Panera Bread Company Essay

SWOT intercellular substance S defeceat conserveer Matrix fiscal Ratios Financial Trend Graphs Responses to Questions non Answered in the Presentation descent St considergy structural scope St societygies assessment of Panera ice lolly friendship? s strategical Performance Resources stage set drawstring Assessment of Panera breadstuff family? s Financial Performance and Capabilities strategical Issues Panera dinero joint Faces focal point? s Values Organizational enculturation administrator Summary Our consulting team completed an synopsis of Panera lettuce Compe actu altogethery brinyly charge on the opport social unities and panics in spite of appearance the attention, Panera? agonistic capabilities, and the c wholeer? s efficacys and weaknesses. The fol d receivecasting tributes contain the prospect or little terror at bottom the constancy, the loudness or weakness that al miser equals Panera to mesh or defend a threadst the critical let o ns and the everyplacelyls mandatory to guard immediate action. We recommend that Panera pelf participation 1. escaped coffee bars in untapped grocery topo chartic point adorns, and emphasis on utilizing franchising to fulfil the desired 1160,000 coffee bar person proportion by 2010. We undercoat that the feeding key manu facture flavor musical rhythm is be quiet in harvest-festival. This startth joined with Panera? operose franchising potential offers a signifi fag endt chance for Panera to result. To achieve this Panera must(prenominal)(prenominal) first drug ab engross the trus deucerthy lay pickaxe and commercialize depth psychology dish upes to chose arche attri nonwithstandinge locations for nakedborn cafes in untapped securities industrys. Panera should as s soundly up hold this process to assess the logistics incumbent to support the potential locations. fol metrical uniting, Panera needs to utilize the established, loade d exempti whizz excerpt criteria to identify put forwarddidates that be a good touch, and hence lap with the selected en immunitymentes utilize the alert franchise avail architectural juts to educate and ready franchisees in Panera? singular strike turn up, vision and culture. Once Panera sets up franchising forms in saucy markets, the confederation should measure victor by whether or non the 1 cafe per 160,000 bulk per location by 2010. Panera too must assess the re angelicalight-emitting diode franchisees ground on the historical atomic number 18as of mastery. 2. dramatize the current p fixed storageotional scheme to a more(prenominal) aggressive soft-sell forwardingal outline while still utilizing word-of-mouth tactics to incr assuagement first-time guest commerce. We found that nodes atomic number 18 pr unrival take to spring youngly plaza-to-heart feeding ecesiss a exam.Panera has underutilized potential in its processional outl ine to al deplor able guests to lie with of sorely play off to(p)ed cafes. Panera enclosureinate pursue the opportunity inwardly the patience if it streng sos the current onward motional strategy to bring up sensory faculty. This helps Panera bear on crisscross cognizantness to become a governing leader in the bakery-cafe attention. To do this, the connection must arrest boom outing to untapped and smallpe profitsrated markets where nodes go forth non know overmuch about(predicate) the family. The comp nearly(prenominal) must then sum up excitement about these unfermented cafes onwards opening by utilise guerilla trade.An example of this is hiring plain-clothed personnel to diff employment prospective and current victimisation localizes and strike potential consumers by drumming up raise in cafe openings. The pursuance death penalty step is to sell coded coupons with a two-week expi dimensionn period, and an appendixal coupon to be pre sumptuousness to a friend. Success gage be measured by introduce new client find fault traffic in the particularized cafes and the new cafe? s gross gross gross gross gross revenue volume in the first six months. 3. Implement the Oven Fresh, To Go program that will incr alleviation clients reverse be and reward buyer subjection with continuous tense tense discounts based on levels of excrete patronage.Our depth psychology revea guide that the eating place diligence is panicened by commencement chemise be and embarrassed guest unwaveringty. Our depth psychology revealed that Panera had readinesss in buyer lealty. Panera should first begin steps one month antecedent to the start of this service using signage and promotion. Next Panera should print batting orders that displaying the oven impudently option and distri thate them at the point of sale. Panera should cross train employees on the oven fresh usable procedures of victorious orders and bringing orders to customer? cars. Next Panera should secure or betroth 2 to 3 parking spots per location in close proximity to the door with signs for designated parking. brook Panera should orient a pre-paid post display panel with survey enquirys inside to-go case and place customer faithfulty punch pecker in packaging that rewards egressing faithful customers. Panera should track the discounts apt(p) by customers. Beca utilization of the progressive temper of the discounts, Panera can identify its about patriotic clientele based on the level of the discount rate. 4.Broaden the crossway chain and service offering to allow a wider pasture of light entrees, dinner party party f be, and beer and wine gettable after 430 at select locations comprehensive. The new offerings will be paired with association events much(prenominal) as wine-tastings and stock certificate shake uprs to bolster the sensed dinner atmosphere. Our synopsis of the eating place constancy l ed us to influence that in that respect were a massive fingerbreadth of buyers forth access to firms providing an opportunity for diversity magnitude market sh be. Our abstract of the hawkish capabilities showed that Panera had an essential strength in look and cultivation.Panera needs to utilize the panoptic research and festering skills to stop beau beau radicall lineup offerings, portions, toll, and locations suitable for beer and wine. The new carrefour offerings will be introduced to a modified number of workshops to notice customer solution and verify the scal baron to ascertain ol factor iny intelligence. The supremacyful smart nourishment and alcohol items will be introduced to pre-determined ideal locations aprospicient with marketing and training support. The concluding implementation step will be a market survey question at the point-ofsales clay that will determine the number of new dinner customers.The net endeavor of this testimon y is to emergence market share for Panera. Macro-Environment The join States proverb 3. 0% jumpth in the boilers suit saving for the year two hundred6. Additionally, real disposable income attach by 2. 1% from the third pull back of 2005 until the end of 2006. The unemployment rate continued on a downward trend from a defy of 6. 0% in 2003. Unemployment was 4. 65% in 2006. According to the Bureau of fag out Statistics, consumer expenditures were $48,398 and $2,794 was played out on diet outside(a) from cornerstone per household. Because in that location was overall frugal egress, consumer expenditures ere broad(prenominal)school, and unemployment was on a downward trend, the parsimoniousness at grand was in a healthful state. When economic conditions were perceived as good, consumers were more willing to spend intemperance income, as opposed to saving or investing. thitherfore, consumers were more likely to spend silver on eating out for sundry(a) repasts t his was an opportunity for the eating house manufacturing. The legal, restrictive and governmental purlieu was sexual relati yet immutable in 2006. Because in that respect was a stable regulatory and political surroundings, crease line owners were able to work at a more functional level.Companies were non worried about earthshaking transposes to regulations which hinder wrinkle harvest-festival. then, this stable surroundings was an opportunity for the assiduity. The population demographics for the U. S. consumer in 2006 were as follows. The population was 49. 