Case Study: Panera Bread Company (2010): Still Rising Fortunes?

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Case Study Week 4

June 26, 2016

Case Study: Panera Bread Company (2010): Still Rising Fortunes?

Synopsis

Panera Bread developed out of a company that could very well be thought of as the patriarch of quick and casual dining, Au Bon Pain. Au Bon Pain originally started as a demonstration bakery for an oven manufacturing company.  Au Bon Pain fittingly translates to “where good bread is” and began in 1976.  Just two years later, Louis Kane acquired Au Bon Pain. By 1981, the company had approximately $3 million dollars in debt (Wheelen, Hunger, Hoffman, Bamford 16-2). At that point Louis Kane was contemplating bankruptcy.

Another developing company, the Cookie Jar bakery, owned by Ronald Shaich, decided to join forces with Au Bon Pain. The two organizations decided to merge together to allow for an extended variety on the menu offered and also reduce the debt that had increased. By 1985, the company made the executive decision to add sandwiches to the menu, after noticing that customers were buying the company’s bread to make their own sandwiches. Au Bon Pain was differentiated from other fast food restaurants and created an alternative to the typical burgers and fries joint.

In 1993, the acquisition of the Saint Louis Bread Company, which established a bakery and cafe style setting, eventually would become the platform of Panera. Au Bon Pain was eventually sold and the Saint Louis Bread Company name was changed to Panera Bread Company. Panera Bread Company expanded through acquisitions, franchises, and newly opened stores with 1,380 stores in 40 different states and additional stores located in Ontario, Canada by 2009 (Wheelen, Hunger, Hoffman, Bamford 16-3).

Resources

Panera’s resources include their brand name, ambience and setting in bakeries and cafes, CEO Ronald Shaich, who was the master baker that concocted the bread-starter, and fresh dough facilities. The Panera Bread Company brand name, which translates to “time for bread” in Latin, is associated with wholesome, fresh bread used for their outstanding sandwiches. In addition to that, the aroma of the freshly baked bread further develops the environment that is created while in the store. This amplifies the customer experience by establishing a welcoming and comfortable bakery style setting.

Next, CEO Ronald Shaich was a groundbreaker in creating the company’s unique bread-starter. With Shaich as CEO, Panera’s revenues continued to rise from 2000 to 2009 an impressive $1,002.7 million (Wheelen, Hunger, Hoffman, Bamford 16-1).

Next, the Panera Bread Company sourdough bread is the foundation to the great artisan bread that is baked daily and allows for an alternative to traditional fast-food restaurants, which changes the way America chooses to eat.

 Lastly, by 2009, Panera Bread Company had twenty-three fresh dough facilities baking bread throughout the night, in order to deliver fresh baked bread everyday to every company-owned and franchised bakery and café.

Capabilities

Some capabilities of Panera Bread Company would include the fast and casual bit, financial capital, nationally recognized brand, and their extremely diverse menu. In 1999, when Au Bon Pain was sold, Panera was capable of expanding due to the elimination of debt that Au Bon Pain had incurred. This allowed not only for Panera to thrive by having financial capital, but also to sustain the company even during the time of the economic recession in 2008. Panera drastically expanded through increases in company-owned stores, franchised stores, growth in Canada, and acquisitions. Additionally, Panera’s fast and casual bit really paved the way in regards to the company’s overall environment. The fast and casual segment was ultimately a combination of offering fresh, made-to-order foods, a casual dining experience, and a pricing point between $6 to $9 dollars (Wheelen, Hunger, Hoffman, Bamford 16-7). Panera, which was in the midst of establishing a nationally recognized brand, also had a wide variety of menu items that attracted a wide range of customers. From your typical breakfast items, such as bagels and muffins, to fresh sandwiches, soups, and salads for lunch, there really was something for everybody. In addition to the wide variety of food choices on the menu, the company spoke to beverage lovers as well by offering unique espressos, coffees, and trendy smoothies. In addition, Panera Bread also offers seasonal items on the menu, making it truly unique and personalized.

Core Competencies

Some core competencies that have driven Panera Bread Company to maintain a competitive advantage in the industry are their franchise strategy, internal fresh dough facilities, and supply chain. Panera’s franchise strategy drove the company to expedited expansion. The “franchised operations segment consisted of 795 franchise-operated bakery-cafés, located throughout the United States and in Ontario, Canada” (Wheelen, Hunger, Hoffman, Bamford 16-14). With the unique bread starter needed by bakers to make leavened bread, fresh dough facilities were absolutely necessary to make the dough and meet the demands of each Panera bakery. With 23 fresh dough facilities delivering   bread dough to all of the Panera bakeries, Panera stood apart from their competition by creating their own, distinguished fresh bread. As a direct result, an effective, strategic supply chain was essential to the company. Panera’s trucking fleet consisted of 184 leased and refrigerated trucks, driving between 300-500 miles per truck, and delivering   to roughly 62 bakeries per fresh dough facility. (Wheelen, Hunger, Hoffman, Bamford 16-15).  

Finding of Fact #1- Panera Bread Company should focus on site selection within retail and grocery stores leading to national expansion.

        Panera Bread Company is extremely careful about their site selection, whether company-owned or franchise-operated. One might even say a little too careful. “In evaluating potential new locations for both company-owned and franchise-operated bakery-cafés, Panera studied the surrounding trade area, demographic information within the most recent year, and publicly available information on competitors” (Wheelen, Hunger, Hoffman, Bamford, 16-14).

While Panera Bread Company is very well known where I live (Saint Louis, which is where it all started with Saint Louis Bread Company), it is not well known everywhere. A friend of mine who lives in a smaller city in Iowa had never even heard of it and the closest location to her was nearly 120 miles away. As a result, she has never been to a Panera Bread Company store, nor has she even seen one in passing. To me, this signifies a problem, considering the number of stores just here in the Saint Louis area. Why not go outside the realm of comfort and select sites that may not fit perfectly into the “site-selection box”.