In this time of occupied lifestyles, where individuals are left with little time to spend time in kitchen, they started opting to spend time in restaurants. Inclination for restaurant is significantly higher among more youths with high disposable livelihoods yet next to no time to spare. The fast food restaurant industry anticipated to generate total revenue of $240 billion in 2014, with a 19% growth in next 5 years. The business is anticipated to achieve a volume of just about 249 billion transactions in 2014.
Despite the economic recession, US remained one of the world's prevailing countries in the worldwide quick service restaurant market. The US fast food industry is anticipated to grow by 4% through 2014. The business sector is governed by increasing youthful populace and growing working class with higher expenditure capacity. Various restaurants are now focusing of various changes to stay ahead of their competitors. Most common changes that we notice is menu, ordering system (online), healthy food, etc. Panera Bread (PNRA) is one such restaurant, which is focusing on its food menu for more health conscious customers by knocking off various artificial additives in the food menu.
Quarter Overview
The company recently reported its second quarter results and was quite good in terms of revenue growth. Consolidated revenue was up 7.1% year over year, to record $631.1 million as compared to $589 million for the same quarter last year. The net income was down by 4% year over year, to record $49.2 million as compared to $51 million in the same quarter last year. The net income was down despite the rise in the revenue, mainly due to decline in the operating margin. In the quarter, the company witnessed a decline in operating margin by 250 basis points year over year.
Operating margin was high as the company underwent various expenditures in infrastructure enhancement, technology, sales and marketing expenses. These expenses will leverage growth in future and influence the bottom line. Despite the decline in the operating margin, diluted EPS did records growth by 5% year over year, to $1.82 as compared to $1.74 in same quarter last year.
In the quarter, the company started 10 new company owned outlets and 9 new franchise outlets. The total count for Panera outlets now records 1818 bakery- cafes.
Menu for Health conscious customers
Albeit late, the restaurant division is by and by finding up with healthy dieting pattern. The bulk of the footsteps in restaurant are now leaning toward healthy recipes in restaurants. Natural nourishment, refreshments and food with low trans fats are progressively discovering their spot in restaurant menus.
Panera Bread is focusing on providing a healthy diet for health conscious customers. Panera has already knocked off high fructose corn syrup from various product categories such as dressings and sauces. The modified menu of Panera looks quite appealing and healthier for calorie conscious customer. The food menu is free from artificial trans fat with calories are posted on menu boards. Panera is also the first restaurant chain to invest in animal proteins raised without antibiotics on a large scale.
Furthermore, Panera has taken up a bold step to eliminate all artificial ingredients and preservatives from its food and bakery items. The new menu is expected to be implemented in all its outlets by end of 2016.
Following are the course of action for the healthy food menu.
All bakery items will be free from high fructose corn syrup. All artificial colors used in bakery icings to be replaced with natural alternatives and also provide better taste and exotic colors for presentation. All artificial preservatives will be removed from dressings, sauces, beverages syrups and deli meats. It plans to use traditional meat like artisan smoked ham. The natural meat option is being currently tried as a pilot run project at various outlets. These changes in the food menu may offset the margin as the cost of natural ingredients is expensive. Panera can always have an option of prince revision of menu to balance out the margin, but in a longer run Panera is certain to benefit with the revised healthy menu.Outlook
Panera is being extravagant on it buy back policy and also investment in key areas to lay a strong foundation f
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