Restaurant Operations Analysis: Panera Bread

[Name of Author]

[Name of Institute]Restaurant Operations Analysis: Panera Bread

Introduction

Panera Bread is a food chain of bakery café and quick casual restaurants in United States and Canada. It has more than thousand franchises all around the country and beyond. Started as a single café it has now become one of the country's leading food chain because of its leadership and the way it faced challenges from its establishment (1993) till yet. It faced challenges regarding its expenditures, recruitment, sanitation and leadership. In this research paper those challenges are discussed along with the recommendations.

Discussion

Cost Control

Panera Bread Company follows an insistent strategy to make the most of its market potential by inaugurating franchised and company-operated stores. It is evident from the growth in numbers of cafes from 262 in 2000 to 1,380 by 2009. During that period, expansion of company-operated stores amounted to 434% (from 90 to 391stores) while the number of franchised stores increased by 370% (from 172 to 636 stores).Between the years 2005 to 2006, system-wide revenues increased by 19.73% (1,596.6M to 1,911.6M) however, the basic earnings per share (EPS) only increased by 11.24% (from $1.69 to $1.88) over the same period, which is much lower than the EPS annual target growth rate of 25%. This is because since 2005restaurant openings have been dominated by corporate-owned locations rather than franchises. Prior to 2005, franchise openings dominated Panera's growth, averaging 72% of the total 479 new restaurants. Since 2005, this has been reversed and corporate-owned establishments now account for the majority of new openings at58% or 169 restaurants out of 286. Corporate-owned stores not only carry more risk they also carry all the costs associated with running each location, whereas franchise-owned operations are just a steady stream of revenue to the parent company without the risk and therefore increase overall earnings. Panera's original strategy was to provide “great bread broadly available to consumers across the United States.” The company was originally known for its artisan breads and its upscale quick service atmosphere. In 2006, the company, in an attempt to appease customers' nutritional desires and attract more diners during evening hours, made a number of changes. This entailed offering more menu items (a new line of artisan sweet goods), upgrading the quality of ingredients (natural, antibiotic-free chicken), and adding light entrees. In addition, the company changed many of its restaurant interiors in an attempt to create a Starbucks-like atmosphere. The result of the menu and decor changes in strategy is an overall decline in net profit and in debt. Bakery café expenses as a percentage of revenue rose from 80.4% in 2005 to 81.5% in2006. Bakery café revenues (as a percentage of overall revenue) dropped from 37.9% in 2005 to 33.4% in2006. The Bakery café segment margin dropped from 19.59% in 2005 to 18.50% in 2006.

Leadership characteristics

The food is business is tougher than any other business not because of the economic recession food and hotel industry is facing but due to the different tactics used in it. Food business is ...