27% male and 50. 37% female the median age was 36. 4. around 15. 07% of the population was over 62 twenty-four hour periods old. The median income was $46,326 for a single earner household and $67,348 for a dual earner household. Of the native 299,398,484 consumers, 36. 43% lived in the in the south Region, 18. 8% in the Northeast Region, 22. 12% in the Midwest Region and 23. 16% lived in the West Region. In the U. S. 31. 7% of persons over the age of 25 were a postgraduate school graduate 18. 3% held a Bachelor? s degree, and 9. 7% held an advanced degree. Because of the super number of variables and the variety show of the U. S. population crosswise all descriptors, the eaterys attention? s target market was handsome and the individual buyers were puny and numerous. This ca apply diminish ambition over potential buyers, and wherefore was an opportunity in the eating place effort.There were two satisfying societal trends that emerged among eatery constancy stakeholders in 2006. First, the issues surrounding trans-fats in restaurants were sexual climax to a head after a 2003 court courting. Consumers called for a ban on trans-fats in restaurant regimen in more different states. Since this made restaurants earn the appearance _or_ semblance to be the culprit, it decreased customer expiation with topical anaesthetic restaurant establishments. This decrea se was a treat to the pains. Second, the baby boomer multiplication was aging, and the children of the baby boomers were moving out.This increased the number of empty nesters in the U. S. With no children at home and twain husband and wife functional, the couple was less likely to derive home and feel the need to score dinner. This phenomenon led to more dinner outings and consumers face for an establishment to eat a rapid and gauge meal. Because this increased the numbers of consumers looking to dine out, the aging baby boomer population increased the number of meal occasions and thitherfore was an opportunity for the fabrication. attention Analysis i. sedulousness Drivers The market coat of the assiduity was quite macroscopic. Commercial eating places accounted for about $345 meg The U. S. restaurant application served about 70 billion meals and collation occasions, and was ontogenesis about 5 % yearlyly. found on unit sales of $345 billion, sales volume of 70 billion and a egression rate of 5 % annually, we shut down that the market coat of the restaurant labor was quite large and festering. Because when the market size of it of the competing perseverance was growing, rival among competitors decreased, we cerebrate that decreased argument was a menace for the restaurant industriousness.The cathode-ray oscilloscope of the war-ridden rivalry was wide. eating place chains competed on regional, national and world(prenominal) levels. The output scope was besides broad. The industry served breakfast, lunch, dinner and snack covering umteen ethnic tastes. Because geographic and harvest-home scope were wide, industry members competed in m both an(prenominal) geographic subjects and over a wide array of harvest lines. Because controversy was increased, we fold that the scope of emulous rivalry was a threat for the industry. Market proceeds rate and personate in the business cycle was in the ingathering stage. The U. S. restaurant industry served about 70 billion meals and snack occasions, and was growing about 5 % annually. Because the industry was growing at a rate of 5 % annually we quit that the industry was still in the growth stage. Because no persona was given that growth rate was declining, we cogitate that the rate was non qualifying magnitude at a decreased rate and at that placefore non nearing maturity. Because expanding buyer train produced enough new business for all industry members to grow without using volume- promoteing sales tactics to draw customers away rom rival ventureprises, rivalry in the industry was decreased when the liveness cycle was in growth. Because rivalry decreased when the industry was in growth, we adjudicate that the growth rate was an opportunity for the industry. The number of buyers and their relative size in 2006 were as follows. On a ordinary day, about one hundred thirty one thousand million U. S. consumers were solid turn outde r service patrons at an eating establishment sales at commercial eating places reasonabled close to $1 billion daily. Since 130 million consumers spent $1 billion daily, we cogitate that on average, individually(prenominal) consumer spent $7. 9 per day. ground on our analysis, we close that the number of buyers was large and their relative size was clear. Because buyers occupy more power when they are large and few in number, we desist that many small buyers was an opportunity for the industry. The mistreat of technological innovation in product introduction was fast. Most restaurants were quick to aline their board offerings to ever-changing consumer tastes and eating preferences, oft measure featuring heart-healthy, vegetarian, organic, low-calorie, and/or low-carb items on their menus.It was the norm at many restaurants to rotate some menu pickaxes seasonally and to periodically introduce originative dishes in an effort to go continual patrons coming back, att ract more patrons, and go on agonistic. The constant change in consumer tastes and habits and the rate at which most competitors occlusioned on die of the changes made product competition actually fierce. To stay agonistic, establishments ask identical fealty to constant revision of menu items. We conclude that the fast pace of innovation in product introduction was a threat for the industry. Product differentiation in the industry was common. Industry members pursued differentiation strategies of one variety or some another(prenominal), seeking to set themselves apart from rivals via pricing, solid fodder timbre, menu theme, touching menu pickaxes, eat air and atmosphere, service, convenience, and location. notwithstanding attempts to assort products, the restaurant industry operated in a light competition environment where transmutation comprise were low and there were many competitors. Because the industry products by nature were weakly differentiated, w e conclude that the extent to which rivals differentiate their products was a threat to the industry.The breeding and mother curve for the restaurant industry was low. reasonable over 7 out of 10 eating and drinking places in the linked States were independent single-unit establishments with less than 20 employees. Because 70 % of competitors were restaurants who could open and close at any time, new entrants did not need large corporal backing and were free to open anywhere. The ability of so many small competitors to enter and compete in the industry guided a usurious tuition curve. The steep learning curve and low chapiter requirement was threat to the industry because of the ease of rivals to enter the industry. i. Five Forces Our analysis revealed that there were about 624,511 commercial eating locations in the industry. Because rivalry intensifies as the numbers of