19-1
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
I. CASE ABSTRACT
At the time when Panera was created, the fast–food industry was
described as featuring low–grade burgers, greasy fries, and sugared colas.
Ron Shaich decided to create a casual but comfortable place where customers
could eat fresh–baked artisan breads and fresh sandwiches, soups, and salads
without worrying about nutrition.i
The company strove to achieve what Shaich termed “Concept Essence,”
Panera’s blueprint for attracting targeted customers that the company
believed differentiated it from competitors. Concept Essence included a focus
on artisan bread, quality products, and a warm, friendly, and comfortable
environment. It called for each of the company’s bakery–cafes to be a place
customers could trust to serve high–quality food. The company’s bakery–cafes
were principally located in suburban, strip mall, and regional mall locations
and featured relaxing décor and free internet access. Panera’s bakery–cafes
were designed to visually reinforce the distinctive difference between its
bakery–cafes and those of its competitors.
On May 13, 2010, after twenty–eight years Ronald Shaich stepped down as
CEO and Chairman effective immediately following the Annual Stockholders
Meeting and William Moreton, previously the Executive Vice President and co–
Chief Operating Officer, assumed the role of CEO. Shaich planned to remain as
the Company’s Executive Chairman.
Decision Date: 2010 FY Sales: $1,353 million
FY Net Income: $801 million
II. CASE SUBJECTS AND ISSUES
CEO Transition First Mover Advantage
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-2
Strategy Formulation Competitive Advantage
Strategy Implementation Franchising
III. STEPS COVERED IN STRATEGIC DECISION–MAKING PROCESS
IV. CASE OBJECTIVES
1. To discuss Panera’s sales growth.
2. To discuss Panera’s business level strategy.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor–led discussion.
2. This is an excellent case for an exam or written case analysis.
VI. DISCUSSION QUESTIONS
1. How was the ‘fast casual’ segment different from ‘fast food’ and
‘casual dining?’
2. What was Panera’s business level strategy?
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-3
VII. CASE AUTHOR’S TEACHING NOTE—Not Available
VIII. STUDENT STRATEGIC AUDIT
1. CURRENT SITUATION
a. Current Performance
• Total system–wide revenues rose from $350.8 million in
2000 to $1,353.5 million in 2009, share price rose 1,654
percent from $3.88 a share (December 31st, 1999) to
$67.95 a share (December 28, 2009).
b. Strategic Posture
i. Mission: in the business of fast, casual dining—“a loaf of
Bread in every arm.”
ii. Objectives
1. Created a casual, comfortable place where customers
can eat healthy and not worry about nutrition.
2. “Get more cash out of each customer, rather than just
more customers”—to increase and sustain
profitability.
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-4
a. Test new products created during R&D trips, in
restaurants.
iii. Strategies
1. Differentiation strategy—innovative products using
new procedures to further improve quality.
2. Growth strategy—growing store profit, increasing
iv. Policies
1. Value oriented menu offering affordably priced
products.
2. Better total experience in restaurant for customers.
2. CORPORATE GOVERNANCE
a. Board of Directors
i. Six Members with three classes of membership that staggered
so only one class expires each annual meeting
ii. Average age is fifty–seven and average time on the board is
nine–point–five years.
iii. Board established three standing committees operating under
a charter approved by the board.
iv. Compensation package
1. Nonemployee directors—cash payments, stock, and
option awards (compensation range from $29,724–$124,
851 in fiscal 2009).
a. Stock options (two classes of stock)—traded on
NASDAQ as PNRA.
i. Class A Common Stock with 30,491,278
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-5
1. All directors/executive officers
hold 1,311,690 shares or 94.22
percent.
b. Top Management
i. Fourteen members
ii. Average age is forty–nine
iii. Compensation package
1. Total compensation for top five highest paid
3. EXTERNAL ENVIRONMENT
a. Societal Environment
i. Economy
1. Economic recession (T)
2. Same–store sales declining (T)
3. Declining traffic (T)
ii. Technology
1. Free Wi–Fi at all café’s (O).
2. Programmed point of sale registers (O).
3. On–line ordering (T).
iii. Political—legal
iv. Sociocultural
1. Adoption of the philosophy around do more with less
(O).
2. Expectation of giving back to the community (O).
3. Organic and fresh items (O).
b. Task Environment
i. Threat of new entrants: High
1. New café, bakeries, and restaurants open all of the
time.
