Panera Bread

Panera Bread


Introduction

Panera Bread

Mission Statement

A loaf of bread in every arm

Panera Bread

Corporate Level Strategy


Panera Bread is engaged in operating a retail bakery-cafe business and franchising business
under the names Panera Bread and Saint Louis Bread Co. As of Dec 26 2006, Co. operated 391
company-owned bakery-cafes, and 636 franchise-operated bakery-cafes. Co. provides baked
goods, made-to-order sandwiches, pizza, soups, salads, custom roasted coffees, and other cafe
beverages. Bakery-cafes are principally located in suburban, strip mall, and regional mall
locations and operate in 38 states in the U.S. As of Dec 26 2006, Co.'s dough operations, which
supply dough items daily to both company-owned and franchise-operated bakery-cafes,
consisted of 18 company-owned fresh dough facilities.

With the single goal of making great bread broadly available to consumers across America,
Panera Bread freshly bakes more bread each day than any bakery-cafe concept in the country.
Every day, at every location, trained bakers craft and bake each loaf from scratch, using the best
ingredients to ensure the highest quality breads.
Panera Bread bakery-cafes showcase the art and craft of bread making, helping customers truly
appreciate and enjoy a great loaf of bread by studying its crust, crumb and craft. Panera Bread
understands that great bread makes great meals, from made-to-order sandwiches to tossed-to-
order salads and soup served in bread bowls.
Panera Bread is widely recognized for driving the nationwide trend for specialty breads. As
reported by The Wall Street Journal, Panera Bread scored the highest level of customer loyalty
among quick-casual restaurants, according to research conducted by TNS Intersearch. For the
eighth consecutive year, customers rated Panera Bread tops among chain restaurants in the 2009
Sandleman & Associates Quick-Track "Awards of Excellence." Additionally, Panera Bread
was named Most Popular (for chain restaurants with less than 5,000 outlets) by Zagat, the trusted
restaurant review service, in its annual consumer-generated 2010 Fast-Food Survey. The concept
was also awarded a #1 ranking for Best Salad and Best Facilities. Panera Bread was also named
to BusinessWeeks 2010 list of top 25 Customer Service Champs, to FORTUNE magazines
2010 list of 100 Fastest-Growing Companies, and has also won Awards and Recognition in
nearly every market it resides. Most recently, Panera Bread was named Casual Dining Brand of
the Year in the 2011 Harris Poll EquiTrend

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Panera Bread

Business Level Strategy
Panera Breads strategy is to provide a premium specialty bakery and caf experience
to urban workers and suburban dwellers. This strategy is most closely aligned with a
broad differentiation strategy, or being unique in ways that a broad range of consumers
find appealing. Prior to taking the Panera concept nationwide, the owners performed
cross-country market research and concluded that consumers could get excited about a
quick, high quality dining experience. The concept is a mix between fast food and
casual dining, or fast casual. By choosing this strategy, Panera is attempting to achieve
competitive advantage in the unique offerings it provides, offerings that rivals dont have
and cant afford to match. In this case, delicious handcrafted bread arriving fresh daily,
served in an inviting atmosphere is the companys competitive advantage and core
competency.

