What are Panera Bread’s primary sources of competitive advantage?

If you analyzed the restaurant industry using Porter’s five forces model, you wouldn’t be favorably impressed with the results. Three of the threats to profitability—the threat of substitutes, the threat of new entrants, and rivalry among existing firms—are high. Despite these threats, one restaurant chain is moving forward in a very positive direction. St. Louis–based Panera Bread, a chain of specialty bakery-cafés, has grown from 602 company-owned and franchised units in 2003 to 2,100 in early 2017. In 2016, system wide sales reached $2.7 billion, up 6 percent from the previous year; and, sales revenue was ticking upward in 2017 as well. These numbers reflect a strong performance for a restaurant chain. So what’s Panera’s secret? How is it that this company flourishes while its industry as a whole is experiencing difficulty? As we’ll see, Panera Bread’s success can be explained in two words: positioning and execution.