Despite the shabby global economy in last five years, the Global Fast Food Restaurant business has been recording growth. The growth is mainly attributed to the industry’s response to the preference changes of the calories conscious foodies. Change in lifestyle is another factor that has influenced the growth of the fast food restaurant industry. In this age of busy lifestyles, where people are cramped up for time, the option of eating out at restaurants has become a routine in life. High disposal income among the younger breed have also provided growth momentum to the fast food restaurant industry. Market Analysts and researchers anticipate this Industry to hit revenue of $2.1 trillion by 2015.
Despite the hard hitting conditions and traffic falling in this industry, some brands in this segment of restaurants have been quite successful to rebound. Panera Bread (PNRA, Financial) is one such brand that rebounded. Panera Bread is a fast food restaurant that is focused on this huge market and its experimenting with various strategies for higher customer satisfaction which can drive more traffic to the restaurant; this objective is exemplified with the launch of Panera 2.0.
Overview of the quarter
The company recently declared its Q3-2014 results and the top line recorded a growth. The revenue increased 8% year-over-year, to a record $619,890 as compared to $572,480 in the same quarter last year. The revenue increased mainly due to the increase in the net bakery café sales that recorded growth of 2.1% while net bakery transaction increased by 1.4%.
The net income declined by 8% year over year, to record $39.2 million ( $1.46 per diluted share) as compared to $42.7 ($1.48 per diluted share )million in the same quarter last year. The net income in Q3-2014, included the favorable tax adjustment of $2.3 million ($0.08 per diluted share), while in the same quarter last year the favorable tax adjustment was $3.8 million ($0.13 per diluted share). Despite this the EPS increased by 2% year over year. Decline in the net income was also leverage by the decline in the operating margins that decreased by around 200 basis points as compared to same quarter last year. The operating margin was affected mainly due to the rising cost of food inventories. The company has also been allocating higher budget for marketing and branding event which also led to the decline in the operating margins.
New Strategies in Panera 2.0 can provide growth momentum
The company has been all focused in experimenting with new strategies with the prime objective of increased customer satisfaction for driving more traffic to the restaurant and this can boost the revenue.
Ordering made easy with Rapid pick-ups: A mobile apps is being launched for the customers of Panera that provides an ease of pick up from the assigned counter without any waiting queue. Customers that are always in a hurry can always be provided low lead time for order and delivery, this can certainly provide higher customer satisfaction and growth for the restaurant with repeat customers. Furthermore, it’s not just orders from phone, but soon Panera bread will launch Kiosks for its customer for effective ordering system and delivery. The company plans around 8 Kiosks per restaurant.
New Staff “expos” to assist customers: Panera bread is appointing new associates as its staff that it calls as expos. The prime objective is assisting the customer for placing an accurate order as per the needs of the customers. The company believes that this will certainly increase the customer satisfaction to next higher level, as most of the orders made by customers are customized and these staff will assist the customers in deciding the best customized orders.
Delivery to table: is incorporated as a new strategy in Panera 2.0 where customers can just place an order, and they will be served on the table. By implementing this strategy a customer gets a higher quality experience that differentiates Panera from fast food restaurant and more as refined fast casual restaurants.
Catering centers: this contributes to around 8% of the Panera’s existing business and is continually growing. Panera is now focusing to build more catering centers that can have a more efficient procedure of distribution of the catering orders. A higher efficiency can be achieved by the company and the staff can now concentrate more on the customer’s problems and providing solutions. Currently all catering orders are assembled at the restaurant reducing the efficiency of the staff working at the restaurants.
Conclusion
The company stays focused on implementing all its new strategies with the launch of Panera 2.0 and is anticipated that this will be implemented across the nation by end of 2014. Post implementation of all the new strategies will certainly provide a higher customer satisfaction and higher satisfaction means higher repeat customers with new customers, and should influence the top and bottom line of the company. Hence, investors who are keen on investment in this segment of industry can always eye to include Panera Bread in their portfolio.
