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The main challenge is to determine how Panera Bread can continue to achieve high growth rates in the future. Panera Bread is operating in an extremely high competitive restaurant market which forces the company to improve and to grow steadily for staying profitable. The company’s mission statement of putting “a loaf of bread in every arm” is just underlying Panera’s commitment for growing. They are now in a good financial situation and facing growth rates of up to 20% per year in a niche market that has a great growth potential. In the next 7 years the fast-casual market is expected to grow by 500% in sales to a total of $30 billion.
Therefore I think that there are 3 alternatives which can be considered for the future. The first idea that came to my mind is to sell Panera or going join venture with one of the big players in the restaurant industry. Panera has an impressively high market value which is indicated by the goodwill estimation on the balance sheet. By getting together with a major franchising company like McDonalds or Burger King, Panera’s expansion could be supported with a much greater amount of money. The backside of this deal would be that Panera’s executives would lose their controlling power over the company’s operations and would allow the joined company to misuse Panera for own interests and goals. Considering these issues by getting together with another company opens up questions of the necessity of a joint venture which led me to the second alternative. The company should keep up with their strategy of a steady growth model and the production of high quality products. Panera was doing really good in the last couple of years and the fast casual market has a great undeveloped potential for the future. Nevertheless, Panera has to be aware of major franchisers competitors who have the power and willingness to compete with Panera for customers, market share and profits. This major threat may result in a recession of sales in the long run. Panera still does not have the financial strength of McDonalds or a similar major franchiser. My third idea was the opportunity of an international expansion which would allow Panera to become a forerunner in the fast-casual world market. There is nothing similar existing in the European market so far and it might be a great fit to the European culture.
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I believe though that Panera should expand their business to Europe and take the risk of hitting the European market. They might do the expansion on a small scale for the beginning and build up restaurants just at some major cities (Berlin, Amsterdam, London). This way Panera can observe people response to their restaurant and reduce the risk of a financial disaster in the case of failure. Panera would be able to create brand awareness among European countries and become a first mover in the fast-casual restaurant business in the European market which is obviously associated with great advantages. Panera is often compared to Starbucks in their dedication for qualitative products. Both companies definitely do not compete on price in their market segments but furthermore on their service and the provided quality. This model brought Starbucks great success, not only in the US but also in Europe where people are still very attracted by their product. I predict a similar effect for Panera on the European market. Should Panera’s pioneer stores succeed and make Panera willing to invest in even more bakery-cafes then they will have to come up some huge investments in order to build a value chain in this new market. These investments though would be highly profitable in the long run and would increase Panera’s growth rates by a significant amount. Having explained my ideas for Panera’s expansion into foreign markets, Panera will also need to keep their eye focused on the US market as well and follow up their steady growth strategy as there is still a lot of potential growth in their domestic market especially for the short run.