Panara internal analysis moorman v4

Panera Bread Company

• By: Dan McLindon Kyle McDanielJeremy SmileyTom AndersonRay Moorman

Contents

1. The Key Question2. Panera Bread Company History/Overview3. External Environment (PEST)4. Market Overview (Demand)5. Industry Overview (Supply)6. Competitive Landscape7. Internal Analysis8. SWOT Analysis9. Recommendations

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?

Contents


Panera Bread Company OverviewOrigin 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

Panera Bread Company Overview

• Strategic Intent– “Make great bread broadly available to consumers across

the United States”

2003 - TNS Intersearch Study •Scored the highest level of customer loyalty among QSR’s

2004 - 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

Contents


Industry Overview (Supply)

Porter’s five forces:

Rivalry among existing competitors

Threat of substitute products

HIGH

Bargaining powerof buyers

HIGH

Threat of new entrants

LOW

Bargaining power of suppliers

LOW

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.

HIGH

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 LOW


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


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

Contents


Internal Analysis – Core CompetenciesCore 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

Red – Easy for competitors to develop

Yellow – Possible for competitors to develop

Green – Very difficult for competitors to develop

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 0 20 N/A

1999 160 180

2006 155 1027

2010 973 2000

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

Contents


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

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

Contents


Recommendations1. Work with franchisees to acquire Corner Bakery Café??? (Franchisee locations

are more profitable and provide higher ROI)2. Expedite expansion in Canada or International (Europe)??

Panara internal analysis moorman v4

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