Panera Bread[1]

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Panera Bread


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Panera Bread

Introduction


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Panera Bread

Mission Statement

A loaf of bread in every arm


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Corporate Level Strategy

Panera Bread is engaged in operating a retail bakery-cafe business and franchising businessunder the names Panera Bread and Saint Louis Bread Co. As of Dec 26 2006, Co. operated 391

company-owned bakery-cafes, and 636 franchise-operated bakery-cafes. Co. provides bakedgoods, made-to-order sandwiches, pizza, soups, salads, custom roasted coffees, and other cafebeverages. Bakery-cafes are principally located in suburban, strip mall, and regional malllocations and operate in 38 states in the U.S. As of Dec 26 2006, Co.'s dough operations, whichsupply dough items daily to both company-owned and franchise-operated bakery-cafes,consisted of 18 company-owned fresh dough facilities.

With the single goal of making great bread broadly available to consumers across America,Panera Bread freshly bakes more bread each day than any bakery-cafe concept in the country.Every day, at every location, trained bakers craft and bake each loaf from scratch, using the bestingredients to ensure the highest quality breads.

Panera Bread bakery-cafes showcase the art and craft of bread making, helping customers trulyappreciate and enjoy a great loaf of bread by studying its crust, crumb and craft. Panera Breadunderstands that great bread makes great meals, from made-to-order sandwiches to tossed-to-order salads and soup served in bread bowls.

Panera Bread is widely recognized for driving the nationwide trend for specialty breads. Asreported by The Wall Street Journal, Panera Bread scored the highest level of customer loyaltyamong quick-casual restaurants, according to research conducted by TNS Intersearch. For theeighth consecutive year, customers rated Panera Bread tops among chain restaurants in the 2009Sandleman & Associates Quick-Track "Awards of Excellence." Additionally, Panera Breadwas named Most Popular (for chain restaurants with less than 5,000 outlets) by Zagat, the trustedrestaurant review service, in its annual consumer-generated 2010 Fast-Food Survey. The conceptwas also awarded a #1 ranking for Best Salad and Best Facilities. Panera Bread was also namedto BusinessWeeks 2010 list of top 25 Customer Service Champs, to FORTUNE magazines2010 list of 100 Fastest-Growing Companies, and has also wonAwards and Recognition innearly every market it resides. Most recently, Panera Bread was named Casual Dining Brand ofthe Year in the 2011 Harris Poll EquiTrend.
http://www.panerabread.com/about/company/awards.phphttp://www.panerabread.com/about/company/awards.php


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Business Level Strategy

Panera Breads strategy is to provide a premium specialty bakery and caf 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 performedcross-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. By choosing this strategy, Panera is attempting to achieve

competitive advantage in the unique offerings it provides, offerings that rivals dont have

and cant afford to match.In this case, delicious handcrafted bread arriving fresh daily,

served in an inviting atmosphere is the companys competitive advantage and core

competency.


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Social Responsibility by Panera Bread

Panera Bread opened its first non-profit cafe with the motto: Take what you need; leave

your fai r share.

Instead of kneading the bread, Panera is pushing the envelopereplacing a for-profit operationwith a non-profit operation. On Sunday, May 16, quietly, without any press releases or ribboncutting,Panera Bread reopened the operation of aClayton, Missouri store as a non-profit. Themodel is take what you need, leave your fair share.

The St. Louis Bread Company Cares Caflooks like a traditional Panera Bread restaurant. Ithas the same menu. Cashiers still take your order. But they wont hand you a bill, instead youreceive a suggested bill representing the price of your order at any other Panera Breadlocation. You can then make the payment, any amount you choose, above or below the

suggested amount, in one of five donation boxes located within the store. If you cannot pay indollars, you can pay by volunteering your time.

The stores expenses, including rent, salaries, and food costs will be paid for by thePaneraFoundation. If the pilot store can cover its food costs, this experiment will expand into two morecities within the next six-months. From there, the executive chairman and former CEO,RonShaich,wants to expand the non-profit cafes into every area with a Panera Bread restaurant.

