Panera Bread Business Strategy Essay Example

itself from competitors through unique production, distribution, presentation, and robust quality standards.

The fresh dough operations division of Panera aids in cutting down the company's overhead expenses. This, in turn, allows Panera to present its product to customers at a more affordable price. By using standardized ingredients, leveraging their knowledge in bakery, and sticking to their production technique, Panera ensures a consistent quality of its products across the country. This has led to gaining customer loyalty and an increase in sales volume. The firm's business model is a fusion of fast food and relaxed casual dining.

By opting for this approach, Panera Bread distinguishes itself from competitors like McDonalds (a fast-food company) and Baja Fresh (an informal dining venue). They offer their patrons an appealing, laid-back, and friendly dining atmosphere (food-away-from-home) by merging features of both. Along with diverse menu options, Panera provides amenities like complimentary Wi-Fi, outdoor seating, and catering services. This unique blend gives Panera Bread a broader target market by setting it apart from its competition.

A SWOT analysis was carried out to assess the overall appeal of Panera Bread, utilizing information from the case study and the company's website. Panera's primary strengths lie in their capacity to offer an enticing, health-conscious menu, a stark contrast to competitors like McDonald's which are known for calorie-dense, high-fat burgers. Moreover, Panera showcases its proficiency in drawing in and retaining quality franchisees through high profitability and rigorous criteria for franchise ownership, thereby guaranteeing the continued success of their business.

Panera's award-winning bakery skills have enabled them to tailor their offerings to their customers' preferences. However, like any organization, Panera Bread Company also has its shortcomings. One of these is

their inability to implement a low-cost value chain due to the high quality products they offer. This necessitates that they price their products above the industry average to cover all their expenses.

One of the company's shortcomings is the tendency for greater sales at franchise stores compared to those owned by the company directly. This might be attributed to the company-operated stores shouldering majority of the production costs for the company's freshly baked goods. It could also be due to franchise locations being in more financially lucrative areas. Nevertheless, Panera possesses potential for further growth in the fast-casual market, given the fact that recent growth in dining and commercial eating market generate daily sales of $1 billion.

This suggests that Panera Bread must persist in discovering novel methods to enhance their sales. They must seriously ponder over various potential hazards such as gaining the attention of fresh competing restaurant chains that could attract some of the existing customer base of the company. Moreover, the growing dissatisfaction amongst numerous franchise owners due to their desire for more territory could lead to potential legal complications in the future.

The SWOT analysis of Panera reveals that the company's position is highly advantageous and their strategy is commendable. However, Panera should focus its efforts towards utilizing its opportunities, and minimizing or completely eradicating its threats and weaknesses to ensure the company's prolonged existence. Panera bread competes mainly with national, regional, or locally owned restaurants in the fast-casual restaurant domain. This includes establishments such as Atlanta Bread Company, Applebee’s Neighborhood Grill and Bar, Baja Fresh, Bruegger’s, Chipotle Mexican Grill, and Cracker Barrel.

Panera Bread's financial records from 2002 to 2006, as shown in Exhibits

1, 2 and 8 of the case, demonstrate remarkable growth in the performance of its company-run bakery-cafes. Their revenue surged by a significant 30.9%. On the other hand, those operated by franchisees recorded slower growth at a rate of 12.2%. Despite this difference in growth rates, franchises reported higher sales than company-managed outlets. The company also saw significant improvements in their EPS (26% increase), return on equity (14.8% rise) and net cash operating activities (an upturn by 22.7%). This upward trend suggests an increased value for shareholders, which could potentially attract numerous investors. However, alongside this consistent expansion across various sectors of business operations, Panera Bread faces potential challenges that need addressing - one notable concern being the slight reduction in net profit margin from 7.5% in 2002 to just 7.1% in 2006; while not drastically large, it is something that needs senior management’s attention.

The margins indicate that Panera can generate a 7.1% profit from every $1 of sales or revenue, however, a small decrease suggests the company has experienced some revenue losses. In addition, the operating profit margin reached its lowest level of 11% over the course of four years. This should alarm the upper management as it signifies that the company is failing to manage efficiently its costs and expenses related to regular business activities.

This issue might necessitate the company to hike their prices eventually or figure out methods to reduce some costs. In summary, Panera Bread is a swiftly expanding business with strong financial standing, although there's perpetually scope for betterment. Panera could diversify their menu offerings more by introducing child-friendly items, which may aid in expanding their customer base. An additional

option could be collaborating with another restaurant chain to take advantage of scale economies, which might also enable the company to provide its end consumers with lower prices.