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Feature Article, January 2005
Panera Perfects Development
Satisfied customers mean rapid expansion in many property types for Panera Bread.
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A regional mall location with an exterior presence allows Panera Bread to capture both mall customers and those wishing to stop just for convenience meals.
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When you have as many loyal customers as Panera Bread has, you have no choice but to give them what they ask for. That’s why Panera Bread is continuing to expand its franchise with a push toward the South and West.
Established in 1981, the company’s history goes back to Au Bon Pain Co., Inc., which prospered along the East Coast of the United States and internationally throughout the 1980s and 1990s and became the dominant operator within the bakery-café category. In 1993, Au Bon Pain Co., Inc. purchased Saint Louis Bread Company, a chain of 20 bakery-cafés located in the St. Louis area. After a comprehensive re-staging of Saint Louis Bread Co., average volumes increased by 75 percent between 1993 and 1997. Ultimately, the concept’s name was changed to Panera Bread.
Known for its all-natural, preservative-free, freshly baked breads, Panera Bread’s menu includes signature sandwiches, such as the Turkey Fresco and Asiago Roast Beef; hot panini sandwiches; café sandwiches; soups; salads; and a variety of fresh bakery goods. A unique Panera concept is its fresh dough manufacturing facilities. The company has established centrally-located “fresh dough facilities”(FDFs), which deliver dough daily to every retail bakery-café between the hours of 10 a.m. and 8 p.m. Panera currently has 17 FDFs across the country.
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A freestanding Panera Bread location.
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Panera Bread began franchising in 1993 and, by 1997, had a large influx of franchise groups come into the system. With only multi-unit operators (the average operates 12 locations), the company reviews many factors when choosing franchisees.
“We’re very thorough in choosing franchisees,” says Stephen Blum, vice president of real estate. “Three of the important factors we consider are multi-unit operating experience, meeting minimum financial hurdles for net worth and liquid assets, and a passion for our business.”
The company, which currently operates 669 bakery-cafés in 35 states and counting, is continuing to expand rapidly across the country. The chain, based in Richmond Heights, Missouri, has increased by roughly 100 stores per year and currently has 197 company-owned locations and 472 franchise locations. By the end of 2005, Panera Bread hopes to have 747 bakery-cafés open (50 company and 95 franchise). With coverage on the East Coast as well as the Midwest, Panera Bread has plans to move to South Florida as well as out West, starting with Northern California and Seattle.
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An interior of a Panera Bread mall location.
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“With 35 states up and operating, we’re certainly eager to expand,” says Blum. “We’ll open up 150 to 160 units in 2005, and we’ll continue to expand. We look forward to being in everybody’s neighborhood if we’re not there already.”
The firm is seeking sites with an average square footage between 4,650 and 5,300. Ideal locations include prominent regional trade areas within power centers, lifestyle centers or strong regional centers, although the company will entertain a freestanding site in the right location. The target for residential density is 50,000 people in a 3-mile radius with a median income of $50,000.
“We have traditionally been a suburban concept,” notes Blum. “I think the convenience aspect of our business would suggest that our better strategy is strip centers and power centers versus a regional mall. But with 145 locations, we do our share of a lot of different types of locations.”
It’s no surprise the company is expanding so quickly. Panera Bread continues to outrank most quick-casual restaurants in customer service and is continually updating its stores, based on customer feedback. According to the J.D. Power & Associates 2004 Restaurant Satisfaction Study, Panera Bread ranks highest among quick-service restaurants in the Midwest and Northeast regions. Panera received the highest ratings in all four of the survey’s measures of customer satisfaction — environment, meal, service and cost in the Northeast — and leads the Midwest region in environment, meal and service. As reported by the Wall Street Journal, Panera Bread scored the highest level of customer loyalty among quick-casual restaurants, according to research conducted by TNS Intersearch. And, as cited in Nation’s Restaurant News, Panera Bread was placed in the Number 1 spot out of 188 competitors in a national customer satisfaction survey of more than 71,000 consumers.
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Some Panera Bread locations at regional malls have an exterior presence.
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“What Panera offers is special,” says Blum. “There have been many who have copied us, but at the end of the day, I don’t think many people fully understand the formula that we have for success. I think it’s seen most easily through our average unit volumes (between $1.8 million and $1.9 million) which, for restaurants that have no drive-thru window and no alcohol sales, is extraordinarily high.”
Blum also notes that shopping center owners like Panera Bread because the bakery-café is successful as the industry leader and attracts sophisticated repeat customers.
“Other tenants like to see our customers pass their front door and, therefore, look at Panera as a strong co-tenant and reason to lease within a shopping center. In addition, Panera’s warm, inviting environment contributes to the aesthetics of the shopping center, which can increase a center’s value.”
— Susan H. Fishman
©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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