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Sample Strategic Designing and Analysis For Panera Bread Company

By: jemima hudson

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Panera Bread has an opportunity for growth inside a difficult trade in 2 key areas - increased sales of specialty drinks and gap international locations - that will enable the company to spread its mission of recent bread for everyone while increasing the bottom line for shareholders. By utilizing many frameworks for thought and projecting the estimated financials of the corporate, we tend to are able to empirically show that these 2 methods will be useful to the customer.

Utilize Historically High Margins on Specialty Drinks to Drive Bottom Line Growth
Whereas Panera's core business revolves around recent bread, the style of the locations suggests that there is substantial revenue in selling occasional and connected drinks, similar to Starbucks. Trying at the low market, estimated real growth is 2.7% or roughly 5.seven% given a three% inflation rate whereas the number of establishments, the particular coffee shops, is predicted to grow only 1.half dozen%, which means that every search on average can see increased revenue, due in half to a 3.5% growth in domestic demand (See Appendix A). Further, profit in specialty drinks is estimated at 19.eight%, abundant beyond Panera's 6.four% profit margin. This implies that increasing the sales of specialty drinks can have a positive impact on Panera's bottom line - clearly the business is growing and is a smart business to be in for Panera.
Consistent with Buffalo Wild Wings' franchise disclosure document, more than 40% of revenue is generated via alcohol and specialty drinks sales. If Panera were in a position to come up with this level of sales with a 19.3% profit margin, its bottom line would increase by nearly 7.eight% to 14.two%, abnormally high for the restaurant business (which averages four-5% margins). Though this profit margin level is doubtless not sustainable, the short-term boost in profit margin will facilitate Panera expand its operations internationally to capture economies of scale with its suppliers.

Look to Business Incumbents for Information and Re-organize Menu Locations
Visually, the layout of a Starbuck's, Dunkin' Doughnuts, or Caribou Low are a lot of additional fluid than Panera Bread with respect to the low ordering location. This analysis attracts heavily on the Eden Prairie Mall and Downtown Minneapolis Nicollet Mall locations. The client flow for Eden Prairie and Downtown is awkward; the customer should enter the store, walk past the bakery and low areas, and then order at the registers. The problem is that the low menus are located above the bakery items, not in clear read of the client at the time of ordering. By the point the client is ready to order, she or he has forgotten what drink to order; furthermore, the drinks are creatively named that is positive for brand identity, but awkward for the average male client to order. At the terribly least, the occasional and specialty drinks would like to bear the following changes:

? Move the menus to the same wall face as the meal menus to ensure customers grasp what occasional is offered when ordering

? Organize the bakery display cases nearer to the registers to entice more impulse purchases

? Remove queue line markers throughout non-rush times, particularly in front of the bakery show cases

? Increase the offerings of specialty drinks, as well as researching alcoholic beverages, to draw in low search regulars into Panera

By focusing on combining the caf? style with a occasional search atmosphere, Panera will become a "sit back" spot plus a premier location for both lunch and dinner. Furthermore, this alteration can be carried to the international markets where caf? atmospheres, like those in France, are more prevalent.

Expand Internationally to Build Complete Image and Diversify Economic Risks
Providing Panera is pursuing Canadian locations, it is safe to assume that the international marketplace for contemporary bread is growing. Indeed, the international market breakdown of business revenues will be found in Appendix B. Clearly, the European market could be a giant marketplace for recent bread. However, IBIS World estimates that a hundred thirty five,000 bakeries operate in Europe, that means the market is fragmented. A whole with a massive promoting budget behind it could quickly enter the market and take a key position (See Appendix C). Given that the culture and preferences of European customers could differ from Americans, it would be best to test new product in Canada previous to the overseas launch of the Panera brand. An attention-grabbing side of the European market is that the strong relationship between the commercial agricultural and milling companies and the commercial bakeries. The most important bakeries are owned by the largest milling and agricultural corporations in the U.K., Sweden, and Austria. This might cause supply chain problems in these countries, though Panera might pursue a partnership or joint venture approach to these markets.

Leverage on Existing Assets to Increase Shareholder Come and Expand
In line with Panera's 2009 ten-K, the corporate had an interest coverage ratio of 200.9x, with EBIT of $140m and interest payments of $700k. Additionally, distance-to-default, a key metric for risk of debt, is quite giant (larger is healthier) because the money readily available of Panera is $77.1m and also the debt/equity ratio is 0.0%. Retained earnings and total equity are $346m and $495m, respectively. This means a large cushion prior to debt default in an extreme situation. In Appendix D, the big difference between Panera and its rivals in terms of debt load is clearly seen. On condition that Panera has $153.2m in FCF, it is safe to assume that Panera could issue at the terribly least 1.0x FCF, though a safe debt load for an organization can be as low as 2x EBITDA, or $400m in debt. With the common caf? costing $1.6m, Panera would be ready to finance the expansion of its brand across approximately 250 corporate-owned locations internationally.

As seen in Appendix E, Panera would be in the prime three of its main competition with these new locations.
As with all public companies, Panera must come back worth to its shareholders while not ignoring the broader array of stakeholders with whom it interacts. FactSet estimates Panera's 2010 sales growth at 10.four% with EPS of $3.41 per share, a 20.half-dozen% increase over 2009. Our proposed strategy would benefit the company both in the short term and long term. Within the short term, sales would be increased and profit margin would increase by 500 bps to 770 bps primarily based on specialty drink sales.

If the international enlargement arrange is pursued, Panera would see sales growth in 2011 beyond the estimated 10.3% and EPS well beyond the projected $3.98. Though the increase in debt could force management to pay additional attention to the cash flow of the corporate, the increased leverage can allow Panera to increase its ROE substantially. If Panera needs to remain competitive, it should utilize its economies of scale to grow faster than competition and continually innovate, turning into the "fast follower" by utilizing adjacent business innovations in its caf? atmosphere.

Article Source: http://depositarticles.com/

William Evan has been writing articles online for nearly 2 years now. Not only does this author specialize in Strategic Planning, you can also check out his latest website about: Silk Wedding Flower Arrangement Which reviews and lists the best Silk Lily Arrangement

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