Panera Bread Company in 2012—Pursuing Growth in a Weak Economy, C-96.

Panera Bread Company in 2012—Pursuing Growth in a Weak Economy, C-96.

1.    Overview – The major written project in MG 4740 A1 L6 Capstone will challenge each student in analyzing, formulating, executing and implementing strategy for a business enterprise through the use of a complex case (case method) selected by the instructor.  In the case study method, relevant data are gathered, organized, evaluated, and generalized.  Recommendations and an implementation plan are also provided.  The case to be analyzed is Panera Bread Company in 2012—Pursuing Growth in a Weak Economy, C-96.

Successful completion of this project will contribute to the student’s proficiency in the following learning outcomes:

•    Explain business strategy, its role in improving a company’s financial and strategic performance, and its contribution to a sustainable competitive advantage

•    Conduct internal and external environmental analyses of a given organization or industrial sector using appropriate analytical tools

•    Formulate and assess alternative strategies and select the best strategies for implementation

•    Create action plans for strategy implementation and execution considering resource allocation and control

•    Manage all the above in a competitive setting

2.  Content – The following content is suggested for the complex case         analysis.  You must, of course, use you own good judgment, also, as         the content and material should be presented in a way that is most         clear and helpful to the reader/decision maker.  Please remember         that the following are suggestions, but you are not limited to them.          Your work should be robust.

•    Introduction/Company Profile – introduction to the company, name, ownership, history, headquarters, locations, size, product scope, geographic scope, integration, organization structure, key executives

•    Company Direction – vision, mission, values, and major goals

•    External Analysis – macro environment (e.g., political/legal, economic, demographic, socio-cultural, technology), industry environment (e.g., dominant economic traits, five forces, driving forces, key success factors), competitor (e.g., strategic group mapping, competitors’ next moves)

•    Internal Analysis – resource strengths and weaknesses, capabilities, core competence, distinctive competence, financial analysis, costs/prices, value chain/value system, competitive strength assessment, and present company strategy/strategies

•    SWOT Analysis – derived from previous two sections of the analysis

•    Identification of Front-Burner Issues (strategic issues and problems) – multiple issues that merit immediate action should be identified; no company is without them

•    Identification of Alternative Courses of Action to Solve the Issues and Problems Identified in the Previous Section – multiple alternatives should be identified for each problem/issue

•    Decision Criteria – Identify the decision criteria used in selecting the course of action for each issue identified

•    Recommendations – your decisions with respect to which alternatives to the problems/issues should be implemented based the identified decision criteria

•    Implementation Plan – “high level” plan(s) to implement the recommendations

•    Any Concluding Remarks

3.   Format – Each student will prepare the major written project using        the following required format:

•    Title page – includes the title of the project, the student’s name and ID number, the course number and name (e.g., MG 4740 Al L6 Capstone Business Strategy), the project due date, and the instructor’s name

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•    Table of Contents – identifies the sections (introduction, main body, conclusion) in the written project and the associated page number for each section

•    Introduction – includes a brief statement of what you intend to accomplish in the project, and a summary of what follows in main body

•    Main Body – see content requirements above; use appropriate headings and subheadings throughout the written project

•    Conclusion – includes a brief statement of what you have accomplished through your discussion in the main body of the project

•    List of References – identifies the academic sources and other published information which you have used; please refrain from using Wikipedia and other wiki sources as, generally, they are not considered to be academic sources

•    Attachments – includes, e.g., visual aids and graphics that you choose not to place in the main text

•    Appendix – includes related material not deemed necessary to be in the main text

•    Turnitin Originality Report – the Turnitin Originality Report must be attached at the end of the project

•    Folder – Place the project in a folder of your choice; it should not be submitted only with the pages stapled or clipped together in the upper left corner

4.  Mechanics – Each student should adhere to the following technical requirements:

•    Documentation:  APA style is required; a guide is available at: libguides.acg.edu – Easybib Pro

•    Word length:  4000 words (plus or minus 10%, i.e., 3600 to 4400 words); it is compulsory to report the number of words at the end of the paper; projects should be double spaced, using Arial font size 12

•    Submission:  The project must be word processed, and each student will submit the project electronically and in paper copy

5. Project Due Date – All projects are due on     Wednesday, December 3, 2014.  Please follow the progress of your work carefully so that you will meet this deadline.

6. Evaluation – The written project will be evaluated using the Evaluation Rubric for Major Written Project – Level 6, a copy of which is available on acgboard.

7.  Contribution to Final Course Grade – The major written project is 70% of the final course grade.

8.  Originality and Authenticity – The rules of academic ethics apply when undertaking this major written project, including the       requirements that the student undertakes the major written project without improper or unauthorized assistance from anyone.  If it is determined that the project is not done individually and solely by the student, the instructor may grade the major written project as an F.

9.  Turnitin – Each student must submit electronically the major written project to Turnitin prior to submitting it to the academic staff.  A copy of the results from Turnitin must be attached to the project.

If you have any questions, please ask.

Nickolas Siscoglou

Room 411, ext 1367

nsisc@acg.edu

C

Copyright © 2007 by Arthur A. Thompson. All rights reserved.

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Panera Bread Company

Arthur A. Thompson

The University of Alabama

COMPANY BACKGROUND

In 1981, Louis Kane and Ron Shaich founded a

bakery-café enterprise named Au Bon Pain Company

Inc. Units were opened in malls, shopping cent-

ers, and airports along the East Coast of the United

States and internationally throughout the 1980s and

1990s; the company prospered and became the dom-

inant operator within the bakery-café category. In

1993, Au Bon Pain Company purchased Saint Louis

Bread Company, a chain of 20 bakery-cafés located

in the St. Louis, Missouri, area. Ron Shaich and a

team of Au Bon Pain managers then spent consider-

able time in 1994 and 1995 traveling the country and

studying the market for fast-food and quick-service

meals. They concluded that many patrons of fast-

food chains like McDonald’s, Wendy’s, Burger King,

Subway, Taco Bell, Pizza Hut, and KFC could be at-

tracted to a higher-quality, quick-dining experience.

