Introduction
Panera bread has been around from 1976. Ronald Shaich, CEO and chair man of Panera bread was the person who created the company together with the master baker called Shaich who combined ingredients. The duo made the phenomenal growth of the company with the guidance of Shaich, the revenue of Panera bread rose from franchise of 419 shops, the average annualized unit volumes (AUVs) increased from 9.1% to 12% a well but in the consecutive year the increase slow down from 0.2% to 0.5%.
History
Before it became a very successful company, there was Au Bon Pain which was purchased by Louis Kane in 1978. The bakery faced a $3 million in debt while struggling with 13 stores but 10 was shut down. Ronald Shaich came into the picture when Kane was about to declare bankrupt. Shaich who owned a bakery: Cookie Jar merged together with Au Bon Pain in 1981 these was to help the sell in the morning. The two expanded the business and decreased the debt between 1981 and 1984.
In 1985 Au Bon Pain became a place for urban folk who were tired of fast food. By 1991 Kane and Shaich took the company public and had 200 stores and $183 million in sales. The duo continued expanding by buying over St. Louis Bread Company from Ken Rosenthal which had 19 store bakery café in St. Louis area. While Au Con Pain was focusing on making St. Louis bread a national brand the expansion of the urban outlet had operational problems and had a debt of $65 million. Lacking of capital they sold Au Bon Pain and concentrated on Panera which the name that was change to in May 16, 1999, being debt free the cash allowed expansion of the bakery cafe stores.
Corporate Governance
Board of Directors
Age
Duration
Experience/Positions
Ronald M. Shaich
50
Since 1981
– Director of Lown Cardiovascular Research Foundation
Larry J. Franklin
55
Since June 2001
– President and Chief Executive Officer of Franklin Sports.
– served on Board of Directors of Bradford soap International
Fred K. Foulkes
62
Since June 2003
– Professor of Organizational Behavior
– Director of Human Resources Policy Institute
– Board of Directors of Bright Horizons Family Solutions and the Society of human resource Management Foundation
Domenic Colasacco
55
Since March 2000
– President and chief Executive Officer of Boston Trust & Investment Management.
Thomas E. Lynch
44
Since June 2003
– Senior Managing Director of Mill Road Associates
– Founder and Managing Director of Lazard Capital Partners
-Managing Director at the Blackstone Group and consultant at the Monitor Company
George E. Kane
99
Since November 1988
– Director of Emeritus
-President of Garden City Trust Company
-Honorary Director of University Trust Company
Top Management
Age
Position
Duration
Experience/Positions
Paul E. Twohig
50
Executive Vice President, Chief Operating Officer
Since January 2003
– Executive at Starbucks Coffee Company as Senior Vice President for retail operations
– Franchisee that owned four Burger King and regional manager in New England
Neal J. Yanofsky
46
Executive Vice President, Chief Administrative Officer
Since June 2003
– Independent business consultant
– Vice President of Fidelity Ventures
– Chief Officer at Boston Coach
Mark A. Borland
51
Senior Vice President, Chief Supply Chain Officer
Since August 2002
– Management position within Au Bon Pain & Panera Bread Divisions
-Senior Vice President of Operations at RetailDNA
Scott G. Davis
40
Senior Vice President, Chief Concept Officer
Since May 1999
– Director of Concept Services and Customer Experience
Mark E. Hood
51
Senior Vice President, Chief Financial Officer
Since April 2003
-Senior Vice President, Finance and Administration
– Chief Financial and Administrative Officer of the U.S. Loyalty Corporation
– Executive Vice President and Chief Financial and Administrative Officer at Saks
– Held a number of financial positions with May Department Stores
Michael J. Kupstas
46
Senior Vice President, Chief Franchise Officer
Since September 2001
-Vice President, Franchising and Brand Communication
– Vice President, Company and Franchise Operations
-Senior Vice President/Division Vice President for Long John Silver’s Inc
John M. Maguire
38
Senior Vice President, Chief Company and Joint Venture Operations Officer
Since August 2001
-Vice President, Bakery Operations
-Vice President, Commissary Operations
-Manager and Director of Au Bon Pain/Panera Bread/St. Louis Bread
Michael J. Nolan
44
Senior Vice President, Chief Development Officer
Since August 2001
-Executive Vice President & director for John Harvard’s Brew House, L.L.C.
