Term Paper on "Panera Bread"

Term Paper 4 pages (1760 words) Sources: 0 Style: MLA

[EXCERPT] . . . .

anera Marketing

In evaluating Panera Bread's current marketing strategies, their

effectiveness, and in making recommendations as to the future growth, an

assessment of strengths, weaknesses, opportunities and threats (SWOT)

analysis is provided first to evaluate the marketing strategies Panera has

used to this point. Recommendations for future growth are also provided

based on the SWOT analysis completed, which serves as the foundation of

this report.

Marketing Strengths

Continued proven expertise in managing sophisticated franchising programs

for both independent and investor-level programs. Panera Bread's

franchising operations focus both on independent third-party franchisees

and Area Development Agreements (ADA), which has delivered over 40

franchise groups signing ADAP agreements. As of the end of the end of Q2-

06, Panera had franchisee commitments to open an additional 433 units,

representing about 5 years of growth. The company has maintained a steady

backlog of franchised locations in recent years, including 409 at the end

of 2003, 418 after 2004, 416 after 2005, and 400 after Q3-06.

Leadership in an emerging specialty breadcaf? category of combined stores

and eat-in light restaurant locations - Operating combined stores and small

eat-in restaurants or caf?s with both the names of Panera Bread and Saint

Louis Bread Company continues to differentiate this company's retail

strategies. Both of these names, Panera Bread and Saint Louis Bread

Company, are given to franchised and company-owned stores. Panera Breads

have been able to accomplish this leadership through their unique series of

breads, many of them unavailable anywhere else, and their casual dining

experience that includes free WiFi in many locations. As of 2006, the

company's retail operations consisted of 311 company-owned bakery-cafes and

566 franchise-operated bakery-caf?s. At that date, there were commitments

to open an additional 416 franchise-operated bakery-caf?s. The company's

bakery-caf?s were principally located in suburban, strip mall, and regional

mall locations and operated in 36 states. As of 2006, the company's fresh

dough operations, which supply fresh dough items daily to both company-

owned and franchise-operated bakery-cafes, consisted of 16 company-owned

fresh dough facilities.

Exceptionally strong revenue growth in their specific food category -

Panera Breads continue to deliver above industry-average financial

performance as is illustrated in the continual growth in sales shown in

Appendix A.

Best-in-class customer listening and focus - One of the company's core

strengths is also its ability to change direction and menu items

specifically in response to the changing preferences of customers. Panera

Bread was ranked the number one concept in customer satisfaction among 118

chains in a survey of over 70,000 consumers conducted by Sandelman &

Associates in 2004 for example, and in a survey of customer loyalty by TNS

Intersearch, Panera Bread enjoyed the highest consumer loyalty of any

concept in the restaurant industry.

Emerging strength in product innovation - With the launch of their lite

pizza line, Panera Bread's marketing teams are looking into moving into the

evening dinner segment and capture more of this lucrative market. Panera

needs more business during dinner hours is needed to support long-term unit

volume growth, since traffic during lunch is already very strong and

approaching capacity in some cases. The evening business currently

represents about 20% of revenue even though the post-5 p.m. time slot

comprises roughly 25% of store operating hours. The first major step

designed to build traffic in the evening is the rollout of Crispani pizza.

Weaknesses

High levels of selling, general and administrative expenses - Despite the

meteoric revenue growth as is shown in Appendix A, there continues to be

the weakness of having high levels of SG&A expenses. For example, the

company has at times experienced over 19% growth in these expenses, as was

the case between 2000 and the end of fiscal year 2005.

A lack of variety and reason to eat other meals besides breakfast at Panera

Bread outlets - This is a major weakness and one the company is looking for

resolve, as internally there are discussions today of moving into thin-

crust pizzas based on their bread expertise, and also opening up a larger

dinner menu.

Concentration in specific markets to the exclusion of others - Today Panera

Bread is concentrated in several larger cities and needs to break out into

other smaller metro areas and look to diffuse economic risk by being in as

many other economic zones of the nation as possible.

