Panera Bread has a chance for growth within a demanding industry in two key areas – enhanced sales of specialty drinks and opening international locations – that will encourage the company to spread its mission of fresh bread for everyone while increasing the bottom line for investors. Through the use of 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 helpful to the client.
Utilize Historically High Margins on Specialty Drinks to Drive Financial Well Being Growth
While Panera’s core business revolves around fresh bread, the design and style in the locations implies that there is substantial revenue in selling coffee and related drinks, much like Starbucks. Exploring the coffee market, estimated real growth is 2.7% or roughly 5.7% given a 3% inflation rate while the number of establishments, the actual coffee shops, is predicted to develop only 1.6%, meaning that each shop on average will discover increased revenue, due partly to your 3.5% development in domestic demand (See Appendix A). Further, profit in specialty drinks is estimated at 19.8%, greater than Panera’s 6.4% profit margin. Because of this enhancing the sales of specialty drinks will have an optimistic effect on Panera’s financial well being – clearly the market keeps growing and is a great industry to remain for Panera Bread. In accordance with 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 with a 19.3% profit margin, its financial well being would increase by nearly 7.8% to 14.2%, abnormally high for that restaurant industry (which averages 4-5% margins). Though this profit margin level is likely not sustainable, the short-term increase in profit margin can help Panera expand its operations internationally to capture economies of scale featuring its suppliers.
Check out Industry Incumbents for Knowledge and Re-arrange Menu Locations
Visually, the design of a 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 past the bakery and coffee areas, and after that order on the registers. The issue is that this coffee menus are situated higher than the bakery items, not in clear view of the consumer at the time of ordering. Once the customer is ready to order, she or he has forgotten what drink to order; furthermore, the drinks are creatively named which is positive for brand identity, but awkward for your average male customer to order. At the very least, the coffee and specialty drinks have to undergo the subsequent changes:
· Move the menus towards the same wall face as the meal menus to make sure customers understand what coffee is offered 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 attract coffee house regulars into Panera
By focusing on combining the café design with a coffee shop atmosphere, Panera could become a “relax” spot as well as a premier location for both lunch and dinner. Furthermore, this modification could be carried to the international markets where café atmospheres, like those who work in France, are definitely more prevalent.
Expand Internationally to construct Brand Image and Diversify Economic Risks
Considering the fact that Panera is pursuing Canadian locations, it really is safe to imagine that this international industry for fresh bread keeps growing. Indeed, the international market breakdown of industry revenues are available in Appendix B. Clearly, the European market is a large industry 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 could quickly go into the market and require a key position (See Appendix C). Given waqpnq the culture and preferences of European customers may differ from Americans, it might be best to test new products in Canada before the overseas launch from the Panera brand. An interesting component of the European industry is the strong relationship between the industrial agricultural and milling companies and the industrial bakeries. The biggest bakeries are owned by the greatest milling and agricultural firms in the U.K., Sweden, and Austria. This could cause supply chain issues within these countries, though Panera could pursue a partnership or joint venture approach to these markets.