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Panera Bread Financial Analaysis Essay

4506 words - 19 pages

Panera Bread Company is a national bakery-cafe with 1,504 locations across the US and Canada. This case study provides information regarding the past performance, current analysis, stock valuation, market evaluation, and industry comparison. In this analysis and case study, we hope you, the reader, will gain usable insight on Panera Bread and its value. We will give a recommendation to our readers according to our given information. Panera Bread is a chain of bakery-cafe quick service restaurants in the United States and Canada that sells breads, sandwiches, soups, salads, and other bakery items. Its headquarters are in Sunset Hills, Missouri, a suburb of St. Louis. Panera bread was once ...view middle of the document...

Panera Bread is a publicly traded company and is seen as PNRA in the NASDAQ index.

Panera’s strategy during the recession has been “to stay consistent and not to react to the recession”; keeping costs constant and offering new salads and sandwiches. As a result, Panera’s “fast casual” niche (between casual dining and fast food) contributes to its relative success; this positioning allowed it to avoid discounting wars and maintain its margins by attracting customers with a higher quality product perceived to be a good value for the money. The company generates revenue through sales from company-operated stores, fees and royalties from franchisees, and sales from fresh dough facilities. At the end of 2009, the company itself fully owned 585 restaurants, which generated $1,152 million in revenues (85.2% of total revenues). Furthermore, franchisee groups owned 795 additional, franchised restaurants. The franchises themselves grossed $1376.4M in sales. Although its franchises only generate a small percentage of the Panera Bread’s total revenue, they are important to the company’s brand name recognition. In addition to restaurants, the company operates 23 fresh dough facilities that supply dough to both company-operated restaurants and franchises. The 23 facilities generated $121 million in sales to franchises in 2009 (9.0% of total revenues). An important aspect of Panera Bread’s business is its product niche—artisan fast food, also termed “fast casual”. This niche protects the company from direct competition in the fast food industry as well as the casual dine-in industry. It targets consumers who seek meals of higher quality than those offered by traditional fast food chains, yet do not have the time to dine in or have a sit-down meal in a restaurant. Although there are many restaurants that also offer this mixture, these restaurants tend to be local, and therefore do not benefit from a national brand name and a large advertising budget, which become increasingly important during times of recession. On the average, each individual Panera Bread bakery-cafe expends $1M on furnishings and decorations, arranging tables and chairs to be conducive to group meetings (as

opposed to most fast food restaurants, which are oriented around quick, in and out dining). Yet, as at other fast food restaurants, customers pay before they receive their food, giving them the freedom to finish their meal and leave without having to ask for the bill and pay gratuity. Panera’s product niche does give it flexibility in raising menu prices because consumers perceive its products as having high quality, especially in comparison to traditional fast food restaurants. The company markets its brand name to associate it with the concept of fast casual dining - an alternative to traditional fast food. The company invests 2.6% of its total revenues in marketing campaigns. Each individual restaurant is required to give 0.7% of its sales to the national advertising fund, and...

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