Panera Bread Company (2010) - Still Rising Fortunes?

Panera Bread Company (2010): Still Rising Fortunes?

Synopsis:

A business entrepreneur named Louis Kane purchased a bread company/cafe in 1978 in Boston, Massachusetts with plans to prosper from its growth potential.  Unfortunately, within four years from opening he had racked up several million dollars of debt and was thinking of declaring bankruptcy.  Fortunately for Kane, Ronald Shaich had started a bakery near one of Kane's Au Bon Pain bread companies.  Shaich was missing a significant amount of customers during morning hours and needed a new product to draw upon those potential passers-by looking for a breakfast menu.  In a wintery February of 1981 the two merged the cookie bakery and bread company and formed one business, Au Bon Pain Co. Inc.  Their synergistic bond contributed to a successful business team, resulting in the opening of several shops.

In 1985 sandwiches were added to the menu to entice a lunchtime crowd but the co-CEOs noticed a pattern emerging.  Customers were buying sliced baguettes and making their own sandwiches.  Walla, a new category of restaurant was born, "fast casual", a service restaurant that gave customers a choice of fast food and fine dining, subsequently becoming the lunchtime alternative to burgers and other fast foods.  The phenomena propelled the company's growth expeditiously in the Boston, New York and Washington, DC areas and due to growth limitation, the business expanded to serve more customers from suburban categories that included the acquisition of Saint Louis Bread Company in 1993 which later become the platform of Panera Bread.  Witnessing a decline in sales of the Au Bon Pain bakery-bread companies in the small urban niches while the bakery-café gained popularity under Saint Louis Bread Company resulted in immediate revenue, Shaich sold the Au Bon Pain shops and focused his energy on the new bakery-café concept. This brought the store to the pinnacle of success by increasing sales and expanding business under the concept of fast casual service.  As the first mover in fast casual category Panera Bread had a competitive edge that lead it to maintain its leadership even in the great recessionary period of 2008-2009. The goodness of artisan bread coupled with a serene environment provided its consumers the prompt services of fast food at the luxury of a fine dining environment (Wheelen et al. 16-2).

Resources

Panera brand name

Artisan dough makers

Management team

Financial strength

Franchises

Stores at strategic positions

Human Resources

Recruiting

Human capital, skilled associates

Company-owned restaurants, U.S. & Canada                

Capabilities

Fast-casual restaurant category

Fresh dough-making

Breads baked fresh, daily

Stringent franchise requirements and strategy

Product research and development program

Training

Customer service

Core Competencies

Brand name---Panera Bread

System-wide bakery-cafés

Findings of Fact

Fact # 1 -

Most companies in the restaurant industry that are competing internationally already have a significant market share domestically.  Other than the large fast-food chains like McDonald, Burger King, Pizza Hut and Kentucky Fried Chicken, globalization in the restaurant industry is low and most companies are not focused on expanding internationally.  Panera Bread does not have operations outside the U.S. and Ontario, Canada, and should consider expanding overseas.

Solution

An opportunity of an international expansion currently exists which would allow Panera Bread Company to become a forerunner in the fast-casual world market.  To my knowledge there is nothing similar existing in the European market and it might be a great fit to the European culture because they care a lot about food quality.  In an ever-growing industrialization time Europeans spend less time cooking or going out to full-service restaurants which are significantly more expensive as compared to fast-casual pricing.  Although an international expansion would be a risky endeavor because of the lack of brand awareness, Panera would have to step up their advertising efforts in the international market to avoid less than desirable returns on its investment.  

The company should continue following their business model of site location evaluation in specific European cities such as London, Amsterdam and Berlin and begin a rollout on a small scale, paying close attention to the demographics and matching their products to those desired of their target audience.  Franchising might be a better choice rather than owning because of the different governmental regulations then increasing the number of restaurants in those select locations in the long-run if the market is supportive.  Evaluating the European response in the earlier stages of expansion as to the services and products would be critical to establishing if this type of restaurant category would be sustainable in the European market.  Creating the brand awareness and becoming the first mover in the fast-casual restaurant in the European theatre would provide Panera Bread another tremendous competitive advantage with a significant profitable revenue opportunity if it is determined to be a successful restaurant category.  

Fact # 2 -

Panera Bread must make the necessary changes to stay ahead of the demand of the consumer.  Otherwise, like other food service industries the niche they currently enjoy may outlive its usefulness and turn out to be another cliché like: "If you always do what you have always done, you will always get what you have always got."

Solution

Much like other fast-food providers in the industry many of their loyal patrons get tired of the same ole thing and although Panera Bread provides items that sometime align with the demographical areas and the different seasons, management should pay close attention to the fast pace expansion it is currently pursuing and that of the changing demands of the consumer.  To do this one option is for Panera to test the idea of offering a semi-full service dining establishment.  Essentially this new concept would operate more like Ruby Tuesday’s where customers are waited on and served and offered a full self-serve salad bar.  Investing in healthier items being offered in the chain's menu has worked thus far for the franchise company and the announcement a semi-full service establishment while providing patrons the opportunity to create their own salad made of fresh ingredients would continue to provide healthier options and generate new customer interest.  This would also allow them the opportunity expand their menu, especially for dinner since this is a slow period for them.  They would even be able to introduce some higher priced menu items which would be more aligned with other full service restaurants.