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CASE#2 TIME FOR BREAD (STRATEGIC MANAGEMENT IN ACTION SIXTH EDITION)

From the heartland of America comes bread baked with heart. As a leader in the fast-casual dining business, St. Louis-based Panera Bread Company operates and franchises more than 1,540 bakery-cafes in 40 states and Canada under the Panera Bread, St. Louis Bread Company, and Paradise Bakery & Cafe trademark names. Its mission statementA loaf of bread In every arm reflects the company's purpose and its passion.

Panera's beginnings can be traced to 1981 when CEO Ron Shaich cofounded Au Bon Pain Company, which operated bakery- cafes on the East Coast and internationally. Shaich and his management team were looking for a concept that combined Au Bon Pain's quality food with the potential for a broader appeal. In late 1993, Shaich met the owners of St. Louis Bread Company, which had 19 bake shops doing about $1 million in lunch business a year. St. Louis Bread had targeted suburban areas where real estate was less expensive, the competition was less Intense, and the target customers lived. Shaich sensed an opportunity, seeing it as "our gateway into the suburban marketplace and backward Into a manufacturing business." After studying the business inside and out, they decided to sell Au Bon Pain Company and purchase the St. Louis Bread Company. Their goalturn the concept into a national brand under the Panera Bread name.

The management team at Panera(Latin for "time for bread") spent considerable time trying to figure out what this business should look like. They looked at restaurants, coffeehouses, and even retailers In an attempt to understand what It would take to be successful. One thing they discovered was that consumers were tired of the boring sameness of dining-out choices. Shaich said, "Customers are rejecting fast food. They want something better, something special." The new owners knew they would have to achieve that perception by paying careful attention to the details. They also used what they had learned in running Au Bon Painquality makes a real difference. In Panera's case, that means, among other things, making fresh dough every single day in 26 locations and trucking it to the cafes for baking. During 2011, Panera opened 68 new stores. Compare that to 2007 when the company had opened 169 new stores.

The uncertain economic environment over the last couple of years led the executive team to pursue a more moderate rate of growth. Panera's locations, of which about 62 percent are owned by franchisees, sell custom sandwiches made with arti san breads as well as soups and salads. Customers also can buy bread, bagels, pastries, and gourmet coffees to go. Panera has attracted customers and built significant loyalty by concentrating on the quality of their fresh-baked breads and other ingredients. Although the average customer check at a typical Panera store is $8.51, company executives recently implemented a "category management"strategy to redefine its menu structure and utilize store associates to change customer behavior. The goal was to Increase gross profit per sales transaction. An important com ponent of this strategy was a systemwide rollout of breakfast items that utilized many of the ingredients already in the stores and that were easy to make, meaning no increase in fixed labor costs. Another important component was the rollout of the MyPaneraTM Loyalty Program. Guests who register can earn a combination of rewards and enjoy unique experiences allowing Panera to deepen relationships with its most loyal customers. This program has resulted in increased purchase frequency with MyPanera"^"members.

Even in today's worrisome economy, the company appears to have tapped into a consumer phenomenon of affordable indulgences. Consumers want to "reward" themselves with small but good-quality products in a few categories that are important to them. Panera's premium sandwiches, bread, and pastries fit into this category. Maybe it really Is Panera's "time for bread!"

DISCUSSION QUESTIONS

4. The company depends heavily on fanchising to fuel its growth. Do some research on franchising. What advantages and draw backs might it present?

5. What other examples affordable indulgences can you think of? What strategic risks are there to such a trend? How can Shaich ensure that Panera doesn't fall victim to those risk?

THANK YOU!