shops, bakeries and casual full-service eateries, such as Starbucks,
Corner Bakery and McDonald's. Further, Panera Bread is threatened by the entry of many new
restaurant concepts into the marketplace. For this reason, Panera Bread has a large menu with
BUSINESS PLAN
different types of items that attract consumers looking for better food. The menu is revised often
to keep the customers attracted to Panera Bread’s innovative cuisine ideas (Hitt, Ireland, &
Hoskisson, 2007) and amenities like free wireless help keep the chain attractive to consumers.
Panera Bread food is considered pricy but the organization strives to demonstrate to its
customers that it is worth paying for premium ingredients, fresh product and skilled
craftsmanship. Panera’s marketing equates bread with art, which helps sell consumers on higher
prices. Therefore, one of the significant weaknesses of Panera Bread’s process is that they keep
their produce for 12-14 days meaning their food is often less than fresh (Arndt, 2009). To
provide fresher produce in its meals, Panera Bread made the decision to contract with local
producers to cut the twelve days of produce delivery to just one day (Arndt, 2009). Panera
Bread is promoting healthy choices in their menu by including fresh fruits, vegetables, fresh
bread, and chicken raised without antibiotics. Panera Bread offers food appropriate throughout
the day, but primarily attracts customers and sees its highest revenue at lunch. Panera Bread has
not been successful it convincing customers to try it for dinner. However, given the food’s
fresh, healthful qualities and the increasingly busy schedules of consumers, there is potential for
the company to be successful marketing certain products, particularly fresh-tossed salads and
breads to accompany dinner if not replace it entirely.
PANERA BREAD – “PAY WHAT YOU WANT”
The Panera Bread “Pay What You Want” (PWYW) program was created by CEO Ronald
Shaich. His idea was to create an environment that allowed people to pay for services not just
based on their value, but on the customer’s budget, subjective assessment of value and
convenience. The PWYW program allows customers to pay what they want for the food.
There is a suggested retail price posted for each item, but customers can pay anywhere from
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0.01$ to $100.00. Anything the customer pays over the suggested amount goes into the charity
jar. Mr. Shaich new this idea was based on taking a chance on society's’ willingness to give and
he was right. Approximately 70% of customers pay the recommended amount, 15% pay less or
even nothing, and 15% pay more. The success of the program, Mr. Shaich says, is due to
placing the jar by the register saying “charity.” The customers know that the additional amount
is going to charity to help people who normally would not be able to afford to eat at a place like
Panera Bread.
The strength of this program is its uniqueness. No other restaurant has anything close to
this program. Most people are generous and caring and when given the opportunity with
someone they trust, they will give willingly. The weakness of this program is that it relies on
customers’ ability and desire to give above and beyond suggested retail amount. If economic
times become more difficult and more people are unemployed, Panera’s revenues may drop
even further than a traditional retailer that has the protection of set pricing. The opportunity is
having the ability to spread this program to other cities and states. As the program reaches the
area, it peaks everyone’s interest to get involved. Then the cycle starts all over again with 15%
of customers paying significantly more for their food. Lastly, the threat would be customers
getting acclimatized to the program and losing interest in its social-benefit aspect. Customers
might either stop going to eat at Panera altogether, or calculate that having already paid a
surplus for their food, they are entitled to start paying less or nothing. If Panera Bread loses this
customer base or the customer base loses its disposable income, it would be a significant
hardship to rebuild.
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FINANCIAL OVERVIEW
Panera Bread sales have been increasing steadily based on its expansion to new locations
in target market in United States.
Panera Bread is benefiting from the price of the meals as seen in the profit of the
company, which is operating debt free in the highly competitive market like the restaurant
industry.
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BUSINESS PLAN
Panera Bread is debt free with high equity in comparison with its debt. The total
equity/debt ratio is not available for Panera Bread has no debt with a debt value per share of
19.97. The total amount of cash that Panera Bread holds is $229.30million (”Panera Bread,”
2011).
