Panera Bread Essay
Panera Bread
Panera Bread began back in 1981. It started out as a small sandwich shop known as Saint Louis Bread. Panera Bread market expansion has growth almost double within only four years range from 1027 in 2006 to almost 2000 location in 2010. Case examined company SWOT analysis, keys successful factors and the generic competitive strategy. Company’s vision was to create a specialty café anchored by an authentic, fresh-dough artisan bakery and up scales quick-service menu selection. Panera Bread was widely recognized as the nationwide leader in specialty bread segment and rated highest in customer loyalty among other well-known quick-casual restaurant. In order to achieve its great success against countless competitors, the company had to implement many …show more content…
successful strategies.
These strategies are including their ability to identifying the opportunities and threats, analyzing the target market, determining position in the market, adapting social trend, deciding on a growth strategy and figuring out the marketing mix.
SWOT analysis of Panera Bread revealed number of strengths and some weaknesses for Panera about their overall attractiveness of company current situation. Some strength were around having an attractive and appealing menu, with item that getting customers’ attention. One of the items of course is the artisan bread, the signature product. Panera’s strength is that their core competence surround around bread baking, which is what they are known for. Other strength is a good brand name, high customer satisfactions studies, and success in catering and good franchisees. The company’s financial strength allows them to grow without taking on too much debt.
One of Panera competitive strengths is
customers’ loyalty. In 2003, under a study conducted by TNS intersearch, Panera Bread scores the highest level of customer loyalty among other quick-casual restaurants. Repeat customers allow Panera to better sustain market opportunity and revenue. In addition, Panera created “My Panera” program to help track down repeat customers’ buying habits, which has helped the company tailor its offerings and gain more customers. Moreover, Panera is strong in learning curve, which derive its strategies to effectively compete in such a competitive market as restaurant industry. For instance, Ron Shaich and executive team spent substantial time study its major competitor including McDonalds’, Wendy’s, Burger King, Subway, Taco Bell etc. In such experience, Panera executives are able to study competitor competitive strengths such as “Starbucks” which influenced Panera’s strategy in focus on providing distinctive and engaging environment (Panera warmth), customer service good atmosphere and access to Wi-Fi that already proved success by Starbucks coffee. Fresh and quality food is a distinctive characteristic of Panera products. Another competitive strength of Panera is its rapid market penetration; Panera growth strategy was to capitalize on Panera’s market potential by open company-owned and franchised location. A Panera Bread franchise strategy was to enter into franchise agreements that required the franchise developer to open a number of units which typically 15-bakery café within six years. Although Panera invested higher cost in providing fresh products such fresh dough to its regional stores, they are good at maintain economic of scale that enable company to continue makes profits.
At the same time, Panera does have some weaknesses. Although their brand is known, it is not as well known as other rivals, such as Starbucks, subway, McDonald, and Applebee’s. In comparative U.S market penetration of selected restaurant chain in 2006, Panera bread still has the smallest market penetration, 910 location compared to major rivals mentioned earlier. Panera only account for only 4.5% of opened stores compared to subway and about 12% of Starbucks Stores. Another weakness is accessibility to supply and mini cost. Panera bread mainly focus on high food quality and promote healthy menu that lead to increasing cost of product sale. The majority of Panera ingredients are organic and the bread is fresh everyday the prices are higher than many fast food restaurants. Fast food restaurants have often done well during recessions, as they are perceived as cheaper alternatives to sit-down restaurants. Panera, as a hybrid of these two models, may still face difficulties to maintain its positioning in the mind of its target customers. To remain competitive in the market they should able to manage low price in the future without reducing the quality image of its products and services.
Panera growth opportunity
Since Panera already familiar with market research tactics and proved successful in market strategies, it should focusing more on regional stores expansion.
Opportunities and global sales
Threats – bad economy, high gas prices, highly competitive industry
Panera’s has a unique strategy, which is “to provide a premium specialty bakery and café experience to urban workers and suburban dwellers.” Out of the five generic competitive strategies discussed in chapter five, the one that most closely fits the competitive approach that Panera Bread is taking is the generic concept of broad differentiation strategy. They are unique in many ways, which give them a competitive advantage over rivals. Their advantage consists of striving to build a competitive advantage based on the triple combination of product, environment and great service. Broad differentiation strategy, or being unique in ways that a broad range of consumers find very attractive. 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 is a mix between fast food and casual dining, or fast casual. The key success of Panera strategy is to attempting to achieve competitive advantage by create find ways to differentiate that create value for buyer and not easy to match or can’t afford to copy by rivals (Chapter 5). For example, Panera invested about $52 million in a network of regional fresh dough facilities that are able to distribute fresh dough daily to both company owned and franchised its bakery café. As a result, company’s large investment on the concept of fresh and high quality, now makes it even more difficult for competitors to imitate this strategy because higher cost is involved.
