Panera Bread Company overview and operations

Panera Bread Company operates in the restaurant industry. The company is operating in the retail bakery-cafe segment of the restaurant industry in the service sector. The company can be considered as a "fast casual restaurant" because it is a mixture of the fast food and causal dinning (Tillotson, 2003). The company is a listed company in NASDAQ as PNRA. Its stores are mostly located in suburban areas. Main competitors of the company are McDonald's and Wendy's. As on the 2010, Panera had 1380 bakery-cafes and it is operating in the 38 states and it is also planning to expand its business in Canada.

Panera Bread Company started its operations in 1981 and initially it was named as Au Bon Pain Company operating on the east cost. After that company purchased St. Louis Bread Company and changed the name of the company to Panera Bread.

Panera Bread Company is one of the largest growing companies in the restaurant industry. As on 2010 in has 429 franchises and 173 company owned bakery-cafe. One of the main reasons of its high growth rate was increasing number of the franchises. Company has strict criteria that must be met to buy the franchise as well as certain amount of capital is also required.

Panera main emphasis was on nutritional value and quality that makes the company different in the industry. Company is also providing longer dining experience to its customers. Company has opened approximately 90 new stores. Company is focusing on the existing markets as well as new markets.

MISSION STATEMENT OF THE COMPANY:

"A loaf of bread in every arm"

Mission statement of the company is short to guide the employees at any level in their daily operations and the mission statement also helps them in making decisions appropriately.

VISION STATEMENT:

Company's vision is to promote its name and make its product well recognized name in the industry by providing best quality food to its customers and also expand business of the company in the form of both franchisees and company owned stores. Company also wants to make its restaurant/cafe special by offering fresh products and quick service menu selection.

INDUSTRY ANALYSIS:

Restaurant industry is a competitive industry and it is purely labor intensive industry. Panera is offering the fast food products as well as offering the unique dinning environment. There are big competitors of Panera such as McDonalds, Burger King and Wendy's. Panera Bread Company is continuously expanding its position in the market and improving its market share. Panera is offering the bakery and deli style sandwiches which make company different in the industry. The industry is highly saturated especially in the fast food segment so it is very difficult to gain market share and make the name of the company highly recognized.

COMPETITORS:

The main competitor of the Panera bread is McDonalds which is the largest fast food chain in the world. They are expanding their operations in international market and recently they have enhanced and improve their menu. Panera is targeting the suburban areas but McDonald is also targeting the cities. Company's key competitors are:

McDonalds

Yum brands co

Start bucks corporation

Darden Restaurants Inc.

Wendy's International

KFC corporation

Whitbread pic

OSI Restaurant Partners LLC

SWOT ANALYSIS:

Strengths:

Company has high customers base and high level of customer loyalty.

Company is providing fresh baked product.

Company is also offering free WIFI

Menu offered by the company are healthy and refreshing

Weaknesses:

High prices than its competitors.

Facing strong competition from McDonalds

Opportunities:

There are opportunities of growth in sugar free syrups.

Opportunity of offering more flavors

Threats:

Easy entry in the restaurant industry.

Competition is so high in the industry

Growth is slow in the restaurant industry.

Business MODEL:

The main revenue of the company comes from sales from stores operated by the company. Company also charges royalty fees from the franchisees and also earns revenue from the fresh dough facilities. Panera is expecting to increase its units from 95 to 105. Company is maintaining a balance between the quality food and competitive pricing.

FINANCIAL OVERVIEW:

From the last 3 years company is continuously improving in terms of revenues and mainly because of the expansion of the stores it has. The growth rate of revenue is around 19% from 2009 to 2010. Company experienced 25% increase in the net income. In 2010 EPS was $1.21 and revenue of the company also increased by 19%. Because of increasing prices in the industry, company operating performance also increased. Company has announced diluted EPS of $1.09 which is 33% more than 2010. Company's 2011 net income is $33 million for the first quarter. Company's sales increase by 3.3%. Company has opened 8 new stores and 11 franchisees in the first quarter of fiscal 2011.

RECOMMENDATIONS OF INVESTORS:

Investors think Panera Bread Company is having good growth potential and it further improve in terms of sales. But on the other hand there are risks while investing in the company because company is giving lower return than the market (Madanoglu, Lee, and Kwansa, 2008). But analysts are predicting sound growth in future for Panera Bread.

STOCK FRONT CHARACTERISTICS:

There are two types of company, value companies and growth companies. Panera Bread Company is basically Value Company so investors must ensure this while investing.

There are risks involved in this industry.

