Panera Bread Company Swot Analysis
Strengths of the Organization This case study identified many strengths Panera Bread has including those dating back to Au Bon Pain Company; however, this section will only identify those strengths associated with the current position of Panera Bread Company. First and foremost is customer service. The company has been awarded with two major customer service awards including the J. D. Power and Associates’ restaurant satisfaction study which “ranked Panera Bread highest among quick-service restaurants in the Midwest and Northeast regions of the United States in all categories”.
Customer loyalty is another key to Panera’s success. Studies from the case show that Panera has a high rate of returning customers once Panera has got them in the door. Panera Bread has a large and diverse menu that has been very well received from the public. In fact, their menu is set up not only to provide healthy and fresh choices but also to accommodate five different dinning times throughout the day including: breakfast, lunch, dinner, ‘chill-out time,’ and light evening fare for eat-in or take-out. The company started with zero debt on its balance sheet in 1999 and had “no long term debt at all” in 2006.
Weaknesses of Panera Bread Co. One weakness Panera Bread has in relation to other companies in the same market is that Panera does not provide a faster pick-up and take-away option like most other quick-service restaurants have. Since most Panera Bread’s are found in strip shopping centers the locations can be difficult to find for travelers or those unfamiliar with the area. The case study also described the difficulties in obtaining a franchise with the company. There are many criteria one must meet before becoming eligible for a franchise.
In addition to the expensive upstart costs, extensive experience in multi-unit restaurant management, and real estate knowledge, after obtaining a franchise and opening locations in line with all of corporate management’s requests, the corporate offices can purchase your location from you at a pre-determined price for no reason other than to add to the number of corporate owned locations. Panera Bread’s commitment to freshness could potentially serve as a weakness if one of their dough distribution centers were temporarily unable to produce the required amount of fresh dough for the locations t serves.
Whether this be a processing issue or if the company was unable to use a key ingredient because of food recalls or if an ingredient became more limited in supply, the company would struggle to provide its full menu. Opportunities in the Environment The biggest opportunity the case study presented was the untapped markets that Panera could potentially expand to including large U. S.
cities and in the international markets. Exhibit three on page C-166 of the case study shows the markets where Panera Bread has limited or no presence.
Each of these cities provides potential pportunities for the company. With Panera’s high rate of return, in the sense of customers returning to the restaurant once they have tried it once, the company needs to strive to get more first time customers in the door. To do this they need to times”. In addition to getting first time customers the company also needs to strive to get customers to come in for meals that they usually do not eat at Panera.
For example, the case explained that most individuals who come in for lunch will only consider Panera Bread Company as an option for lunch.
What the company needs to trive for is to get those individuals who usually come in for lunch to consider stopping by in the morning for a fresh pastry and a premium roast coffee or swing by on their way home from work to pick up dinner and bring it home to the family. As before mentioned in the difficulties of obtaining a franchise the company has the right to purchase any location within the first five years of the contract. This provides the company with a way to build up its number of corporate owned locations with those that have proven to be successful and are already built and staffed. Threats in the Environment
More restaurants are now offering healthier choices on their menus and at lower prices than Panera is. Most quick-service have special menus and advertising campaign designating specifically for raising the public’s awareness of these special selections.
Fast food chains are also providing a specially trained chef or baker to each location as Panera has done for a number of years. Each of these threats in the environment makes Panera Bread lass distinguishable from other fast food restaurants since they are not the only ones providing these features and choices anymore.
In a struggling economy the first thing to go in most families is the spending of money on extras and since most families see eating out as an extra, dinning out is one of the first things to go. Panera is a more expensive quick-service choice than most other competitors in the market and in an economy similar to the one the U. S. and the rest of the world finds itself in now Panera could lose customers to other restaurant chains providing value or dollar menus.
Critical Issue The critical issue seen in the case study is the potential for Panera Bread Company to successfully tap into new markets.
Since most new stores are opened under franchise tags the company needs to find new investors willing and able to put up the capital and other resources necessary to become a franchise partner. This could very well be a challenge though. Considering the current economic conditions and the solution nowhere in sight, there could be a lot of investors unwilling to take the risk of opening up new quick-service restaurants. Alternative I Corporate management should reduce the qualifications and restrictions put on new investors. This would encourage new investors to take on the added risk of entering nto a new market.
Panera could also see expansion of its company during times when other chains are not expanding, during the recession. The fallbacks of this strategy though are that corporate could attract less qualified franchisees which could potentially hurt the company in the long run. Since Panera prides itself on its dedicated staff and customer service having the owner of five to ten locations that is not as committed as all other chains around the country could have negative implications for the customer loyalty and satisfaction of customers attending those articular locations.
This solution could also prove detrimental if the investor did not have the financial resources to make it through a recession if the new franchises Another option is for the company to offer more incentives for franchisees that have shown previous success in opening multiple new restaurants to enter in a new market to open more locations. This is an alternative that provides the company with the assurances that the owner is well qualified, to the standards of Panera Bread Company, and has enough experience to make a great impression on a new market nd its consumers.
The setbacks of this that could be seen would be that the owner would have a hard time managing two different markets, especially if there is significant distance between them.
Also, if the new market were to be unsuccessful the owner of the franchises might be more inclined to liquidate his holding in Panera Bread Company and since it was already determined that this individual was a top performer that could hurt the company in both markets. Alternative Ill The final option is for corporate to open up new locations in these new markets sing their own resources.
This alternative would eliminate any incentives or risk of attracting unqualified franchisees. This solution could also be used as a recruiting tool to potential investors in these new markets that might not have wanted to be the only investor in an unproven market. Showing that Panera Bread locations can be successful and showing the company is confident they are willing to put up their own money could be attractive to potential investors. Drawbacks from this include the potential of a failing market and losses at the corporate level.
Both of these disadvantages would hurt the company. Recommendation for Solution My personal recommendation for the company is to choose alternative number three. Corporate knows better than anyone what it takes to start-up and run a successful branch of Panera Bread and when entering into a new market the company wants to put its best foot forward. The first two alternatives require the company to give something valuable away, whether it be incentives or lower standards, each take away from the company’s mission of excellent customer service and a dedicated staff.