In this case, delicious handcrafted bread arriving fresh daily, served in an inviting atmosphere is the company’s competitive advantage and core competency.
Not only, unique menu with high focused on fresh artisan bread products, and the outstanding Panera’s bakery-cafe operations, signature bakery-cafe design, and the great bakery-cafe locations are major factors of Panera’s success. In addition to this, Franchising is a key component of Panera’s success. Franchising has enabled Panera to grow more rapidly because it is the strategy of the Panera that enable it to be available in such location where customer can easily find it. Between January 1999 and December 2006, there were 850 Panera Bread bakery-cafes operating and signed commitments to open more Panera franchised bakery-cafes. Panera’s market penetration data showed 17 locations successfully opened in Los Angeles, which demonstrated strong potential growth for Panera since LA is consider one of the most competitive market especial its substantial amount population per bakery cafe.
In Panera Bread’s product offerings and menu provide signature product was artisan bread that were made from natural ingredients and focusing on healthy ingredient. In late 2004, Panera recognized new social trend which consumers were more conscious about eating healthy. Bakery menu offering is regularly review and revise to match customers’ demand and also quickly adapt to new trend
Therefore, the unique menu offerings itself is the one of the major success factors of the Panera Bread. Distinctive Menu, great location and unique operating system: Panera Bread’s distinctive menu, signature café design, inviting ambience, operating systems, and unit location strategy allowed it to successfully compete in the restaurant industry especially for breakfast, lunch, daytime chill out dinner, light evening fare for eat-in or take-out, and take home bread. Beside this, convenience location and the way they operate themselves is also the key to their success.
Fast-Service and healthy and quality foods: Panera Bread is able to provide a higher quality product in a short amount of time to its customers. Their operations combine the speed and convenience of traditional fast food with the food quality and appealing décor of casual-dining restaurants. Beside this it is able to convince its customers that all the food in Panera is made with higher quality materials and ingredients including the antibiotic-free chicken. They use highest-quality ingredients, with only fresh dough and preservatives and the bread is baked fresh every day. Panera Bread has a strong presence in the bakery-cafe segment. They have high quality food, including the award winning sourdough bread, which is key to the Panera Bred success.
Artisan and Specialty Bread: The distinctive blend of genuine artisan bread is one of the key factors of the Panera Bread success, which is served in warm, comfortable atmosphere. Artisan and Specialty bread offerings, which has standard combination of calories, sodium, fiber and carbohydrates.
Product Niche: Panera Bread has niche market segment of artisan fast food that protects the company from direct competition in the fast food industry as well as the casual dine-in industry. It targets consumers who seek meals of higher quality than those offered by traditional fast food chains, yet do not have the time to dine in or have a sit-down meal in a restaurant. Panera Bread's product niche gives it the tools to cope more effectively with the challenges facing the fast food industry as well as the challenges facing the dine in industry. Panera Bread's cheaper items make it an attractive alternative to traditional eateries.
Meeting Customer Demands and Wi-Fi: To address the customer’s busyness and make them feel comfortable in the dining hall, they have equipped their restaurants dining hall with free wireless Internet. By offering this amenity they can fully meet the needs of sophisticated and diverse customer base. Panera Bread has strong customer loyalty; they have a strong appeal to customers. They also have a wide variety of food, which appeals to a large group of people.
All above-mentioned factors are the key components of the Panera Bread, which enabled it to be market leader in its business. But those factors may not be the same in the future because of two reasons: the first one is that the customer’s needs and demands may not be the same in the future or whatever is appealing for customer today may not be the same in the future. The second one is that there is a huge possibility that competitor with extra strengths and product and service offerings may emerge in the market place leading Panera Bread and replacing it from its unique market segments.
Rising production costs: Increasing cost of raw materials and cost of production like wheat prices, fresh dough prices, labor costs, rent, and other input costs may force Panera to increase the cost of its product. On the other hand due to the inflation consumer purchasing power may go down forcing management team of Panera Bread to reduce the price of the product to counter the inflationary effect and appeal more customers. Therefore, it is one of the key challenges to the Panera Bread to manage the price that is affordable to its customers, competitive in the market and still earn profit to sustain in the market.
Growing competition: Both traditional fast food and dine in restaurants are beginning to respond to the success of fast casual restaurant like Panera Bread. Other fast food chains have started to offer similar kind of offerings to its customers as Panera Bread does. Meanwhile, dine in restaurants have instituted carryout programs, fast-lunch guarantees, and lower prices, all measures to counter the concept of fast casual. If these trends continue, Panera Bread can no longer enjoy the safety of the product niche that it has occupied, and will face greater competition in terms of pricing and food quality. Beside this, intense rivalry in the industry pressures both market share and profit margins. As a consequence, increased competitive activity requires chain operators seek opportunities for improving both unit productivity and profitability.
