Strategic Management at Panera Bread: Analysis & Recommendations

Industry and Company Overview

For a variety of reasons and factors presented in the sections below, the restaurant industry has changed and evolved considerably over the past several years. This paper offers both a strategic management study of one particular restaurant chain, Panera Bread, and an overview of the restaurant industry as a whole. Upon completion of this study, a clearer understanding of Panera and its industry will emerge, along with recommendations for Panera Bread's strategy going forward.

To understand the business model for Panera Bread, one must first understand the restaurant industry overall, as well as the specific segment in which Panera competes: the fast-casual market.

Worldwide, there are approximately 8 million restaurants operated by about 300,000 restaurant companies. These have traditionally consisted of the full-service segment — which comprises "conventional" restaurants such as family-style, buffet, and dinner houses — and the fast-food segment, which typically serves sandwiches, hamburgers, and similar items in a McDonald's-type format (Gilliard & Khandekar, 2004). Because of the maturity and intense competition in the fast-food segment, and because full-service restaurants are likewise in a state of saturation (Korn, 2001), a large segment of the population emerged whose desire to spend money at restaurants was going unanswered. These consumers were tired of fast-food offerings yet did not always have the time or money to visit full-service restaurants. Moreover, conventional fast foods were proving unhealthy, and health-conscious consumers sought an alternative — enter the fast-casual restaurant industry.

The fast-casual restaurant industry has been growing steadily at an annual rate of 15–20% over the past several years, even in light of economic slowdowns (Gilliard & Khandekar, 2004). Panera Bread competes and seeks to grow in this expanding segment, which holds a great deal of promise.

Situational Analysis

Panera Bread's specific situation is equally important to consider. Panera Bread is one of the fastest-growing chain restaurant companies, working to capture as much of the $6 billion fast-casual restaurant industry as it can, with annual sales rapidly approaching $1 billion. The company has a unique business model that brings the concept of the local bakery back to neighborhoods, offering freshly baked breads and other goods for retail sale, as well as a key ingredient in the many sandwiches, soups, and other menu items served at its restaurants. To be precise, 18 kinds of baked goods are offered at the typical Panera Bread restaurant, along with gourmet coffees and other non-alcoholic café drinks (Gilliard & Khandekar, 2004).

One move that gave Panera Bread a decided edge over its competitors was becoming the first national chain to offer high-speed Internet access to restaurant customers at no charge. Not only was this an embrace of the latest technology, it was also a bold move designed to attract customers — one that added measurably to the chain's early success. This kind of forward thinking has typified Panera Bread over the years. Another excellent example is the modification of menu offerings to meet emerging consumer trends. In the early 2000s, the proliferation of low-carb diets and an increased focus on healthy eating led Panera Bread to offer a complete line of low-carb breads and other baked goods, once again demonstrating the organization's willingness to evolve alongside its customers and build brand loyalty — a key strategic move in highly competitive situations (Dewar, 2002).

Two other critical attributes of Panera Bread have contributed to its success not only over competitors in the fast-casual market, but also relative to more upscale full-service restaurants and conventional fast-food chains. Panera's menu is different, and the restaurant setting itself differs from other fast-casual establishments. Unlike chains such as PF Chang's or Krispy Kreme, Panera Bread restaurants feature a décor that resembles a French café, complete with a fireplace and china dishes on which food is served (Sharos, 2006). What this presents to the customer is high-quality food, served quickly, yet offered in an attractive setting with all the amenities.

Panera's business expansion model has also been highly successful, achieved largely through the effective use of a franchising structure. Since 1996, Panera Bread has been offering not conventional franchises to individuals, but rather what are called Area Development Agreements (ADAs), which give investors the opportunity to develop a series of Panera locations in protected territories, secured by payment of fees to Panera Bread's corporate organization. ADA owners also receive extensive training in the proper operation of a Panera Bread restaurant, ensuring uniform quality and menu offerings for customers regardless of which location they visit. This franchising model, first popularized by McDonald's in the 1950s, remains highly effective and is definitively a key catalyst in Panera Bread's viability and future possibilities (Gubman & Russell, 2006).

Conclusion

Panera Bread finds itself at the crossroads of tremendous opportunity and challenge. Properly enacted, the strategy detailed in this research affords Panera Bread the chance to turn challenge into opportunity and enhance the entire organization.

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