Running head: PANERA BREAD SWOT ANALYSIS 1

Panera Bread SWOT Analysis

Prepared by:

Brian McDonald, Ora Carson, Bree McCraw, and Ginger Terry

MOD 440

Facilitator Dr. Berry Ziggler

Week 4 July 31, 2012

2PANERA BREAD SWOT ANALYSIS

HISTORY

The Panera Bread restaurant chain was founded by Ron Shaich and Louis

Kane as Au Bon Pain Co. After acquiring the St. Louis Bread Company chain, the Panera Bread

concept evolved. In 1999, the Au Bon Pain restaurants were sold, and the company put its

primary focus on growing the Panera Bread restaurants. The St. Louis Bread Company

restaurants continue to operate with the same Panera Bread concept and menu in the state of

Missouri.

There are currently 1,504 company-owned and franchise-operated bakery cafes (Panera

Bread, 1999-2011). Panera Bread is considered to be in the restaurant industry, but they are in a

different group as the others. Panera Bread has one of the highest stock market prices of all their

competitors in the industry.

3PANERA BREAD SWOT ANALYSIS

INTRODUCTION

In every business there will come a time when the business needs to understand the

things that will help a business and what will hurt that business. A business can determine their

opportunities and the threats that are associated with that specific business. In determining these

opportunities that a business has will help in directing the business’s future plans. The threats

that the business determines will help in making that business aware of the potential problems

that can plague the business and cause it not to succeed.

Panera Bread is a company that is incorporated into the food industry. In being

associated with this group of businesses, Panera Bread will be dealing with the government and

many other agencies. One of the main agencies that they deal with is the U.S. Food and Drug

Administration (FDA). Panera Bread acknowledges both their opportunities and threats, which

in turn helps the business to become a success.

STRATEGY

Panera Bread is the Apple of fast food. Panera continues with its pre-recession strategy

of charging premium prices for its sandwiches and salads as if they were iPhones. While other

businesses might be suffering or worse; Panera Bread’s owner Ron Shaich has no plans on

slowing down. He plans to add at least 80 locations to his ever growing company, all the while

he’s upping Panera’s investment in its distribution system. The company's expansion seems

sharp actually. The value of commercial real estate has collapsed along with home prices. Shaich

says he's been able to bargain down lease rates by 20% to 25%. Plus, Panera can lock in these

low terms for the next 20 years. Ron has also set a new bar by bringing in fresh produce daily

opposed to the 12 to 18 day old produce that is typical for most restaurants. So far, selling high-

4PANERA BREAD SWOT ANALYSIS

quality, high-priced fast food has worked just fine for Panera. Its same-store sales increased

3.6% in 2008 (see Exhibit 1), vs. declines at many other chains including Starbucks (see Exhibit

2). Its average check rose to $8.50, and each restaurant is now pulling in $2 million on average,

putting Panera just behind McDonald's and double what a typical Arby's and KFC unit grosses.

Main Issue

The main issue with Panera Bread is the economy. Many consumers because of the

downturn in the economy have cut back on their dining out. This has cause a loss of customers

at Panera Bread Cafes. If Panera Bread cannot get customers into the cafes then they do not sell

their product and do not make a profit. Panera Bread prices for their product is higher than the

average fast food product which determines if a customer will visit their store or one of their

competitor’s. Panera Bread will need to determine new ways and promotions that will entice the

customers to visit their cafes.

SWOT

Strengths WeaknessesWell-known brand name Consumer preferencesHigh quality product Decline in customer serviceStrong financial condition Narrow product lineGreat strategy Higher prices

Opportunities ThreatsExpansion EconomyCulture CompetitorsIntroduce new items Government regulationsExpand product line Price changes in product

5PANERA BREAD SWOT ANALYSIS

Recommendations

Panera Bread needs to understand the customer’s needs and desires in the present

economy. The promotions that the company presents will help in getting the customers into the

cafes and buying the product. Panera Bread strategy of introducing new products on a regular

basis will help in convincing the consumers that Panera Bread is the choice that they want to

make for that lunch or dinner trip out.