Panera Bread began back in 1981. It started out as a small sandwich shop known as Saint Louis Bread. Panera Bread market expansion has growth almost double within only four years range from 1027 in 2006 to almost 2000 location in 2010. Case examined company SWOT analysis, keys successful factors and the generic competitive strategy. Company’s vision was to create a specialty café anchored by an authentic, fresh-dough artisan bakery and up scales quick-service menu selection. Panera Bread was widely recognized as the nationwide leader in specialty bread segment and rated highest in customer loyalty among other well-known quick-casual restaurant. In order to achieve its great success against countless competitors, the company had to implement many …show more content…
successful strategies.
These strategies are including their ability to identifying the opportunities and threats, analyzing the target market, determining position in the market, adapting social trend, deciding on a growth strategy and figuring out the marketing mix.
SWOT analysis of Panera Bread revealed number of strengths and some weaknesses for Panera about their overall attractiveness of company current situation. Some strength were around having an attractive and appealing menu, with item that getting customers’ attention. One of the items of course is the artisan bread, the signature product. Panera’s strength is that their core competence surround around bread baking, which is what they are known for. Other strength is a good brand name, high customer satisfactions studies, and success in catering and good franchisees. The company’s financial strength allows them to grow without taking on too much debt.
One of Panera competitive strengths is
customers’ loyalty. In 2003, under a study conducted by TNS intersearch, Panera Bread scores the highest level of customer loyalty among other quick-casual restaurants. Repeat customers allow Panera to better sustain market opportunity and revenue. In addition, Panera created “My Panera” program to help track down repeat customers’ buying habits, which has helped the company tailor its offerings and gain more customers. Moreover, Panera is strong in learning curve, which derive its strategies to effectively compete in such a competitive market as restaurant industry. For instance, Ron Shaich and executive team spent substantial time study its major competitor including McDonalds’, Wendy’s, Burger King, Subway, Taco Bell etc. In such experience, Panera executives are able to study competitor competitive strengths such as “Starbucks” which influenced Panera’s strategy in focus on providing distinctive and engaging environment (Panera warmth), customer service good atmosphere and access to Wi-Fi that already proved success by Starbucks coffee. Fresh and quality food is a distinctive characteristic of Panera products. Another competitive strength of Panera is its rapid market penetration; Panera growth strategy was to capitalize on Panera’s market potential by open company-owned and franchised location. A Panera Bread franchise strategy was to enter into franchise agreements that required the franchise developer to open a number of units which typically 15-bakery café within six years. Although Panera invested higher cost in providing fresh products such fresh dough to its regional stores, they are good at maintain economic of scale that enable company to continue makes profits.
At the same time, Panera does have some weaknesses. Although their brand is known, it is not as well known as other rivals, such as Starbucks, subway, McDonald, and Applebee’s. In comparative U.S market penetration of selected restaurant chain in 2006, Panera bread still has the smallest market penetration, 910 location compared to major rivals mentioned earlier. Panera only account for only 4.5% of opened stores compared to subway and about 12% of Starbucks Stores. Another weakness is accessibility to supply and mini cost. Panera bread mainly focus on high food quality and promote healthy menu that lead to increasing cost of product sale. The majority of Panera ingredients are organic and the bread is fresh everyday the prices are higher than many fast food restaurants. Fast food restaurants have often done well during recessions, as they are perceived as cheaper alternatives to sit-down restaurants. Panera, as a hybrid of these two models, may still face difficulties to maintain its positioning in the mind of its target customers. To remain competitive in the market they should able to manage low price in the future without reducing the quality image of its products and services.
Panera growth opportunity
Since Panera already familiar with market research tactics and proved successful in market strategies, it should focusing more on regional stores expansion.
Opportunities and global sales
Threats – bad economy, high gas prices, highly competitive industry
Panera’s has a unique strategy, which is “to provide a premium specialty bakery and café experience to urban workers and suburban dwellers.” Out of the five generic competitive strategies discussed in chapter five, the one that most closely fits the competitive approach that Panera Bread is taking is the generic concept of broad differentiation strategy. They are unique in many ways, which give them a competitive advantage over rivals. Their advantage consists of striving to build a competitive advantage based on the triple combination of product, environment and great service. Broad differentiation strategy, or being unique in ways that a broad range of consumers find very attractive. 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 is a mix between fast food and casual dining, or fast casual. The key success of Panera strategy is to attempting to achieve competitive advantage by create find ways to differentiate that create value for buyer and not easy to match or can’t afford to copy by rivals (Chapter 5). For example, Panera invested about $52 million in a network of regional fresh dough facilities that are able to distribute fresh dough daily to both company owned and franchised its bakery café. As a result, company’s large investment on the concept of fresh and high quality, now makes it even more difficult for competitors to imitate this strategy because higher cost is involved.
