Panera Bread Company: Still Rising Fortunes

Michelle Bowman

MGMT-479

Professor

November 13, 2016

Panera Bread Company: Still Rising Fortunes

Panera Bread Company became so successful when Ronald Shaich realized his urban area fast casual restaurant Au Bon Pain’s growth was limited. As a result, he ventured off to purchase Saint Louis Bread Company only to realize he stumble on to an even more profitable niche in the fast casual restaurant segment. The niche was to create a neighborhood bakery café that provided fast service, like the fast food restaurant, serve food similar to sandwich shops, and have the inviting atmosphere of coffee shops (847). He sold off Au Bon Pain in 1999 to focus on the new Panera Bread chain.

This concept has grown Panera to almost 1,400 stores in three different business segments across the US and Canada (847). There are 585 company owned bakery cafés, 795 US and Canada franchises and 23 fresh dough facilities (859). Shaich strategically located them in areas that already receive high traffic, such as malls and shopping center in order to reduce advertising and marketing cost. He also strategically positions the company to target middle class consumers between the ages of 25-50, who would not mind paying more for quality food (862). To ensure Panera has fresh baked bread that is consistently the same at every Panera they opened fresh dough facility that delivers prepared dough on temp controlled trucks to seven different locations, where it is then baked by professional bakers in store. All franchisees agrees to only purchase dough from Panera’s dough facilities and distributors to ensure consistent menu items.

Panera’s business model allowed them to gain a competitive advantage through their differentiation strategy, which also made them resilient in economic hard times. During the rescission their stock price grew 115%, had sales of 2.8 billion, increasing sales of 7.1%, and they opened more bakery cafés (852-854), while other restaurants profits faltered during the recession, downsized, or closed down. Panera had competitors in the fast-casual segment, but they did not have any direct competitors that sold the same types of menu items and warm inviting environment. Though, there has been attempts to imitate the business model, but has proven to be unsuccessful. Panera remains and is projected to remain the leader in the fast-casual restaurant segment.

Resources: tangible and intangible

• Brand name known nationally
• Positive perception of the brand through charity work and natural healthy menu items
• 585 Company owned bakery café, 795 franchises, and 23 fresh dough facilities strategically located in regional places, such as in malls
• Equipment, such as delivery trucks to deliver dough and buildings
• Experienced management, creative marketers use a marketing mix, and expert HR to hire a workforce that matches managements strategic company mission
• Management information systems, such as point of sales and The Harvest
• Strategic process of supply chain method, disciplined capital expenditures, and ADA agreements
• Financial stability to sustain and grow with access to $250 million in credit and virtually no debt.
• Franchises and 4%-5% Royalties and advertising fees with additional $35,000 initial franchise fees

Panera resources allow them to have the capabilities to grow and gain more competitive advantage.

Capabilities:

• Positive brand name to attract more sale, investors and franchises
• Credit line to invest in growth, infrastructure, and information systems
• Strategic process to cut cost
• Assets such as equipment and buildings to grow or a sell in economic downturn or for acquisitions
• Company owned bakery cafés and franchises to generate money for expansions
• Fresh dough facilities that provide fresh dough daily to each Panera

Core Competencies:

• Panera has gained competitive advantage through their supply chain method by providing fresh artisan breads, a niche exclusive to them. They are able to accomplish this by opening 23 fresh dough facilities in regional locations, that deliver them to the bakery cafés where a professional baker bakes them fresh twice a day.
• By locating the bakery cafés in high traffic, high sales volume areas Panera is able to cut marketing and advertising cost.
• Panera is able to keep loyal customers by reviewing and updating menu items and rotating menu items by seasons to keep up with changing customer preferences and changed to menu system that draws attention to high profit items. Also, has a positive perception of healthy food and charity unlike competitors.
• Has an environment that is welcoming through the use of décor, friendly associates, food/drinks, and Wi-Fi that differentiates it from competitors.

Finding of Fact 1: Panera’s supply chain function for fresh dough could cause growth problems.  

          “Panera has a commitment to doing the best bread in America.” Freshly baked bread made with fresh dough was integral to honoring this commitment. (861). It is only right Panera adhere to the mission by providing bread that is consistently the same and fresh. To do that Panera has 23 fresh dough facilities strategically located in regional areas from Panera bakeries and cafes. Dough is prepared at the facility to ensure consistent taste and texture, then delivered on a truck to each Panera daily. Each temperature controlled trucks deliver the dough to seven different Panera bakery café, where it is then baked by professional bakers several times a day to ensure freshness. Though the supply chain method to deliver the dough gives the advantage of providing consistent taste and freshness of the bread, which is unlike any other restaurant it does have its disadvantages in regards to growth.

Growth can potentially be limited if there is not a location that is within distance from a dough facility. If there is not a location to lease within deliver distance then opening a bakery café will not adhere to the mission of providing fresh dough, the hallmark of the company. When deciding to open a Panera not only does distance from a dough facility important but also locating them in high traffic areas with the targeted demographics, and staying within budget. All of these criteria must be met to align with the strategic competitive plan. Panera took advantage of the recession by strategically selecting properties that met these criteria for a lower price, which gave them an increased return on investment. However, now that the economy has leveled out Panera may find it difficult to find locations to lease that meets all of the criteria.