Panera Bread has an opportunity for growth within a demanding industry in two key areas – increased sales of specialty drinks and opening international locations – which will allow the company to spread its mission of fresh bread for everybody while increasing the bottom line for investors. By utilizing many frameworks for thought and projecting the estimated financials of the company, we’re able to empirically demonstrate that these two strategies is going to be beneficial to the consumer.
Utilize Historically High Margins on Specialty Drinks to operate Bottom Line Growth
While Panera’s core business revolves around fresh bread, the design in the locations suggests that there exists substantial revenue in selling coffee and related drinks, much like Starbucks. Looking at the coffee market, estimated real growth is 2.7% or roughly 5.7% given a 3% inflation rate while the quantity of establishments, the specific coffee houses, is predicted to cultivate only 1.6%, which means each shop normally will discover increased revenue, due partly to some 3.5% development in domestic demand (See Appendix A). Further, profit in specialty drinks is estimated at 19.8%, much higher than Panera’s 6.4% profit margin. This means that improving the sales of specialty drinks could have a positive influence on Panera’s financial well being – clearly the business is increasing and is an excellent industry to remain for Panera Bread store hours. Based on Buffalo Wild Wings’ franchise disclosure document, more than 40% of revenue is generated via alcohol and specialty drinks sales. If Panera had the ability to generate this amount of sales using a 19.3% profit margin, its financial well being would increase by nearly 7.8% to 14.2%, abnormally high for the restaurant industry (which averages 4-5% margins). Though this profit margin level is likely not sustainable, the short-term boost in profit margin may help Panera expand its operations internationally to capture economies of scale with its suppliers.
Check out Industry Incumbents for Knowledge and Re-arrange Menu Locations
Visually, the layout of any Starbuck’s, Dunkin’ Doughnuts, or Caribou Coffee tend to be more fluid than Panera Bread with respect to the coffee ordering location. This analysis draws heavily on the Eden Prairie Mall and Downtown Minneapolis Nicollet Mall locations. The client flow for Eden Prairie and Downtown is awkward; the consumer must enter in the store, walk beyond the bakery and coffee areas, and then order at the registers. The issue is that the coffee menus are situated over the bakery items, not in clear view of the client at the time of ordering. Once the client is ready to order, he or she has forgotten what drink to buy; furthermore, the drinks are creatively named which can be positive for brand identity, but awkward for that average male customer to order. At a minimum, the coffee and specialty drinks need to undergo these changes:
· Move the menus for the same wall face as the meal menus to make sure customers understand what coffee exists when ordering
· Arrange the bakery display cases closer to the registers to entice more impulse purchases
· Remove queue line markers during non-rush times, especially before the bakery display cases
· Boost the offerings of specialty drinks, including researching alcohol based drinks, to draw in coffee shop regulars into Panera
By focusing on combining the café design having a cafe atmosphere, Panera may become a “chill out” spot and also a premier place for both lunch and dinner. Furthermore, this change can be carried to the international markets where café atmospheres, like those in France, are more prevalent.
Expand Internationally to develop Brand Image and Diversify Economic Risks
Given that Panera is pursuing Canadian locations, it is safe to assume that the international market for fresh bread keeps growing. Indeed, the international market breakdown of industry revenues can be found in Appendix B. Clearly, the European marketplace is a large marketplace for fresh bread. However, IBIS World estimates that 135,000 bakeries operate in Europe, meaning the market is fragmented. A brand using a large marketing budget behind it may quickly go into the market and take a key position (See Appendix C). Given waqpnq the culture and preferences of European customers may differ from Americans, it would be advisable to test new items in Canada before the overseas launch from the Panera brand. An appealing component of the European marketplace is the strong relationship between the industrial agricultural and milling companies and the industrial bakeries. The greatest bakeries are owned by the greatest milling and agricultural firms in the U.K., Sweden, and Austria. This may cause supply chain issues in these countries, though Panera could pursue a partnership or joint venture approach to these markets.