Panera Bread Case Study - Part 2

1 - Panera Bread Case Study introduction. Panera Bread’s strategy is to deliver a high quality dining experience by offering high quality food; an inviting and comfortable atmosphere; sought after menu options; friendly service; efficiently and at an affordable price. Their strategy includes growing the business both organically, through encouraging higher frequency of visits from current customers throughout the day, as well as growing through the opening of additional franchise bakery-cafes.

Panera Bread is trying to achieve a competitive advantage by the quality of their food offerings. Their point of difference compared to many other quick service dining options is their baking expertise as well as their use of all natural, high quality ingredients. Additionally, Panera’s restaurant environment is a point of difference compared to other quick service restaurants, as Panera’s décor offers a very comfortable setting. These are Panera’s distinctive core competencies.

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2. Strengths: Baking expertise; use of all natural high quality ingredients; high customer ratings and loyalty; comfortable and unique dining environment with some locations in high traffic shopping areas or with outdoor seating and/or fireplaces; free Wi-Fi Weaknesses: Stringent franchise qualifications and agreement might affect ability to increase number of outlets Opportunities: Use catering business to increase revenue and as a marketing tool to gain new customers; increase current customers’ trial of different dining time options; increase the number of locations in current markets and penetrate untapped markets both domestically and abroad Threats: New restaurant entries; changing customer preferences

3. Panera’s financial performance is very strong. Both company operated and franchise store revenues and earnings per share, have increased every year between 2000 and 2006. Like most companies that are continuing to invest in their future, Panera goes through ebbs and flows as far as their amount of liquidity. However, it has never fallen into a high risk level. Additionally, the company’s debt to equity ratios are strong, illustrating their strong balance sheet and creditworthiness.

4. In my opinion, I believe Panera’s closest rival is Starbucks due to the number of outlets this chain already has in place (over 7x that of Panera), the store atmosphere and free Wi-Fi is similar to Panera’s, and Starbucks is beginning to expand their food and drink menu options. I also believe the two restaurants pull from the same customer base. However, another potential rival is Chipotle Mexican Grill due to the fact that they have more locations than most other fast-casual restaurant chains (although still less than Panera), and customers get high quality food quickly and at a reasonable price. Additionally, I would assume Chipotle’s start up costs for new stores are significantly less than Panera’s and that Chipotle is focused on increasing their number of outlets. However, Panera has a strong advantage compared to Chipotle when it comes to menu options and relaxing environment.

5. The strategic issues that Panera’s management should address include the competition from other current, or upcoming, quick service dining restaurants, as well as consumers’ changing preferences.

6. Panera should do a few things to strengthen its competitive position compared to other chains including using their catering business to introduce new customers to the high quality food Panera offers. The catering business has less competition in many parts of the country than the quick dining segment does. Additionally, Panera benefits from turning a first time customer into a repeat customer, at a higher rate than many other restaurant chains. Panera needs to continue, and possibly increase, many of their activities that they are already doing to stay ‘top of mind’ to customers including: using marketing at both the national and local levels, adjusting the menu selections according to season and changing customer preferences, and continue to enhance their customer loyalty through rewards programs.

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