Financial analysis of the company

Vertical analysis of balance sheet 2010

(Common size balance sheet)

ASSETS

2010

Current Assets

Cash and cash equivalents

299299

32.37%

Trade accounts receivable, net

20,378

2.20%

Other accounts receivable

17,962

1.94%

Inventories

14,345

1.55%

Prepaid expenses

23,905

2.59%

Deferred income taxes

24,796

2.68%

Total Current Assets

330,685

35.77%

Property and equipment, net

444,094

48.03%

Other assets:

Goodwill

94,442

10.21%

Other intangible assets, net

48,402

5.24%

Deposits and other

6,958

0.75%

Total other assets

149,802

16.20%

Total Assets

$924,581

LIABILITIES

Current Liabilities

Accounts payable.

$7,346

0.79%

Accrued expenses

204,170

22.08%

Total current liabilities

211,516

22.88%

Deferred rent

47,974

5.19%

Deferred income taxes

30,264

3.27%

Other long-term liabilities

39,219

4.24%

Total liabilities

328,973

35.58%

EQUITY

Panera bread company stockholders' equity:

Treasury stock

-78,990

-8.54%

Additional paid-in capital

130,005

14.06%

Accumulated other comprehensive income

0.03%

Retained earnings

544,315

58.87%

Total equity

595,608

64.42%

Total equity and liabilities

$924,581

Horizontal Analysis of balance sheet 2010

ASSETS

2010

2009

% (Increase/Decrease)

Current Assets

Cash and cash equivalents

$229,299

$246,400

-6.94%

Trade accounts receivable, net

20,378

$17,317

17.68%

Other accounts receivable

17,962

11,176

60.72%

Inventories

14,345

12,295

16.67%

Prepaid expenses

23,905

16,211

47.46%

Deferred income taxes

24,796

18,685

32.71%

Total current assets

330,685

322,084

2.67%

Property and equipment, net

444,094

403,784

9.98%

Other assets:

Goodwill

94,442

87,481

7.96%

Other intangible assets, net

48,402

19,195

Deposits and other

6,958

4,621

50.57%

Total Other Assets

149,802

111,297

34.60%

Total Assets

$924,581

$837,165

10.44%

LIABILITIES

Current liabilities

Accounts payable.

$7,346

$6,417

14.48%

Accrued expenses

204,170

135,842

50.30%

Total current liabilities

211,516

142,259

48.68%

Deferred rent

47,974

43,371

10.61%

Deferred income taxes

30,264

28,813

5.04%

Other long-term liabilities

39,219

25,686

52.69%

Total liabilities

328,973

240,129

37.00%

EQUITY

Panera Bread Company stockholders' equity:

Treasury stock

-78,990

-3,928

1910.95%

Additional paid-in capital

130,005

168,288

-22.75%

Accumulated other comprehensive income

22.77%

Retained earnings

544,315

432,449

25.87%

Total equity

595,608

597,036

-0.24%

Total equity and liabilities

$924,581

$837,165

10.44%

Vertical analysis of Income Statement 2010

REVENUES

2010

Bakery-cafe sales, net

$1,321,162

85.65%

Franchise royalties and fees

86,195

5.59%

Fresh dough and other product sales to franchisees

135,132

8.76%

Total revenues

1,542,489

Costs and expenses

Bakery-cafe expenses

Cost of food and paper products

374,816

24.30%

Labor

419,140

27.17%

Occupancy

100,970

6.55%

Other operating expenses

177,059

11.48%

Total bakery-cafe expenses

1,071,985

69.50%

Fresh dough and other product cost of sales to franchisees

110,986

7.20%

Depreciation and amortization

68,673

4.45%

General and administrative expenses

101,494

6.58%

Pre-opening expenses

4,282

0.28%

Total costs and expenses

1,357,420

88.00%

Operating profit

185,069

12.00%

Interest expense

0.04%

Other expense, net

4,232

0.27%

Income before income taxes

180,162

11.68%

Income taxes

68,563

4.44%

Net income

111,599

7.23%

Less: net (loss) income attributable to non-controlling interest

-267

-0.02%

Net income attributable to Panera Bread Company

111,866

7.25%

Earnings per common share attributable to Panera Bread

Company

Basic

3.65

Diluted

3.62

Weighted average shares of common and common equivalent outstanding

Basic

30,614

Diluted

30,922

(Common Size Income Statement)

REVENUES

2010

2009

% increase/decrease

Bakery-cafe sales, net

$1,321,162

$1,153,255

14.56%

Franchise royalties and fees

86,195

78,367

9.99%

Fresh dough and other product sales to franchisees

135,132

121,872

10.88%

Total revenues

1,542,489

1,353,494

13.96%

Costs and expenses

Bakery-cafe expenses

Cost of food and paper products

374,816

337,599

11.02%

Labor

419,140

370,595

13.10%

Occupancy

100,970

95,996

5.18%

Other operating expenses

177,059

155,396

13.94%

Total bakery-cafe expenses

1,071,985

959,586

11.71%

Fresh dough and other product cost of sales to franchisees