But first, the Cares Caf has to support itself. According toUSA Today,this is the first time anational chain has adopted the pay-what-you-want model. However it is not the first time ithas been tried. TheOne World Everybody Eats Caf in Salt Lake City has been successfully

operating since 2003. Denise Cerreta has been running her caf in the mixed for-profit/non-profit mode since 2003. Since then she has helped open six other community cafes. She haseven publishedSpirit in Business A Guide For Starting a Community Cafe.It was the OneWorld Caf that inspired Shaich. After seeing a newscast mentioning One World Caf, Shaichmet with Cerreta. Less than two months later the Company Cares Caf was opened.

Will it work on a national level? Only time will tell. It will be fascinating to watch theexperiment. If Shaichs passion and enthusiasm have anything to do with success, well beseeing Company Cares Cafes in our own neighborhoods very soon.

Operation Dough-Nation Programs

Since our founding, Panera Bread and its franchisees have been active in our communities.Operation Dough-Nation was founded in 1992 to formalize our commitment to communityinvolvement. Since then, it has grown to include four major activities: Community Breadboxcash collection boxes, the Day-End Dough-Nation program, Panera/SCRIP Card fundraisingand participation in community events.
http://www.panerabread.com/http://www.ci.clayton.mo.us/http://www.wiserearth.org/organization/view/18f6c85e6a34e1c94250b718bcd7c7e2http://www.wiserearth.org/organization/view/18f6c85e6a34e1c94250b718bcd7c7e2http://www.panerabread.com/about/company/mgmt.phphttp://www.panerabread.com/about/company/mgmt.phphttp://www.usatoday.com/money/industries/food/2010-05-18-panerabread18_ST_N.htmhttp://www.oneworldeverybodyeats.com/home.htmlhttp://www.oneworldeverybodyeats.com/images/One_World_Everybody_Eats_-_Spirit_In_Business_-_Starting_a_Community_Kitchen.pdfhttp://www.oneworldeverybodyeats.com/images/One_World_Everybody_Eats_-_Spirit_In_Business_-_Starting_a_Community_Kitchen.pdfhttp://www.oneworldeverybodyeats.com/images/One_World_Everybody_Eats_-_Spirit_In_Business_-_Starting_a_Community_Kitchen.pdfhttp://www.oneworldeverybodyeats.com/images/One_World_Everybody_Eats_-_Spirit_In_Business_-_Starting_a_Community_Kitchen.pdfhttp://www.oneworldeverybodyeats.com/images/One_World_Everybody_Eats_-_Spirit_In_Business_-_Starting_a_Community_Kitchen.pdfhttp://www.oneworldeverybodyeats.com/images/One_World_Everybody_Eats_-_Spirit_In_Business_-_Starting_a_Community_Kitchen.pdfhttp://www.oneworldeverybodyeats.com/home.htmlhttp://www.usatoday.com/money/industries/food/2010-05-18-panerabread18_ST_N.htmhttp://www.panerabread.com/about/company/mgmt.phphttp://www.panerabread.com/about/company/mgmt.phphttp://www.wiserearth.org/organization/view/18f6c85e6a34e1c94250b718bcd7c7e2http://www.wiserearth.org/organization/view/18f6c85e6a34e1c94250b718bcd7c7e2http://www.ci.clayton.mo.us/http://www.panerabread.com/


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Community Breadbox

The Community Breadbox program ensures that donations made at Panera Bread feedback in tothe community. A portion of cash donations made by customers in bakery-cafes may be matchedby Panera and its franchisees and distributed to local non-profit organizations. Contributions

generated through the program have provided basic necessities for those in need, and havecreated special places and opportunities. If you would like to contribute to our efforts to assistlocal non-profit organizations in the communities we serve, please look for the CommunityBreadbox collection containers at participating Panera Bread or Saint Louis Bread Co.locations.

Day-End Dough-Nation

Through the Day-End Dough-Nation program, unsold bakery products are packaged at the end ofeach day and donated to local food banks and charities. In 2008, Panera Bread bakery-cafescollectively donated a retail value of more than 50 million dollars worth of bread and baked

goods to charitable organizations helping to address the need for food distribution in our localcommunities. Many of these organizations are served by Feeding America, formerly America'sSecond Harvest, the nation's largest domestic hunger-relief organization.

Please Note: We are now accepting online requests only. Please click on the link below if youare interested in submitting a donation request.

