Executive Summary
Problem Statement: While Panera bread has incorporated a great strategy by provided their customers with an upscale, high-quality dining experience in the specialty Café category, they have fallen slightly behind in their pricing strategy in order to remain competitive when so many competitors are offering a similar experience with lower prices.
Analysis:
Panera’s Strategic intent and vision has been:
• Make great bread broadly available to customers across the US
• Have an attractive Menu
• Upscale dining Ambience
• Specialty café anchored by authentic fresh dough artisan bakery
• To be one of the leading fast casual restaurant chains in the nation
• Incorporate a “name your own price” pricing strategy.
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Their marketing strategy is to allow consumers to “collide” with the brand and discovery it themselves in hopes that they will recommend it to others.
“Pay what you want” at Company Cares Cafe: in May of 2010 Panera Bread did experiment with a different pricing strategy. They formed a non-profit organization and restaurant called Company Cares Café in which you pay what you can and want for your meal. You get a suggested price but you pay at your discretion.
External Environment: Panera’s external environment has changed as more and more restaurants open within their category. However they have maintained they initial strategies as these are the ones that got them to where they are now. They have also added more franchisees and more locations. Another significant change they have undergone since 2007 is that Panera now has a new CEO. In Appendix A Ronald Shaich writes a letter to the company explaining he will be leading the company from a different role. He will be part of the board and no longer the CEO. He is still passionate about Panera but he wants to explore other ways of expanding the business and cannot do it while running the company
Challenges: As explained previously some of the challenging Panera faces are falling short in their pricing strategy. Although they have been profitable, competitors are fierce and fast and they prices are lower for more food; and in America, more means value. They
The Panera Bread legacy started in 1981 as AuBon Pain Co., Inc. In May of 1999, all of the AuBon Pain Co., Inc.’s business units were sold, except for Panera Bread, thus the company was renamed Panera Bread (Panera). As of December 2015, there are 1,972 bakery-cafes in 46 states, the District of Columbia, and in Ontario Canada (Panera, n.d.). Today, Panera Bread has a market capitalization of $4.5 billion and continues to be on a journey to serve food, as it should be. They continue to strive on serving quality foods that are free of artificial ingredients and making sure customers have a great experience.
Another organizational crisis arose in 1995 when efforts to expand the Saint Louis Bread chain in order to increase brand awareness backfired as consumers favored Saint Louis Bread over its parent company. To solve this conflict, new divisional presidents were created for each chain, and in 1999 Shaich convinced the board of directors to sell all the Au Bon Pain cafes and restructure the Saint Louis Bread chain under the name Panera Bread. Panera’s current organizational structure utilizes vertical integration, with 17 fresh dough facilities that deliver to 1,591 cafes and franchises (“Our History”). Upper level managers now make menu and pricing decisions and overlook the marketing, franchise, concept development, legal, technology, supply chain, and human resource departments (“Organizational Chart”). Lower level
As mentioned in the case study, Panera Bread Company is known to be one of the leading bakery/café that offers freshly baked pastries and French inspired entrées across various states in the US. However in the recent years, Panera Bread faced a decrease in their usual high growth rate from 9.1% and 12.0% in the year 2000 to merely 0.2% and 0.5% of comparable sales and annualized unit volumes respectively.
A key aspect of Panera Bread’s business that protects the company from direct competition in the fast food industry is their product niche, artisan fast food. Fast food chains are often criticized for offering unhealthy foods. But, Panera Bread focuses on a higher nutritional value in their products. Dine in restaurants are very susceptible to drops in consumer spending, so Panera Bread’s
At the end of 2007, Panera Bread Company was in an unfamiliar position where taking out debt was a necessary action to gain funding. Raising prices would be an option to help with the deteriorating margins, but there is fear that this move will slow the growth of the company. Other options, such as lowering the quality of food, would go against Panera’s fundamental goal of serving high quality food. At this time, Panera is in a position where it needs to repurchase stock. The $75 million buy-back should help give confidence to their shareholders. However, to accomplish their growth goals and stock repurchase, Panera will require external funding for the first time.
