While this figure indicates an increase in sales revenue and net income it is important to note that the company’s expenses have been increasing as well. In fact, last year, expenses increased by 32% while sales increased at 29%. This statistic shows poor expense management on the part of Panera’s management team. In calculating the company’s net profit margins it becomes clearer that expenses are too high. Figure 2 indicates that margins have been consistently low ranging between 7% and 8.
5% since 2002. It also shows that the margin decreased last year which is a negative trend that must be considered when analyzing financial health and future growth potential. Net profit margin 9. 00% 8. 50% 8. 00% 7. 50% Net profit margin 7. 00% 6. 50% 6. 00% 2002 2003 2004 2005 2006 Figure 2 Conducting further analysis I analyzed the company’s balance sheet to evaluate its financial position. My analysis shows that Panera is a low risk investment. In calculating its debt to
equity ratio, which is shown in figure 3, I found that while it has been increasing the company’s ratio has never been higher than . 5. This means the company has stable liabilities and their positive cash balance indicates they have money to work with to invest in their future growth or pay to owners. Owner’s equity has been increasing every year which indicates that owners are reinvesting in the company by retaining income. Reported on the balance sheet at around $398million Panera’s equity indicates that this is a valuable company.
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Smoking in the United States has recently seen a rapid increase in the percentage of teenagers who are picking up the habit. Although still lower than it was in the 1970's, teen smoking rates are quickly approaching the percentages of the decade. There are multiple factors that have contributed to the surge of teenage smokers, and several suggestions have been made to suppress it. From 1991 until ...
Panera Bread Company also has no long term debt obligations. This is a very interesting financial statistic. This is a good position for Panera to be in and shows that they have been able to run a successful operation without taking on long-term debt. Debt to Equity Ratio 0. 4 0. 3 Debt to Equity Ratio 0. 2 0. 1 2002 2003 2004 2005 2006 Figure 3 The Panera Bread Company is currently in a stable financial position. They have been able to expand the company without taking on long term debt and have maintained a stable debt to equity ratio.
Its growing owner’s equity indicates increasing value of the company. The company has been able to increase sales and net income every year and have proven that they can make money in the industry. Investment in this company shows little risk. However, with less risk comes less potential reward. The company’s low debt to equity could be an indication they are not missing out on higher potential profits they might achieve by taking on more financial leverage. Another area that causes worry is the decreasing profit margins.
Panera may need to pull in their expenditures and better manage their costs to turn more of their revenues into net income. These are a few things Panera’s management should consider moving forward. 2. Panera Bread Company is in a good position strategically. The company is currently using a broad differentiation generic strategy that has been working well for them in the fast-casual restaurant business. The basis of its differentiation strategy is to gain competitive advantages by providing higher quality products and an overall dining experience unmatched by rivals.
They have achieved competitive advantages by adding value throughout their operations. The main sources are in their product quality, distribution methods, and cafe designs. The company combines simple, all natural ingredients with specialized know how of experienced artisan bakers to create high quality products that their customers crave, delivered to each bakery-cafe fresh daily. The company’s ability to make fresh dough daily comes from a sound production and distribution strategy.
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We will always design the most desired products by listening to consumer needs and preferences in terms of pricing, quantities, size and performance. We will strive to maintain product presence in each segment at all times. Marketing: We will price our products at above average prices in each segment. We will promote our products with ample of sales budgeting. We want our customers to be aware of ...
The company has 17 regional fresh dough locations to supply to both company owned and franchised bakery-cafes with fresh dough each day. The dough is never frozen and is delivered using Panera’s fleet of 140 temperature-controlled trucks. This strategy ensures consistent product quality and dough making efficiency. The investment in their new G2 design creates an overall dining experience that sets Panera apart from their competition. Completing a SWOT analysis shows Panera’s internal strengths and weakness as well as external opportunities and threats:
Strengths: Panera’s fresh dough making capabilities and upscale design is just a couple of its strengths. The company also has a good company image and high customer satisfaction. The company also adapts their menu to keep up with changing customer preferences and has a diversified menu that changes slightly each season. They offer higher quality options at reasonable prices and serve their food on real china with real silverware. Wi-Fi is also offered at many Panera locations which is an additional benefit that will attract customers.
The company pays attention to quality and detail and makes sure every aspect of their operation is carefully monitored to ensure success. . In 2006, Panera had only 1,027 units open and has much room to grow and expand. Weaknesses: The Panera Bread Company does not have an aggressive marketing strategy and aims to let customers discover Panera on their own. Panera’s service is not as fast as other fast-food companies and charges higher prices. Threats: The industry is extremely competitive, and risky. Many rivals are using differentiation strategies.
Buyer switching costs are low and customer loyalty is hard to achieve. Opportunities: Growing food service industry. In 2006, sales were forecast to be about $511 billion in the US. The U. S. restaurant industry was growing at about 5% annually. Sales at commercial eating places averaged close to $1 billion dollars a day. As I previously mentioned, the Panera Bread Company is using a broad differentiation generic strategy. To compete using this strategy it is important to provide products and services unmatched by rivals, develop a strong brand name, and command a price premium.
The Business plan on Panera Bread’s Strategy
1. What is Panera Bread’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Panera Bread is taking? What type of competitive advantage is Panera Bread trying to achieve? The two core elements of Panera’s strategy were to aggressively expand its market presence across North America and to improve the quality of the ...
Panera’s value chain is supporting this strategy: focusing on R&D, sales and marketing, service, and operations. The company focuses a lot on R&D to ensure they are keeping up with changing preferences. They depend on marketing to attract new customers and make sure they provide quality service to ensure customers will have a good dining experience and will return in the future. Panera has sound operations that ensure they can offer high-quality products and make a profit. Overall Panera is a sound financial investment with a lot of potential for growth.