– Senior Vice President, Development for American Hospitality Concepts, Inc
-Vice President of Real Estate & Development for Apple South Inc
-Vice President of Real Estate and Development for Morrison Restaurants Inc
PEST
Political
(If franchisees failed to develop bakery-cafes on schedule, the company had the right to terminate the ADA and to develop company owned locations or develop locations through new ADA developers in that market) T
-With this agreement it might decrease the franchisees because things might go wrong and if they do not meet the target they lose their ADA which will scare away franchisees so it is a threat.
(The company had the right to purchase the joint venture partner’s interest at a determined value, and joint venture partner had the right to sell its interest back to the company at a lower value.) O
-The Company could buy over the joint venture if they have enough revenue and in benefit they joint ventured can only sell at a lower value.
(Contract vendors delivered virtually all food products and supplies for retail operations to distributors, which then delivered to the individual bakery-cafes. Franchised bakery-cafes operated under individual contracts with either the company’s distributor or other regional distributors.) O
-Allows franchisees to choose from which distributor they want.
(The “Operation Dough-Nation” program ensured that every purchase at Panera would give back in some way to the community.) O
-This will create a good image on Panera doing community charity to the public.
(All company owned bakery cafes were in leased premises. Lease terms were typically 10 years, with one, two, or three 5year renewal option periods thereafter. Lease typically had charges for minimum base occupancy, a proportionate share of building and common area operating expenses and real estate taxes, and contingent percentage rent based on sales above a stipulated sales level.) T
Economic
(Au Bon Pain attracted customers who were happy to pay more money ($5 per sandwich) than they would have paid for fast food.) O
The customers would eat healthy and pay the same price so an opportunity so having the same price as the fast food would benefit the company.
(The company had $68 million in sales and was a leader in the quick service bakery segment) O
Being the leader would post a better threat to new competitor.
(Au Bon Pain began pouring capital into the chain when Shaich had another “eureka” moment in 1995.) O
When there is a great idea that is realistic and achievable that is the opportunity that they should take because if no one else has the idea in the market they can be the first.
(Margins continued to contract because of higher food cost, stagnant sales, and decreased comparable store sales.) T
If the sale starts falling the company should take action to prevent it or they will fail.
(The fast casual market had enjoyed double digit aggregate growth since 1999 and was expected to continue to grow by double digit figures. Fast casual chain sales were expected to reach $50 billion in the next decade) O
The company has revenue to grow in the coming years which is a good prospect.
(Diverse dining offerings and higher profitability contributed to industry’s growth) T
If the industry grows, the industry will become more popular and new companies will keep coming in which will over crowd the industry.
(Panera was the major financier of the bakery cafes and earned revenues from operations.) O
Operations cost are high but because by providing the bakery cafes they earn from the cafes.
(The company sold the facility and its frozen dough business to Bunge Food Corporations for approximately $13 million in cash) OT
By selling the facility they do not own the factory so they do not have to bother about the operating cost which is an opportunity but by selling away the facility which they need and contracting with them again meaning the Bunge Food Corporations can raise the price.
(Pricing was the key to promoting the company’s concept. Pricing was structured so customers perceived good value with high quality food at reasonable prices to encourage frequent visits.) OT
The price can be high or low but customers can perceive that the food cost this amount and can feel that the price is reasonable however in another way it can be expensive deterred by the product.
Social
(They noticed a pattern in customer behavior) O
Studying the customers behavior is very important to know what they want and what is the “in” things to do which will also come out with the new ideas first.
(The main customers of the company were office workers) OT
Although office workers are the main customers it is an opportunity to earn from them but just on a segment would be too dependable on just one.
(The management team understood that a growing number of consumers wanted a unique expression of tastes and styles.) O
Adapting to the customers taste would help the company draw in more customers.