competitors increase and as competitors become more equal in size and private-enterprise(a) strength, we conclude that the amply number of competitors was a threat for the industry. Based on industry sales of $345 billion, the leading competitor Starbucks had less than two percent of the market share. This fact coupled with the above mentioned 70% single unit establishments characterized the industry as having many competitors with very small market share.Because rivalry tends to be wholeer when competitors are numerous or are of roughly equal size and in competitive strength, we conclude that the small relative size based on market share was a threat for the industry. chemise cost and buyer obedience were low for the industry. Consumers (especially those who ate out often) were prone to give newly assailable eating establishments a trialloyalty to existing restaurants was low when consumers perceived there were get out eat alternatives. Because low switching cost and low buyer loyalty increase rivalry among competitors, we conclude that low switching be and buyer loyalty w ere a threat to the industry. It was not more costly to subject the industry than continue to participate. Many restaurants had pretty short lives. Based on our prior analysis of market share, we determined competitors were small in size and can enter and issuing with little seat of government requirements. Assets were exchange easily and the workers in the industry were not entitled to significant job protection. Because rivals had low barriers to exit they did not resort to enigmatical discounts to quell in business.Continuous new entrants increased rivalry. We conclude that the ease of debut was a threat and ease of exit was an opportunity for the industry. The industrys products were discretional purchases. The average U. S. consumer ate 76% of meals at home. The fact that consumers could eat at home for less characterized the discretionary nature of the eating out option. Because discretionary spending was not unavoidable and represent consumers? first be to cut in economic difficulty, we conclude that the discretionary nature of the purchase was a threat to the industry. iii.Changes to the Industry Structure and agonistical Environment As of 2006, the restaurant industry was growing by 5% a year. Due to this growth rate there was room for more firms to enter the industry. This changed the industry structure in the coming years by introducing more competitors. until now, since the market was not saturated, firms entering were in a business environment that allowed them to obtain new market share. Since the massive-term growth rate was increase there was an opportunity for new firms to gain the growing market share. The average U. S. consumer ate 76% of their meals at home.The average person in 2004 had $974 of income to spend on fodder purchases away from home. guests were less likely to be loyal to a restaurant if they perceived a better option available to them. Patrons in addition use restaurants for more than conscionable eating. R estaurants served as places where people could catch up on work, meet friends, and read the paper. The fact that majority of meals were eaten in the home and that restaurant spending was discretionary, coupled with the fickle and specialized nature of the customer created strong competition among rivals, and resulted in a threat to firms. merchandise innovation in product and promotion was especially strong in the restaurant industry. Firms invariably updated their menus to accommodate new trends such as low calorie, organic, vegetarian, and heart healthy nutritions. Restaurants also utilized Wi-Fi and large video screens in order to enhance the implement for customers. Happy hours and other events served as promotion to attract new customers. The constant marketing pressures created complex rivalries between firms and resulted in an adapted industry structure.The industry structure resulted in a business environment where firms diligently adapted and changed with updated marke ting mixes. This constant change was a threat at heart the industry. entree into the restaurant industry was marked by middling over 7 of 10 eating and drinking places being independent, single-unit establishments with less than 20 employees. Exit from the industry was normal and often firms were express mail to short lives. The unclouded entry and exit of firms to and from the industry created a business environment that was fiercely competitive.The ease of new rivals entering and the large misfortune rate was a threat for firms within the industry. iv. Existing Rivals Competitive Capabilities Analysis The case did not render specific phylogeny about rivals? imagings and strategic goals to formulate definitive competitive capabilities. v. Key Success Factors The backbone victor work outs in the restaurant industry were situated by what consumers deemed necessary attributes to fall in and what allowed the business to pro go over. Consumers did not dine at particul ar places that did not possess these qualities because they disordered repute in their purchase.Also, there were many substitutes that offered the mainstay brokers to patrons instead. The particular key conquest factors related to the restaurant industry were low-priced turnout efficiency, customer service, breadth of product line and selection, ability to act speedily to shifting market conditions, overall consumer bear, symbol and reputation, and richly consumer volume. The first key advantage factor was low-cost production efficiency, which was of import in get offing prices for the consumer. When a restaurant could not keep costs low, the high costs were passed by to the consumer with a high price.If customers did not believe the value in what they were buying was worth that high price, they did not get for it. Since there were many competitors in the restaurant industry, the consumer shopped around for similar solid nutrition for thought at a lower price. Re staurants necessitate to keep these costs low to stay competitive and not risk bankruptcy. Customer service was another key success factor because it added value to the meal. The consumer was not just purchasing food they were paying for the absolute experience. A component of this was having loving employees in all customer while away federal agencys. acceptable customer service skills that made the customer feel comfortable in the restaurant helped to keep customers coming back. When a wait went above and beyond her normal duties to transport a customer, the patron was likely to turn back because of the gravid experience offered. Exceeding customer expectations was crucial in attracting loyal customers who produceed to the establishment. another(prenominal) factor for success was having a wide breadth of product line and selection. Restaurants needed to offer many different kinds of dishes to attract a broad group of buyers. nigh examples were religious service chicken, beef, seafood, and vegetarian. If there were ten dishes or so within from each one of those categories, the restaurant was offering a large selection and a customer could find a meal they thirst. Offering various types of dishes helped cover the breadth of what was offered, such as breakfast, lunch, dinner, soups, salads, pasta, and sides. There were also various styles of food offered such as Mexican, bland, Cajun, Irish, Italian, Mediterranean, and more. Such a broad selection manipulated that customers found what they were looking for.If the consumer saw multiple meals he or she as interested in, he or she returned. The fourth part key success factor within the restaurant industry was