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 enable the company to spread its mission of fresh bread for everybody while increasing the bottom line for shareholders. By utilizing many frameworks for thought and projecting the estimated financials of the company, we are able to empirically reveal that these two strategies will be good for 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 in the locations shows that there is certainly substantial revenue in selling coffee and related drinks, similar to 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 specific coffee houses, is anticipated to cultivate only 1.6%, meaning that each shop on average will see increased revenue, due to some extent to your 3.5% increase in domestic demand (See Appendix A). Further, profit in specialty drinks is estimated at 19.8%, higher than Panera’s 6.4% profit margin. Because of this improving the sales of specialty drinks may have a good impact on Panera’s main point here – clearly the industry is increasing and is a great industry to stay in for Panera Bread business hours. Based on Buffalo Wild Wings’ franchise disclosure document, greater than 40% of revenue is generated via alcohol and specialty drinks sales. If Panera could actually generate this level of sales using a 19.3% profit margin, its financial well being would increase by nearly 7.8% to 14.2%, abnormally high for that restaurant industry (which averages 4-5% margins). Though this profit margin level is likely not sustainable, the short-term improvement in profit margin may 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 the 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 go into the store, walk past the bakery and coffee areas, and then order on the registers. The issue is that the coffee menus can be found higher than the bakery items, not in clear look at the customer at the time of ordering. Once the client is able to order, he or she has forgotten what drink to buy; furthermore, the drinks are creatively named which is positive for brand identity, but awkward for the average male customer to order. At the very least, the coffee and specialty drinks need to undergo the following changes:
· Move the menus for the same wall face since the meal menus to make sure customers understand what coffee is offered 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
· Raise the offerings of specialty drinks, including researching alcoholic beverages, to bring in coffee shop regulars into Panera
By concentrating on combining the café design using a cafe atmosphere, Panera could become a “chill out” spot in addition to a premier location for both lunch and dinner. Furthermore, this modification may be carried for the international markets where café atmospheres, such as those who work in France, are more prevalent.
Expand Internationally to construct Brand Image and Diversify Economic Risks
Considering that Panera is pursuing Canadian locations, it really is safe to imagine the international marketplace 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 industry for fresh bread. However, IBIS World estimates that 135,000 bakeries function in Europe, meaning the marketplace is fragmented. A brand name having 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 differ from Americans, it might be best to test new releases in Canada ahead of the overseas launch from the Panera brand. An interesting facet of the European market is the strong relationship in between the industrial agricultural and milling companies and the industrial bakeries. The biggest bakeries are properties of the greatest milling and agricultural firms in the U.K., Sweden, and Austria. This may cause supply chain issues during these countries, though Panera could pursue a partnership or joint venture strategy to these markets.