Panera Bread has an opportunity for growth within a demanding industry in 2 key areas – increased sales of specialty drinks and opening international locations – that can allow the company to spread its mission of fresh bread for everybody while increasing the bottom line for investors. Through the use of 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 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 and style from the locations shows that there is certainly substantial revenue in selling coffee and related drinks, much like Starbucks. Looking at the coffee market, estimated real growth is 2.7% or roughly 5.7% given a 3% inflation rate while the number of establishments, the particular coffee houses, is expected to cultivate only 1.6%, which means each shop typically will spot 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. Because of this increasing the sales of specialty drinks will have an optimistic influence on Panera’s bottom line – clearly the market is growing and is an excellent industry to stay in for Panera Bread. In accordance with Buffalo Wild Wings’ franchise disclosure document, more than 40% of revenue is generated via alcohol and specialty drinks sales. If Panera could actually generate this amount of sales using a 19.3% profit margin, its financial well being 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 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 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 customer 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 in the registers. The issue is that this coffee menus can be found higher than the bakery items, not in clear look at the consumer at the time of ordering. Once the client is able to order, she or he has forgotten what drink to acquire; furthermore, the drinks are creatively named which is positive for brand identity, but awkward for your average male customer to acquire. At the very least, the coffee and specialty drinks must undergo the following changes:
· Move the menus to the same wall face because the meal menus to make sure customers 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 alcoholic beverages, to bring in coffee house regulars into Panera
By concentrating on combining the café design having a coffee shop atmosphere, Panera can become a “chill out” spot and also a premier area for both lunch and dinner. Furthermore, this transformation can be carried towards the international markets where café atmospheres, such as individuals in France, tend to be more prevalent.
Expand Internationally to develop Brand Image and Diversify Economic Risks
Given that Panera is pursuing Canadian locations, it is actually safe to believe the international industry for fresh bread keeps growing. Indeed, the international market breakdown of industry revenues are available in Appendix B. Clearly, the European marketplace is a big marketplace for fresh bread. However, IBIS World estimates that 135,000 bakeries function in Europe, meaning the marketplace is fragmented. A brand having a large marketing budget behind it might quickly enter the market and have a key position (See Appendix C). Given waqpnq the culture and preferences of European customers may vary from Americans, it will be advisable to test new products in Canada ahead of the overseas launch of the Panera brand. An interesting component of the European market is the strong relationship involving the industrial agricultural and milling companies and also the industrial bakeries. The largest bakeries are properties of the greatest milling and agricultural firms within the U.K., Sweden, and Austria. This could cause supply chain issues during these countries, though Panera could pursue a partnership or joint venture approach to these markets.