Sample Strategic Planning and Assessment For Panera Bread Company
Panera Bread has an opportunity for expansion in a challenging industry in two essential spots – greater sales of specialty drinks and opening global destinations – that will enable the company to distribute its mission of refreshing bread for anyone whilst raising the bottom line for shareholders. By using quite a few frameworks for assumed and projecting the approximated financials of the company, we are able to empirically show that these two tactics will be valuable to the customer.
Use Historically Superior Margins on Specialty Beverages to Drive Base Line Advancement
Though Panera's core business revolves around clean bread, the design of the spots implies that there is substantial revenue in selling espresso and linked beverages, similar to Starbucks. Wanting at the coffee current market, believed actual progress is 2.7% or around 5.7% supplied a 3% inflation rate even though the amount of establishments, the genuine espresso stores, is predicted to improve only 1.6%, indicating that each and every store on normal will see amplified revenue, thanks in element to a 3.5% development in domestic desire (See Appendix A). Further, profit in specialty drinks is estimated at 19.8%, substantially higher than Panera's 6.4% profit margin. This implies that rising the sales of specialty drinks will have a good effect on Panera's base line – evidently the industry is escalating and is a excellent industry to be in for Panera. According to Buffalo Wild Wings' franchise disclosure document, additional than 40% of revenue is generated by way of liquor and specialty beverages sales. If Panera were able to produce this amount of sales with a 19.3% profit margin, its base line would increase by virtually 7.8% to 14.2%, abnormally large for the restaurant industry (which averages 4-5% margins). Even though this profit margin degree is in all probability not sustainable, the limited-term increase in profit margin will assistance Panera extend its functions internationally to capture economies of scale with its suppliers.
Appear to Industry Incumbents for Knowledge and Re-set up Menu Locations
Visually, the layout of a Starbuck's, Dunkin 'Dunuts, or Caribou Coffee are considerably far more fluid than Panera Bread with regard to the espresso buying area. This examination draws greatly on the Eden Prairie Shopping mall and Downtown Minneapolis Nicollet Shopping mall areas. The purchaser flow for Eden Prairie and Downtown is uncomfortable the shopper should enter the retail outlet, walk earlier the bakery and coffee regions, and then get at the registers. The problem is that the coffee menus are located previously mentioned the bakery objects, not in apparent look at of the buyer at the time of ordering. By the time the consumer is ready to order, he or she has neglected what drink to purchase in addition, the drinks are creatively named which is positive for brand identity, but awkward for the regular male shopper to buy. At the really least, the coffee and specialty beverages need to go through the subsequent changes:
· Go the menus to the very same wall encounter as the meal menus to ensure customers know what espresso is made available when ordering
· Set up the bakery display screen circumstances nearer to the registrants to entice extra impulse purchases
· Take out queue line marks in the course of non-rush situations, specially in front of the bakery screen circumstances
· Maximize the choices of specialty beverages, such as exploring alcoholic drinks, to bring in espresso store regulars into Panera
By focusing on combining the café design and style with a espresso store environment, Panera can become a “chill out” place as nicely as a premier area for each lunch and evening meal. In addition, this change can be transported to the worldwide marketplaces wherever café atmospheres, these kinds of as people in France, are much more commonplace.
Extend Internally to Make Brand Graphic and Diversify Financial Hazards
Given that Panera is pursuing Canadian places, it is harmless to think that the international current market for refreshing bread is increasing. Without a doubt, the international market breakdown of industry revenues can be located in Appendix B. Plainly, the European industry is a significant market for contemporary bread. Even so, IBIS Planet estimates that 135,000 bakeries operate in Europe, meaning the marketplace is fragmented. A brand with a massive marketing funds driving it could speedily enter the market place and get a essential placement (See Appendix C). Supplied that the lifestyle and tastes of European shoppers may possibly differ from Individuals, it would be most effective to take a look at new products and solutions in Canada prior to the abroad launch of the Panera brand. An appealing aspect of the European market place is the powerful relationship in between the industrial agricultural and milling firms and the industrial bakeries. The major bakeries are owned by the major milling and agricultural firms in the British isles, Sweden, and Austria. This may trigger offer chain difficulties in these nations around the world, although Panera could pursue a partnership or joint venture method to these marketplaces.
Leverage on Present Assets to Maximize Shareholder Return and Increase
In accordance to Panera's 2009 10-K, the company experienced an desire protection ratio of 200.9x, with EBIT of $ 140m and desire payments of $ 700k. On top of that, distance-to-default, a vital metric for hazard of debt, is pretty huge (greater is better) as the cash on hand of Panera is $ 77.1m and the debt / equity ratio is .%. Retained earnings and overall equity are $ 346m and $ 495m, respectively. This implies a significant cushion prior to debt default in an excessive problem. In Appendix D, the significant variation in between Panera and its rivals in phrases of debt load is clearly seen. Presented that Panera has $ 153.2m in FCF, it is protected to presume that Panera could problem at the extremely least 1.0x FCF, while a safe and sound debt load for a company can be as very low as 2x EBITDA, or $ 400m in debt. With the normal café costing $ 1.6m, Panera would be in a position to finance the enlargement of its brand throughout about 250 company-owned areas internationally. As witnessed in Appendix E, Panera would be in the major a few of its major competitiveness with these new spots.
As with all community companies, Panera ought to return value to its shareholders although not disregarding the broader array of stakeholders with what it interfaces. FactSet estimates Panera's 2010 sales advancement at 10.4% with EPS of $ 3.41 for every share, a 20.6% maximize over 2009. Our proposed strategy would reward the company the two in the brief term and very long term. In the limited term, sales would have improved and profit margin would boost by 500 bps to 770 bps based mostly on specialty drink sales. If the international enlargement plan is pursued, Panera would see sales advancement in 2011 further than the approximated 10.3% and EPS properly past the projected $ 3.98. Whilst the enhance in debt may pressure management to pay extra interest to the cash flow of the company, the elevated leverage will let Panera to enhance its ROE significantly. If Panera needs to continue to be competitive, it will have to employ its economies of scale to mature quicker than levels of competition and repeatedly innovate, getting the “quick follower” by utilizing adherent industry innovations in its café environment.
Appendicies can be identified at Liekos Group's web site.