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Case Study 15 Panera Bread Growing a Company with Personality in movies. But for Panera Bread, a company able to successfully Canada Panera's 801 franchise stores slightly outrumber its 740 on the East Coast. To expand its domestic presence, Au Bon Painthought to be a marginal market force, has become the norm. Panera Bread is in the business of satisfying customers Wath fresh baked breadsgow met soupe and efficient servicethe franchise har surpassed all spectations for stocess. But how du a startup food company get so big oly watching and carefully in market French Roots, American Tastes What's so exciting about bread and soup? For some people, it Tom GarWide World Photos conjures up images of bland food that soothes an upset stomach. Others think of the kind of simple gruel offered to jailed prisoners are more than 1,500 Panera Bread bakery/cafs in 40 states and spot long-term trends in the food industry, artisan-style bread company-owned outlets. served with deli sandwiches and soups is a combination proven to please the hungry masses. Despite its abundance of restaurants, Panera Bread is a rel- Modern Tastes, Modern Trends atively new company, known by that name only since 1997. Its Panera's success has come partly from its ability to predict long. roots go back to 1981, when Louis Kane and Ron Shaich founded term trends and orient the company toward innovation to fulfill Au Bon Pain Company Inc., which merged Kane's three existing Cond will predated the current national trend (now rebounded consumers' desires. Its self-perception as a purveyor of artisan Au Bon Pain stores with Shaich's Cookie Jar store The chain of French-style bakeries offered baguettes, coffee, from the brief low-carb crate) for fresh bread and the explosion of and sandwiches served on either French bread or croissants. It artisan bakeries throughout metropolitan America. soon became the dominant operator in the bakery/caf category Consumers' desire for organic and all natural foods, once purchased the Saint Louis Bread Company, a Missouri-based chain Keenly positioning itself at the forefront of retail outlets support of about 20 bakery-cafs, in 1993. It renovated the Saint Louis ing this trend, Panera recently introduced a children's menu called Panera Kids Kids can choose from items such as peanut butter Bread Company stores, renamed them Panera Bread, and their sales skyrocketed and jelly, grilled cheese, and yogurt, and the all-natural and or ganic foods will please choosy parents." In addition, Panera proactively responded to unease in the Birth of a Brand marketplace about the negative impact of trans fats on a healthy Executives at Au Bon Pain invested heavily toward building the diet by voluntarily removing trans fats from its menu. "Panera new brand. In 1999, Panera Bread was spun off as a separate recognized that trans fat was a growing concern to our custom- company. Since then, the firm has sought to distinguish itself in ers and the medical community, therefore we made it a priority the soup-and-sandwich restaurant category. Its offerings have to eliminate it from our menu," said Tom Gumpel, vice-president grown to include not only a variety of soups and sandwiches, of bakery development for Panera Bread. Though reformulating but also souffls, salads, panini, breakfast Sandwiches, and a va the menu incurred unexpected costs, all Panera menu items are riety of pastries and sweets. Most of the menu offerings some now free from trans fats, except for some small amounts that how pay homage to the company name and heritage-bread occur naturally in dairy and meat products, as well as in some Panera takes great pride in noting that its loaves are handmade condiments. and baked fresh daily. To conserve valuable real estate in the According to Ron Shaich, former CEO and now executive retail outlets, as well as to reduce the necessary training for new chairman of the board of Panera, "Real success never comes by employees, many bread doughs are manufactured off-site at one simply responding to the day-to-day pressures, in fact, most of of the company's 17 manufacturing plants. The dough is then do that is simply noise. The key to leading an organization is under livered daily by trucks-driving as many as 0.7 million miles per standing the long-term trends at play and getting the organiza- tion ready to respond to it." year--to the stores for shaping and baking. At this point, there For CANOE OVS DonArt of and get away as and we openings, Pamera redwo 25 ) in the enviable position of having no debt stable liable, 250 ml the bank. Taking advantage of weak US hon chocante Through wiecial management Panere Brend found real market, the company opened nearly 80 Ver Last yet having only closed stores the last three Thical year with a debre balance sheet the company plans Bread has demonstrated that sticking to company ideals while Panera learned from ege.com Strucks that offering better position for the end of the financial crisis Parers Termindustry trend will please customers time and time on intal purchase thing the head of a secondary successfully forecasting, and then leading the response to long The low-carb Credit fare Panera, but can this com Continue to navigate the changing dietary trends in today's new employees in 2010 and 2011 S SU Di yores coffee cute and then werd head for the cash rege where they.com os deportycom and go dostly Sticking It Out dering in during a moring rush and cut the wait for that first steaming table market? What Makes a Customer Stay? went access can make customers ingerater their purchase. Now most of its stores offer customers free Wi- c. According to spokesperson Julie Somers, the decision to fer Fibegan as a way to separate Panera from the compe tion and to comply the company's welcoming atmosphere We are the firment where all customers are wel come to hang out Somers said "They can get a quick bite or cup of coffee read the paper or use a computer and stay as long as they like. And in the course of staying, people may have cappuccino and a pastry or a soup. She went on to note that the chief corporate benefit to offering Wi-Fi is that wireless cus- tomers tend to help fill out the slow time between main meal segments Executive Vice President Neal Yanofsky concurred. "We just thinks one more reason to come visit our cafes," he sad And wireless users' tendency to linger is just fine with him. "It leads to food purchases," he concluded. And he's right--the average Panera store has an annualined unit volume of $2.3 million Discussion Questions 1. How might consumers' perception of Panera's menu and atmosphere affect the dining experience and tendencies to return as customers? 2. Describe how stereotypes about the fast-food industry might positively and negatively impact Panera. Do you think of Paner as a fast-food restaurant, or has the com pary managed to distinguish itself from this group? Problem Solving Can an entrepreneurial and leadership personality like Ron Shaich's be replaced? But how much of its success comes directly from Shaich as a person? Is it possible for his personal qualities to be ingrained in the corporate culture to the extent they will continue after he departs? As a consultant, what would you identify as the three or four most important of Shaich's personal qualities? What would you suggest be done to firmly embed these qualities in the Panera culture? Profits Rise Along with the Dough All of Paneras attention to the monitoring of trends has paid off handsomely Since Panera went public, the company's stock has grown thirteen-fold, creating more than $1 billion in shareholder value. Business Week recognized Panera as one of its "100 Hot Growth Companies." And Forbes named it 84 on its list of "Top 20 Franchises for the Buck." And even more recently, the Wall Street Journal recognized the company as the top performer in the Restaurants and Bars category for one-year returns (63% return, five-year returns (42% return and ten-year returns (32% return) to shareholders. In ad- dition, a Sandleman & Associates survey of customer satisfaction ranked Panera #2 among 120 other competitors last year, it had held the top spot for the prior eight years. Panera continued its rapid growth in the face of the recession: In 2011, its company-owned stores saw a 4.9% increase in same- store sales, while franchise stores saw a 3.4% increase. These numbers helped contribute to a record $1.8 billion in revenues for he year 15% increase over 2010-and brought the company's Further Research Find data reporting on how Panera's sales were affected by the recent economic downturn, See if the effects were different in various regions of the country Does Panera have special strengths that help it deal better than oth- ers with challenges such as those posed by a difficult economy