CASE TEACHING NOTE 8
Panera Bread Company

OVERVIEW

AS PANERA BREAD COMPANY HEADED INTO 2007, IT WAS CONTINUING TO SWIFTLY EXPAND ITS MARKET PRESENCE. THE COMPANY’S STRATEGIC INTENT WAS TO MAKE GREAT BREAD BROADLY AVAILABLE TO CONSUMERS ACROSS THE UNITED STATES. IT HAD OPENED 155 NEW COMPANY-OWNED AND FRANCHISED BAKERY-CAFES IN 2006, BRINGING ITS TOTAL TO 1,027 UNITS IN 36 STATES. PLANS WERE IN PLACE TO OPEN ANOTHER 170 TO180 CAFÉ LOCATIONS IN 2007 AND TO HAVE NEARLY 2,000 PANERA BREAD BAKERY-CAFÉS OPEN BY THE END OF 2010. MANAGEMENT WAS CONFIDENT THAT PANERA BREAD’S ATTRACTIVE MENU AND THE DINING AMBIANCE OF ITS BAKERY-CAFÉS PROVIDED SIGNIFICANT GROWTH OPPORTUNITY, DESPITE THE FIERCELY COMPETITIVE NATURE OF THE RESTAURANT INDUSTRY.

Panera Bread competed with specialty food, casual dining and quick service restaurant retailers including national, regional and locally owned restaurants. Its closest competitors were restaurants in the so-called “fast casual” restaurant category. Fast casual restaurants filled the gap betweeen fast-food and casual, full table service dining. A fast casual restaurant provided quick-service dining (much like fast-food enterprises) but were distinguished by enticing menus, higher food quality, and more inviting dining environments; typical meal costs per guest were in the $7-$12 range. Some fast casual restaurants had limited table service and some were self-service (like fast-food establishments).

Between January 1999 and December 2006, close to 850 additional Panera Bread bakery-cafés were opened, some company-owned and some franchised. Panera Bread reported sales of $829.0 million and net income of $58.8 million in 2006. Sales at franchise-operated Panera Bread bakery-cafés totaled $1.2 billion in 2006.

Already Panera Bread was widely recognized as the nationwide leader in the specialty bread segment. In 2003, Panera