Strategic Audit of Panera Bread Company

Case 29 Strategic Management MGMT 436 Group 5

Current Situation (John L.)

A. Current Performance
Revenues between 2000 and 2003 rose sharply due to new unit expansion but masked a slowing year-to-year growth rate. New strategies and initiatives must be taken in order to continue growth.
Revenues rose from $350.8 million in 2000 to $977.1 million in 2003, fueled by new unit expansion In 2000, comparable sales and annualized unit volumes (AUVs) increased 9.1% and 12.0% respectively. In 2003, those same figures increased only 0.2% and 0.5% reflecting slowed growth.

Current Situation (John L.)

B. Strategic Posture
Mission Mission Statement "A Loaf of Bread in Every Arm" (www.panerabread.com/about/company). Objectives Provide the following fast casual food service qualities The casual atmosphere of coffee shops The quality food of sandwich shops The quick service of fast food chains Strategies Specialize in the following five consumer dining needs Breakfast Lunch Daytime "chill-out" Lunch in the evening Take-home bread

Strategic Managers (Travis)

A. Board of Directors
Ronald M. Shaich (only internal member) Larry J. Franklin Fred K. Foulkes Domenic Colasacco Thomas E. Lynch George E. Kane All 6 own class A stocks 4 of 6 directors were brought on between 2000-2003

Strategic Managers (Travis)

B. Top Management
Brought outside key positions in other companies like real estate, financial investments, other food chains, and even customer experience. Ages 38 to 51 helps with different generations of views. Several combined years of experience. Top management seems to be well rounded.

External Environment (J.W.)

A. Natural Environment
Climate, crops such as wheat, grain, sugar cane, fruits and vegetables are affected by adverse weather conditions such as droughts, hurricanes, tornadoes, and excessive rain resulting in increased ingredient costs driving up product costs negatively affecting company profits Energy costs, rising gas prices will affect transportation and shipping costs while increasing electrical charges will also negatively affect company profits.

External Environment (J.W.)

Societal Environment
Economic
Double digit growth with fast casual restaurants matches company objective (o) Competition with other specialty restaurants as consumers move to eat out more (t) Emerging technology Free Wi-Fi (o) Real time inventory tracking thru robust data network (o) Adhere to local government regulations, and taxes (t) Monitor all products for health and safety issues (t) Consumers are eating healthier (o)

Technological

Political-Legal

Sociocultural

External Environment (J.W.)

B. Societal Environment
STEEP
Category Economic ISSUE Real Estate costs Competition with other specialty foods and casual dining restaurants Threat/Opportunity Threat Threat Ranking 6 1

Double digit growth with fast casual

Expansion into foreign markets Franchises Joint Venture Stores Expansion into other US locations Technological WIFI In-store info system Political-Legal None

Opportunity
Opportunity Opportunity Opportunity Opportunity Opportunity Opportunity None

2
5 4 4 3 1 2

Sociocultural

Move to Healthy foods

Opportunity

EFAS Table (J.W.)

External Factors Opportunities opened average 23 new stores each year WEIGHT RATING WEIGHTED SCORE COMMENTS

Double digit growth with fast casual

0.2

Expansion into foreign markets

Franchises Joint Venture Stores Free WIFI In-store info system Consumer move to Healthy foods

0.01
0.2 0.1 0.03 0.01 0.02

0
4 2 4 5 4

0
0.8 0.2 0.12 0.05 0.08

No expansion in foreign markets opened average 83 new stores each year no data Rated best in tech mags for free offering accurate inventory tracker main product offering

Threats long term leases selective locations hitting the mark with consumers Quality product no negative outcomes at this time concern could have negative inpact on image and financial burden on buyback questionable variable factor questionable variable factor

Real Estate costs Competition with other specialty foods and casual dining restaurants litigation for product defects

0.02 0.1 0.01

4 4 3

0.08 0.4 0.03

Franchise failures Food costs rise Distribution costs rise Total Scores

0.1 0.1 0.1 1

3 4 4

0.3 0.4 0.4 3.86

External Environment (Nick)

C. Task Environment

1. North American market mature and global market maturing - consumers demand alternative to the typical fast food agenda as well as different type of dining. 2. Industry is expanding globally as North American firms continue to expand internationally 3. Restaurant continues to grow in pleasing the customer with more of an experience than typical fast food and consumer desire a different style food and dining 4. Rivalry High. Chipotle, Einstein Brothers , Starbucks are all major companies in competition as well as fast food chains and other fast casual chains. 5. Buyers Power Low. The menu and processes of creating the food is ever changing 6. Power of Other Stakeholders Medium. Only on member of the board was internal the rest were outside the company they received a onetime grant for stock options. 7. Distrubtors Power Low. Owned their own facilities for making all there fresh goods and has only three main suppliers 8. Threat of Substitutes Low. Due to fast casual dining experience. 9. Entry Barriers Low. New entrants unexpected due to dining experience.

Internal Environment (John T.)

A. Corporate Structure

Realized the quality of employees is critical to a successful and unique company. (S) Invested in training programs to ensure quality of its operations. (S) Provides employees with stock ownership opportunities. (S) Rewards well managed and successfully operated locations with bonuses for managers as well as ownership of minority interest in a bakery-cafe. (S)

Internal Environment (Shavera)

B. Corporate Culture

The essential ingredient: Panera Care. Warmth and caring are the fundamentals of Panera Bread culture. (S) Corporate culture is based on founder Ronald Shaichs commitment to doing the best bread in America; quality, tradition, specialization, leadership, caring for employees & family, customers, and the community. (S) Good employee relations with high retention rates. (S) One of the top ten fast food chains rated excellent for Quick Track studies according to Sandleman & Associates. (S) All 1,453 Company owned and franchise-operated bakery cafes in 40 states and Ontario, Canada adhere to Panera Bread Culture. (S)

IFAS Table

Internal Factors

Weight

Rating

Weighted Score

Comments

Strengths Great Corporate Culture 0.2 5 1 Internal Integration and Team cohesiveness.

High Quality Food & Performance

0.25

4.5

1.13

Food prepared with only fresh ingredients. Friendly Sales Associates.

Experienced Managers/Leadership

0.15

3.5

0.53

Employee & customer driven. Participative & Achievement oriented Leadership.

Good Employee Relations Value Added Services for Customers

0.2 0.2

4 5

0.8 1

High rentention rates & employee satisfaction. Great benefits and career advancement opportunities. Warm comfortable atmosphere, free WiFi & Newspapers.

Total Scores

4.46

Backup Slides for Natural Environment

WASHINGTON, D.C.September 29, 2003 Falling crop production resulting from extreme weather events, diseases and pest infestations will increasingly be fueled by global warming and create an uncertain future for U.S. agricultural production and the nation's food supplies, according to leading experts gathered here today at a Harvard Medical School Center for Health and the Global Environment briefing, made possible by the Civil Society Institute, the Energy Foundation and the National Environmental Trust. A news media event was followed by a congressional staff briefing sponsored by Sen. Harkin (D-IA), Sen. Brownback (R-KS), Sen. Bill Nelson (D-NE) and Sen. Lugar (R-IN).

http://www.ers.usda.gov/Publications/

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