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How Is Panera Bread Expanding Its Business?

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Unit growth

Let’s discuss another revenue driver: unit growth. From the beginning of 2Q15 to the end of 1Q16, Panera Bread (PNRA), which forms 0.33% of the holdings of the iShares Core S&P Mid-Cap ETF (IJH), increased its unit count by 96, of which 25 units were added in 1Q16.

How is Panera Bread Expanding Its Business?

For expansion, Panera Bread is focused on franchising. Since 2Q15, the company has increased its franchised restaurant unit count by 113, while its company-owned restaurant unit count has fallen by 17. However, in 1Q16, the company added 15 company-owned restaurants compared to ten franchised restaurants.

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Panera 2.0 upgrade

In 1Q16, 51 company-owned restaurants were converted to Panera 2.0 restaurants. By the end of 1Q16, 452 company-owned restaurants and 11 franchised restaurants were converted to Panera 2.0 locations.

Peers comparison

In 1Q16, Panera Bread’s peers Chipotle Mexican Grill (CMG) and Brinker International (EAT) increased their unit counts by 58 and one, respectively. Analysts expect Shake Shack (SHAK) to add three units to its unit count in 1Q16.

Outlook

By the end of 2016, analysts expect Panera Bread to add 72 more units to take its total unit count to 2,069 from the current 1,997. Panera’s management has planned to convert another 148 restaurants to Panera 2.0 locations by the end of 2016.

The company’s management added that 75% of its franchise owners would start the conversion process in 2016. It expects 100 of its franchised restaurants to be converted by the end of 2016.

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