Panera Bread is one of the top bakery-café in the United States and it has been known for the high quality and taste of its products. The company has been successfully using the strategy of differentiation to offer a diverse menu of sandwiches, pasta, soups and salads to a wide range of consumers. It has presence in more than 45 states and Ontario, Canada and it has grown to be a successful brand through the satisfying experience provided to the consumers. It has been providing a fine eating experience with perfect food and ambience so that it could delight the consumers. As competition in the restaurant industry is increasing due to increasing tendency of consumers to eat out, there has been stiff competition amongst players to integrate the concepts of technological adaptation, menu development and high quality food and service to consumers for creation and sustenance of brand image. Panera Bread has been known for its innovation and it is suggested that the company should leverage the power of conservative financing policies to raise funds and opt for international diversification. This would help it to benefit from scale and scope economies and would also catapult its position to a global brand name.
Introduction
This report is based on the analysis of the company Panera Bread Company (PNRA). The foundation of the company dates back to 1981 when it was founded in St. Louis, Missouri. The company is engaged in the business of owning, franchising and operating retail bakery cafes all across the United States. It has been offering a wide range of products such as freshly baked goods, customized sandwiches, soups, pasta, coffee and other products. As of December, 2014, it had been operating about 1880 stores in the United States across 45 states and Ontario. It was formerly known as Au Bon Pain Co. and the name was changed to Panera Bread in August 1998 (Yahoo Finance, 2015). This report presents an analysis of the external operating environment of the business, followed by an assessment of the strengths and weaknesses and concludes with recommendations that can be used for the future strategic planning of the company.
Industry analysis
Panera Bread has been a major player in the restaurant industry since it provides fine-dining experience to the consumers. The restaurant industry is highly affected by the economy’s state since people tend to spend more on eating out when they have higher levels of disposable incomes. During times of recession, the marginal propensity to save increases for the consumers and they are less willing to spend on luxuries of eating out. At the same time, an increasing number of Americans have been working including females and this increases the opportunity costs for them to stay at home and indulge in cooking. As such, this force increases the demand for restaurants serving healthy food. As per research conducted by United States Department of Agriculture (2014), the proportion of income spent on food away from home to the total household food expenditure has been increasing as shown in the graph.
As can be seen from the graph, the total proportion of eating out has been increasing and in 2012, the proportion of money spent on eating out was 42% of the total food expenditures made by the individuals and families. This trend is expected to provide a strong growth to the US restaurant industry and indicates that the restaurant industry is in the growing stage.
As stated by Maze (2015), the growth of the restaurant industry is expected to be 3.8% in the year 2015. In real terms, this growth is expected to be 1.5% after adjusting for inflation. This implies that in 2015 alone, the industry would grow by an amount of $26 billion. The total sales across all restaurants are expected to be $709.2 billion and this industry would be a prominent sector of the US economy which would provide employment to almost 10% of the employed Americans. The boost in the sales comes from domestic demand as well as tourism. United States have been a prominent destination in international tourism and as the global economy recovers, it is expected that it would create demand for increasing levels of tourism which would further increase the demand for the restaurant industry.
As stated by GPS (2015), the total number of restaurants in the United States has been 624,900 and this shows that the industry is highly competitive. The market value of the industry has been estimated to be $384 billion and it is also estimated that the average value of sales per establishment has been $1.2 million. The size of the competitors has also been varying since only 0.1% of the total restaurants employ more than 250 employees. This is an indicator that the industry is highly fragmented and there are small establishments all across the country that are seeking to offer niche services to consumers and cater to a limited and targeted market base. The consistently growing sales of the restaurant industry across 6 years (Maze, 2015) highlight the untapped potential of the industry and yields growth opportunities for the existing players.
PESTEL analysis has been analyzed to identify the relative strength and attractiveness of the restaurant industry and analyze its growth prospects. PESTEL refers to the political, economic, social, technological, environmental and legal factors that influence the restaurant industry. In the case of the US restaurant industry, political and legal factors are not significantly important. The companies are bound as per law to provide high quality food and services to the consumers. If they serve food that is unhealthy and cause health risks to the consumer, they can be subjected to law-suits. As such, adherence to quality standards is very important.
The economic factors are positive for the restaurant industry. As the global economy has been recovering, people are increasingly adopting a luxury lifestyle and preferring to eat out. This would fuel growth of the sales of the restaurant industry since the demand for the services would increase. Tourists would create additional demand for the services. The growth of employment across the economy would also increase the spending power of the consumers and would serve as a stimulating factor for the US restaurant industry.
The social factors have mixed impact on the restaurant industry. Restaurants provide an ambience for individuals to host parties and get-togethers and this factor would positively
impact the industry. At the same time, there has been an increase in health consciousness

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