Bakery Cafes

The Bakery Cafes industry’s revenue has increased modestly during the five years to 2020. These generally quick casual restaurants combine the quality and taste of fine dining with the quickness and cost of fast food companies. Consumers have responded positively to the more health-conscious and personalized alternatives appearing on operators’ menus, and as a consequence, the industry has grown faster than the rest of the foodservice sector.

Over the five years through 2020, industry revenue increased by an annualized 1.9 percent to $11.1 billion, including a fall of 1.3 percent in 2020 alone. Overall increases in per capita disposable income and higher coffee consumption have aided the industry’s prosperity.

However, the COVID-19 (coronavirus) pandemic has dragged the whole economy down, resulting in a decline in disposable income as unemployment soars. As a consequence, industry revenue is expected to decline in 2020 as customers strive to reduce discretionary spending and avoid wasting time on public transportation.

The present time has seen a sea change in the industry’s environment, with three of the industry’s four main operators merging into a single holding company. Throughout the era, the JAB Holding Company (JAB), headquartered in Luxembourg, has followed a rigorous mergers and acquisitions strategy. Bruegger’s Enterprises Inc., Panera Bread Firm, and ABP Corporation were bought by the company.

Each of these categories is franchise-based, which has permitted the fast rise of small, independently owned locations with well-known brand names. Franchising helps bigger operators to increase income via franchise and royalty fees while minimizing risk and capital investment. Franchise operations have posed a challenge to a number of small, independently owned bakery cafés that have always catered to local markets.

Over the next five years, as consolidation continues, bigger operators should have more access to resources, allowing them to expand their franchise operations. Smaller operations, unable to compete with larger chains’ geographic reach and marketing budgets, will almost certainly be pushed to specialize. As a consequence, the market is expected to see an increase in the number of specialty operators selling upscale confections such as cupcakes and macarons.

Additionally, throughout the projection period, additional operators are likely to enter the morning sector, increasing their products to include breakfast sandwiches, bagels, and coffee. These advancements are likely to have a favorable impact on sales and profit. Over the five years to 2025, revenue is predicted to expand at an annualized rate of 1.6 percent to $12.0 billion.

Over the five years through 2020, the Bakery Cafes business has been one of the greatest performers in the larger foodservice sector. With disposable income and consumer confidence increasing most of the time, bakery cafés have accelerated their growth by capitalizing on evolving customer tastes. Individuals want the convenience of fast food establishments without sacrificing flavor.

Industry outlets place a premium on offering high-quality cuisine with a variety of healthy selections while keeping a quick service tempo. As a consequence, industry sales increased at an annualized rate of 1.9 percent to $11.1 billion for the five years through 2020, despite a 1.3 percent drop in 2020 alone.

The industry is made up of restaurants that specialize in baked foods such as bread, cakes, pastries, and pies, as well as supplementary foods such as sandwiches, salads, and soups. Food is cooked for instant consumption, and the majority of operators provide eating rooms on-site, but some also provide drive-thru service. The business is divided between quick-service restaurants that specialize in fast food and provide limited table service and full-service restaurants that provide a complete dining experience with table service and wide menus.

Over the last five years, the industry has outperformed the wider foodservice sector by capitalizing on emerging consumer preferences. Consumer awareness of the perils of obesity and an increasing emphasis on high-quality ingredients has resulted in a demand for high-end, inexpensive, healthy food. As a result, baked products and fresh fruit have grown popular as the highlight of the ordinary bakery cafe’s menu.

Additionally, the industry’s biggest participant, Panera Bread Company (Panera), declared a goal of eliminating all artificial additives from its menu items by 2016, indicating a shift toward more health-conscious options in response to shifting customer tastes. The firm analyzed and altered over 450 recipes, the majority of which featured menu items from the business’s bakery café.

Additionally, the firm continually added new menu items over time, demonstrating its ability to respond to changing customer tastes. The industry’s rise has also been boosted by operators’ ability to serve meals swiftly, as customers with hectic lives have increasingly sought more convenience.

In metropolitan areas, a bombardment of shop openings has been fueled by specialty operators catering to high-income clientele. French pastry shops, such as macarons, brioches, and croissants, have been particularly prevalent. Gourmet cupcakes have been a part of this trend, with the number of locations rapidly expanding over the last decade.

During this time span, the industry’s environment has changed dramatically. The Luxembourg-based JAB Holding Company has bought a number of the industry’s top operators (JAB). In 2017, the business acquired the Bruegger’s Bagels trademark via the acquisition of the chain by its subsidiary Caribou Coffee Company Inc. from French restaurant behemoth Groupe Le Duff.

The most major deal was JAB’s acquisition of Panera Bread for more than $7.5 billion. Panera, working via the JAB umbrella, bought the ABP Corporation, the parent company of Au Bon Pain bakery cafés, in 2018. The two restaurants were owned by the same parent firm until 1981, and their menus are surprisingly identical.

Three out of four of the industry’s top operators now share a holding company as a consequence of this merger and acquisition activity. Despite the fact that these firms continue to operate under their original brand identities, this action demonstrates consolidation among significant businesses.

Each of these organizations also uses the franchise concept. While revenues in smaller locations are not included in the company’s income, bigger operators profit from licensing and royalty payments collected from franchisees. This allows major operators to diversify their geographic reach while reducing risk and capital expense. The industry’s franchisee base has grown dramatically in recent years.

Franchisees benefit from the backing of the companies that manage their restaurants, including their extensive geographic reach and recognized brand. To minimize price competition and maintain profit margins, these operators are likely to focus on areas with larger growth potential, such as the morning crowd. Breakfast has historically been less competitive, and bakery cafés are projected to increase sales by expanding their breakfast sandwich, bagels, and coffee offerings. Other small players carve out niches in the industry by supplying upscale confectionery such as cupcakes and macarons.

