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Panera Bread Company
Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman
Contents
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. 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
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
Panera Bread Company OverviewOrigin 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
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
PEST Analysis for PaneraCategory Issue Threats/Opportunities Ranking
(1-5)
Political None
Economic Restaurant business extremely competitive
Threat 4
Sales at food service locations in US trend upward
Opportunity 3
Social 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 marketsOpportunity – untapped markets
13
Consumers loyal when satisfied with experience
Opportunity 5
Technological None
Contents
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
Overview of the Industry - Demand• Growth Rate
– 925,000 food service locations in the U.S.– Are customers hungry for more?
1996 20060
100
200
300
400
500
$308b
$511bSales
1955 200605
101520253035404550
25%
47.5%
Food Dollars Spent in Segment
• 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
Overview of the Industry - Demand
Contents
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
Industry Overview (Supply)
Porter’s five forces:
Rivalry among existing competitors
Threat of substitute products
HIGH
Bargaining powerof buyers
HIGH
Threat of new entrants
LOW
Bargaining power of suppliers
LOW
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 Ranking (1-5)
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%
5
Bargaining power of suppliers• Panera is not limited by sourcing from a single supplier• Several suppliers are available for each ingredient
1
Bargaining power of buyers • Switching costs are non-existent for consumers with varied options
4
Industry Overview (Supply)
Factor Ranking (1-5)
Rivalry among existing competitors• Consumer preferences are constantly being targeted and adapted to by competitors• Competition is competing for $1 bn in daily sales
5
Threat of new entrants• Substitute products offer lower prices and convenience. •The majority of meals are eaten at home – 76% 1
Contents
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
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 2005Baked 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 Kitchen190+ 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
Typical Competitors within the Fast-Casual Arena
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 strategyHigh Food Quality
Quick dining experience
Full Service Applebee’sChili’s
Lower Food Quality
Slower dining experience
Fast CasualPaneraChipotleBrugger’s
QSRWendy’s McDonalds
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
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
Internal Analysis – Markets Served• Competing in 5 submarkets 1. Breakfast2. Lunch3. “Chill out”4. Light evening5. 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
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
Low/Untapped Markets
Internal Analysis – Core CompetenciesCore Competency Description
Diverse Menu • 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/Cust
omer Loyalty
Diverse Menu
Identifying Where to Locate new
Stores
Strong Relationshi
ps with Existing
Franchise Partners
Core Competencies
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?
YearNumber of
new locations
Total Locations
Percent Increase
1993 0 20 N/A
1999 160 180 800%
2006 155 1027 15%
2010 973 (forecasted)
2000 (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
Biggest issue existing partners have is desire for more locations
Agreed to open additional 423 locations
Still leaves 550 locations to meet 2000 by 2010
Either by new franchise partners or corporate
2006
42 franchise groups in 54 markets 34 states
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
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
SWOT Analysis for Panera BreadStrengths
•Strong/Loyal Customer Base in NE & Midwest•Menu Options/ Variety•Able to provide healthy options to customers•Analysis of market
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
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)
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
1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations
Recommendations1. 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