Conclusion

Panera Bread has shown that they know how to manage their business to delight of their

investors and creditors. They have kept their ratios to the correct levels and maintained decent

inventories for the company. Their stock has risen very high and seems to be going even higher.

The future of this company seems very bright and will keep bringing in profit for the investors

and security for its creditors. Panera Bread is trying to provide premium specialty bakery and

café experience to urban workers and suburban dwellers. Panera is trying to be "better than the

guys across the street." They are trying to make the experience of dining at Panera so attractive

that customers would be willing to pass by the outlets of other fast-casual restaurants competitors

to dine at a near-by Panera Bread.

Every business needs to know what its strengths and weaknesses are in the industry. A

business that knows its opportunities and threats will become a more stable company and make

plans for its future. A business needs to use its strengths in making decisions. The business

needs to understand its weaknesses and improve on them. A business that uses its strengths and

manages its weaknesses will determine if that business will be a success.

6PANERA BREAD SWOT ANALYSIS

Exhibit 1

Annual Income Statement (values in 000's) Get Quarterly Data

Period Ending: Trend 12/27/2011 12/28/2010 12/29/2009 12/30/2008

Total Revenue $1,822,032 $1,542,489 $1,353,494 $1,298,853

Cost of Revenue $1,185,969 $1,005,912 $904,419 $1,031,155

Gross Profit $636,063 $536,577 $449,075 $267,698

Operating Expenses

Sales, General and Admin. $329,320 $278,553 $238,565 $84,393

Non-Recurring Items $6,585 $4,282 $2,451 $3,374

Other Operating Items $79,899 $68,673 $67,162 $67,225

Operating Income $220,259 $185,069 $140,897 $112,706

Add'l income/expense items $466 ($4,232) ($273) ($883)

Earnings Before Interest and Tax

$220,725 $180,837 $140,624 $110,314

Interest Expense $822 $675 $700 $1,606

Earnings Before Tax $219,903 $180,162 $139,924 $108,708

Income Tax $83,951 $68,563 $53,073 $41,272

Minority Interest $0 $267 ($801) ($1,509)

Net Income-Cont. Operations $135,952 $111,866 $86,050 $67,436

Net Income $135,952 $111,866 $86,050 $67,436

Net Income Applicable toCommon Shareholders

$135,952 $111,866 $86,050 $67,436

Taken from nasdaq.com

7PANERA BREAD SWOT ANALYSIS

Exhibit 2

Income StatementGet Income Statement for:

View: Annual Data | Quarterly Data All numbers in thousands

Period Ending Oct 1, 2011 Oct 2, 2010 Sep 26, 2009

Total Revenue 11,700,400 10,707,400 9,774,600

Cost of Revenue 4,949,300 4,458,600 4,324,900

Gross Profit 6,751,100 6,248,800 5,449,700

Operating Expenses

Research Development - - -

Selling General and Administrative 4,703,200 4,414,100 4,142,500

Non Recurring - 53,000 332,400

Others 523,300 510,400 534,700

Total Operating Expenses - - -

Operating Income or Loss 1,524,600 1,271,300 440,100

Income from Continuing Operations

Total Other Income/Expenses Net 146,100 50,300 37,000

Earnings Before Interest And Taxes 1,844,400 1,469,700 599,000

Interest Expense 33,300 32,700 39,100

Income Before Tax 1,811,100 1,437,000 559,900

Income Tax Expense 563,100 488,700 168,400

Minority Interest (2,300) (2,700) (700)

Net Income From Continuing Ops 1,419,400 1,093,700 512,700

Non-recurring Events

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

1 GO

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Other Items - - -

Net Income 1,245,700 945,600 390,800

Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares 1,245,700 945,600 390,800

Taken from nasdaq.com

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References

Admin. (2010, April). Managing Growth in Business.

Nasdaq. (2012). Panera Bread Company Financials. Retrieved from Nasdaq Stock Market

Panera Bread. (2012). Panera Bread Corporation. Retrieved from www.panerabread.com