Panera Bread: Occupying a Favorable Position in a Highly Competitive Industry IntroductionIf you analyzed the restaurant industry using Porters five forces model, you wouldnt be favorably impressed with the results. Three of the threats to profitabilitythe threat of substitutes, the threat of new entrants, and rivalry among existing firmsare high. Despite these threats, one restaurant chain is moving forward in a very positive direction. St$.$ Louisbased Panera Bread, a chain of specialty bakery$-$caf$$s$,$ has grown from $602$ company$-$owned and franchised units in $2003$ to $2,100$ in early $2017.$ In $2016,$ system wide sales reached $$2\mathrm{.}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 whats Paneras secret? How is it that this company flourishes while its industry as a whole is experiencing difficulty? As well see, Panera Breads success can be explained in two words: positioning and execution. Changing consumer tastesPaneras roots go back to $1981,$ when it was founded under the name of Au Bon Pain Co$.$ and consisted of three Au Bon Pain bakery$-$caf$$s and one cookie store. The company grew slowly until the mid$-1990$s$,$ when it acquired Saint Louis Bread Company, a chain of $20$ bakery$-$caf$$s located in the St$.$ Louis area. About that time, the owners of the newly combined companies observed that people were increasingly looking for products that were specialmeaning that they differed from run$-$of$-$the$-$mill restaurant food. Second, they noted that although consumers were tiring of standard fast$-$food fare, they didnt want to give up the convenience of quick service. This trend led the company to conclude that consumers wanted the convenience of fast food combined with a higher$-$quality experience. In slightly different words, they wanted good food served quickly in an enjoyable environment. The emergence of Fast casualAs a result of these changing consumer tastes, a new category in the restaurant industry, called fast casual, emerged. This category provided consumers the alternative they wanted by capturing the advantage of both the fastfood category $($speed$)$ and the casual dining category $($good food$),$ with no significant disadvantages. The owners of AuBon Pain and Saint Louis Bread Company felt that they could help pioneer this new category, so they repositioned their restaurants and named them Panera Bread. The position that Panera moved into is depicted in the graphic titled Positioning Strategy of Various Restaurant Chains. A market positioning grid provides a visual representation of the positions of various companies in an industry. Panera Bread emerged as a bakery$-$caf$$ that sells flavorful, wholesome food in a warm, friendly environment. Customers order their meal at a counter and receive it from a server in a booth or at a table, usually in less than $10$ minutes. Paneras version of Fast casualTo establish itself as the leader in the fast$-$casual category and to distinguish itself from its rivals, Panera $($which is Latin for time for bread$)$ added a bonus to the mixspecialty food. The company has become known as the nations bread expert and offers a variety of artisan and other specialty breads, along with bagels, pastries, and baked goods. Panera Breads restaurants are open for breakfast, lunch, and dinner, and also offer hand$-$tossed salads, signature sandwiches, and hearty soups served in edible sourdough bread bowls, along with hot and cold coffee drinks and other beverages. The company also provides catering services. Its restaurants present customers with an inviting neighborly atmosphere and relaxing decor, adding to their appeal. Panera even suggests a new time of day to eat specialty foods, calling the time between lunch and dinner chill$-$ out time.With high hopes for future expansion, Panera Bread is an acknowledged leader in the fast$-$ casual category. Its unique blend of fast$-$casual service and specialty foods also continues to gain momentum. This sentiment is captured in the following quote from Mark von Waaden, an investor and restaurateur who signed an agreement to open $20$ Panera Bread restaurants in the Houston, Texas, area early in the companys recent growth spurt. Commenting on why he was attracted to Panera Bread as opposed to other restaurant chains, von Waaden said, My wife, Monica, and I fell in love with the fresh$-$baked breads and the beautiful bakery$-$caf$$s$.$ We think the Panera Bread concept of outstanding bread coupled with a warm, inviting environment is a natural fit with the sophistication that the Houston market represents.The spirit of von Waadens statement captures the essence of Paneras advantage. It isnt just another restaurant. By observing trends and listening to customers, its leaders helped the firm carve out a unique and favorable position in a difficult industry. Present Status and Challenges Moving ForwardsPaneras leadership in the fast$-$casual category and its financial performance have drawn considerable attention. The company employs more than $47,000$ people, serves $8\mathrm{.}3$ million customers per week, and is currently one of the largest restaurant chains in the United States. It also continues to innovate and evolve. In $2012,$ Panera started testing a notion called Panera $2\mathrm{.}0,$ which is a series of integrated technologies $0$intended to enhance the guest experience. The concept was rolled out in a select number of restaurants in $2014$ with more being added each year. Panera $2\mathrm{.}0$ brings together new capabilities for digital ordering, payment, and operations. The Panera Bread restaurants that have transitioned to Panera $2\mathrm{.}0$ have table kiosks, which the company calls Fast Lane, where customers may place an order and pay without going to the counter. The orders are placed on iPads. Customers can also place orders and pay via a smartphone app. In regard to challenges, Panera has a growing number of competitors. The fast$-$casual category now includes restaurant chains such as Chipotle Mexican Grill, McAlisters Deli, Panda Express, and Jimmy Johns Gourmet Sandwiches among others. As a result, in $2015$ Panera refined its positioning to reconceive its brand mission as one of offering craveable wellness and an elevated experience within the fast$-$casual space. Panera $2\mathrm{.}0$ is part of this. The company also introduced new menu items that are intended to help the firm establish a premium reputation. The items, which have become very popular, include Paneras Roasted Turkey, Apple and Cheddar Sandwich and its Ancient Grain, Arugula and Chicken Salad. As part of enhancing the customer experience, in $2016$ Panera also started eliminating the few remaining preservatives, sweeteners, artificial flavors, and artificial colors that remain in its food items.To keep its growth on track, Panera is considering additional initiatives. The company is exploring opening Panera Bakery$-$Cafes in nontraditional locations. It is also exploring food delivery. Given its unique positioning, Panera sees food delivery as a mass$-$market opportunity moving forward. Questions $(1)$ How has Panera Bread established a unique position in the restaurant industry?$(2)$ How its unique position in the restaurant industry contributed to the firms success?$(3)$ What barriers to entry has Panera Bread created for potential competitors?$(4)$ What are Panera Breads primary sources of competitive advantages?$(5)$ What are the ways that Panera Bread can conduct ethical and proper forms of competitive analysis to learn about potential competitors enterg facategory? End os