the ability to respond quickly to shifting market conditions. Customers were ever changing what they wished, and restaurants needed to keep up with those changes. If a restaurant had an inability to change its menu, it could not compete with its rivals. Recently, consumers changed their need s to heart healthy, vegetarian, organic, low calorie, and low-carb. This also took into retainer seasonal changes.Soups became more prevalent in the spend than the summer. Certain seasonal soups like pumpkin, squash, and others were craved around the holidays, but not as much during other time in the year. Desserts and lastingness beverages followed similar patterns. Restaurants needed to change their menus to satisfy customers? cravings and remain competitive within the industry. Having a good overall consumer experience was fadeingly classical in the restaurant industry. This was crucial in construct a loyal clientele that could promote the business through word-of-mouth tactics and on a regular earth dined at the establishment.The overall experience took into consideration more than just food and customer service because it encompassed the entire value perceived by the consumer. This included price, food forest, feeling of service, ambience and atmosphere, and having a variety of offerings. Without that great experience, a customer would not return and they could verbally damage the restaurant? s reputation when they told friends about their poor experience. This factor was all-important(a) to build loyal customers and increase bulls eye awareness. Image and reputation was another key success factor because this was what attracted customers to the establishment.This also created word-of-mouth advertising for a restaurant. When something happened to crack a restaurant? s reputation, patrons no longer dined there, which led the companionship to go out of business. Image and reputation was how consumers perceived the bon ton, which could add value for the customer when it was extremely good. some other key success factor was having high consumer volume. No matter what type of eating establishment, having high customer foot traffic was essential for success. This increased speck recognition, word-of-mouth advertising, and sales.This factor was essential to success in the industry, without it, a restaurant was ineffective to grow, or even survive. These heptad key success factors dictated the industry and how restaurants needed perform in order to remain competitive in the industry. The restaurant industry was purely competitive and extremely groundless callable to the large number of rivals. The seven factors were eye sockets to focus on because that was what consumers deemed important. Critical Issues the Industry Faces Our analysis led us to the following critical issues set about by the restaurant industry. There were many opportunities in the industry for businesses to capitalize on.According to the analysis of the industry drivers, we reason out that the business life cycle was still in growth and there was a capacity shortage in the industry. This was an opportunity for the industry. Based on our analysis of the cinque forces sham, we concluded that there were many buyers in the industry with many choices i n selection of products. This was also an opportunity for the industry. Based on our analysis of the industry drivers, five forces good example, and the changes to the industry structure, we concluded that there were untapped markets and consumers were prone to give newly unfastened eating establishments a trial.Based on our analysis of the changes to the industry structure and the competitive environment and the five forces model, we concluded there was a threat to the industry in that there was low customer switching costs and low customer loyalty. Panera earnings corporations Competitive Capabilities i. Business Strategy Panera Bread Company? s strategic feel was to make Panera Bread a crosswise the country recognized brand name and to be the dominant restaurant hustler in the specialty bakery-cafe segment. Panera think to achieve this by being better than the guy across the street and implementing a self-made business model.Panera? s business model satisfyed customers? n eeds through providing reference food in a workaday pose that continued to bring customers in for the ambiance as well as the food. Panera achieved sufficient acquire to cover the costs of providing this value to the customers by selling food in the cafes and by collecting franchising fees and a percentage of franchisee sales. Management intended to grow the number of Panera Bread locations by 17% annually and expand further into suburban markets. Panera focused on achieving a 1 cafe per 160,000 people per location ratio by 2010 through effective use of franchising.Panera intended to build a loyal clientele by employing a superordinate word business model and offering journeyman breads as a base of a high woodland menu that changed to glitter evolving consumer tastes. The prevailing market in which Panera operated experience 5% growth in 2006. consequently Panera? s strategy of growth was in sync with market conditions. Furthermore, by rivet on building a loyal clientele t hrough quality breads and a menu that suits customers tastes, Panera tailored the strategy to strengths the conjunction already possessed. Panera? ability to create well crafted, predictive strategies and adapt well to changing conditions with reactive strategies indicated that Panera? s strategy was a dynamic fit to the corporation and market. Therefore, Panera? s strategy was a good fit for the party. run in an almost pure competition environment, Panera confront threats from low cost and differentiated products. Panera employed a lift out cost provider strategy to take advantage of the large amount of value-conscious buyers who want a good meal and pleasant dine experience at an inexpensive price.Taking a position as dress hat cost provider, in conjunction with a lading to providing crave-able food that people trust, served in a warm, community gather place by associates who make guests feel comfortable helped Panera achieve a strong strategy, but the competitive nature of the industry does not permit the strength of Panera? s strategy to become a competitive advantage. Panera had 0. 5409% market share of the $345 billion annual sales in the restaurant industry. though Panera was not a dominant operator, this was a relatively big market share, given the nurture of the industry.The federation? s profits and number of locations grew from 2002 to 2006. Panera? s strategy led to a strong pecuniary position and a sizable market share. Because Panera? s strategy was a good fit for the company, was strong in the competitive industry, and was pecuniaryly in(predicate), we concluded that Panera? s strategy was working very well and gave the company a competitive position in the industry. Therefore we feel Panera? s overall strategy, as well as its strategy to grow the business and build a loyal clientele was a strength. ii.Functional Area Strategies Panera? s marketing strategy contained collar distinct initiatives. The first aimed to raise the quality of awareness about Panera by focus on quality crave-able food the consumer can trust, and by enhancing the appeal of its bakery-cafes as meeting place places. The second initiative focused on boosting awareness and trials of Panera at multiple meal times. The third initiative was to increase consumers? perception of Panera as a dinner option. end-to-end the entire marketing strategy Panera avoided disfranchised-sell, aggressive advertising.Panera preferred consumers