Panera Bread has a chance for growth within a demanding industry in two key areas – enhanced sales of specialty drinks and opening international locations – which will enable the company to spread its mission of fresh bread for everyone while increasing the bottom line for shareholders. By making use of many frameworks for thought and projecting the estimated financials of the company, we’re able to empirically reveal that these two strategies will be beneficial to the consumer.
Utilize Historically High Margins on Specialty Drinks to Drive Financial Well Being Growth
While Panera’s core business revolves around fresh bread, the design in the locations shows that there is certainly substantial revenue in selling coffee and related drinks, much like Starbucks. Exploring the coffee market, estimated real growth is 2.7% or roughly 5.7% given a 3% inflation rate while the amount of establishments, the specific coffee houses, is predicted to cultivate only 1.6%, which means each shop on average will discover 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%, much higher than Panera’s 6.4% profit margin. This means that improving the sales of specialty drinks may have an optimistic effect on Panera’s bottom line – clearly the business is increasing and is a great industry to remain for Panera Bread business hours. Based on Buffalo Wild Wings’ franchise disclosure document, more than 40% of revenue is generated via alcohol and specialty drinks sales. If Panera had the ability to generate this amount of sales with a 19.3% profit margin, its main point here 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 increase in profit margin may help Panera expand its operations internationally to capture economies of scale with its suppliers.
Check out Industry Incumbents for Knowledge and Re-arrange Menu Locations
Visually, the design of any Starbuck’s, Dunkin’ Doughnuts, or Caribou Coffee tend to be more fluid than Panera Bread with respect 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 enter in the store, walk past the bakery and coffee areas, then order at the registers. The issue is the coffee menus can be found higher than the bakery items, not in clear take a look at the consumer during ordering. When the customer is ready 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 buy. At the minimum, the coffee and specialty drinks must undergo the subsequent changes:
· Move the menus towards the same wall face as the meal menus to make certain customers know what coffee is offered when ordering
· Arrange the bakery display cases nearer to the registers to entice more impulse purchases
· Remove queue line markers during non-rush times, especially before the bakery display cases
· Increase the offerings of specialty drinks, including researching alcoholic beverages, to draw in coffee shop regulars into Panera
By focusing on combining the café design having a coffee house atmosphere, Panera may become a “chill out” spot in addition to a premier place for both lunch and dinner. Furthermore, this transformation could be carried for the international markets where café atmospheres, such as individuals in France, are definitely more prevalent.
Expand Internationally to construct Brand Image and Diversify Economic Risks
Given that Panera is pursuing Canadian locations, it is safe to imagine that this international industry for fresh bread keeps growing. Indeed, the international market breakdown of industry revenues can be found in Appendix B. Clearly, the European industry is a big marketplace for fresh bread. However, IBIS World estimates that 135,000 bakeries operate in Europe, meaning the current market is fragmented. A brand with a large marketing budget behind it may quickly go into the market and have a key position (See Appendix C). Given waqpnq the culture and preferences of European customers may differ from Americans, it will be best to test new items in Canada prior to the overseas launch in the Panera brand. An interesting facet of the European market is the strong relationship between the industrial agricultural and milling companies and the industrial bakeries. The greatest bakeries are owned by the biggest milling and agricultural firms in the U.K., Sweden, and Austria. This may cause supply chain issues in these countries, though Panera could pursue a partnership or joint venture strategy to these markets.