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Thursday, May 26, 2011

PANERA BREAD CASE STUDY AND KEY SUCCESS FACTORS



Panera Bread is one of the largest players in the field of fast food restaurant business offering value added service with exceptionally high quality offerings. Its strategy is to provide a premium specialty bakery and café experience to urban workers and suburban dwellers. This strategy is closely aligned with a broad differentiation strategy in a ways that a broad range of consumer finds Panera’s offerings appealing and attractive. Besides this, unique menu with high focused on fresh artisan bread products, and the outstanding Panera’s bakery-cafe operations, signature bakery-cafe design, and the great bakery-cafe locations are major factors of Panera’s success.  In addition to this, Franchising is a key component of Panera’s success. Franchising has enabled Panera to grow more rapidly because it is the strategy of the Panera that enable it to be available in such location where  customer can easily find it. Till December 30, 2008, there were 725 Panera franchised bakery-cafes operating and signed commitments to open an additional 256 Panera franchised bakery-cafes.
As mentioned in its official site “Panera Bread serves fresh baked, handcrafted artisan breads, sweet and savory baked goods, hand-tossed salads, wholesome soups, and signature sandwiches in a distinctly warm and welcoming environment. Panera Bread is committed to using high quality ingredients in the food they offer and making a lasting contribution to the neighborhoods in which their customers and employees live and work through programs like Operation Dough-Nation”. Therefore, the unique menu offerings itself is the one of the major success factors of the Panera Bread.
Other Key Success factors of Panera Bread:
Distinctive Menu, great location and unique operating system: Panera Bread’s distinctive menu, signature café design, inviting ambience, operating systems, and unit location strategy allowed it to successfully compete in the restaurant industry especially for breakfast, lunch, daytime chill out dinner, light evening fare for eat-in or take-out, and take home bread. Beside this, convenience location and the way they operate themselves is also the key to their success.
Word of mouth communication: Panera’s Location and advertising are major factors in drawing in people. The main reason to be successful is through repeat business and word-of-mouth advertising. As mentioned in the case that 57 percent of the customers who had ever tried dining at Panera had been customers in the past 30 days.
Fast-Service and healthy and quality foods: : Panera Bread is able to provide a higher quality product in a short amount of time to its customers. Their operations combine the speed and convenience of traditional fast food with the food quality and appealing décor of casual-dining restaurants. Beside this it is able to convince its customers that all the food in Panera is made with higher quality materials and ingredients including the antibiotic-free chicken. They use highest-quality ingredients, with only fresh dough and preservatives and the bread is baked fresh every day. Panera Bread has a strong presence in the bakery-cafe segment. They have high quality food, including the award winning sourdough bread which is key to the Panera Bred success.
Artisan and Specialty Bread: The distinctive blend of genuine artisan bread is one of the key factors of the Panrea Bread success which is served in warm, comfortable atmosphere.  Artisan and Specialty bread offerings which has standard combination of calories, sodium, fiber and carbohydrates. 
Product Niche:  Panera Bread has niche market segment of artisan fast food that protects the company from direct competition in the fast food industry as well as the casual dine-in industry. It targets consumers who seek meals of higher quality than those offered by traditional fast food chains, yet do not have the time to dine in or have a sit-down meal in a restaurant. Panera Bread's product niche gives it the tools to cope more effectively with the challenges facing the fast food industry as well as the challenges facing the dine in industry. Panera Bread's cheaper items make it an attractive alternative to traditional eateries.
Meeting Customer Demands and Wi-Fi: To address the customer’s busyness and make them feel comfortable in the dining hall, they have equipped their restaurants dining hall with free wireless internet. By offering this amenity they can fully meet the needs of sophisticated and diverse customer base. Panera Bread has strong customer loyalty; they have a strong appeal to customers.   They also have a wide variety of food which appeals to a large group of people.
All above mentioned factors are the key components of the Panera Bread which enabled it to be market leader in its business. But those factors may not be the same in the future because of two reasons: the first one is that the customer’s  needs and demands may not be the same in the future or whatever is appealing for customer today may not be the same in the future. The second one is that there is a huge possibility that competitor with extra strengths and product and service offerings may emerge in the market place leading Panera Bread and replacing it from its unique market segments.
Possible future challenge that may affect Panera Bread key success factors
Rising production costs: Increasing cost of raw materials and cost of production like wheat prices, fresh dough prices, labor costs, rent, and other input costs may force Panera to increase the cost of its product. On the other hand due to the inflation consumer purchasing power may go down forcing management team of Panera Bread to reduce the price of the product to counter the inflationary effect and appeal more customers. Therefore, it is one of the key challenges to the Panera Bread to manage the price that is affordable to its customers, competitive in the market and still earn profit to sustain in the market.
Growing competition: Both traditional fast food and dine in restaurants are beginning to respond to the success of fast casual restaurant like Panera Bread. Other fast food chains have started to offer similar kind of offerings to its customers as Panera Bread does. Meanwhile, dine in restaurants have instituted carryout programs, fast-lunch guarantees, and lower prices, all measures to counter the concept of fast casual. If these trends continue, Panera Bread can no longer enjoy the safety of the product niche that it has occupied, and will face greater competition in terms of pricing and food quality. Beside this, intense rivalry in the industry pressures both market share and profit margins. As a consequence, increased competitive activity requires chain operators seek opportunities for improving both unit productivity and profitability. Food safety issues: Panera Bread’s relatively nutritious menu does not make it completely immune to problems faced by other fast food regarding safety issues. Today customers are educated conscious regarding health issues and they are always looking for healthier alternatives. Furthermore, problems with the food supply, such as an avian flu outbreak, also pose a significant threat to Panera Bread’s business. Even the perceived risk of illness could detract from consumers’ willingness to eat at the company’s restaurants.
Restaurants are affected by recession:  Fast food restaurants have often done well during recessions, as they are perceived as cheaper alternatives to sit-down restaurants. Panera, as a hybrid of these two models, may still face difficulties to maintain its positioning in the mind of its target customers. To remain competitive in the market they should able to manage low price in the future without reducing the quality image of its products and services.
References:


www.panerabread.com.

Thompson, A.A., Strickland, A.J. & J.E. Gamble (2010) Crafting and Executing Strategy: The Quest for Competitive Advantage 17th edition. New York, McGraw-Hill Irwin



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