Panera Bread Company

Panera Bread Company • By: Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman

Contents • The Key Question • Panera Bread Company History/Overview • External Environment (PEST) • Market Overview (Demand) • Industry Overview (Supply) • Competitive Landscape • Internal Analysis • SWOT Analysis • 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?

Panera Bread Company Overview

Panera Bread Company Overview • Strategic Intent • “Make great bread broadly available to consumers across the United States”

Industry Overview (Supply) Porter’s five forces: Threat of substitute products HIGH Rivalry among existing competitors Bargaining power of buyers HIGH Bargaining power of suppliers LOW Threat of new entrants LOW

Porter’s Five Forces

Industry Overview (Supply)

Internal Analysis – Markets Served Low/Untapped Markets • Competing in 5 submarkets • Breakfast • Lunch • “Chill out” • Light evening • Take home bread • Differentiate with wide variety of menu options and café ambience • Management goal to make Panera a nationally recognized name brand • High penetration in St. Louis, Columbus, Jacksonville, Omaha, Cincinnati, Pittsburgh, Washington DC

Internal Analysis – Core Competencies 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?

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

Internal Analysis – Supply Chain • 17 regional fresh dough facilities (16 corporate, 1 franchise) • Service both company and franchise cafes • Manufactures over 50 different products • Dough distributed via 140 trucks, each truck delivering to 6 cafes on average • Panera corporate recognizes profit on dough sold to franchise locations • Fresh dough making considered competitive advantage by management as it helped with consistency and effieciency • With rapid plans for expansion is this advantage in jeopardy as trips are already exceeding optimal 300 mile trip? • Sweet goods provided by Dawn Food Products in a cost-plus agreement • Finished onsite by bakers, but single source for sweet goods improves ability to deliver consistent products

SWOT Analysis for Panera Bread

Recommendations • Work with franchisees to acquire Corner Bakery Café??? (Franchisee locations are more profitable and provide higher ROI) • Expedite expansion in Canada or International (Europe)?? • Vertically integrate and acquire Dawn Food Products Inc. • Limit growth in existing markets and begin to focus on expansion into South and West • Offer existing franchisees opportunity to enter markets first • If limited interest open corporate stores to see if concept works before opening up new markets to new franchise partners

Panera Bread Company