To

p management at Au Bon Pain then instituted a

comprehensive overhaul of the newly-acquired Saint

Louis Bread locations, altering the menu and the din-

ing atmosphere. The vision was to create a specialty

café anchored by an authentic, fresh-dough artisan

bakery and upscale quick-service menu selections.

Between 1993 and 1997, average unit volumes at the

revamped Saint Louis Bread units increased by 75

percent, and over 100 additional Saint Louis Bread

units were opened. In 1997, the Saint Louis Bread

bakery-cafés were renamed Panera Bread in all mar-

ke

ts outside St. Louis.

By 1998, it was clear that the reconceived Panera

Bread units had connected with consumers. Au Bon

Pa

in management concluded the Panera Bread format

A

s Panera Bread Company headed into 2007,

it was continuing to expand its market pres-

ence swiftly. The company’s strategic in-

tent was to make great bread broadly available to

consumers across the United States. It had opened

155 new company-owned and franchised bakery-

cafés in 2006, bringing its total to 1,027 units in 36

states. Plans were in place to open another 170 to

180 café locations in 2007 and to have nearly 2,000

P

anera Bread bakery-cafés open by the end of 2010.

Management was confi

dent that Panera Bread’s

attractive menu and the dining ambience of its

bakery-cafés provided signifi

cant growth opportu-

nity, despite the fi

ercely competitive nature of the

restaurant industry.

Already Panera Bread was widely recognized

as the nationwide leader in the specialty bread seg-

ment. In 2003, Panera Bread scored the highest level

of customer loyalty among quick-casual restaurants,

according to a study conducted by TNS Intersearch.

1

J.

D. Power and Associates’ 2004 restaurant satisfac-

tion study of 55,000 customers ranked Panera Bread

highest among quick-service restaurants in the

Midwest and Northeast regions of the United States

in all categories, which included environment, meal,

service, and cost. In 2005, for the fourth consecutive

ye

ar, Panera Bread was rated among the best of 121

competitors in the Sandleman & Associates national

customer satisfaction survey of more than 62,000

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consumers. Panera Bread had also won “best of ”

aw

ards in nearly every market across 36 states.

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had broad market appeal and could be rolled out na-

tionwide. Ron Shaich believed that Panera Bread had

the potential to become one of the leading fast-casual

restaurant chains in the nation. Shaich also believed

that growing Panera Bread into a national chain re-

quired signifi

cantly more management attention and

fi

nancial resources than the company could marshal

if it continued to pursue expansion of both the Au

Bon Pain and Panera Bread chains. He convinced Au

Bon Pain’s board of directors that the best course of

action was for the company to go exclusively with

the Panera Bread concept and divest the Au Bon Pain

cafés. In August 1998, the company announced the

sale of its Au Bon Pain bakery-café division for $73

million in cash to ABP Corporation; the transaction

w

as completed in May 1999. With the sale of the Au

Bon Pain division, the company changed its name to

Pa

nera Bread Company. The restructured company

had 180 Saint Louis Bread and Panera Bread bakery-

cafés and a debt-free balance sheet.

Between January 1999 and December 2006,

close to 850 additional Panera Bread bakery-cafés

we

re opened, some company-owned and some fran-

chised. Panera Bread reported sales of $829.0 mil-

lion and net income of $58.8 million in 2006. Sales

at franchise-operated Panera Bread bakery-cafés

totaled $1.2 billion in 2006. A summary of Panera

Bread’s recent fi

nancial performance is shown in

Exhibit 1.

Exhibit 1

Selected Consolidated Financial Data for Panera Bread, 2002–2006

($ in millions, except for per share amounts)

2006 2005 2004 2003 2002

Income Statement Data

Revenues:

Bakery-café sales $666,141 $499,422 $362,121 $265,933 $212,645

Fr

anchise royalties and fees 61,531 54,309 44,449 36,245 27,892

F

resh dough sales to franchisees

101,299

86,544 72,569 61,524 41,688

T

otal revenues 828,971 640,275 479,139 363,702 282,225

Bakery café expenses:

F

ood and paper products 197,182 142,675 101,832 73,885 63,370

Labor 204,956 151,524 110,790 81,152 63,172

Occupancy 48,602 37,389 26,730 18,981 15,408

Other operating expenses 92,176 70,003

51,044 36,804 27,971

T

otal bakery café expenses 542,916 401,591 290,396 210,822 169,921

F

resh dough costs of sales to

franchisees

85,618 75,036 65,627 54,967 38,432

Depreciation and amortization 44,166 33,011 25,298 18,304 13,794

General and administrative expenses 59,306 46,301 33,338 28,140 24,986

Pre-opening expenses 6,173 3,241 2,642 1,531 1,051

T

otal costs and expenses 738,179

559,180 417,301 313,764 248,184

Operating profi t 90,792 81,095 61,838 49,938 34,041

Interest expense 92 50 18 48 32

Other (income) expense, net (1,976) (1,133) 1,065 1,592 467

Provision for income taxes 33,827 29,995 22,175 17,629 12,242

Net income $ 58,849 $ 52,183 $ 38,430* $ 30,669 $ 21,300

Earnings per share

Basic $1.88 $1.69

$1.28 $1.02 $0.74

Diluted 1.84

1.65 1.25 1.00 0.71

(

Continued

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Panera Bread Company in 2012—Pursuing Growth in a Weak Economy, C-96.

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