Intrapreneurship and Corporate Venturing 409Panera: Rising to the Challenge
The Panera restaurant chain has been laud-
ed as a top contender in customer satisfac-
tion by J.D. Power and Associates and is rec-
ognized as a leader in returns to sharehold-
ers by The Wall Street Journal. During the
five-year period beginning in 2000, the com-
pany’s sales rose 33 percent a year while its
net income grew at an annual rate of 50 per-
cent. During that same period the price of its
stock quintupled. Now that growth has appar-
ently hit a plateau. Increases in same-store
sales have begun to dip, and there is some
doubt about whether the Panera Bread
Company has the innovative yeast to allow its
growth and profits to keep rising.
Positioned as an alternative to what its
CEO Ronald Schaich calls “self-service gaso-
line stations for the body,” Panera specializes
in breads baked daily at each of its locations
and free of unhealthy transfats. The company
motto is “A loaf of bread in every arm.” The
chain also makes bagels, muffins, and pas-
tries; blends coffee drinks; serves homemade
soups; and prepares salads and custom
sandwiches from hormone-free chicken and
other healthy ingredients. “It’s food you crave,
food you trust,” explains Schaich. “People
sense it.”
Panera has much more panache than
most fast-food restaurants. The food is
served on china plates with stainless steel
utensils. The tables and chairs are wood, the
floors are carpeted, and there is free wireless
Internet to lure patrons toting laptops. Those
perks may explain why the average Panera
customer spends $8.51 on lunch, almost
twice the $4.55 industry average.
That lunchtime business is at the core of
Panera’s dilemma. While traffic and sales in
the middle of the day are strong, morning and
evening business is weaker. The chain intro-
duced breakfast soufflés to help build its A.M.
business. Now it is reaching out to the after-
work crowd by experimenting with drive-
through lanes and by offering a flatbread
pizza called crispani after 4 P.M. “It is a very
upscale product, and the first salvo in our
effort to boost sales during the evening,” says
Schaich. “It’s a natural extension of our bread
business.”
Schaich has some experience with menu
innovation. It was his idea to add salads to
Panera’s offerings when the low-carbohy-
drate diet craze hit in 2003. The chain contin-
ues to present a wide variety of vegetarian
and low-fat dishes to suit shifting American
tastes, and it keeps its menu fresh by sea-
sonally rotating soups and sandwiches and
rolling out new items.
Panera currently has over 930 bakery-
cafés in 37 states, one-third company-owned
and two-thirds operated as multiple-unit fran-
chises. It is opening new stores at a rate of
100 to 150 a year and plans to expand into
Canada shortly. Schaich believes Panera
could someday have as many as 5,000
stores, and industry analysts seem to agree.
But analysts also note that newer stores are
doing less business than those opened
before 2005, a not-uncommon problem for
aggressively expanding restaurant chains. A
study of the storefronts opened in 2005
showed that sales at franchise stores were 5
percent lower than sales at the company-
owned stores.
While Panera has historically been subur-
ban-based, it is beginning to expand into big
cities. Panera CEO Schaich has some expe-
rience with that kind of location, too. Schaich
was CEO and co-founder of Au Bon Pain,
Inc., when the chain purchased the 20-unit
St. Louis Bread Company and renamed it
Panera Bread in 1993. When Schaich decid-
ed to concentrate on building Panera inDISCUSSION CASE