1. Panera Bread Company By: Dan McLindon Kyle McDaniel Jeremy Smiley
Tom Anderson
Ray Moorman

2. Contents The Key Question Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations

3. 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?

4. Contents The Key Question Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations

5. Panera Bread Company Overview
Origin
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

6. Panera Bread Company Overview
Strategic Intent
“Make great bread broadly available to consumers across the United States”
TNS Intersearch Study
Scored the highest level of customer loyalty among QSR’s
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

7. Contents The Key Question Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations

8. Industry Overview (Supply)
Porter’s five forces:
Threat of
substitute products
HIGH
Bargaining power
of suppliers
LOW
Rivalry among
existing competitors
Bargaining power
of buyers
HIGH
Threat of
new entrants
LOW

9. 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.
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

10. 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

11. 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

12. Industry Overview (Supply)
Baked Goods Competitors
Location Detail
Factors at work
Acquisition Opportunity?
Atlanta Bread Company
160 bakery-cafés in 27 states
Menu categories are not in line with Panera brand N
Au Bon Pain
- 190 bakery-cafés in U.S.
- 222 locations internationally
- $245M in sales
- Acquisition would require Panera, franchisee partnership Y
Bruegger’s
- 260 bakery-cafés in 17 states
Revenues - $155M
- Acquisition would require Panera/franchisee partnership
Corner Bakery Café
- 90 locations in 8 states and D.C.
Avg capital investment-$1.7M

13. Contents The Key Question Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations

14. Internal Analysis – Markets Served
Competing in 5 submarkets
Breakfast
Lunch
“Chill out”
Light evening
Take home bread
Differentiate with wide variety of menu options and café ambience
Management goal to make Panera a nationally recognized name brand
High penetration in St. Louis, Columbus, Jacksonville, Omaha, Cincinnati, Pittsburgh, Washington DC
Low/Untapped Markets
New York City, Philadelphia, Green Bay, Atlantic City, Toronto
Salt Lake City, LA, Northern California, Seattle, Phoenix, Tucson, Vancouver, Albuquerque, Spokane
Miami, Dallas, Houston, San Antonio, Memphis, New Orleans, Shreveport, Baton Rouge, Little Rock

15. Internal Analysis – Core Competencies
Core 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
Core Competencies
Strong Brand/Customer Loyalty
Diverse Menu
Identifying Where to Locate new Stores
Strong Relationships with Existing Franchise Partners
Red – Easy for competitors to develop
Yellow – Possible for competitors to develop
Green – Very difficult for competitors to develop

16. 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 20
N/A
1999
160
180
800%
2006
155
1027
15%
2010
973 (forecasted)
2000 (forecasted)
49%

17. 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
2006
42 franchise groups in 54 markets
34 states
Agreed to open additional 423 locations
Still leaves 550 locations to meet 2000 by 2010
Either by new franchise partners or corporate
Biggest issue existing partners have is desire for more locations

18. Internal Analysis – Supply Chain
17 regional fresh dough facilities (16 corporate, 1 franchise)
Service both company and franchise cafes
Manufactures over 50 different products
Dough distributed via 140 trucks, each truck delivering to 6 cafes on average
Panera corporate recognizes profit on dough sold to franchise locations
Fresh dough making considered competitive advantage by management as it helped with consistency and effieciency
With rapid plans for expansion is this advantage in jeopardy as trips are already exceeding optimal 300 mile trip?
Sweet goods provided by Dawn Food Products in a cost-plus agreement
Finished onsite by bakers, but single source for sweet goods improves ability to deliver consistent products

19. Contents The Key Question Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations

20. 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
Grow number of customers that consider Panera as a dinner option
Get existing customers to come at different times of the day (ex – breakfast crowd to come for dinner)
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

21. Contents The Key Question Panera Bread Company History/Overview
External Environment (PEST)
Market Overview (Demand)
Industry Overview (Supply)
Competitive Landscape
Internal Analysis
SWOT Analysis
Recommendations

22. Recommendations
Work with franchisees to acquire Corner Bakery Café??? (Franchisee locations are more profitable and provide higher ROI)
Expedite expansion in Canada or International (Europe)??
Vertically integrate and acquire Dawn Food Products Inc.
Limit growth in existing markets and begin to focus on expansion into South and West
Offer existing franchisees opportunity to enter markets first
If limited interest open corporate stores to see if concept works before opening up new markets to new franchise partners