Panera Bread Company
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Panera Bread Company
• By: Dan McLindon Kyle McDanielJeremy SmileyTom AndersonRay Moorman
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
Red – Easy for competitors to develop
Yellow – Possible for competitors to develop
Green – Very difficult for competitors to develop
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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?
Year Number of new locations
Total Locations
Percent Increase
1993 0 20 N/A
1999 160 180
2006 155 1027
2010 973 2000
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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
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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
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SWOT Analysis for Panera Bread
Strengths•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
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
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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
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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)??