SCRIP Fundraising

We are proud to participate in the Scrip fundraising program, helping non-profit organizationsraise money. This popular fundraising program invites non-profit organizations to pre-purchase

$10 Panera Card gift cards at a 9% discounted rate and then re-sell the Panera Cards at fullprice.

Community Events

We also value corporate citizenship and regularly make in-kind donations to local communityevents such as silent auctions, runs and walks, trivia nights and raffles.


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Internal and External Analysis of Panera Bread

SWOT Analysis

Strengths - Repeat customers, learning curve, word-of-mouth, fresh, and quality food, and rapidmarket penetration, economies of scale, customer service, and good atmosphere

Weaknesses - leased land, off-site dough preparation and delivery, many untapped

markets, no sustainable competitive advantage, unclear strategic direction, unfavorable

financial trends

Opportunitiescatering, national focus on health, dinner crowd, global sales

Threatsbad economy, high gas prices, highly competitive industry

Five Forces Analysis

I. Rivalry among Competitive Sellers

The restaurant industry is a very competitive industry. On a typical day US consumers spend atotal of $1 billion at eating establishments (Thompson). There are constantly new entrants toworry about as well as companies struggling to make a profit. Panera competes on many levelsincluding fast casual dining and specialty foods (Panera). Paneras main competitors include

McDonalds, Starbucks Coffee and Subway. However there are hundreds of restaurants thatcompete with Panera on a national, regional, and local level that has a negative impact on thecompanys revenue and market share (Panera).

To stay profitable in the highly competitive restaurant industry, Panera regularly reviews andrevises their menu to sustain the interest of regular customers, satisfy changing customer

preferences, and be responsive to various seasons of the year (Thompson). Panera develops an

advantage in changing their menu over competitors such as McDonalds and Subway who do notchange their menu frequently and customers often lose interest in their menu offerings.

Starbucks Coffee however, does offer seasonal coffee beverages and a la carte food items to staycompetitive for similar reasons as Panera. Starbucks and Panera have similar in-storeatmospheres that make them rivals. Both companies offer an atmosphere that invites patrons tostay for a while with comfortable chairs, calming music and Wi-Fi. In order to gain a competitiveadvantage over Starbucks in terms of the atmosphere, Panera introduced meeting rooms at many

of its locations to attract large groups of patrons. Panera, in 2004, introduced its catering serviceVia Panera to further expand the business and gain an advantage over rivals (Thompson).

II. Threat of Substitutes

In the restaurant and food industry, there are not any substantial substitutes to food becausepeople have to eat food every day. Food is a basic need and nothing can substitute that. Since


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there are no major substitutes the threat is relatively low in this category. However, there aresubstitutes to Paneras atmosphere and their coffee selections.

Panera has developed an atmosphere that encourages people to hold meetings or get work doneat the restaurant. A substitute to this could be to have the meeting in the office or just work from

home. Panera has to offer people a reason to come into their restaurant as an alternative to theworkplace or their home. The company competes with this substitute by offering a professionalcalming environment to get their work done without any distractions that may hinder peoplefrom working.

One of Paneras signature menu items is its coffee. Substitutes to coffee are caffeinated

beverages and energy drinks. Instead of going into a Panera for a coffee, one could simply stopby the gas station and pick up an energy drink of caffeinated beverage. Panera has the advantagewith this substitute because many people either prefer coffee or prefer energy drinks and stick totheir preference so the risk of customers switching to a substitute is low.

III. Threat of New Entrants

The threat of new entrants is high because barriers to entry are low and the pool of entrycandidates is large (Thompson). People are always looking for a new and different place to eatand because of this demand new restaurants open daily. In addition many restaurants do not stayin business for very long due to bad menus, dining experience, food quality and service(Thompson).

Barriers to entry are low because there are little regulations from the government, there areusually no patent or legal protection needed, and there are little technological drawbacks thatother industries experience (Hudson). If a person raised enough capital they could easily open up

their own restaurant without many restrictions.

New eateries also have an advantage over established restaurants because consumers are morelikely to give new restaurants a try (Thompson). Consumers are constantly looking for variety intheir meals so this gives new restaurants an incentive to open as well as steady business in thebeginning of their operations. Panera competes with these new entrants by constantly changingtheir menu to meet customers diet and seasonal wants.