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BUSINESS PLAN
Financial Ratios for the Year 2010 Current ratio 1.6 Quick ratio 1.4 Inventory turnover 70.1 Accts recvble turnover 24 daysNumber of days to collect 15 daysDebt to assets 0.2 Debt to equity 0.4 Net Profit Margin* 0.1 Gross profit on sales 0.3 Return on assets* 0.1 Return on equity* 0.2 Earnings per share* $37.29 there are 3000 shares outstanding
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Financial summary
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CONCLUSION
Panera Bread is not the leader in its industry but it is generating huge profits despite the
economic difficulties that other restaurants and coffee shops are facing. The high quality of the
freshly-crafted foods, the variety in Panera Bread's menu, comfortable design and attractive
amenities have gained Panera Bread a competitive advantage among its rivals. The company’s
innovative ideas result in a better product and attract new customers every day. This growth
trend is likely to gain momentum in years to come. The growth in revenues from
$1,298,853,000 in 2008 to $1,542,489,000 in 2010, an 18.76% increase strongly suggest
investors will be able to realize this growth in the form of higher stock values and success
through market share growth based both on expansion and a growing customer base in already
established locations.
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BUSINESS PLAN
References
Arndt, M. (2009, March 19). Panera Bread’s Apple strategy. Bloomberg Newsweek. Retrieved
from http://www.businessweek.com/ the_thread/ brandnewday/ archives/ 2009/ 03/
panera_bread_is.html
Daily Finance. (n.d.) Panera Bread Company stock quote. Retrieved from
http://www.dailyfinance.com/ quotes/ panera-bread-company/ pnra/ nas
Gregory, S. (2009, December 23). How Panera Bread defies the recession. Times. Retrieved
from http://www.time.com/ time/ business/ article/ 0,8599,1949371,00.html
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2007). Strategic focus: Panera Bread Company:
Thriving through internal innovation. In Strategic management: competitiveness and
globalization (7th edition ed., pp. 412-414). 5191 Natorp Boulevard, Mason, OH 45040:
Thomson South-Western.
Leonard, C. (2010, May 18). Non-profit Panera restaurant: Pay what you want at pilot location.
The Huffington Post Inc. doi:580316
National Restaurant Association. (n.d.). Restaurant industry facts at a glance. Retrieved from
http://www.restaurant.org/ research/ facts/
Panera Bread. (n.d.). Retrieved from http://www.panerabread.com
Panera Bread Company. (n.d.). Yahoo finance. Retrieved February 18, 2011, from
http://finance.yahoo.com/ q?s=PNRA
Panera Bread Company form 10-K for 2010 [Editorial]. (2010, February 26). The New York
Times. Retrieved from http://markets.on.nytimes.com//research/ modules/ company_topic/
drawFiling.asp?docKey=136-000095012310018483-
0DQROSNL7E07ES9QKQ0S3DRP8A&docFormat=HTM&formType=10-K
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Panera Bread Company reports fiscal 2010 diluted eps of $3.62. (2011, February 14). Restaurant
News Resource. Retrieved from
http://www.restaurantnewsresource.com//article52238.html
Stevenson, A. (2002, January). Rising dough. Kiplinger’s personal finance, Volume 56(No 1),
71.
Steverman, B. (2010, November 8). How Panera Bread kept rising through the recession.
Bloomberg Business Week. Retrieved from http://www.businessweek.com/ investor/
content/ nov2010/ pi2010118_183529.htm
Brandau, M. (2010, July 20). U.S. restaurant count continues to fall. Nation’s Restaurant News.
Retrieved from http://www.nrn.com/article/us-restaurant-count-continues-fall
Wasserman, S. (2011, February 14). Call volume rises on Panera Bread following upbeat
earnings report. Retrieved from Schaeffer’s Investment Research, Inc. website:
http://www.schaeffersresearch.com/ marketcenters/ optionscenter/ default.aspx?
c=bytefeed&ID=105024&single=true