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Panera Bread

Social Responsibility by Panera Bread

Panera Bread opened its first non-profit cafe with the motto: Take what you need; leave
your fair share.
Instead of kneading the bread, Panera is pushing the envelope replacing a for-profit operation
with a non-profit operation. On Sunday, May 16, quietly, without any press releases or ribbon
cutting, Panera Bread reopened the operation of a Clayton, Missouri store as a non-profit. The
model is take what you need, leave your fair share.
The St. Louis Bread Company Cares Caf looks like a traditional Panera Bread restaurant. It
has the same menu. Cashiers still take your order. But they wont hand you a bill, instead you
receive a suggested bill representing the price of your order at any other Panera Bread
location. You can then make the payment, any amount you choose, above or below the
suggested amount, in one of five donation boxes located within the store. If you cannot pay in
dollars, you can pay by volunteering your time.
The stores expenses, including rent, salaries, and food costs will be paid for by the Panera
Foundation. If the pilot store can cover its food costs, this experiment will expand into two more
cities within the next six-months. From there, the executive chairman and former CEO, Ron
Shaich, wants to expand the non-profit cafes into every area with a Panera Bread restaurant.
But first, the Cares Caf has to support itself. According to USA Today, this is the first time a
national chain has adopted the pay-what-you-want model. However it is not the first time it
has been tried. The One World Everybody Eats Caf in Salt Lake City has been successfully
operating since 2003. Denise Cerreta has been running her caf in the mixed for-profit/non-
profit mode since 2003. Since then she has helped open six other community cafes. She has
even published Spirit in Business A Guide For Starting a Community Cafe. It was the One
World Caf that inspired Shaich. After seeing a newscast mentioning One World Caf, Shaich
met with Cerreta. Less than two months later the Company Cares Caf was opened.
Will it work on a national level? Only time will tell. It will be fascinating to watch the
experiment. If Shaichs passion and enthusiasm have anything to do with success, well be
seeing Company Cares Cafes in our own neighborhoods very soon.

Operation Dough-Nation Programs
Since our founding, Panera Bread and its franchisees have been active in our communities.
Operation Dough-Nation was founded in 1992 to formalize our commitment to community
involvement. Since then, it has grown to include four major activities: Community Breadbox
cash collection boxes, the Day-End Dough-Nation program, Panera/SCRIP Card fundraising
and participation in community events.
Panera Bread

Community Breadbox
The Community Breadbox program ensures that donations made at Panera Bread feedback in to
the community. A portion of cash donations made by customers in bakery-cafes may be matched
by Panera and its franchisees and distributed to local non-profit organizations. Contributions
generated through the program have provided basic necessities for those in need, and have
created special places and opportunities. If you would like to contribute to our efforts to assist
local non-profit organizations in the communities we serve, please look for the Community
Breadbox collection containers at participating Panera Bread or Saint Louis Bread Co.
locations.
Day-End Dough-Nation
Through the Day-End Dough-Nation program, unsold bakery products are packaged at the end of
each day and donated to local food banks and charities. In 2008, Panera Bread bakery-cafes
collectively donated a retail value of more than 50 million dollars worth of bread and baked
goods to charitable organizations helping to address the need for food distribution in our local
communities. Many of these organizations are served by Feeding America, formerly America's
Second Harvest, the nation's largest domestic hunger-relief organization.
Please Note: We are now accepting online requests only. Please click on the link below if you
are interested in submitting a donation request.
SCRIP Fundraising
We are proud to participate in the Scrip fundraising program, helping non-profit organizations
raise money. This popular fundraising program invites non-profit organizations to pre-purchase
$10 Panera Card gift cards at a 9% discounted rate and then re-sell the Panera Cards at full
price.
Community Events
We also value corporate citizenship and regularly make in-kind donations to local community
events such as silent auctions, runs and walks, trivia nights and raffles.


Panera Bread

Internal and External Analysis of Panera Bread
SWOT Analysis
Strengths - Repeat customers, learning curve, word-of-mouth, fresh, and quality food, and rapid
market penetration, economies of scale, customer service, and good atmosphere

Weaknesses - leased land, off-site dough preparation and delivery, many untapped
markets, no sustainable competitive advantage, unclear strategic direction, unfavorable
financial trends

Opportunities catering, national focus on health, dinner crowd, global sales

Threats bad economy, high gas prices, highly competitive industry
Five Forces Analysis
I. Rivalry among Competitive Sellers
The restaurant industry is a very competitive industry. On a typical day US consumers spend a
total of $1 billion at eating establishments (Thompson). There are constantly new entrants to
worry about as well as companies struggling to make a profit. Panera competes on many levels
including fast casual dining and specialty foods (Panera). Paneras main competitors include
McDonalds, Starbucks Coffee and Subway. However there are hundreds of restaurants that
compete with Panera on a national, regional, and local level that has a negative impact on the
companys revenue and market share (Panera).
To stay profitable in the highly competitive restaurant industry, Panera regularly reviews and
revises their menu to sustain the interest of regular customers, satisfy changing customer
preferences, and be responsive to various seasons of the year (Thompson). Panera develops an
advantage in changing their menu over competitors such as McDonalds and Subway who do not
change their menu frequently and customers often lose interest in their menu offerings.
Starbucks Coffee however, does offer seasonal coffee beverages and a la carte food items to stay
competitive for similar reasons as Panera. Starbucks and Panera have similar in-store
atmospheres that make them rivals. Both companies offer an atmosphere that invites patrons to
stay for a while with comfortable chairs, calming music and Wi-Fi. In order to gain a competitive
advantage over Starbucks in terms of the atmosphere, Panera introduced meeting rooms at many
of its locations to attract large groups of patrons. Panera, in 2004, introduced its catering service
Via Panera to further expand the business and gain an advantage over rivals (Thompson).
II. Threat of Substitutes
In the restaurant and food industry, there are not any substantial substitutes to food because
people have to eat food every day. Food is a basic need and nothing can substitute that. Since
Panera Bread