IV. Buyer Bargaining Power

Buyer bargaining power is relatively high for Panera. The restaurant must constantly be staying

in tune to customer preferences or the customers will easily eat at another restaurant. The foodindustry is highly competitive and in addition there are low switching costs for consumers andconsumers have access to quality and nutrition information.

One item that makes the buyers bargaining power high is that there are relatively low switchingcosts to choose another restaurant over Panera. Consumers taste preferences change daily andeating at another restaurant other than Panera offers no additional costs other than the foodprices. Panera recognizes this changing taste preference and offers a wide enough selection of


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menu items for customers to enjoy multiple times a week since the average American eats outfour times a week (Nutrition).

Buyers also have a great amount of power because quality information of the restaurant industryis readily available. 83% of restaurant patrons like nutrition information on the food products

(Nutrition). Many restaurants have seen this and are now posting nutrition information becausecustomers are more likely to visit a restaurant that posts the information. Also, in many citieslaws have been passed that requires restaurants to post inspection results in a visible spot. Thisnow makes restaurants pay closer attention to the restaurant quality because they may losebusiness if they do not receive a good inspection.

V. Supplier Bargaining Power

Paneras suppliers have a relatively low bargaining power because they implement a lot ofcontrols to keep their bargaining power low. Panera controls the quality of their main product bymaking the bread themselves daily. Also, the company contracts with numerous suppliers to

keep an individual suppliers bargaining power low.

Panera has an advantage in terms of suppliers because the make their own bread in 17 freshdough facilities and own 140 trucks to deliver the dough anywhere from 300 to 500 miles tostores (Thompson). This vertical integration has made Panera capable of controlling the qualityof its signature product, their bread. The bread is delivered daily so if for any reason the breadcannot make it to the store sales and brand reputation can suffer.

Panera has numerous suppliers for each ingredient so that it can obtain ingredients from othersuppliers when necessary (Thompson). This lowers the risk of a supplier driving up the price forPanera because if one does, Panera could simply switch to another supplier. Panera also has

contracts with suppliers and distributors to control the costs of their supplies.

Panera Bread Co. (PNRA)

Direct Competitor Comparison

PNRA CMG BAGL SBUX Industry

Market Cap: 3.94B 10.12B 246.63M 30.25B 282.55M

Employees:15,900 26,500 6,796 137,000 15.90K

Qtrly Rev Growth (yoy):15.90% 24.30% 0.40% 9.90% 20.90%
http://finance.yahoo.com/q?s=PNRAhttp://finance.yahoo.com/q?s=CMGhttp://finance.yahoo.com/q?s=BAGLhttp://finance.yahoo.com/q?s=SBUXhttp://finance.yahoo.com/q/in?s=PNRAhttp://finance.yahoo.com/q/in?s=PNRAhttp://finance.yahoo.com/q?s=SBUXhttp://finance.yahoo.com/q?s=BAGLhttp://finance.yahoo.com/q?s=CMGhttp://finance.yahoo.com/q?s=PNRA


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Revenue (ttm):1.60B 1.94B 412.14M 11.19B 1.60B

Gross Margin (ttm):34.97% 37.59% 22.60% 58.61% 34.97%

EBITDA (ttm):266.74M 378.73M 44.83M 1.99B 266.74M

Operating Margin (ttm):12.25% 15.91% 6.50% 13.00% 6.32%

Net Income (ttm):118.79M 187.52M 11.91M 1.09B N/A

EPS (ttm):3.89 5.91 0.71 1.43 1.57

P/E (ttm):33.92 55.03 20.85 28.20 28.18

PEG (5 yr expected):1.56 2.31 1.11 1.51 1.56

P/S (ttm):2.46 5.28 0.60 2.70 2.46

CMG= Chipotle Mexican Grill, Inc.

BAGL= Einstein Noah Restaurant Group, Inc.

