Panera breads business model is, “to provide a meal and dining environment of sufficient high quality that customers would gladly pay for that quality – at a price that would also make the company financially successful” (Panera Bread Case). Through Panera Bread’s business model one can see that they took the marketing technique of higher quality for slightly higher prices. Panera bread differentiated itself from many competitors through its superior quality and welcoming environment. This business model deemed successful at first and helped the company to grow and maintain profits, but over the recent years Panera has been running into some obstacles. Personally I like their business model and it has been proven with their early success,
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In order to help with transaction growth and decreasing margins I suggest that Panera Bread raises their prices by very small amounts. I recommend a ten cents to twenty-five cents increase on all of their menu items. This very small increase in price will be enough to help stabilize their margins and allow for more growth. Due to the very small increase in price it should not affect their growth too much if at all. For example Chipotle, another food chain, systematically increases their prices ten to twenty-five cents every so often while maintaining a high level of growth and strong margins.
Coming back to the problem of Panera Bread deciding to repurchase $75 million dollars in stock in 2008. The reason for their repurchase as stated in the Panera Bread Case is, “The repurchase would signal management’s position on the ‘long-term potential of the business as well as many company-specific near-term initiatives to drive sales and margin improvements”’. The stock repurchase will increase the price of the Panera Bread stock and shows the public the confidence management has in the company to continue to improve their margins. The repurchasing of the stocks will help lead to the increase in the value of the firm. I believe that the repurchasing of stocks is necessary in this case because it will help to raise the price of their stocks and encourage outside stock buying that will help finance them in the future.