there are no major substitutes the threat is relatively low in this category. However, there are
substitutes to Paneras atmosphere and their coffee selections.
Panera has developed an atmosphere that encourages people to hold meetings or get work done
at the restaurant. A substitute to this could be to have the meeting in the office or just work from
home. Panera has to offer people a reason to come into their restaurant as an alternative to the
workplace or their home. The company competes with this substitute by offering a professional
calming environment to get their work done without any distractions that may hinder people
from working.
One of Paneras signature menu items is its coffee. Substitutes to coffee are caffeinated
beverages and energy drinks. Instead of going into a Panera for a coffee, one could simply stop
by the gas station and pick up an energy drink of caffeinated beverage. Panera has the advantage
with this substitute because many people either prefer coffee or prefer energy drinks and stick to
their preference so the risk of customers switching to a substitute is low.
III. Threat of New Entrants
The threat of new entrants is high because barriers to entry are low and the pool of entry
candidates is large (Thompson). People are always looking for a new and different place to eat
and because of this demand new restaurants open daily. In addition many restaurants do not stay
in business for very long due to bad menus, dining experience, food quality and service
(Thompson).
Barriers to entry are low because there are little regulations from the government, there are
usually no patent or legal protection needed, and there are little technological drawbacks that
other industries experience (Hudson). If a person raised enough capital they could easily open up
their own restaurant without many restrictions.
New eateries also have an advantage over established restaurants because consumers are more
likely to give new restaurants a try (Thompson). Consumers are constantly looking for variety in
their meals so this gives new restaurants an incentive to open as well as steady business in the
beginning of their operations. Panera competes with these new entrants by constantly changing
their menu to meet customers diet and seasonal wants.
IV. Buyer Bargaining Power
Buyer bargaining power is relatively high for Panera. The restaurant must constantly be staying
in tune to customer preferences or the customers will easily eat at another restaurant. The food
industry is highly competitive and in addition there are low switching costs for consumers and
consumers have access to quality and nutrition information.
One item that makes the buyers bargaining power high is that there are relatively low switching
costs to choose another restaurant over Panera. Consumers taste preferences change daily and
eating at another restaurant other than Panera offers no additional costs other than the food
prices. Panera recognizes this changing taste preference and offers a wide enough selection of
Panera Bread

menu items for customers to enjoy multiple times a week since the average American eats out
four times a week (Nutrition).
Buyers also have a great amount of power because quality information of the restaurant industry
is readily available. 83% of restaurant patrons like nutrition information on the food products
(Nutrition). Many restaurants have seen this and are now posting nutrition information because
customers are more likely to visit a restaurant that posts the information. Also, in many cities
laws have been passed that requires restaurants to post inspection results in a visible spot. This
now makes restaurants pay closer attention to the restaurant quality because they may lose
business if they do not receive a good inspection.
V. Supplier Bargaining Power
Paneras suppliers have a relatively low bargaining power because they implement a lot of
controls to keep their bargaining power low. Panera controls the quality of their main product by
making the bread themselves daily. Also, the company contracts with numerous suppliers to
keep an individual suppliers bargaining power low.
Panera has an advantage in terms of suppliers because the make their own bread in 17 fresh
dough facilities and own 140 trucks to deliver the dough anywhere from 300 to 500 miles to
stores (Thompson). This vertical integration has made Panera capable of controlling the quality
of its signature product, their bread. The bread is delivered daily so if for any reason the bread
cannot make it to the store sales and brand reputation can suffer.
Panera has numerous suppliers for each ingredient so that it can obtain ingredients from other
suppliers when necessary (Thompson). This lowers the risk of a supplier driving up the price for
Panera because if one does, Panera could simply switch to another supplier. Panera also has
contracts with suppliers and distributors to control the costs of their supplies.