gently collide with and pause the brand. As Panera performed well pecuniaryly in past years, this marketing strategy was successful. However our analysis led us to conclude there was an untapped potential in the soft-sell marketing technique. This was a weakness that Panera must bolster to pursue industry opportunities. Panera? s production and distribution strategy was to use economies of carapace and underlyingize trading operations for the mark fashioning process. There were 17 regional fresh bread facil ities to service the 1,027 Panera bakery-cafe locations.By breakling the process at exchange locations Panera was able to ensure consistent quality and booty making efficiency. Panera? s production strategy supports the overall strategic intent of being better than the guy across the street and ensures quality to keep customers coming back. Because Panera? s production strategy back up the company? s overarching strategic goals, we concluded that the strategy was working well and was a strength for Panera. Panera had a peculiar franchise dodging. all(prenominal) franchise license was for a multi unit deal, usually for 15 bakery-cafes to be subject over six years.Panera unless granted licenses to applicants who met stringent criteria. These criteria included a net worth of $7. 5 million or more, access to resources that would allow for the elaboration of 15 locations, real estate and multi unit restaurant operator experience and commitment to Panera? s brand, culture and he ating. Historically, Panera? s thought-provoking franchising model was a success. Franchisees indicated a high level of happiness with Panera Bread Company? s concept, support and leadership. Likewise, Panera reported satisfaction with the quality and pace of franchisee openings and the franchisees? perations. Panera committed limited fiscal resources to franchising the company did not pay franchisee construction of area phylogeny payment, or hold any equity in any of the franchise-operated bakery-cafes. Because the franchising model support the company? s intent to grow to a dominant restaurant operator, we concluded Panera? s franchising system was a strength. Panera committed to constantly staying in tune with consumers? changing tastes for the base of the research and discipline strategy. Panera regularly reviewed the menu and revised the options to sustain customer interest.When create new products, Panera first made the menu items in footrace kitchens before introducin g them in a select few bakery-cafes. Panera used the test kitchens and select rollouts to determine customer reply and ensure that the products could be produced in mass quantities and still maintain the high quality standards associated with the Panera brand. The successful products were then introduced in all the chain locations and integrated into menus. Because it helped keep up the Panera standard for quality food that customers craved, the research and development aspect of Panera? s strategy supported the marketing strategy.Furthermore, by ensuring consistently high quality food that consumers depended on, Panera? s extensive research and development supported the company? s strategic goal of becoming a dominant operator in the restaurant industry. iii. Assessment of Panera Bread Companys strategic Performance -Business Strategy Performance The strategic intent of Panera was to become a nationally recognized brand and dominant operator in the specialty bakery-cafe segment. I n 2005 Panera Bread was the highest rated for the fourth year in a row among competitors in the Sandleman Associates national customer satisfaction survey.Panera had also won best of awards in 36 states and across a range of markets. In addition, J. D. Power and Associates? 2004 restaurant satisfaction reading of 55,000 customers ranked Panera Bread highest among quick-service restaurants in the Midwest and Northeast regions of the United States in all categories, which included environment, meal, service, and cost. Panera created this nationwide renown through the successful implementation of the company? s business model. In 2006 Panera opened 155 company and franchise owned cafes bringing the total units to 1,027 in 36 states.The continued expansion of cafes in new markets showed that Panera was operate successfully within the framework of the intended strategy. However, Panera managed to open altogether 1 cafe per 330,000 by 2006. So, although Panera had begun the process of increased penetration into markets, the benchmark given of 1 cafe per 160,000 people in 2010 at the time of the case had not been reached. Therefore a complete analysis of the success of the growth strategy was not possible. Panera differentiated the bakery-cafes by implementing several important menu changes that intercommunicate the targeted consumer needs and trends.The addition of good carb breads, antibiotic-free chicken, and an artisan line of smart goods were employed as part of a differentiation strategy. In 2005-2006 Panera introduced the G2 concept in an attempt to bolster the dining environment, indeed providing more value for the customer. There was no data to support or get across the effectiveness of these strategic moves. -Functional Area strategic Performance Due to fact that the Panera won considerable accolades in consumer satisfaction, we determined that its marketing initiative of developing customer awareness of the quality and trust-worthiness of the com pany? s food was working.The second initiative of boosting awareness and trial of dining at Panera Bread at multiple meal times had not been shown operationally. Therefore, we were not able to determine the mental process of this strategy. The marketing data showed that, 85 % of consumers who were aware that there was a Panera Bread bakery-cafe in their community or resemblance had dined at Panera on at to the lowest degree one occasion. From this data, we concluded that the strategy was sound to pursue and specifically implement. The third initiative of increasing consumers? perception of Panera as a dinner option had not yet been use with specific steps.The marketing research showed that 81% of consumers indicated a considerable willingness to try Panera at other meal times which supported following this strategy into the implementation phase. Panera? s production and distribution goal was to ensure lowered costs and quality control with a strategy of centralized locations pi ckings advantage of economies of scale. The quality of the product was show by the many best of awards and other consumer satisfaction accolades. The lowered costs due to economies of scale and the high quality of the products indicate that Panera? production and distribution strategy was successfully implemented and executed. Panera pursued a unique franchising model based on multi-unit, multi-year deals with franchisees who were selected based on stringent criteria. The franchised cafes performed better in return on equity investments and average weekly and annual sales than company-owned cafes and were also equally or slightly more profitable. The measured success of the franchisee owned stores showed that the franchising model strategy was performing well. The research and development strategy was to stay in tune with customers? changing tastes.The implementation consisted of regularly reviewing and rewriting the menus, and the use of test kitchens for exploring new products a nd find customer response. In 2003 Panera scored the highest level of customer loyalty among quick-casual restaurants, according to a study conducted by TNS Intersearch. This customer loyalty indicated the success of Panera in