Panera Bread has a chance for growth within a demanding industry in two key areas – increased sales of specialty drinks and opening international locations – that will allow the company to spread its mission of fresh bread for everyone while increasing the bottom line for investors. By utilizing many frameworks for thought and projecting the estimated financials of the company, we are able to empirically demonstrate that these two strategies is going to be beneficial to the customer.
Utilize Historically High Margins on Specialty Drinks to operate Bottom Line Growth
While Panera’s core business revolves around fresh bread, the style of the locations shows 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 quantity of establishments, the actual coffee houses, is expected to grow only 1.6%, meaning that each shop typically will see increased revenue, due partly to a 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. Which means that improving the sales of specialty drinks will have a positive impact on Panera’s main point here – clearly the business is increasing and is a great industry to remain for Panera Bread hours of operation. Based on Buffalo Wild Wings’ franchise disclosure document, greater than 40% of revenue is generated via alcohol and specialty drinks sales. If Panera were able to generate this amount of sales with a 19.3% profit margin, its main point here 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 increase in profit margin will help Panera expand its operations internationally to capture economies of scale featuring its suppliers.
Turn to Industry Incumbents for Knowledge and Re-arrange Menu Locations
Visually, the design of a Starbuck’s, Dunkin’ Doughnuts, or Caribou Coffee are far more fluid than Panera Bread with regards to the coffee ordering location. This analysis draws heavily on the Eden Prairie Mall and Downtown Minneapolis Nicollet Mall locations. The consumer flow for Eden Prairie and Downtown is awkward; the customer must go into the store, walk past the bakery and coffee areas, and after that order on the registers. The problem is the coffee menus are situated higher than the bakery items, not in clear look at the customer during the time of ordering. By the time the consumer is ready to order, she or he has forgotten what drink to buy; furthermore, the drinks are creatively named that is positive for brand identity, but awkward for your average male customer to buy. At the very least, the coffee and specialty drinks have to undergo the following changes:
· Move the menus to the same wall face because the meal menus to make sure customers really know what coffee is provided 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 using a coffee shop atmosphere, Panera could become a “chill out” spot and also a premier location for both lunch and dinner. Furthermore, this modification could be carried to the international markets where café atmospheres, like individuals in France, are definitely more prevalent.
Expand Internationally to develop Brand Image and Diversify Economic Risks
Given that Panera is pursuing Canadian locations, it really is safe to believe the international industry for fresh bread is increasing. Indeed, the international market breakdown of industry revenues are available in Appendix B. Clearly, the European market is a large market for fresh bread. However, IBIS World estimates that 135,000 bakeries function in Europe, meaning the current market is fragmented. A brandname having a large marketing budget behind it might quickly enter in the market and take a key position (See Appendix C). Given waqpnq the culture and preferences of European customers may vary from Americans, it might be advisable to test new items in Canada ahead of the overseas launch from the Panera brand. An appealing element of the European industry is the strong relationship between the industrial agricultural and milling companies and also the industrial bakeries. The biggest bakeries are owned by the greatest milling and agricultural firms inside the U.K., Sweden, and Austria. This might cause supply chain issues during these countries, though Panera could pursue a partnership or joint venture approach to these markets.