Panera Bread Co. (PNRA)
Direct Competitor Comparison

PNRA CMG BAGL SBUX Industry
Market Cap:
3.94B 10.12B 246.63M 30.25B 282.55M
Employees:
15,900 26,500 6,796 137,000 15.90K
Qtrly Rev Growth (yoy):
15.90% 24.30% 0.40% 9.90% 20.90%
Panera Bread

Revenue (ttm):
1.60B 1.94B 412.14M 11.19B 1.60B
Gross Margin (ttm):
34.97% 37.59% 22.60% 58.61% 34.97%
EBITDA (ttm):
266.74M 378.73M 44.83M 1.99B 266.74M
Operating Margin (ttm):
12.25% 15.91% 6.50% 13.00% 6.32%
Net Income (ttm):
118.79M 187.52M 11.91M 1.09B N/A
EPS (ttm):
3.89 5.91 0.71 1.43 1.57
P/E (ttm):
33.92 55.03 20.85 28.20 28.18
PEG (5 yr expected):
1.56 2.31 1.11 1.51 1.56
P/S (ttm):
2.46 5.28 0.60 2.70 2.46


CMG = Chipotle Mexican Grill, Inc.
BAGL = Einstein Noah Restaurant Group, Inc.
SBUX = Starbucks Corporation
Industry = Specialty Eateries

Restaurant Companies Ranked By Sales

Company Symbol Price Change Market Cap P/E
McDonald's Corp.
MCD 85.60 -0.53% 88.82B 18.09
Yum! Brands, Inc.
YUM 55.61 0.04% 25.89B 22.98
Darden Restaurants, Inc.
DRI 53.22 -0.76% 7.17B 15.69
Starbucks Corporation
SBUX 40.35 0.07% 30.25B 28.20
Autogrill S.p.A.
Private - View Profile
Panera Bread

Brinker International Inc.
EAT 26.55 -0.08% 2.25B 15.73
Wendy's International, Inc.
Private - View Profile
KFC Corporation
Private - View Profile
Whitbread plc
WTBCF.PK 25.65 0.00% 4.52B 12.67
OSI Restaurant Partners, LLC
Private - View Profile



McDonalds is the largest fast food chain in the world. They have been very successful in
expanding into international markets. McDonalds CEO, Charlie Bell, recently stepped down
due to health concerns, which resulted in a price fall in their stock. However, since the naming
of Jim Skinner as CEO, analysts have reaffirmed a positive outlook on McDonalds. The
success of Panera Bread and other such places has forced McDonalds to reassess their menu and
add healthier items. McDonalds also markets to a different market than Panera Bread in that
McDonalds is a low cost provider. Panera Bread stays in suburban areas while McDonalds has
a suburban presence but also floods the cities. So although McDonalds and Panera Bread do not
operate too similarly, they do compete in the same industry and it is important to look at
McDonalds as a main competitor when analyzing the restaurant industry.

Starbucks Corporation has a very similar niche to that of Panera Bread Company. However,
Starbucks concentrates only on the beverage side of the caf. Panera Bread also sells coffees and
cappuccinos as Starbucks does, but Panera has a wider variety of products to sell. Starbucks and
Panera are considered to be competitors because they both have a caf environment. Starbucks
has been extremely profitable in years past. Both companies take advantage of the unique
environment that a caf provides.

New World Group Inc. owns and operates several different companies entitled Einstein Bros.,
Noah's, Manhattan, Chesapeake, and New World Coffee. New World Group sells caf
beverages, bagels, soups, salads, and deserts among other products. New World Groups cafes
may be the most direct competition to Panera Bread. New World Group is a much smaller
organization than Panera Bread but both produce similar products and target a similar customer
base.