We Have A New Leader: Panera Bread Co (PNRA), Starbucks Corporation (SBUX), Dunkin Brands Group Inc (DNKN)

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For all those investors who still think Chipotle Mexican Grill, Inc. (NYSE:CMG) is the growth leader in the fast casual restaurant industry, I have two words for you, Panera Bread Co (NASDAQ:PNRA). I’m sorry Chipotle fans, but Panera is just a flat out better deal today. The two companies are both growing fast, but Panera’s diversified menu and cheaper valuation make this our new leader.

Panera Bread Co (NASDAQ:PNRA)A Whole New Industry
Over the last several years, a whole new segment of the restaurant industry has developed. The concept of a “fast casual” restaurant seems to have a broad appeal, and until the last year, Chipotle was the category leader. Chipotle has been admired by other writers and myself for their efficiency, cash flow generation, and huge growth. The fact that a Chipotle can be run by a handful of staff, generates huge profits, and can be located in any strip mall, seemed to make this chain unbeatable. By contrast, Panera Bread and their larger footprint, more diverse menu, and greater staffing needs seemed a nice second choice.

Sure there are other companies that offer fast service and a good selection. Who could talk about the restaurant industry and use the word fast without mentioning McDonald’s Corporation (NYSE:MCD)? I would also argue that Panera’s main competition includes companies like Starbucks Corporation (NASDAQ:SBUX) and Dunkin Brands Group Inc (NASDAQ:DNKN). Let’s face it, if a customer wants to pick up a quick bite to eat and a drink, McDonald’s, Starbucks, or Dunkin Donuts fits this bill. All of these companies offer a selection of food and drink that is quick to prepare, and is relatively inexpensive, so what makes Panera different?

It’s Comfortable”
If you ask many customers what draws them to Panera, a common response is, “it’s comfortable.” Think about it for a minute, at a traditional McDonald’s the goal was always to get the customer in and out of the store. The company is beginning to remodel stores to make customers more likely to stick around, but most people think of McDonald’s as more fast than casual. The image of Dunkin Donuts increasingly is that of a drive-thru window. Dunkin Donuts doesn’t exactly go out of its way to offer seating, with limited options, if any, at many of its stores. Chipotle’s is much the same with hard metal and wooden chairs, and sparse decorations or reason to stick around. Starbucks is closer to Panera Bread’s feel with free Wi-Fi, and comfortable seating. However, of all of these chains, Panera offers a larger restaurant that can accommodate more guests.

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