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Panera Bread Business Model and Growth Strategy

The Panera Bread business model incorporates a focus on high quality foods at low-costs. This has been a growing trend within the entire food industry as of late, but especially within the quick service restaurants. In the past, restaurants have focused on providing clean facilities, excellent customer services, and a variety of menu options as cost-effective ways to save money and bring more people into the restaurant.

Panera Bread is taking the lead in adding another concept: creative recipes that feature cheap proteins that can make the company money while they save customers money. It’s working well for this company as they are one of the fastest growing chains in the United States right now. With over 1,400 stores, many of them are able to keep their food costs below 25%. Offering bread is a core concept, of course, but just being a bakery would limit their customer base.

Panera Bread Focuses On a High Quality and Quantity Concept

The customer turnover rate is important to the Panera Bread business model. These chains want to have customers coming in to see that there are food products that have been freshly made just for them. The task of the bakers in this chain isn’t to serve immediate customer demands, but instead to fill the display cases that are in each restaurant.

People shop for food products with their eyes more than their heads or stomachs, so the visual display encourages customers to purchase. Panera Bread also winds up with a lot of extra products at the end of the day that don’t sell. They receive a public relations benefit in their business model by donating leftover food products to food banks and homeless shelters instead of trying to selling it all to day-old retailers.

How Does a Low-Cost, High Volume Business Succeed?

There are two traits that must be present for a low-cost, high volume business to find success. The first is high energy. People need to be baking and serving people at a fast rate to increase the amount of customers that can be served over the course of a day. There must also be a sense of value to the overall experience. Value can be found in cleanliness, speed, or cost, but the actual flavors and textures of the menu items cannot be ignored either.

With the Panera Bread business model, creativity is demanded of each employee. Low-cost proteins are difficult to manipulate into something tempting, but this chain makes it happen. Side dishes and entrees featuring these low-cost food items are one of the most craved chain foods that working professionals want over the course of the day. Offering sandwiches and seasonal items rounds out the customer demand so that brand loyalty develops with every serving offered.

The one moment when an employee at a high quantity, high volume restaurant is perceived to be tired, lazy, or unengaged is the moment that customers will begin to see less value in the brand itself.

It is also important to note that Panera Bread has focused on dominating their market niche as well. There are lots of restaurants that offer fast service and higher quality ingredients, but this chain does so with an emphasis on the traditional deli-style experience and personal customer service.

What Can We Learn From the Panera Bread Business Model?

The one lesson that can be learned with Panera Bread’s business model is that a company does not need to have high retail upcharges on the food products that they are serving. Even something has simple as a 4x upcharge will bring high profitability, yet still be affordable to the average consumer. If a bowl of soup can be made for $0.50, then with a 4x upcharge model, the customer would receive the bowl of soup for $2.

That’s good value because it’s made by someone and is about the same price as a pour and serve can of soup from the grocery store.

This business model also proves that it pays to develop your market niche presence before trying to expand. Use your current location to perfect your best practices so that profits can be maximized. Reinforce these best practices every day and provide ongoing training to make sure everyone is on the same page. In doing so, a business can limit their overhead costs in many different budgetary areas.

The Panera Bread business model proves that a strong perceived value, backed up by low-cost menu options, can provide a real value that is unbeatable. That’s why it is important to pay attention to the lessons learned here.

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