uploads///

How’s Panera Bread Expanding Its Business?

By

Updated

Unit growth

After discussing same-store sales growth in the previous part, we’ll discuss another revenue driver—unit growth. From the beginning of 2Q15 to the end of 4Q16, Panera Bread (PNRA) increased its units by 71. In 1Q16, analysts expect the company to add 18 more units.

How is Panera Bread Expanding Its Business?

In 1Q16, Panera’s peers such as Chipotle Mexican Grill (CMG) and Shake Shack (SHAK) are expected to increase their unit count by 49 units and 3 units, respectively.

Article continues below advertisement

For expansion, Panera Bread is more focused on franchising. In 2015, the company increased its overall unit count by 92 units. The unit count of company-owned restaurants decreased by 24—compared to an increase of 116 units for franchised restaurants. In 2015, the company refranchised 75 restaurants. Management plans continue with the refranchising process in 2016. Panera Bread and Dunkin’ Brands (DNKN) form 0.6% of the holdings of the iShares Core S&P Mid-Cap ETF (IJH).

2016 outlook

Management set a target to open 90–100 new restaurants in 2016. Analysts are expecting the company to add 94 restaurants in 2016. It’s expected to add 24 restaurants in 2Q15 and 3Q15. In 4Q15, the company is expected to add 28 restaurants.

Panera 2.0 upgradation

In 2015, Panera Bread converted 304 restaurants to Panera 2.0. This brought the total number of restaurants being converted to 410. In 2016, the company is expecting to upgrade another 200 units to Panera 2.0. Management expects to spend $200 million–$225 million for these initiatives. Management also claimed that 100 franchised restaurants will be upgraded to Panera 2.0 in 2016.

In the next part, we’ll discuss Panera Bread’s earnings before interest and tax margins.

Advertisement

More From Market Realist