ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Panera Bread® - From Humble Beginnings to Incredible Success

Updated on October 20, 2014

Sunset Hills, Missouri is home to the headquarters of Panera Bread®!

The story of Panera is an interesting one. The company began with St Louis Bread back in 1987 in Kirkwood, Missouri. Outside of the St Louis vicinity, the St Louis Bread Company is known as Panera Bread. There are several key players who brought this thriving franchise to life, and each of them contributed in rather unique ways. The restaurant chain was founded by Louis Kane and Ron Shaich as Au Bon Pain Company. This company acquired the St Louis Bread Company which was founded by Ken Rosenthal back in 1987. Just 12 years later, the Au Bon Pain Company made the decision to expand the franchise into a national restaurant chain. Following this strategic decision, Panera Bread set up its new HQ in Richmond Heights, Missouri.

Panera Bread Commercial - The Hard Road

Loaf of Bread

The company has a rather nebulous mission statement which is simply – A loaf of bread in every arm. However, the misguided mission statement has hardly dampened the public's excitement about the quality and desirability of Panera’s products. To better illustrate the company’s objectives; Panera Bread has at its heart the goal of making terrific bread widely available to customers across the United States. Its bread leadership role is best defined as follows:

Panera Bread

Panera Success

Today, Panera Bread operates in excess of 1,800 bakery cafes across 45 states in the nation. It also has restaurants up and running in Ontario Canada, and the District of Columbia. The architect behind the runaway success of Panera Bread is Ron Shaich. Three decades ago he set out on a mission to bring a new way of eating to America. His two restaurant concepts totally redefined the public's perception of fast food. By offering freshly baked artisan food, Shaich was able to prove that eating healthy was a concept that could go mainstream. Many at the time were sceptical that what was for all intents and purposes a bakery-style business could compete with industry juggernauts like Wendy's, Burger King, McDonald's, Arby’s and other unhealthy fast food businesses. But the numbers don't lie: today Panera serves an estimated 8,000,000 people per week, and is responsible for the employment of 80,000 associates. Equally impressive is the company's ranking on Fortune's World's Most Admired Companies List, where Panera sits comfortably in fifth position. And much of this success can be directly attributed to the creativity, vision and strategic approach adopted by its chief executive officer and chairman – Ronald M. Shaich.

Panera Menu

What Makes Panera Bread® so Enticing?

The company prides itself on healthy eating. All of the meats used at Panera are raised antibiotic free. Every meal has a balanced variety of all the necessary food groups, and it is presented in a way that makes people want to come back for more. It's not surprising that the company has quickly become one of the fastest-growing restaurant chains in America, and it ranks as the most popular bakery-cafe in the country. But the true success of this fast food restaurant enterprise is not limited to the sensation that it elicits from people's taste buds. Panera Bread® is a highly lucrative business that is raking in the cash – hand over fist.

Panera Commercial - Live Consciously. Eat Deliciously.

Things You May Not Have Known About Panera Bread®

It began way back, in 1981. After the expansion took place in 1999 it took another six years for the company to hit the big time. By 2005, BusinessWeek listed it as #37 on its Hot Growth Companies List. Barely 7 years later, Panera Bread® generated revenues of $2.13 billion. This is impressive, especially when compared to the $1 billion that it generated back in 2008. But the true success of the company rests with its appeal. Panera has clearly hit on a winning formula that resonates with customers across the US and Canada. And the reason for this is the healthy alternative that Panera presents to customers. For starters, none of the food is deep fried and dripping with TFAs. The Panera Bread® restaurants are designed with comfortable eating in mind and are nothing like the cheap and nasty seating you’re likely to find at Wendy’s, Burger King, McDonald’s or Arby’s. It’s the wholesome and healthy alternative that Panera offers which been gobbled up by patrons, and they want more of it. The graphic below shows how a $100 investment in Panera Bread 5 years ago performed against the NASDAQ Composite Index and S&P MidCap Restaurants.

Panera comparison of 5 year cumulative total return.

It's all about customer service!

There are many reasons for the phenomenal success of Panera Bread® and it all comes back to the customer experience. People can’t seem to get enough of the brand – but is this a fad or does it represent a genuine shift in the fast food industry? Here are some interesting facts about Panera before we delve into the financial viability of the company, the restaurant industry and the potential growth problems facing the company.