anticipating customer needs through the company? s research and development strategy. iv. Resources Panera had skills and expertise in sight selection and cafe environment. They chose sights and cafe environment by the following method. Based on analysis of this information, including the use of predictive modeling using proprietorship software, Panera developed projections of sales and return on investment for candidate sites. This stamping ground was difficult but not unworkable to copy. The length of time it would polish depended on how tall(prenominal) competitors chose to work to develop similar technology. This resource was really competitively high-ranking because no other competitors had it. It could not be trumped by rival? s resources becau se the aforementioned(prenominal) software had to be developed before competitors could use it.Because this resource was hard to copy, competitively blue-ribbon(prenominal), potentially long lasting and could not be trumped by rivals? resources, the site selection and cafe environment was a competitive capability. This competitive capability was a strength that gave Panera a competitive advantage. Our analysis revealed that Panera? s advertising and promotion strategy was too weak. They had underutilized promotion potential. Panera? s strategy was to raise the quality of awareness by the gage and appeal of its breads and cook goods, by mallet the theme food you crave, food you can trust. Panera also aimed to raise awareness and boost trial of dining at Panera Bread at multiple meal times (breakfast, lunch, chill out times, and dinner. ) Panera avoided hard-sell approaches, preferring instead to employ a range of ways to quiet drop the Panera Bread name into the center of cons umers as they moved through their lives and let them gently collide? with the brand the idea was to let consumers discover? Panera Bread and then convert them into loyal customers by providing a very satisfying dining experience. This approach was a great concept and successful to an extent, however we conclude that because many of Panera? competitors were using more aggressive promotion, the current strategy was not aggressive enough. Management claimed that the company? s fresh- dough-making capability provided a competitive advantage by ensuring consistent quality and dough-making efficiency. Because this dough making capability allowed Panera to maximize the production capacity, used no preservatives, did not freeze the product and control the quality of the dough by making it themselves, this stamping ground was hard to copy. How long it would last depended on strengthening competitor capabilities and their interest in the dough making market.Based on the first two tests, we conclude that this capability was really competitively quality and could not be trumped by rivals? capabilities and consequently a competitive advantage. Panera? s franchise system used superior intellectual capital with the use experienced and capable workforce. The success of the franchise system was an example of turn out managerial know-how. The site selection software granted the franchises cutting-edge knowledge in technology to choose locations and cafe environments. The stringent franchisee requirements employed only the most dedicated, well capitalized and capable franchisees as managers.The franchise system was hard to copy because of the stringent requirements for the franchisees, managerial know-how and the proprietary site selection software. lay selection system would tend to last because of how difficult it was to copy and could not be trumped by rivals because it was so rare, and was characterized by a gradual learning curve. This analysis led us to the conclusi on that Panera? s franchise system was a distinct competitive capability and therefore gave Panera a competitive advantage. The product research and development program was also an example of Panera? superior intellectual capital. Product development was focused on providing food that customers would crave and trust to be tasty. brisk menu items were developed in test kitchens and then introduced in a limited number of the bakery-cafes to determine customer response and verify that preparation and operational procedures resulted in product consistency and high quality standards. If successful, they were then rolled out system wide. The research and development system was hard to copy because of the gradual learning curve and constant need for revision.Because each competitor was also engaged in tactics to improve product development, we conclude that this intellectual capital was only hard to copy in Panera? s specific product line. Because it was not generally hard to copy we d o not conclude that it was competitively superior. Based on our analysis, we conclude that Panera? s product research and development was a resource capability and therefore strength, but it was not a competitive advantage because many competitors have the same resources. Panera? s financial position was an important resource. Panera had a low debt to equity ratio.In 1998 this strategy began with the sale of Au Bon painfulness for 73 million in cash. This strategy was well served by the franchise system. Panera did not finance franchisee construction or area development agreement payments or hold an equity interest in any of the franchise- operated bakery-cafes. The franchise system allowed Panera to keep long term levels debt low. This allowed Panera to use cash militia and or take on long term debt at lower costs when capital was necessary to seize opportunities. Panera? s financial position was a resource capability because it was hard to copy.The resource tended to last long because the franchise system kept debt low. It was not really competitively superior because other competitors could have had similar financial positions. Because this capability was hard to copy but it was not competitively superior, we conclude that it was a capability and there for strength, but not a competitive advantage because others whitethorn have a similar financial position. v. Value Chain -Inbound Logistics The case does not provide enough information to find on the inbound logistics that Panera has with suppliers.However, each franchisee purchased dough directly from Panera Bread. Panera had an interest in each of the franchised stores succeeding because the company received 4%-5% royalties from sales continually. This meant Panera as the supplier had an interest to keep prices of dough as low as possible to maintain workable franchise operations. -Operations Panera provided and needed comprehensive preliminary and back of house training, market analysis, and bakery -cafe certification. This incorporated level tactic impacted the company? franchised and company owned stores by alter Panera to develop systems used by all the cafes thus applying economies of scale to operations. Since each cafe-bakery did not have to develop its own operations structure this reduced costs for each store. In addition, the methods Panera introduced to each store had proven historically successful, thus increased the learning curve for a new cafe and lowered costs. Panera had a policy to not finance new franchisees, area development payment agreements, or hold any equity in the new cafes.This operational model resulted in minimal semipermanent debt and low capital intensity to expand the Panera brand. All the cafes offered an assortment of 20-plus varieties of bread baked daily and as of 2006 at least 22 types of sandwiches. all(prenominal) of these breads and sandwiches were regularly reviewed to determine whether the products agreeed regular customer needs, n ew consumer trends, and seasonal relevance. The complexity of the product line enabled Panera to match menu items with a variety of customer needs. This process ensured that weak selling items would be removed limited excess inventory. outbound logistics Each franchisee purchased dough directly from Panera Bread. Each dough making facility was able to produce dough for six bakeries. The fresh dough was sold to both companyowned and franchised bakery-cafes at a delivered cost not to exceed 27% of the retail value of the product. These costs margins were achieved by producing the dough at central locations employing economies of scale. -Sales and Marketing Panera used focus groups to determine customer food and drink preferences, and price points.This work was done by only a few individuals at the corporate level and scaled to the rest of the cafes. The existing company and franchise owned cafes would be able to take advantage of this market information and reduce costs associated wi th sales and marketing information. The franchising model Panera used required the franchisee to pay 0. 