Panera Bread has a chance for growth within a challenging industry in two key areas – enhanced sales of specialty drinks and opening international locations – that can encourage 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 helpful to the customer.
Utilize Historically High Margins on Specialty Drinks to operate Main Point Here Growth
While Panera’s core business involves fresh bread, the design from the locations shows that there is certainly substantial revenue in selling coffee and related drinks, much like Starbucks. Studying 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%, which means that each shop normally will spot increased revenue, due to some extent 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. Because of this increasing the sales of specialty drinks could have an optimistic impact on Panera’s financial well being – clearly the market is increasing and is a great industry to stay in for what time does Panera Bread open today. 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 your restaurant industry (which averages 4-5% margins). Though this profit margin level is likely not sustainable, the short-term improvement in profit margin can help Panera expand its operations internationally to capture economies of scale using its suppliers.
Look to Industry Incumbents for Knowledge and Re-arrange Menu Locations
Visually, the layout of any Starbuck’s, Dunkin’ Doughnuts, or Caribou Coffee are much 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 client flow for Eden Prairie and Downtown is awkward; the customer must enter the store, walk beyond the bakery and coffee areas, and after that order in the registers. The problem is that this coffee menus are located above the bakery items, not in clear take a look at the customer during the time of ordering. When the client is ready to order, she or he has forgotten what drink to buy; furthermore, the drinks are creatively named which is positive for brand identity, but awkward for your average male customer to acquire. At a minimum, the coffee and specialty drinks need to undergo the subsequent changes:
· Move the menus towards the same wall face since the meal menus to make certain customers understand 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 in front of the bakery display cases
· Raise the offerings of specialty drinks, including researching alcoholic beverages, to draw in cafe regulars into Panera
By centering on combining the café design using a coffee shop atmosphere, Panera may become a “chill out” spot as well as a premier place for both lunch and dinner. Furthermore, this change may be carried to the international markets where café atmospheres, including individuals in France, are more prevalent.
Expand Internationally to construct Brand Image and Diversify Economic Risks
Given that Panera is pursuing Canadian locations, it is actually safe to assume that the international market for fresh bread keeps growing. Indeed, the international market breakdown of industry revenues are available in Appendix B. Clearly, the European industry is a sizable market for fresh bread. However, IBIS World estimates that 135,000 bakeries operate in Europe, meaning the current market is fragmented. A brand with a large marketing budget behind it may quickly go into the market and require a key position (See Appendix C). Given waqpnq the culture and preferences of European customers may vary from Americans, it might be better to test new products in Canada before the overseas launch of the Panera brand. An appealing element of the European market is the strong relationship in between the industrial agricultural and milling companies as well as the industrial bakeries. The largest bakeries are properties of the greatest milling and agricultural firms in the U.K., Sweden, and Austria. This could cause supply chain issues in these countries, though Panera could pursue a partnership or joint venture approach to these markets.