Panera Bread Essay

Panera Bread Case Analysis
Michael Gibbons
Strategic Management W 7:10 - 10:10

1. Panera Bread’s strategy is to provide a superior product to a diverse customer base. Panera Bread’s concept is “to provide a premium specialty bakery and café experience to urban workers and suburban dwellers.” Their strategy has allowed them to provide an alternative meal to fast food restaurants. Analyzing Chapter Five’s generic competitive strategies the most closely fit competitive approach that Panera Bread is taking is the broad differentiation strategy. The broad differentiation strategy shows that Panera Bread is seeking to differentiate what they are trying to offer from their competitors, by providing a product that appeal to a broad spectrum
of buyers. The owners researched numerous locations throughout the United States. The owner’s research led them to creating the restaurant, Panera Bread, where they provide a quick and casual dining experience. The owner’s strived to provide the best product, the best environment, and the best service, which they refer to as PEGS. Panera Bread has taken their PEGS strategy and created a product that is superior to their competitors, who are unable to afford what Panera Bread has to offer. The competitive advantage is that Panera Bread has a unique product that offers quick and casual dining at affordable prices. The strategy that Panera Bread has to offer is a great strategy. Panera Bread makes it a great strategy by creating affordable foods, providing a quick service, and an environment that a customer would like to return too.

2. Strengths: * Providing a variety of appealing menu items * Leading company in the bakery and café market * Artisan Breads * Catering * Franchises * Ability to show growth and stability * Customer satisfaction and repeat business * Quality Foods

Weaknesses: * Company owned stores less profitable than franchise * Minimum advertising (Word of mouth) * Unreliable financials * Untapped markets

Opportunities: * Additional catering * Penetrating other markets * Advertising * Recognizing healthier options * Expansion (Domestic and International)

Threats: * Competition * Over saturated market * Economical downfall

3. Panera Bread’s financial performance based on Exhibits 1, 2, and 8 show continuous growth and stability. Since 2002 to 2006, Panera Bread has had an increase of total revenue of nearly 400%, and an operating profit increase of nearly 375%. The net income has risen nearly 275% and an increase in earnings per share of $1.04. Below are some ratios derived by using Table 4.1 in Chapter 4.
Operating Profit Ratio: 2006 – 10.95% 2002 – 12.06%
Net Profit Ratio: 2006 – 7.09% 2002 – 7.54%

Overall, Panera Bread shows some steady percentages, although slightly deceasing, they still continue to grow and are definitely bringing in the dough, pun most definitely intended.

4. Any restaurant is a rival to Panera Bread; however, there are some significant standouts as noted in Exhibit 9. Below is a list of the top 5 closest rivals to Panera Bread. The below rivals have the highest return of revenues generated, the most locations nationwide and globally, and offer different array of foods. The rivals are all well known restaurants nationwide and their revenues stifle Panera Breads. However, Panera Bread is an upcoming restaurant that shows steady growth and is a force to be reckoned with.
1. Applebee’s Neighborhood Grill & Bar
2. Chili’s Grill and Bar
3. Cracker Barrel
4. Starbucks
5. Qdoba Mexican Grill

5. The strategic issues and problems that Panera Bread’s management need to address would have to be the weaknesses and threats noted in the SWOT analysis of question two. The weakness that the company owned stores are less profitable than the franchises should set off alarms with the owners.
They should perform an analysis of the franchise stores to evaluate what they are doing differently and possibly adapt some of these trends. Another weakness to address would be the lack of advertising. Companies have survived off of first time visits and word of mouth, but those can also back fire. They need to find ways to increase foot traffic, especially during dinner hours. If Panera Bread was to attempt to penetrate the market through advertising it would make them a more recognized organization. In addition to advertising, Panera Bread needs to expand in the market making them known as an industry leader. Threats to any company can be detrimental. In Panera Bread’s case, the threat of competition is its biggest issue. They need to find a way to corner the market and see how they can stand out from the other competition. Panera Bread can focus on providing the healthier options, fresher products, or a more friendly and family environment. The over saturated market hinders their day to day operations. In today’s society we have too many choices when it comes to restaurants. Panera Bread needs to find a way to stand out in the over saturated market and with the steady downfall of the
economy. Overall, Panera Bread’s management needs to address how they can positively stand out in a struggling economy.

6. Panera Bread needs to strengthen its competitive position and business prospects vis-à-vis other restaurant chain rivals. With a downward spiraling economy it is hard to spend money, let alone hard to stay above water. However, when others are not advertising or marketing their products, it leaves a window of opportunity. Panera Bread needs to corner untapped markets, advertise heavily in the struggling markets, and study their weaknesses and the strengths of their competitors. They need to find their own niche and run with it. Whether it is organic and fresh bakery goods, new menu items, or healthier choices, they need to find the answer, because they are going to experience shrinking profit margins. They can also possibly find ways to address the over expenditures and expenses. Overall, Panera Bread needs to think out of the box to find that competitive edge over their rivals.