The case study: “Panera Bread Company (2010): Still Rising Fortunes?” Case 16 st

Question

The case study: “Panera Bread Company (2010): Still Rising Fortunes?” Case 16 starting on page 16-1, will include a synopsis; using the Week 1 Addendum, identification of their resources,capabilities, and core competencies; and three findings of fact. Each finding of fact will require a justified solution, each a minimum of one page each. Support your recommended solutions with rational thought learned from the course material, other courses, and real-life experiences.

-Include a synopsis

-The resources, capabilites, core competenciesand three findings of fact need to be identified in a bulleted format.

-Each finding of fact will require a justified solution, each a minimum of one page each

Support your recommended solutions with rational thought learned from the course material, other courses, and real-life experiences.

read Company (2010) Rising Fortunes? celette and Ellie A. Fogarty ND BASIC, but nonetheless special has transcended millennia. A mas- simple ingredients to create what has been an integral part of society American creation, was ter baker combined and culture for over 6000 years. Sourdough bread, a uniquely made from a "cul and water and was the to be cultured, fed, and tended or "starter." Sourdough starter contained natural yeasts, flour medium that made bread rise. In order to survive, a starter had proper care and maintenance, the yeast, or the growth factor, would slow down and die Without a strong starter, bread would no longer rise Ronald Shaich, CEO and Chairman of Panera Bread Company, created the company's starter." Shaich, the master baker, combined the ingredients and cultivated the leavening agent that catalyzed the company's phenomenal growth. Under Shaich's guidance, Panera's total systemwide (both company and franchisee) revenucs rose from US$350.8 million in 2000 to US$1,353.5 million in 2009, consisting of US$1,153.3 million from company-owned bakery-café sales, US$78.4 million from franchise royalties and fees, and US$121.9 million from fresh dough sales to franchisees. Franchise-operated bakery-café sales, as reported by franchisees, were US$1,640.3 million in fiscal 2009.' Panera shares have outperformed every major restaurant stock over the last 10 years.2 Panera's share price has risen over 1 Along the way, Panera largely led the evolution of what became known as the "fast casual from US$3.88 a share on December 31, 1999, to US$67.95 a share on December 28, 2009 restaurant category Ronald Shaich had clearly nurtured the company's "starter' and had been the vision and driving force behind Panera's success from the company's beginnings until his resignation This case was prepared by Ellie A. Fogarty, EdD, and Professor Joyce P. Vincelette of the College of New Jersey the written permission of the copyright holders, Ellie A. Fogarty and Joyce P. Vincelette granted by the publisher, Prentice Hall, for the book Strategic Management and Business Policy, 13t international and electronic versions of this book) by the copyright holders, Ellie A. Fogarty and Joyce P. Vincele This case was edited for SMBP 13th Edition. The copyright holders are solely responsible for case publication of the case (translation, any form of electronic or other media) or sale (any form of partnersh publisher will be in violation of copyright law, unless Ellie A. Fogarty and Joyce P. Vincelette have granted additional written reprint permission. Reprinted by permission. Ellie A. Fogarty and Joyce P. Vincelette. This case cannot be reproduced in any form without . Any other

Explanation / Answer

Panera Bread Company is operating in 'Fast casual' restaurant category with a defined mission of providing the best and differentiated customer experience. Panera bread has its roots from 1976 with Au Bon Pain which was then sold to Louis Kane. Further transitions included its merger with cookie store to form Au Bon Pain Co. Inc led by Kane and Shaich. Due to growth limitation, the business expanded to serve more customers from suburban categories that included the acquisition of Saint Louis Bread Company in 1993 which later become the platform of Panera Bread. The bakery-café gained popularity under Saint Louis Bread co and resulted in immediate results. This brought the store to the pinnacle of success by increasing sales, expanding business and gave birth to the concept of fast casual category. The first mover advantage in fast casual category gave Panera Bread the competitive edge that leads it to maintain its leadership even in recessionary period. The goodness of artisan bread coupled with a serene environment provided its consumers the prompt services of fast food at the luxury of fine dining environment.

Identification of Resources

Panera bread resources lie in its leadership that focuses on the vision of serving highest customer value. The leadership included the founders who envisioned Panera Bread as the leader in fast casual segment. Ronald Shaich who served as CEO was the master mind behind the organization success as he realized the potential of artisan bread offerings to customer in a bakery-café atmosphere (Lyons, 2015).

The top management is one of the prime resources that evolved Panera. Since the target market demographics for organization is 25 to 50 years old the top management falls close to this age range within 42-57 years and thus contributing through their own range of experiences that realize the demand pattern of the demographics while considering the business aspect of organization.

The financial strength of Panera also contributed in its overall growth and market leadership. The evolution of Panera was based on a debt-free condition that increased the influx of capital into establishment of bakery-café restaurants. Also, since it focused on franchising its business with almost 57% of its cafes owned by franchises, it served as a mean of contributing to its financial resources.

Panera's resources also included its ability to setup bakery-store at strategic positions that lead to stronger sales even in recessionary period. This was possible as Panera had a profitable financial statements and strong management skills that made it a desirable tenant for these locations. The human resource is prime resource of Panera considering it is operating in services industry. Panera recruited skilled associates for its bakery-cafes, dough facilities and support center operations and also designed different training programs in order to increase its level of operations. Since the organization was witnessing boom it also lead the managers to enjoy the success which helped in capturing the highly skilled and experienced human capital that ultimately funneled.

