Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
Panera Bread Company (PNRA)Stock (Casual & Upscale Restaurants Industry, Food & Beverage Industry)
 Most Panera Bread restaurants are located in suburban strip malls and regional malls. At the end of 2007, there were 1167 Panera Bread and Saint Louis bakery-cafes, spanning 38 states, as well as some locations in Canada. In 2007, Panera Bread's revenues reached $1.1B, a 29% increase from 2006 revenues. Despite this growth, the company’s operating income actually decreased by 2.2%.[2] This inconsistency can be attributed to rising costs of production, such as increases in wheat and fresh dough prices , as well as rising labor and rent costs. Traditionally, companies like Panera have suffered in recessions, which decrease the frequency with which consumers eat out at restaurants.[3] The company’s brand name will continue to play an important role in its business, as consumers tend to limit their choice of restaurants to the brands they feel most loyal to during times of recession.
[edit] Business FinancialsIn the past three years, Panera Bread's revenues have increased steadily, driven mainly by growth in the number of new restaurants. However, operating income has wavered, primarily the result of increased commodities prices.
[edit] Business OverviewPanera Bread offers handcrafted, fresh-baked, artisan items such as breads, bagels, muffins, scones, rolls and sandwiches, as well as soups, salads, and specialty coffee drinks. The restaurant chain distinguishes its products by emphasizing nutritional value and quality (such as antibiotic free chicken and whole grain bread), especially when compared to hamburger-based fast food restaurants such as McDonald's, Burger King, and Wendy's, which focus on affordable pricing.[25] Panera also differs from traditional fast food in its focus on providing longer dining experiences to its customer - for example, by offering free Internet access in its buildings. The restaurant chain also regularly introduces new items and removes unprofitable old ones. In 2007, the company created menu options such as the Grill Salmon Salad and the Chicken Tomesto Sandwich, and discontinued the Crispani hand-crafted pizza line.[26] Recently, Panera Bread has also introduced products that are not self-manufactured in its fresh dough facilities. This shift has decreased same-store sales.[27] Panera Bread opened 148 new restaurants in 2007, of which 79 were company-owned and 69 franchised. The company’s growth strategy is two-fold. First, management seeks to expand into new markets, such as the Western states and Canada. Although such markets represent significant revenue potential for the company, expansion into these markets requires the company to build brand recognition and adapt to different consumer tastes. Second, the management seeks to open bakery-cafes in existing markets. Although this strategy could increase Panera Bread’s penetration, same store sales could decline as a result of customers patronizing one Panera Bread restaurant over a nearby one.[28] [edit] Business ModelThe company generates revenue through sales from company-operated stores, fees and royalties from franchisees, and sales from fresh dough facilities. At the end of 2007, the company itself fully owned 532 restaurants, which generated $894.4M in revenues (81% of total revenues).[29] Furthermore, 39 franchisee groups owned 666 additional, franchised restaurants. Franchise-operated restaurants are required to pay the company franchising fees and royalties based on the percentage of sales, the two of which amounted to $67.2M in 2007 (6% of total revenues).[30] The franchises themselves grossed $1376.4M in sales. Although its franchises only generate a small percentage of the Panera Bread’s total revenue, they are important to the company’s brand name recognition. In addition to restaurants, the company operates 23 fresh dough facilities that supply dough to both company-operated restaurants and franchises. The 23 facilities generated $104.6M in 2007 (9.5% of total revenues).[31] [edit] Product NicheAn important aspect of Panera Bread’s business is its product niche—artisan fast food. This niche protects the company from ``direct`` competition in the fast food industry as well as the casual dine-in industry. It targets consumers who seek meals of higher quality than those offered by traditional fast food chains, yet do not have the time to dine in or have a sit-down meal in a restaurant. Although there are many restaurants that also offer this mixture, these restaurants tend to be local, and therefore do not benefit from a national brand name and a large advertising budget, which become increasingly important during times of recession. On the average, each individual Panera Bread bakery-cafe expends $1M on furnishings and decorations, arranging tables and chairs to be conducive to group meetings (as opposed to most fast food restaurants, which are oriented around quick, in and out dining). Yet, in concordance with other fast food chains, customers pay before they receive their food, giving them the freedom to finish their meal and leave without having to ask for the bill and pay gratuity. Panera Bread's product niche gives it the tools to cope more effectively with the challenges facing the fast food industry as well as the challenges facing the dine in industry. Fast food restaurants chains are often criticized for offering unhealthy food, but the higher nutritional value found in Panera Bread’s products makes it less prone to nutrition campaigns that have hurt chains such as McDonald’s.[32]. Meanwhile, dine in restaurants are very susceptible to drops in consumer spending. Therefore, Panera Bread's cheaper items make it an attractive alternative to traditional eateries. However, this does not mean that Panera Bread is immune to these challenges. The company must achieve a balance between quality food and competitive pricing. Nevertheless, Panera’s product niche does give it flexibility in raising menu prices because consumers perceive its products as having high quality, especially in comparison to traditional fast food restaurants. In 2007, the company’s management introduced a 2.5% increase in Panera’s prices, and reported no significant decrease in the total number of sales. This tool becomes important when production costs increase. The company markets its brand name to associate it with the concept of fast casual dining - an alternative to traditional fast food. The company invests 2.6% of its total revenues in marketing campaigns. Each individual restaurant is required to give 0.7% of its sales to the national advertising fund, and spend 2% of its sales on local advertising. The company’s marketing strategies focus on product merchandising (such as the promotion of new menu items), instead of product prices. It also frequently sponsors charitable events as a marketing tool. Most Panera Bread restaurants donate their leftover breads and other foods to local charities at the end of each day.[33] [edit] Geographic DistributionPanera Bread currently operates in 36 states. The chain is not very well established in the West and Southwest regions, which means that these two regions are attractive markets for expansion. Furthermore, the company's management has indicated that it intends to expand into Canada (Toronto and locations in Ontario) through franchising agreements.[34]
[edit] Key Trends and Forces
[edit] CompetitionPanera Bread must still compete with traditional fast food chains, as well as specialty food cafes, casual dine in restaurants, street vendors, pizza parlors, bakeries, and national, regional and locally-owned restaurants. Many of the company’s competitors have greater financial resources, which translate into greater advertising capacity. These competitors include:
 Panera Bread Company2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available
[edit] Market ShareThe fast food industry is highly fragmented. Total revenues are estimated to be around $120B.[63]  [edit] References
|
The Shelf
|
Edit
History
Bookmark