Expanding the target market of Panera Bread is a good growth opportunity for them. This can be achieved by product line (menu options) extension or by entering international market outside the American continent so as to increase their geographical coverage. In addition, Panera has an opportunity to get additional market and growth by adapting rapidly to changing market and customer preferences. They need to advertise and market themselves as a healthy option for eating out. Health oriented food or food that are low in calories, sugar, cholesterol, etc. is getting very important as people started becoming very health conscious and selective. Their effort to roll out new products with fresher ingredients such as antibiotic-free chicken needs to be further expanded. Recognizing the health risks associated with transfat, Panera had completely removed all transfat from its menu by 2006. Organic food, non GMO, etc. They could increase number of their franchises. A number of markets were still available for franchise development. The have opportunity in front of them to open more outlets, both company-owned and franchises. They could open within North America and mainly in areas where they are not present now, and those areas where the growth potential is good, like some of the suburban markets. Many good locations for fast casual dining options are available in many of the untapped areas. Panera has a good market opportunity outside the small urban niche where greater growth
The driving concept behind Panera Bread is to provide a premium specialty bakery and café experience to urban workers and suburban dwellers. Panera can compete at a high level in the quick food industry because of what they offer customers better than their
Panera has three business segments: Company-owned bakery-café, franchise operations and fresh dough operations. The company’s growth strategy was “to grow their store profits, to increase transactions and gross profits per transaction, use capital wisely and put into place drivers for concept differentiations and competitive advantage” (Vincelette & Fogarty, 2010, p7.). In 2009 while everyone else was experiencing the hard economic times Panera Bread was sticking to their strategic plan. Panera did not lay off employees, or worry about closing underperforming stores. Instead, they continued to add menu items and even increased prices on existing items. This strategy worked for them and they were able to take advantage of clientele that came from fine dining. The company has
The Panera Bread Company is starting 2007 with unfinished goals and missed targets previously set and a review of their strategy is in order to continue their ongoing success. The company has grown substantially since its inception in the competitive restaurant industry; however, an aggressive target of 2,000 Panera Bread bakery-cafes will require a focused strategic plan. The company has a strong base with loyal customers who appreciate Panera’s unique dining atmosphere with a focus on quality products at a reasonable price. Panera will need to continue its market research and focus on environmental issues, which are an important core value. The opportunity for
The generic competitive strategy that Panera best fits is broad differentiation. This is primarily because Panera sought to be the first choice for patrons looking for fresh-baked goods, a sandwich, soup, a salad or a beverage in a pleasing environment. In this platform Panera has set their eyes on people who may not necessarily be looking for an expensive meal, but might also not want cheap, fast food but instead are looking for a fresh meal that can be enjoyed in a relaxing environment. In this Panera is looking for a
The rivalry among competing sellers, often the strongest competitive pressure, is also fairly high for Panera in the restaurant industry. No switching costs, numerous competitors, and an increase in the availability of healthy food
Being a nationally recognized brand and a dominant in restaurant operations in the specialty bakery café segment and to expand broadly in the regional market is Panera’s strategy. And by giving high quality product Panera is following their strategy.
Panera breads business model is, “to provide a meal and dining environment of sufficient high quality that customers would gladly pay for that quality – at a price that would also make the company financially successful” (Panera Bread Case). Through Panera Bread’s business model one can see that they took the marketing technique of higher quality for slightly higher prices. Panera bread differentiated itself from many competitors through its superior quality and welcoming environment. This business model deemed successful at first and helped the company to grow and maintain profits, but over the recent years Panera has been running into some obstacles. Personally I like their business model and it has been proven with their early success,
This approach has been one of the main competitive advantages of the company that maintained its stores and cafes in a friendly and ambient atmosphere in various locations. The company did not start as a traditional fast food restaurant, but rather as a network of places where people could fulfill their natural instincts with healthy and freshly cooked food with a little higher than average price range. Panera Bread was one of the trend makers of casual-food restaurants, whose vision was entirely different from the typical model of public facilities. All of the locations shared a common design and menu that created a unique environment of the franchise. Moreover, in order to enable high-quality service, the executive team of the company decided to equip all of the bakery’s completely to be capable of making their own products directly to the spots. This fact allowed to reach a certain level of autonomy and reliability of the brand that always managed to deliver and provide the freshest and natural
The Panera Bread Company has a wide diversification of Artisan and Specialty breads targeting urban workers and suburban dwellers. This is the major basis for differentiating Panera from its competitors. In response to the competition, Panera Bread competes against a wide assortment of specialty food, casual dining, and quick-service establishment operating nationally, regionally, and locally, but its strongest competitors are in the dining establishing in the so-called “fast casual” restaurant category.