(The company specialized in meeting five consumer dining needs: breakfast, lunch, daytime “chill out” lunch in the evening and take home bread. Daytime chill out is the time between breakfast and lunch and between lunch and dinner when customers stop in to take a break from their daily activities. This niche of consumers included senior, matinee goers, shoppers, business and sales people, and students.) OT
By catering to all these customers it allows many more of them to come however it is a niche market so expenses could be high because by “chill out” they can spend a lot of time sitting down with a drink.
(Décor inspired a more enjoyable experience for the customer as the environment of fast casual restaurant was more akin to that of a neighborhood bistro or casual restaurant.) O
With a comfortable dining environment customers would come back because of the vibe, surrounding and comfort.
(Baby boomers and their children, was largely responsible for the growth in fast casual. Both segments had little time for cooking and grew tired of fast food, and they desired a high quality, fresher, healthier dining experience, but did not have the time for a full dining experience.) O
Having healthier trend, Panera can increase more revenue from these changing population.
(The menu was designed to provide the company’s target customers with products that built on the strength of the company’s bakery expertise and met customers’ new and ever changing tastes.) O
The menu is important to attract customers, seeing what the restaurant have would help them decide if they would like to eat at that restaurant.
(Most marketing was done through product promotion and word of mouth marketing.) OT
Word of mouth is a powerful marketing tool however when it comes to promoting the restaurants it all depends on how the customers who visited the restaurant speak of the restaurant.
Technological
(In 1985, the partners added sandwiches to bolster daytime sales) O
Adding new products in would increase a new product life span.
(Au Bon Pain management spent two years studying St. Louis Bread Co.) O
Research is important to a company if they are taking over another company to increase sells.
(The fresh dough was then baked overnight in a $50000 stone bottom oven, standard in all bakery-café) O
With all the standard dough all the branches would have the identical taste rather than all different so it is quality control.
(Each company operated bakery café had computerized cash registers to collect point of sale transaction data) OT
Computerized cash registers are faster and more efficient but if the reliance on technology is too much; if the computer spoils it would cause a lot of trouble for the company.
(The system supplied sales, bank deposit, and variance data to the company’s accounting department on a daily basis.) T
(The fresh dough facilities had computerized systems that allowed the fresh dough facilities to accept electronic orders from the bakery cafes and deliver the ordered product to the bakery cafes. The company also used network/integration systems, encompassing e-mail and all major financial systems, such as general ledger data base systems and all major operational systems such as store operating performance data base systems.) OT
Technology helps a lot in many different ways in speed and efficiency however in a system failure data might be lost and unretrievable which will have to redevelop it again.
TASK Potters five forces
Bargaining power of suppliers (medium)
Threat of substitute product (high)
Bargaining power of buyers (Medium)
Threat of new entrants (medium)
Rivalry among existing firms (medium)
Threat of new entrants
The level of entry to the F&B industry is high however cafes that mainly sells bread are less seen but now in the modern times more are looking to eat health and eat less so they would choose bread as an alternative. Many business men look at this as an opportunity so they start opening new shops like the Panera. Panera which have been running longer and better establish, it give them the advantage so level of treats to entry would be medium.
Bargaining power of suppliers
There are three suppliers that are supplying Panera, one is owned by the company and the other two are Bunge Food Corporation and Dawn Food Products, Inc who are contracted. The current suppliers now are increasing so the suppliers’ power is medium.
Threat of substitute product
Substitute for café is a high treat having so many other stalls like food centers, cafeteria, fast food and other restaurants that are selling food which are replaceable of sandwich. Another way is people would buy their own raw food and cook it at home. So substitute is high.
Bargaining power of buyers
Looking at the price and the kind of food Panera sells it has almost similar products to the other restaurants. So buyers can have the choice to choose which restaurants they want so their bargaining power is high.
Rivalry among existing firms
Existing firms like subway and McDonalds would be the best match for Panera because of the kind and style of concept they have however McDonalds is one of the strong rivals but compared to Panera, Panera is healthier because McDonalds is concentrated on fast food. For Subway the food is healthy less fatty and the concept is almost the same which is a compatible competitor. So as for now the rivalry would be medium.
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