SBUX= Starbucks Corporation

Industry= Specialty Eateries

Restaurant Companies Ranked By Sales

Company Symbol Price Change Market Cap P/E

McDonald's Corp.MCD 85.60 -0.53% 88.82B 18.09

Yum! Brands, Inc.YUM 55.61 0.04% 25.89B 22.98

Darden Restaurants, Inc.DRI 53.22 -0.76% 7.17B 15.69

Starbucks CorporationSBUX 40.35 0.07% 30.25B 28.20

Autogrill S.p.A.Private -View Profile
http://finance.yahoo.com/q?s=CMGhttp://finance.yahoo.com/q?s=CMGhttp://finance.yahoo.com/q?s=BAGLhttp://finance.yahoo.com/q?s=BAGLhttp://finance.yahoo.com/q?s=SBUXhttp://finance.yahoo.com/q?s=SBUXhttp://finance.yahoo.com/q/in?s=PNRAhttp://finance.yahoo.com/q/in?s=PNRAhttp://finance.yahoo.com/q?s=MCDhttp://finance.yahoo.com/q?s=YUMhttp://finance.yahoo.com/q?s=DRIhttp://finance.yahoo.com/q?s=DRIhttp://finance.yahoo.com/q?s=SBUXhttp://biz.yahoo.com/ic/61/61181.htmlhttp://biz.yahoo.com/ic/61/61181.htmlhttp://biz.yahoo.com/ic/61/61181.htmlhttp://biz.yahoo.com/ic/61/61181.htmlhttp://finance.yahoo.com/q?s=SBUXhttp://finance.yahoo.com/q?s=DRIhttp://finance.yahoo.com/q?s=YUMhttp://finance.yahoo.com/q?s=MCDhttp://finance.yahoo.com/q/in?s=PNRAhttp://finance.yahoo.com/q?s=SBUXhttp://finance.yahoo.com/q?s=BAGLhttp://finance.yahoo.com/q?s=CMG


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Brinker International Inc.EAT 26.55 -0.08% 2.25B 15.73

Wendy's International, Inc.Private -View Profile

KFC CorporationPrivate -View Profile

Whitbread plcWTBCF.PK 25.65 0.00% 4.52B 12.67

OSI Restaurant Partners, LLCPrivate -View Profile

McDonalds is the largest fast food chain in the world. They have been very successful inexpanding into international markets. McDonalds CEO, Charlie Bell, recently stepped down

due to health concerns, which resulted in a price fall in their stock. However, since the naming

of Jim Skinner as CEO, analysts have reaffirmed a positive outlook on McDonalds. Thesuccess of Panera Bread and other such places has forced McDonalds to reassess their menu and

add healthier items. McDonalds also markets to adifferent market than Panera Bread in thatMcDonalds is a low cost provider. Panera Bread stays in suburban areas while McDonalds hasa suburban presence but also floods the cities. So although McDonalds and Panera Bread do not

operate too similarly, they do compete in the same industry and it is important to look atMcDonalds as a main competitor when analyzing the restaurant industry.

Starbucks Corporation has a very similar niche to that of Panera Bread Company. However,Starbucks concentrates only on the beverage side of the caf. Panera Bread also sells coffees andcappuccinos as Starbucks does, but Panera has a wider variety of products to sell. Starbucks and

Panera are considered to be competitors because they both have a caf environment. Starbuckshas been extremely profitable in years past. Both companies take advantage of the uniqueenvironment that a caf provides.

New World Group Inc. owns and operates several different companies entitled Einstein Bros.,Noah's, Manhattan, Chesapeake, and New World Coffee. New World Group sells cafbeverages, bagels, soups, salads, and deserts among other products. New World Groups cafesmay be the most direct competition to Panera Bread. New World Group is a much smallerorganization than Panera Bread but both produce similar products and target a similar customerbase.
http://finance.yahoo.com/q?s=EAThttp://biz.yahoo.com/ic/11/11621.htmlhttp://biz.yahoo.com/ic/11/11621.htmlhttp://biz.yahoo.com/ic/11/11621.htmlhttp://biz.yahoo.com/ic/56/56325.htmlhttp://biz.yahoo.com/ic/56/56325.htmlhttp://biz.yahoo.com/ic/56/56325.htmlhttp://finance.yahoo.com/q?s=WTBCF.PKhttp://biz.yahoo.com/ic/13/13867.htmlhttp://biz.yahoo.com/ic/13/13867.htmlhttp://biz.yahoo.com/ic/13/13867.htmlhttp://biz.yahoo.com/ic/13/13867.htmlhttp://finance.yahoo.com/q?s=WTBCF.PKhttp://biz.yahoo.com/ic/56/56325.htmlhttp://biz.yahoo.com/ic/11/11621.htmlhttp://finance.yahoo.com/q?s=EAT

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Panera Bread[1]