Findings and Solutions

The main challenge is to determine how Panera Bread can continue to achieve high growth rates in the future. Panera Bread is operating in an extremely high competitive restaurant market which forces the company to improve and to grow steadily for staying profitable. The company’s mission statement of putting “a loaf of bread in every arm” is just underlying Panera’s commitment for growing. They are now in a good financial situation and facing growth rates of up to 20% per year in a niche market that has a great growth potential. In the next 7 years the fast-casual market is expected to grow by 500% in sales to a total of $30 billion (Halstrøm & Galle, 2015).

Therefore I think that there are 3 alternatives which can be considered for the future. The first idea that came to my mind is to sell Panera or going join venture with one of the big players in the restaurant industry. Panera has an impressively high market value which is indicated by the goodwill estimation on the balance sheet. By getting together with a major franchising company like McDonalds or Burger King, Panera’s expansion could be supported with a much greater amount of money. The backside of this deal would be that Panera’s executives would lose their controlling power over the company’s operations and would allow the joined company to misuse Panera for own interests and goals. Considering these issues by getting together with another company opens up questions of the necessity of a joint venture which led me to the second alternative. The company should keep up with their strategy of a steady growth model and the production of high quality products. Panera was doing really good in the last couple of years and the fast casual market has a great undeveloped potential for the future. Nevertheless, Panera has to be aware of major franchisers competitors who have the power and willingness to compete with Panera for customers, market share and profits. This major threat may result in a recession of sales in the long run. Panera still does not have the financial strength of McDonalds or a similar major franchiser. My third idea was the opportunity of an international expansion which would allow Panera to become a forerunner in the fast-casual world market. There is nothing similar existing in the European market so far and it might be a great fit to the European culture. Europeans in general care a lot about the food quality and with the ever growing industrialization Europeans spent less time on cooking or going out to full-service restaurants which are also significantly more expensive. An international expansion would be a risky endeavor though. Panera might fail the needs of European customers and end up in a financial crisis by getting no return on its investment. We have just to remember Wal-Mart’s failure in Germany because of misinterpreting people needs even though Wal-Mart had enough financial backups for economical surviving while Panera would face a financial crisis in the case of failure.

I believe though that Panera should expand their business to Europe and take the risk of hitting the European market. They might do the expansion on a small scale for the beginning and build up restaurants just at some major cities (Berlin, Amsterdam, London). This way Panera can observe people response to their restaurant and reduce the risk of a financial disaster in the case of failure. Panera would be able to create brand awareness among European countries and become a first mover in the fast-casual restaurant business in the European market which is obviously associated with great advantages. Panera is often compared to Starbucks in their dedication for qualitative products. Both companies definitely do not compete on price in their market segments but furthermore on their service and the provided quality. This model brought Starbucks great success, not only in the US but also in Europe where people are still very attracted by their product. I predict a similar effect for Panera on the European market. Should Panera’s pioneer stores succeed and make Panera willing to invest in even more bakery-cafes then they will have to come up some huge investments in order to build a value chain in this new market. These investments though would be highly profitable in the long run and would increase Panera’s growth rates by a significant amount. Having explained my ideas for Panera’s expansion into foreign markets, Panera will also need to keep their eye focused on the US market as well and follow up their steady growth strategy as there is still a lot of potential growth in their domestic market especially for the short run.

A loaf of bread in every arm” is the mission statement of Panera Bread Company. Panera started as a small bakery under the name Au Bon Pain and grew to one of the largest fast food service companies in the U.S. In 2008 they had the 5th overall rating in the restaurant industry. “Panera Bread is widely recognized for driving the nationwide trend for specialty breads”. Over $3 million in debt and preparing to file for bankruptcy Kane partnered with Ronald Shaich. Shaich saw potential in Kane’s business and the first strategic move was to offer extended menu choices to boost morning sales. From 1981-1984 the company was expanding their business, they were working to lower their debt and to centralize their dough production. In 1985, through the observation of customers bringing in deli meat to add to their bread, Kane had his first “eureka moment”. The new strategy was fresh quality sandwiches, bread & coffee (Simon, 2015)

Conclusion

As you walk through the doors of Panera Bread, the lighting and décor calm you while the fresh smells of the bakery envelop you. Every detail has been carefully coordinated to ensure a high quality dining experience at a reasonable price (Rosenblum, 2015). This sophisticated concept for Panera began when a cookie company and a fast casual restaurant, called Au Bon Pain, synergized their efforts and found a propitious niche between fast food and fine dining. By 2003, the company was able to generate significant revenues through company-owned stores, through the sale of fresh dough to franchisees, and through royalties and fees paid by franchisees

Reference

            Lyons, B. (2015). Valuation Multiples: A Tool for Fundamental & Firm Analysis. Journal of Higher Education Theory and Practice, 15(2), 19.

            Halstrøm, P. L., & Galle, P. (2015). Design as co-evolution of problem, solution, and audience. Artifact, 3(4), 3-1.

            Simon, H. (2015). Pricing in Crises and Price Wars. In Confessions of the Pricing Man (pp. 177-191). Springer International Publishing.

            Rosenblum, A. (2015). Specialty Coffee Expansion in Traditional Retail: Lessons from Non-Traditional Retailers (Doctoral dissertation, Kansas State University).

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