Panera Bread Company Analysis

Panera Bread Company Analysis

Case # 5 Panera Bread Company

1. What is Panera Bread's strategy? Which of the four generic competitive strategies discussed

in Chapter 3 most closely fit the competitive approach that Panera Bread is taking? What

specific kind of competitive advantage is Panera Bread trying to achieve?

Driving concept: to provide a premium specialty bakery and café experience to urban workers and suburban dwellers.

Generic: Broad differentiation strategy.

Competitive advantage: striving to build a competitive advantage based on the triple combination of Product, Environment, and Great Service (PEGS).

2. What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its situation?

Strengths:

• Attractive & appealing menu

• Bread-baking expertise (a core competence) – artisan breads are Panera's signature product.

• Nationwide leader in the bakery-café segment

• High ratings in customer satisfaction studies

• Good brand name

• Fresh dough operations & sales to franchised stores

• Initial success in catering

• Good franchisees – higher sales in franchised stores compared to company-owned

• Financial strength of the company – able to grow without taking on too much debt

Weaknesses:

• A less well-known brand name than some rivals (Applebee's, Starbucks)

• Sales at franchised stores higher than company-owned stores – Why?

External Threats

• Rivals begin to imitate menu offerings/or dining ambience – easy to copy?

• Competition from other chains

• Saturate the market – will it become harder to find attractive locations for new stores and slow company's growth

Opportunities

• Open more outlets – untapped growth potential in a number of suburban markets (see Exhibit 3)

• International expansion

3. What is your appraisal of Panera Bread's financial performance based on the data in case

Exhibits 1, 2 and 8? How well is the company doing financially? Use the financial ratios in

Table 5.1 of Chapter 5 as a guide in doing the calculations needed to arrive at an analysis based

answer to your assessment of Panera's recent financial performance.

Strong CAGR in a number of important areas – total revenues, royalties, fresh dough sales, net income and EPS.

Declines in G & A expense a desirable trend – some erosion in operating profit margins bears watching (not a desirable trend). Declines in liquidity (as measured by current ratio and working capital numbers) and a fluctuating but still acceptable ROE also warrant attention.

Overall, the data indicate that Panera is growing quite rapidly and is performing well, although not spectacularly. While there are some areas of concern, the areas of weakness as of 2006 are from alarming.

CAGR 2006 2005 2004 2003 2002

Total Revenues

30.9

828,971

640,422

362,121

265,933

212,645

Franchise royalties & fees

21.8

61,531

54,309

44,449