Panera Bread Company
OVERVIEW
As Panera Bread Company headed into 2007, it was continuing to swiftly expand its market presence.
The company’s strategic intent was to make great bread broadly available to consumers across the
United States. It had opened 155 new company-owned and franchised bakery-cafes in 2006, bringing
its total to 1,027 units in 36 states. Plans were in place to open another 170 to180 café locations in
2007 and to have nearly 2,000 Panera Bread bakery-cafés open by the end of 2010. Management was
confident that Panera Bread’s attractive menu and the dining ambiance of its bakery-cafés provided
significant growth opportunity, despite the fiercely competitive nature of the restaurant industry.
Panera Bread competed with specialty food, casual dining and quick service restaurant retailers
including national, regional and locally owned restaurants. Its closest competitors were restaurants in
the so-called “fast casual” restaurant category. Fast casual restaurants filled the gap betweeen fast-food
and casual, full table service dining. A fast casual restaurant provided quick-service dining (much like
fast-food enterprises) but were distinguished by enticing menus, higher food quality, and more inviting
dining environments; typical meal costs per guest were in the $7-$12 range. Some fast casual
restaurants had limited table service and some were self-service (like fast-food establishments).
Between January 1999 and December 2006, close to 850 additional Panera Bread bakery-cafés were
opened, some company-owned and some franchised. Panera Bread reported sales of $829.0 million
and net income of $58.8 million in 2006. Sales at franchise-operated Panera Bread bakery-cafés
totaled $1.2 billion in 2006.
Already Panera Bread was widely recognized as the nationwide leader in the specialty bread segment.
In 2003, Panera Bread scored the highest level of customer loyalty among quick-casual restaurants
according to a study conducted by TNS Intersearch. The J.D. Power and Associates’ 2004 Restaurant
Satisfaction Study of 55,000 customers ranked Panera Bread highest among quick service restaurants
in the Midwest and Northeast regions of the United States in all categories, which included
environment, meal, service, and cost. In 2005, for the fourth consecutive year, Panera Bread was rated
among the best of 121 competitors in the Sandleman & Associates national customer satisfaction
survey of more than 62,000 consumers. Panera Bread had also won “Best of” awards in nearly every
market across 36 states.
The case lays out Panera Bread strategy in some considerable detail, plus it provides good financial data
on Panera, information about the fast-casual segment of the restaurant industry, and brief coverage of
Panera’s chief rivals. SUGGESTIONS FOR USING THE CASE
The Panera Bread case is a good vehicle for having students identify a company’s strategy and
evaluate its pros and cons. There is plenty of information in the case for students to conduct a fullblown SWOT analysis. Doing a SWOT analysis, evaluating Panera’s financial performance, and
sizing up the competition from rival restaurant chains constitutes the bulk of the analysis that student
will need to do here, once they get a solid grip on Panera’s competitive strategy (which mirror that of
broad differentiation). The relatively modest length of the case will please students, and students will
easily grasp the nature of Panera’s business.
Because the analysis of Panera Bread is not as demanding as several of the other cases, it is highly suitable for an early case assignment. We suggest assigning the Panera Bread case anytime after
coverage of Chapters 1-5.
The assignment questions and teaching outline presented below reflect our thinking and
suggestions about how to conduct the class discussion and what aspects to emphasize. To give students guidance in what to think about and what analytical tools to utilize in preparing the
Panera Bread case for class discussion, we strongly recommend providing class members with a set of
study questions and insisting that they prepare good notes/answers to these questions in preparing for
class discussion of the case.
To facilitate your use of study questions and making them available to students, there is file
of suggested study questions for the Panera Bread case that is posted on the student section
of the publisher’s Online Learning Center for the 17th edition (www.mhhe.com/thompson);
these study questions correspond to the assignment questions that appear in the next
section of this TN. (As a point of information, there is a set of study questions posted in the
student section of the OLC for each of the 26 cases included in the 17th edition.)
It is really very difficult to have an insightful and constructive class discussion of the Panera Bread
case unless students have conscientiously have made use of pertinent core concepts and analytical
tools in preparing substantive answers to a set of well-conceived study questions before they come to
class. In our classes, we expect students to bring their notes to the study questions to use/refer to in
responding to the questions that we pose. Moreover, students often find having a set of study questions
is useful in helping them prepare oral team presentations and written case assignments—in addition to
whatever directive questions you supply for these assignments. Hence, we urge that you have students
make full use of study questions—either those we have provided or a set of your own questions—in
preparing each and every case assignment.
There is a splendid accompanying video for the Panera Bread case—about 10 minutes in length—
which we suggest showing at the very beginning of the class discussion. Alternatively, you can show
the video just prior to asking students for their recommendations on what Panera Bread should do.
We heartily recommend use of the Panera Bread case for written assignments and oral team
presentations. Three good assignment questions are:
1. Panera Bread management has employed you as a consultant and asked you to assess the
company’s strategy, competitive market position and overall situation, and recommend a set
of actions to improve the company’s future prospects. Please prepare a report to the senior
executives at Panera Bread that includes an identification of the key elements of the company’s strategy, a discussion of which of the five generic competitive strategies described in Chapter 5
seem most closely match the competitive strategy that Panera bread is employing, the pros and cons of the company’s strategy, an assessment of Panera’s strengths, weaknesses, opportunities and threats, an evaluation of Panera Bread’s financial performance, which rival restaurant chains appear to be Panera’s closest rivals, the strategic issues and problems that Panera Bread’s management needs to address, and a set of action recommendations to deal with these issues and problems. Your report should be 5-6 pages, plus it should include an assortment of charts, tables, and
exhibits to support your analysis and recommendations. 2. (Short written case assignment) What are the pros and cons of Panera Bread’s strategy? What
evidence indicates that the strategy is working well or not so well?
3. (Short written case assignment) What does a SWOT analysis reveal about Panera Bread’s
overall situation? ASSIGNMENT QUESTIONS
1. What is Panera Bread’s strategy? Which of the five generic competitive strategies discussed in
Chapter 5 most closely fit the competitive approach that Panera Bread is taking? What type of
competitive advantage is Panera Bread trying to achieve?
2. What does a SWOT analysis of Panera Bread reveal about the overall attractiveness of its
situation? Does the company have any core competencies or distinctive competencies?
3. What is your appraisal of Panera Bread’s’s financial performance based on the data in case
Exhibits 1, 2 and 8? How well is the company doing financially? Use the financial ratios in Table
4.1 of Chapter 4 as a guide in doing the calculations needed to arrive at an analysis-based answer
to your assessment of Panera’s recent financial performance.
4. Based on the information in case Exhibit 9, which rival restaurant chains appear to be Panera’s
closest rivals?
5. What strategic issues and problems does Panera Bread management need to address?
6. What does Panera Bread need to do to strengthen its competitive position and business prospects
vis-à-vis other restaurant chain rivals?
