Operators of all kinds say the battle of running a restaurant is won or lost within a unit’s four walls.
The number of customer transactions, the gross profit on each item, the cost control of food, labor and maintenance all play weighty roles in the success or failure of a restaurant each and every day, whether the unit is within a large chain or an independent operation.
To many in the industry, Panera Bread Co., the parent to 1,335 bakery-cafes, has become a model of control, working to pull all the levers that lead to success, from marketing and customer service to cost control and menu price strategy. The chain’s same-store sales rose 3.4 percent systemwide last year, and it was one of few public restaurant companies to see its stock price increase amid the doldrums of the recession.
In 2008, the chain’s operating margin improved a net 30 basis points, or 0.3 percent, despite headwinds from increases in the cost of wheat and diesel fuel. This year, the company continues to target between 75 to 125 basis points, or 0.75 percent to 1.25 percent, of further margin improvement.
The Richmond Heights. Mo.-based company’s most recent moves to maintain outperforming results include:
Blunting the impact of the recession by adding transactions within the red-hot breakfast daypart. In the first quarter alone, breakfast transactions grew 6 percent and were helped by the chain’s trial-focused Share the Warmth promotion. Implementing a new lettuce-sourcing program that cuts about a week off the age of the product. Panera says it allows for tighter quality and temperature controls of the lettuce from the field through distribution to the bakery-cafe. Increasing the price of its new coffee by 5 cents per cup when it was introduced earlier this year. Panera took an additional 1-percent price increase on its higher-priced signature items in the current quarter. The company has worked diligently at creating a tiered-pricing structure that helps increase average checks without a large falloff of traffic. “Panera continues to benefit from its differentiated position that is increasingly critical as many operators conform, its ability to build and gain market share in a self-funding fashion due to its pristine balance sheet, and, as a result, its aptitude to retain key executives and store-level employees.”—Nicole Miller Regan, senior research analyst, Piper Jaffray & Co., Minneapolis Focusing on managing the growth of controllable expenses, with potential areas of savings including energy reduction, office supplies and uniforms. In addition, the company has said it wants to keep overhead growth rates to 75 percent of revenue growth, which it maintains will drive operating leverage. Undertaking eco-friendly initiatives. “Yes, green is the right thing to do,” said Ronald Shaich, Panera’s chairman and chief executive, “but it’s not the right thing to do simply because of its impact on the earth that we all inhabit, but as well because green offers material opportunities for waste reduction and material opportunities for reduced energy consumption and therefore improves operating margin.”— [email protected]
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