Panera Bread Case Study Answers

Panera Bread Company is a leader in the “fast-casual” segment of the restaurant industry. With over 1,777 companies owned and franchise locations across the country and Canada. Panera has dominated the bakery café category, by providing consumers with superior fast-casual dining experience.

Founded in 1981 by Louis Kane and Ron Shaich as Au Bon Pain Company Inc.; a bakery-café company in the East Coast. In 1993, the company bought the Saint Louis Area Bread Company (20 additional stores). After an extensive market research by the management team, Panera belief that there was a need for higher quality, fresh and quick dinning. The idea to try in the “fast-casual” dinning segment was in the works. By 1997, the idea proved to be a success; sales volumes increased, and over a hundred new stores were opened. Later that year, management decided to officially rename the company to Panera Bread Company. Not long after the changed, in 1998 the Board of Directors decided to sell Au Bon Pain division to ABP Corp. for $73 million dollars. Using the revamped company’s concept and debt free, Panera new focus was concentrated in the fast growth of the company, expanding its locations all across the United States.

Mission, Vision and Objectives

Ron Shaich believed Panera Bread had the potential to become one of the leading

“fast-casual” restaurant chains in the nation. His vision was to create a specialty café anchored by an authentic, fresh-dough, artesian bakery and upscale, quick-service menu selection (Thompson, Peteraf, Gamble & Strickland, 2014, p.C-122).
The mission was to make Panera Bread a nationally recognized brand and to be the dominant restaurant operator in the upscale quick-service dinning. The goal was to “Be better than the guys across the street” (Thompson, Peteraf, Gamble & Strickland, 2014, p.C-124).
Based on the vision, mission and goals, Panera was extremely focused on the expansion and growth of the company. Panera ambitious goals were to maximize growth, and have 2,000 stores in operation by the end of 2010. After a short pause in 2008-2009 (recession), the company implemented the rapid-growth strategy by opening a net of 76 new company-operated and franchises in 2010. In 2011, they opened 88 new establishments, by the end of 2012 another 111 new establishments, and 125 in 2013.The company has been successful in their aggressive strategy, planned to open between 115 and 125 new establishments in 2014 (Thompson, Peteraf, Gamble & Strickland, 2014, p.C-121).
Current Strategy
Panera’s efforts to position themselves in the marketplace and gain a competitive advantage over strong competitors have relied on the Broad differentiation strategy. According to Thompson et al. (2014), this type of strategy focus on seeking to differentiate the company’s product offering from rival’s products by offering superior attributes that will appeal to a broad spectrum of buyers (p.118).
The strategic intent was to make Panera Bread a nationally, recognized brand name, and a dominant restaurant operator that provides specialty bakery and café experience, to urban workers and suburban dwellers looking for quick-service. In addition, make their artisan fresh baked bread broadly available across United States.
Panera management’s implemented a business model called “Concept Essence”, determinate to differentiate Panera from its competitors. This business model fulfilled customers’ needs by first, providing a comfortable and welcome environment for families and friends to sit and enjoy a higher quality meal. In addition, Panera develop a diverse menu in order to draw customers from breakfast to dinner hours. Panera gained the competitive advantage because the service experience it provides. The company provides a complete “fast-casual” dining experience; what they call the “Panera Warmth” (Thompson, Peteraf, Gamble & Strickland, 2014, p.C-13). Features such as, cozy seating, fireplaces, warm lighting, soft music, free Wi-Fi, stainless steel silver ware, real china, and relaxing décor all create a welcome and comfortable environment to dine in.
Overall, this strategy has proven to achieve its aim for Panera because customers are willing to pay the price for quality and unique service and product. This is something that the competition has been unable to match.
Industry Analysis
The competitive pressure for a company within an industry comes from five main sources; (1) competition from rival sellers, (2) potential new entrants to the industry, (3) competition from producers of substitute products, (4) supplier bargaining power, and (5) customer bargaining power. After analyzing the restaurant industry and the segments that Panera operates in, there are several factors that have strengthened or weaken the competitive pressure of the company.
Rivalry among competing sellers: Strong
The restaurant industry in the U.S.

is extremely competitive, labor intense and risky. It is saturated with multiple different types of restaurants many competing in the exact segments. Companies operating in this type of environment seek differentiation strategies in order to set themselves apart from rivals, using various tactics such as pricing, food quality, menu theme, signature menu selections, dinning ambience and atmosphere, service, convenience, loyalty programs, specials, heart-healthy, and location (Thompson, Peteraf, Gamble & Strickland, 2014, p.C-138). Many restaurants can’t keep abreast and don’t survive, making them go out of

business.

Threat of new entrants: Weak
The cost to operate a restaurant is extremely high. The startup capital required can become a high entry barrier for many entrepreneurs. In addition, all the required governmental and legal policies and regulations can be restrictive depending on the segment that will operate. In this industry entry barriers are high, therefore making the threat of entry low.
Substitute’s products: Strong
The competitive pressure is strong because consumers can find a vast of good substitutes that are available, easy to find, and at a less price. This factor puts pressure in companies operating in this industry to focus on maintain operational and overhead cost low, or reduce them in order to maintain prices affordable.
Supplier bargaining power: Weak
The supplier bargaining power is weak within this industry. There is a vast of supply chain that can provide the same type of supplies at a competitive cost. In most occasions the switching cost is low, making easier for a company to change its supplier.
Buyer bargaining power: Strong
With the vast amount of restaurants, consumers have assorted selections to choose from, therefore making the pressure from buyers bargaining power strong. The constant change of consumers taste forces companies to provide a variety of items or constantly change its menu just to attract more consumers. Loyalty to existing restaurants has deceased, more consumers are seeking for variety and are willing to try out new restaurants. Price is another critical factor; consumers tend to be more prices sensitive when making purchases depending on their economic status. This limits a company the ability to increase prices and continue to maintain a high volume of clientele.

Overall, it is difficult to operate in this industry where rivalry is extremely strong; the operating cost, the barriers for new entry, the treat of substitute products, and buyer bargaining power are all strong, making this industry less desirable to operate in.