In this case, delicious handcrafted bread arriving fresh daily, served in an inviting atmosphere is the company’s competitive advantage and core competency.
Not only, unique menu with high focused on fresh artisan bread products, and the outstanding Panera’s bakery-cafe operations, signature bakery-cafe design, and the great bakery-cafe locations are major factors of Panera’s success. In addition to this, Franchising is a key component of Panera’s success. Franchising has enabled Panera to grow more rapidly because it is the strategy of the Panera that enable it to be available in such location where customer can easily find it. Between January 1999 and December 2006, there were 850 Panera Bread bakery-cafes operating and signed commitments to open more Panera franchised bakery-cafes. Panera’s market penetration data showed 17 locations successfully opened in Los Angeles, which demonstrated strong potential growth for Panera since LA is consider one of the most competitive market especial its substantial amount population per bakery cafe.
In Panera Bread’s product offerings and menu provide signature product was artisan bread that were made from natural ingredients and focusing on healthy ingredient. In late 2004, Panera recognized new social trend which consumers were more conscious about eating healthy. Bakery menu offering is regularly review and revise to match customers’ demand and also quickly adapt to new trend
Therefore, the unique menu offerings itself is the one of the major success factors of the Panera Bread. Distinctive Menu, great location and unique operating system: Panera Bread’s distinctive menu, signature café design, inviting ambience, operating systems, and unit location strategy allowed it to successfully compete in the restaurant industry especially for breakfast, lunch, daytime chill out dinner, light evening fare for eat-in or take-out, and take home bread. Beside this, convenience location and the way they operate themselves is also the key to their success.
Fast-Service and healthy and quality foods: Panera Bread is able to provide a higher quality product in a short amount of time to its customers. Their operations combine the speed and convenience of traditional fast food with the food quality and appealing décor of casual-dining restaurants. Beside this it is able to convince its customers that all the food in Panera is made with higher quality materials and ingredients including the antibiotic-free chicken. They use highest-quality ingredients, with only fresh dough and preservatives and the bread is baked fresh every day. Panera Bread has a strong presence in the bakery-cafe segment. They have high quality food, including the award winning sourdough bread, which is key to the Panera Bred success.
Artisan and Specialty Bread: The distinctive blend of genuine artisan bread is one of the key factors of the Panera Bread success, which is served in warm, comfortable atmosphere. Artisan and Specialty bread offerings, which has standard combination of calories, sodium, fiber and carbohydrates.
Product Niche: Panera Bread has niche market segment of artisan fast food that protects the company from direct competition in the fast food industry as well as the casual dine-in industry. It targets consumers who seek meals of higher quality than those offered by traditional fast food chains, yet do not have the time to dine in or have a sit-down meal in a restaurant. Panera Bread's product niche gives it the tools to cope more effectively with the challenges facing the fast food industry as well as the challenges facing the dine in industry. Panera Bread's cheaper items make it an attractive alternative to traditional eateries.
Meeting Customer Demands and Wi-Fi: To address the customer’s busyness and make them feel comfortable in the dining hall, they have equipped their restaurants dining hall with free wireless Internet. By offering this amenity they can fully meet the needs of sophisticated and diverse customer base. Panera Bread has strong customer loyalty; they have a strong appeal to customers. They also have a wide variety of food, which appeals to a large group of people.
All above-mentioned factors are the key components of the Panera Bread, which enabled it to be market leader in its business. But those factors may not be the same in the future because of two reasons: the first one is that the customer’s needs and demands may not be the same in the future or whatever is appealing for customer today may not be the same in the future. The second one is that there is a huge possibility that competitor with extra strengths and product and service offerings may emerge in the market place leading Panera Bread and replacing it from its unique market segments.
Rising production costs: Increasing cost of raw materials and cost of production like wheat prices, fresh dough prices, labor costs, rent, and other input costs may force Panera to increase the cost of its product. On the other hand due to the inflation consumer purchasing power may go down forcing management team of Panera Bread to reduce the price of the product to counter the inflationary effect and appeal more customers. Therefore, it is one of the key challenges to the Panera Bread to manage the price that is affordable to its customers, competitive in the market and still earn profit to sustain in the market.
Growing competition: Both traditional fast food and dine in restaurants are beginning to respond to the success of fast casual restaurant like Panera Bread. Other fast food chains have started to offer similar kind of offerings to its customers as Panera Bread does. Meanwhile, dine in restaurants have instituted carryout programs, fast-lunch guarantees, and lower prices, all measures to counter the concept of fast casual. If these trends continue, Panera Bread can no longer enjoy the safety of the product niche that it has occupied, and will face greater competition in terms of pricing and food quality. Beside this, intense rivalry in the industry pressures both market share and profit margins. As a consequence, increased competitive activity requires chain operators seek opportunities for improving both unit productivity and profitability.