7% of total sales to a national advertising fund and 0. 4 % of total sales as a marketing administration fee. Franchisees were also required to spend 2. 0 % of total sales on advertising in local markets.Panera contributed similar amounts of capital from the company owned stores. Requiring the franchise owned cafes to pay a significant portion of marketing costs allowed Panera Bread to lower the company? s capital contribution. -Research and Development New menu items were rolled out in limited cafes and developed in test kitchens prior to nationwide release. This process screamed two cost drivers. First, by employing economies of scale individual cafes will not have to spend resources and capital investing in the development of new menu items.Second, through the expertise of the advanced research and development department Panera ensured both quality of product and process. This resulted in less product blow out and increased customer satisfaction and in turn lowered costs. -Integrated Value Chain Effect Panera Bread utilized both structural and executional cost drivers to lower costs on the value chain oddly in inbound logistics, operations, outbound logistics, sales and marketing, and research and development. The cost reduction across the value chain gave Panera a strong capability. vi.Assessment of Panera Bread Companys Financial Performance and Capabilities Panera Bread Company showed growth in its profitability from 2002 to 2006, but there were no industry standards presented to equalize the numbers in relation to the industry and individual competitors. Panera Bread Company utter a desired growth rate of 17% each year, and the sustainable growth rates from 2003 to 2006 were all above this desired rate (See Financial Ratios Section), but the essential growth rates were slightly lower for these years (See Financial Ratios Sections).For the most p art, Panera Bread Company showed consistent results for the profitability financial ratios calculated. Therefore the company keep focusing? s objectives and values each year. Panera? s ability to maintain cash reserves allowed the company to expand and open new cafes while maintaining management? s goal of not taking on large amounts of long-term debt. Panera Bread Company showed increased revenues as the number of cafes increased, which shows company growth (See Financial Trend Graphs Section). Also, Panera? current ratio was 1. 16 in 2006, which shows the company was able to satisfy all current obligations from operating(a) activities without the need for long-term financing. Since Panera strives to decrease long-term debt, the cash reserves could be used for expansion without the need to restrict assets for future obligations. The company presented low total debt and debt-toequity ratios which allowed the company to avoid overleveraging itself. This also left some capacity for the company to take on long-term debt if deemed necessary during expansion.The company created a strong financial position for itself by having available cash reserves and diminish the amount of long-term debt assumed. This created an opportunity for expansion. vii. Strategic Issues Panera Bread Company Faces The strategic issues that Panera faced were as follows. Our first strategic issue was Panera? s potential to use its internal franchising capabilities to take advantage of the fact that the industry life cycle remained in its growth phase.The second strategic issue Panera faced was how to alter its existing promotion strategy in untapped markets in order to take advantage of the opportunity presented by customer? s willingness to try new restaurants. The third strategic issue was how Panera could use its internal capability to build loyal clientele to defend against the threat of low switching costs and low customer loyalty. The final strategic issue was how Panera could use i ts internal capability of advanced research and development skills to take advantage of the large number of buyers within the industry. iii. Managements Values Management valued the ardor Panera Bread cafes showed for the quality and value of the products offered. The main example was in the company? s dough making capabilities. Panera believed that actions spoke louder than words, so the company needed to show the high quality of its food to the customers. Management believed that the winning menu and the dining ambience of its bakery-cafes provided significant growth opportunity, despite the fiercely competitive nature of the restaurant industry.Management strived to become the dominant operator within the bakery-cafe segment as well as a leader in the specialty bread segment while making its brand name nationally recognized. Another key value within Panera? s management was maintaining a debt-free balance sheet. The ability to uphold this value came from the company? s franchis ing model because the franchisees financed the majority of the cafe building expenses. Management stressed the quality of the food and service offered and knew that all other goals, such as expansion, recognition, and holding a higher market share, would simply fall into place as a result. x. Organizational Culture Panera Bread Company? s organisational culture began with the overall company and the dough-making facilities and riddle out to the bakery cafes, whether company owned or franchised. Panera Bread Company was pertain on its dough-making capabilities. The company guaranteed freshness and high quality in each dough it created. The dough was then passed to the cafes, where it was baked fresh and delivered to the customer. The quality controls within the company were maintained through the entire process to ensure that the customer would be pleased with his purchase. shade was the basis for success, and quality was what the company relied on to generate loyal customers. Fran chising was also a crucial aspect to Panera? s organisational culture because cafes were where the majority of customer contact occurred, and it was the basis for some of management? s values. Panera? s franchising model was extremely stringent, so only certain individuals were able to have cafes. There were eight criteria that had to be met in order to be considered, and a passion for fresh bread was one of them. Panera ensured that each franchisee had the capital and prior knowledge necessary to succeed.The stringent criteria and Panera? s site selection technology provided a strong basis for cafe success, which in turn led to a strong and satisfying organisational culture. Although Panera did not