  • Panera Bread stores receive fresh dough daily from 20 bakeries around the country
  • During 2006/7 Panera Bread offered more free Wi-Fi than any other company in the US
  • Unbeknownst to many, Panera Bread donates all leftover baked goods and bread to hunger relief charities
  • Only 5 states do not have any Panera Bread stores, including: Wyoming, North Dakota, Idaho, Montana and Utah
  • Panera Bread goes by its original name in St. Louis – The St. Louis Bread Company

In the Money – Panera Bread has been an Investor’s Dream Come True

Panera listed on the NASDAQ on the 10th June 1991. At the time, the opening price was $13.25. By the 15th October 2014, the price of a single Panera Bread (PNRA) share was trading at an astonishing $165.59. That’s 12.5 times higher in 23 years. The stock’s 1-year target is $184 and the 50-day average daily volume is 490,985. The company has a market cap of $4.481 billion with a P/E Ratio of 24.32, which is a little on the high side. Even in the midst of the recent October crash on the US equities markets, the community sentiment for PNRA remains bullish. The 2013 financial reports show a company that is strong and positioned for growth moving forward.

Panera Bread® share price since inception in 1991

Are there Problems with the Panera Bread® Model?

In spite of the aforementioned achievements, Panera Bread has challenges ahead of it. Several analysts believe that its current business model is unsustainable, for the simple fact that sales have outstripped their process for delivering their food. Operations management is an issue that needs specialised attention. Customer wait times at many locations are excessive, and store layout remains a challenge. It has been reported by many customers in surveys that there is inadequate seating at Panera restaurants during busy hours. Of course it's entirely possible that the business could focus on more on to-go orders, without alienating those who are seated at their restaurants.

Many customers complain that the beverage stations obscure their vision of the pickup area in the restaurant. As a result, lines begin to develop and customer dissatisfaction is an issue that is increasing. Now it should be remembered that having such high demand is in itself a positive thing for the company, but managing that demand so that it does not lead to dissatisfaction is paramount. Another issue that crops up in the analysis of the process at Panera is that of employee spacing. The more employees that are hired, the lower the overall return – it’s the law of diminishing returns. The company cannot hope to speed things up by packing more employees into the kitchen, because that ultimately drives up costs and slows things down.

The Panera App

In an attempt to correct this very real problem, Panera launched an app to reduce the time needed to take orders. However the roll-out of this technology was plagued with problems and it was incompatible across a wide range of devices. On the issue of noise coming from the pick-up counter, Panera decided to raise the wall alongside the Barista station. The issues of quality control and throughput need to be addressed urgently. Employees are constantly repeating orders between one another in an attempt to get them right. Since the allocated kitchen space is limited, additional employees will not make things smoother; they will simply get in one another's way. The app currently allows for customisation of orders, but as more people cotton onto it the throughput will become more complicated. Employees need a system to manage the orders better, perhaps an electronic system that notifies employees which ingredients they have already used and what ingredients are unavailable. An interesting set of data was released from morning Star which shows that during the last 5 years at Panera, margins increased from 15.37% to as high as 17.61% in 2013, but for the last 12 months the margins are down to 16.71%. The app is a great way to boost the number of take-out orders, but bottlenecks and operations management needs to improve to avoid a recurrence of the problem.

Take Panera home with you

Comments

    0 of 8192 characters used
    Post Comment

    • profile image

      elviefox 

      4 years ago

      Go ahead Sarah, enjoy your meal! lol Try out their Bacon Turkey Bravo sandwich. nom nom nom.

    • sarahfalcone profile image

      Sarah Falcone 

      4 years ago

      I'd like to buy some of their stocks but the price is prohibitive. So I am gonna buy one of their sandwiches instead. =)

    • elviefox profile image

      Elvie Fox 

      4 years ago

      All this talk about bread and stuff is making me hungry. LOL. Their fresh salads are awesome. hmmm hmmm.

    • Iris Draak profile image

      Cristen Iris 

      4 years ago from Boise, Idaho

      I live in one of the few states without a Panera, but I have eaten at locations in other states. I liked their healthier options. This is a very interesting article as a business model and lesson of the ups and downs that accompany success.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)