Opportunities

Moving into other meal options - With 75% of American families not knowing

what they will have for dinner at 4:30pm any evening, Panera Bread has the

potential to move into offering dinner meals. The discussions within the

company center on a thin-crust pizza they have labeled Crispani, the

company is moving through test markets of this concept today and hopes to

generate greater customer in-store sales as a result. Panera Bread is

predicting that Crispani will generate a higher in-store check and is also

assuming 75% of the Crispanis will be ordered with salad or soup. Finally,

Crispani is expected to generate high margins, as many say the company with

its internal efficiencies can generate an 80% gross margin on the sales of

Crispani.

Continued build-out of the bakeries - The continued growth of the Panera

Bread chain of stores is also a significant business opportunity, and a

necessary one as the company looks to equalize its economic risk across

regions.

Going international - To date, Panera Bread only operates in the US. It is

clear that for their growth to continue, they need to move into

international markets, starting with Canada and progressing to the UK and

other westernized, English-speaking nations.

More people are eating out than ever before - According to the National

Restaurant Association's index of restaurant activity, the outlook for

restaurant industry growth appears strong for the year 2006. An increase in

this index indicates that future sales are likely to increase.

Introduction of hybrid meals stressing low carbohydrates - Panera Bread

continues to battle the diet focus on many consumer's minds with meals that

stress both nutrition and a focus on good tasting food that is less

fattening. The company is planning to move into low-calorie children's

dinners in 2006, and back in 2004 the company announced the addition of six

new, lower-carb items to its menu. The new items include: golden original

bread, Italian herb bread, rosemary walnut bread, plain bagel, asiago

cheese bagel and Italian herb breadsticks.

More focus on making ADA penetration into franchising groups globally -

Panera's Area Development Agreements are the most cost-effective approach

to generating high levels of metro coverage efficiently with a single

business partner. The company needs to consider these for global expansion

as well.

Continue connecting with and creating meals for the two dominant customer

groups the company serves - The company needs to focus on locking up the

loyalty of their two target customer groups, the "bread loving trend

setters" and the "bread loving traditionalists" as well. The continued

focus on these two customer groups is critical for the success of Panera

Bread, and getting their opinions reflected in future product directions

are critical.

Threats

Diets get re-born in America - This has negatively affected some food

categories including breads and especially pizzas in the past. While the

low-carb and high-fat diet has drawn an estimated 20 million people since

the 1970s, or just slightly above 6% of the US population.

Rising fuel and as a result food prices - The run-up in fuel costs

throughout 2006 and their continued escalation over the first years of the

21rst century are contributing to the growth of SG&A expenses in Panera

today and as a result is forcing the company's margins to flat-line at 6%,

even with revenues growing significantly.

Competition is intensifying - Many restaurants including the quick-serve

restaurant segment (QSR) specifically are looking to expand their share of

the dinner meal marketplace. For Panera Bread to increase its revenue

growth it will need to quickly move into dinner meals and also re-vamp

their stores to focus more on the dining experience.

The unforeseen impacts of government regulation - Federal agencies require

all fresh dough manufacturing facilities to meet federal, state, and local

health, sanitation, safety, fire regulations. A significant change to any

of these levels of governments' requirements will significantly impact the

company's ability to compete profitably.

Recommendations for Panera Bread Marketing

For Panera Marketing the challenges are keeping a highly profitable

business on track for exceptional growth opportunities, by both building

greater efficiencies into the delivery of bakery items, striving to make

these efficiencies a competitive advantage, and expanding the network of

stores to increase market share. Here are the specific recommendations for

Panera Bread's Marketing to pursue based on the SWOT analysis completed:

. Aggressively launch into the evening dining market with Crispani and

follow-on foods. The rollout of Crispani pizza is the first major step

specifically intended to grow the lower-volume evening business (about

20% of revenue). Based on successful tests, the Q3-06 introduction of

Crispani is expected to fuel near-term results by adding 2-4% to sales

in the 75% of stores participating… READ MORE

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