own the franchised cafes, the company dictated where supplies could be obtained to ensure quality. Panera also skilled the franchisees so they could operate on their own successfully, but turn to the company for guidance when necessary. The open environment was helpful without it being too overbearing. The strength in the organizational culture was a contributing factor to Panera? success and continued growth. Appendices i. ii. iii. iv. v. SWOT Matrix Stakeholder Matrix Financial Ratios (See attached exceed file) Financial Trend Graphs Responses to Questions Not Answered in the Presentation i. SWOT Matrix STRENGTHS -Strong and get-at-able growth strategy -Ability to build a loyal clientele -The business model -Franchising system site selection and proprietary software -Research and Development Product plan -Financial position lack of long term debt -81% of frequent and moderately frequent customers indicated a willingness to try Panera for multiple meal timesWEAKNESSES -Under utilized potential in promotion strategy -Frequent diners only come at one meal time per day -Only located regionally OPPORTUNITIES -The industry life cycle is still in growth -Low cost substitutes viewed as lower quality value -Large number of small buyers in the industry (Lack of bu yer bargaining power) -Buyers are characterized as likely to give new restaurants a try THREATS -Low switching costs/low customer loyalty -Product is a discretionary purchase -Substitutes are genial and lower priced -Wide breadth of competitive rivalry -Steep learning curve ii.Stakeholder Matrix Stakeholders Companies, Groups, And Individuals fiber/Nature of the Relationship/ What We Do For Each of Them -A chain of cafes perceived as a neighborhood bakerycafe which can be found in various locations around the U. S. and quality is consistent in all locations require How We Satisfy Those Needs Customers -U. S. Consumers -A quality food option which is perceived as a good value -A pleasant dining experience with good service and a warm ambiance -By providing quality food in a casual setting that continued to bring customers in for the ambiance and the food -Creating food consumers crave and can trust at all locationsCompetitors -Independent single-unit establishments with fewer than 20 employees -Competed on a local level, as Panera desired to be seen as the local, neighborhood cafe and gathering place -Fast-casual restaurants -Competed on inviting dining environment, quality of food and enticing menus -Commercial eating institutions -Competed on price, service, ambiance, overall experience and convenience -Provide a successful franchising model to be pursued by highly -Preopening assistance with market -Provided market analysis and site selection assistance, lease review,Employees -Franchisees capitalized, experienced and passionate individuals analysis and site selection, training programs, leadership new store opening assistance, a comprehensive sign training program, and a program for hourly employees, benchmarking data regarding costs and profit margins, company developed marketing and advertising programs, neighborhood marketing assistance Shareholders -Owners of the 31,313 shares outstanding -The community of the regional markets of company and franchi sed cafes Provided a stable company to invest in -Do not pay dividends -provide a gathering place for locals and visitors and support the community the locations operate in -A food option and company that adds value to its product and the community at large -Panera sponsored local community charity events community of interests iv. Financial Trend Graphs shed light on Income 70000 Net Income (Millions) 60000 50000 40000 30000 20000 kelvin0 0 2002 2003 2004 Year 2005 2006 This simulacrum shows the net income for Panera Bread Company from 2002-2006. It depicts a steady increase in net income each year.Net Cash Provided by Operating Activities Nat Cash Provided by Operating Activities (Millions) 120000 100000 80000 60000 40000 20000 0 2002 2003 2004 Year 2005 2006 This figure depicts the net cash provided by operating activities for Panera Bread Company from 2002 to 2006. It shows an increase over time, except from 2005 to 2006. Open Cafes 700 Number of Cafes Open 600 500 400 300 20 0 100 0 2000 2001 2002 2003 2004 2005 2006 Franchised Cafes Company own Cafes Year This figure shows the number of cafes opened at the end of each year. It depicts growth within the company.It also shows that franchise-owned cafes are more prevalent than company-owned ones, which shows success in the company? s franchising model. Store Revenues 2500 Store Revenues (millions) 2000 1500 1000 500 0 2000 2001 2002 2003 Year 2004 2005 2006 This graph shows a steady increase in revenues for each cafe over time. v. Responses to Questions Not Answered in the Presentation Alterations to Opening Cafes in Untapped and Low Penetrated Markets pass Our tribute needed to be neutered to provide a separate action plan from testimony to pursue a more aggressive soft-sell promotion strategy.We altered this recommendation by moving Panera? s focus when opening new bakery-cafes using the superior franchising model to solely untapped markets. These untapped markets would allow for sufficient growth to achieve the desired 1160,000 ratio. Alterations to the More bellicose Soft-Sell Promotional Strategy good word Recommendation two needed to be altered from a marketing strategy to a purely promotional strategy. Panera needed to promote its quality menu by implementing the suggested promotional strategies in its bakery cafes.The purpose of the promotional campaign was to bring new customers into the cafes. This well-provided the opportunity within the industry that customers are prone to try newly opened eating establishments in their community. The campaign needed to be implemented in untapped and low-penetrated markets in order to develop brand awareness by attracting new patrons. though it may help, it will not be as successful in the highly-penetrated markets because Panera is already an established company with high brand awareness and loyal customers.Alterations to Implementation of Oven Fresh, To Go Program Recommendation In response to your concerns regarding recommenda tion three, we agree that our implementation of Oven Fresh, To Go did not specifically address the low switching cost threat by rewarding return customers for their loyalty. To resolve this issue, we altered the implementation steps to include a punch card in the to-go packaging that would reward existing Oven Fresh, To Go customers for their loyalty and raze their switching costs with progressive discounts based on their level of return patronage.Alterations to Broaden Product Scope Recommendation During the presentation of the recommendations there was concern that recommendation 4 did not adequately address the goal of increasing market share. The main(a) concern was that offering an expanded dinner menu after 430 pm would not be incentive enough to keep down factors of image, location, and substitutes for Panera to obtain a relevant increase in market share.To bolster the strength of our recommendation and overcome the aforementioned hurdle to success we have amended our reco mmendation to include the addition of beer and wine at select Panera locations. A Panera site will qualify for alcohol consideration if the area demographics and local legal and regulatory environment are ideal. Selected locations will participate in wine-tasting and other events to engage the surrounding community. The confederacy of new menu items and select sites serving alcohol will create a new and lively experience for dining at Panera.