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-6
iii. Threat of substitute products: High
1. Everyone spends money on food.
iv. Bargaining power of suppliers: Low
1. Economies of scale give Panera bargaining power.
2. Strong reputation results in real estate bargaining
power.
v. Rivalry among competing firms: High
1. Panera and Chipotle combined made up 25 percent of
vi. Power of other stakeholders: Moderate
1. Public company responds to shareholders.
2. Board of Directors influence key decisions.
3. Regulated by FDA
See Exhibit 1 for the External Factor Analysis Summary (EFAS)
4. INTERNAL ENVIRONMENT
a. Corporate Structure
i. Operates in three business segments:
1. Company–owned bakery–café operations
2. Franchise operations (via ADA’s, requiring fifteen or
ii. Support through functional departments and complex
agreements with franchise owners provide an efficient
process.
iii. The current structure is conducive to long–term growth,
with operations currently generating the bulk of profits .
iv. U.S. based business with minimal international presence via
b. Corporate Culture
i. A well–defined culture of shared beliefs, expectations, and
values existing due to a careful staff selection process,
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-7
expansive training program, and information sharing across
business.
iv. Culture is consistent with expansion and sales objectives
rewards general managers and multi–unit managers on the
basis of productivity.
c. Corporate Resources
i. Marketing
1. Customer word–of–mouth is utilized to develop brand
image and is heavily used as a marketing tool.
2. Maximizes mediums (i.e. store locations and campaigns
of competitors rather than investing a great deal of
funds in large–scale advertising).
3. Tied closely to internal and external environments,
as it reflects part of the company’s culture and
strategy to effectively execute outwardly facing
marketing efforts.
4. Franchises are required to pay the company
advertising fees based on sales.
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-8
b. Marketing provides Panera with a competitive
advantage as marketing and strategic decisions
are closely tied together.
8. Panera has found success when marketing “in tandem”
with other companies’ large–scale marketing effort,
ii. Finance (See Exhibit 2 for the Financial Ratios)
1. Strategic goals are to experience growth during the
economic recession and continue to increase profits.
a. Financial strategy clearly stated in metrics to
2. Performance is outstanding despite external
challenges.
3. Panera ranks at the top (with a large gap) in
comparison to other similar companies (see exhibit 3
for sales for Top Fast Casual Chains in the United
States).
iii. Research & Development
1. Test kitchen production in developing new products.
iv. Operations & Logistics
1. Objectives, strategies, and policies for operations
and logistics are a core competency.
2. Strategies and policies include meeting and exceeding
four criterions:
a. Limited service format
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19-9
4. Product and service–oriented, with an equal focus on
both:
5. Liability is in the hands of franchise store–unit
managers, which minimizes a great deal of external
risk.
6. Attention is paid to scheduling its staff according
to customer demand and minimal waste of inventory
because orders are made–to–order.
marketing.
v. Human Resources
1. Provide effective training to a skilled workforce.
2. Encourage a strong corporate culture.
4. Standardized employee training, as well as a
performance–based pay for general and store managers.
5. HR supports the company’s past and pending strategic
6. Growing work force to keep customer satisfaction high
instead of trying to do more with less.
7. Joint venture program, which is an accepted practice
that is proven to improve employee performance.
8. There is no mention of the diversity of the
workforce.
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19–10
ensure customer satisfaction and maintain product
standards.
vi. Information Systems
1. Existing information systems are designed to help
support company–owned and franchise locations at
point–of–sale.
a. Information systems are clearly stated and
utilized for performance but are not
2. The company’s information systems provide
comprehensive data down to daily sales forecasts
based on weather–related data from years past.
3. Point–of–sale systems and automate pricing help
provide consistency, accuracy, and timely
transactions.
4. Customer satisfaction websites gather and share data
with employees, utilizing a corporate intranet.
Exhibit 4 provides the Internal Factor Analysis Summary (IFAS)
5. ANALYSIS STRATEGIC FACTORS
a. Strategic Factors
i. See exhibit 5 Strategic Factor Analysis Summary
b. Review of Mission and Objectives
i. No changes required—Panera Bread’s exceptional performance
indicates mission and objectives are being met.
6. STRATEGIC ALTERNATIVES, RECOMMENDED STRATEGY AND IMPLEMENTATION
a. Strategic Alternatives
i. Cost Leadership—price reduction to drive sales volume.
CASE 19
Panera Bread Company (2010): Still Rising Fortunes?
19–11
CON: Potential for competitors to mimic, steal market–share
increases.
iii. Growth—increase rate of new store openings, expand to
international markets.
PRO: increased market share, heightened consumer awareness,
iv. Supply Chain/Logistics—develop key strategic partnerships
with organic farmers and livestock companies.
PRO: improved negotiating power and improved access to
v. Marketing Strategy—increase brand awareness by increasing
marketing mix.
b. Recommended Strategy
i. Growth—requires policy modification governing expansion
criteria. Achieves growth objectives and expands brand
image. Leverages existing core competencies and corporate
infrastructure (IT/HR/SC).
1. Expansion to international markets
a. Increase speed of opening new restaurants in
2. Expansion to both domestic and international airports
a. Meet customer needs for fast, fresh, healthy
choices at the airport.
b. Increases brand awareness and may open new
doors in other international markets.
c. Ability to leverage existing core competencies.
ii. Brand Awareness—requires modification to existing marketing
strategy and added resources to oversee marketing
campaigns.
1. Increase Marketing Mix—develop better brand
recognition and improve
2. same–store sales, while also improving ability and