Due to the potential associated with specialty markets and franchising, the number of industry operators increased by an annualized 1.8 percent to 8,920 in the five years to 2020. Wage expenditures have also grown, despite more automated operations, increasing by 3.2 percent on an annualized basis to $3.7 billion during the same time. This arises as a result of several states passing legislation increasing the required minimum wage. This impacts a large number of industrial workers designated as low-skilled laborers.

Increased labor expenses have put a little squeeze on industry earnings. Profit, defined as profits before interest and taxes, is projected to account for 4.8 percent of industry sales in 2020, down from 5.8 percent in 2015. While profit margins remain high, companies must account for material price volatility. The cost of food is the industry’s largest expenditure, and bigger chains may leverage economies of scale and acquire supplies in bulk from wholesalers at advantageous terms. However, profit margins have been squeezed by severe internal rivalry among industry players.

In general, the industry’s revenue is expected to decline in 2020, mostly as a result of the COVID-19 (coronavirus) epidemic. Numerous owners were obliged to temporarily close outlets in order to comply with the Centers for Disease Control and local and state regulators’ instructions. As a result, even after restaurants starting opening or offering online ordering, people remain afraid to walk out and pick up meals.

Additionally, the epidemic has resulted in a dramatic increase in unemployment, resulting in a decline in disposable income and consumer confidence. However, as compared to other foodservice sectors, this one often does better because of its inexpensive prices. Despite this, consumers have attempted to rein in discretionary spending, which includes food and beverage purchases outside the house, resulting in decreased demand in 2020.

The Bakery Cafes business is predicted to expand over the next five years, particularly as the global economy recovers from the COVID-19 (coronavirus) pandemic. The sector has significant development potential, and aggressive shop expansions by big companies are anticipated to continue as demand grows. The overall economic situation is predicted to improve throughout the forecast period,

which means that rising consumer spending and confidence will almost certainly drive revenue growth. However, research anticipates that the market would approach saturation at the conclusion of the forecast period, further limiting revenue growth. As a consequence, growth is predicted to decelerate, with revenue predicted to rise at an average rate of 1.6 percent to $12.0 billion over the next five years to 2020. This is a little slower pace than the pace projected for the five years to 2020, but still consistent with GDP growth.

Consumer expenditure is forecast to grow at an annualized rate of 2.8 percent over the next five years through 2025, as per capita disposable income increases. This is expected to increase out-of-home dining expenditures and allow customers to indulge in more costly menu items. Additionally, since many customers have reduced their out-of-home dining owing to health concerns, this trend is projected to reverse as more people dine out during the next five years.

While value will likely remain a primary consideration for the majority of customers, the trend toward premiumization throughout the whole foodservice industry is likely to continue. As customer knowledge about the nutritional composition of goods grows, bakery cafés will almost certainly continue to provide healthier options. Healthy, high-quality food is predicted to become the standard, and customers with greater incomes are likely to pay a premium for it, boosting industry revenue even more.

Consolidation in the industry is likely to continue as the number of establishments grows, increasing by an average of 1.6 percent to 12,262 sites during the five years to 2025. Panera Bread Company (Panera) has expressed its intention to expand worldwide and domestically in the future years and is likely to maintain its leadership position in the market.

Additionally, in early 2018, the business bought rival ABP Corporation, the firm behind Au Bon Pain bakery cafés, extending its dominating market dominance in the sector. Franchise agreements, which are the favored business model for the majority of big chains, will almost certainly allow operators to build a huge number of additional sites with little capital commitment and risk. Meanwhile, independent bakery cafés are unlikely to succeed unless they have a well-defined target market and a strong local reputation.

Over the last decade, the business has mostly succeeded by targeting the lunch crowd, with most operators generating well over 50.0 percent of their daily sales and profit between 11:00 am and 4:00 pm. While this will almost certainly continue to be the most profitable time period for bakery-cafes, many are anticipated to actively pursue the underserved morning and supper markets.

This method will almost certainly assist operators in avoiding price-based rivalry in a highly competitive business. Operators will almost certainly strive to entice customers by offering expanded breakfast menus and early morning specials. Chains such as Einstein Bros. and Corner Bakery Cafe have already offered breakfast sandwiches and are targeting the morning population by offering healthy breakfast options such as granola, fruit, and yogurt.

Additionally, Panera released a supper menu in June 2019 that includes flatbreads, bowls, and sides. Traditionally, breakfast has been taken at home; but, as consumers’ discretionary money develops, they are anticipated to dine out more often for their first meal of the day. Additionally, by selling supper products, sector operators may divert customers away from more conventional sit-down eateries frequented for supper.

Profitability, defined as profits before interest and taxes, is expected to remain largely consistent over the next five years as competition grows in lockstep with demand, growing slightly to 4.9 percent of industry sales in 2025. Bakery cafés will almost certainly continue to earn a low-profit margin as long as competition remains severe, while certain operators may achieve a higher profit margin via product innovation.

If demand stays robust, as projected, operators will likely be able to increase prices in response to rising input costs. Wages as a percentage of revenue are likely to stay largely stable over the next five years, growing just slightly as technological advancements enable operators to do formerly labor-intensive jobs. While routine tasks are likely to be automated, labor remains critical for many operators’ success, since providing superior service remains one of the most effective ways to differentiate one’s institution from the competitors.

The industry’s major operators will almost certainly continue to spend extensively on technology, shop layouts, and cooking equipment in order to improve productivity and supplement in-person service in order to provide a more well-rounded experience for a diverse group of customers. As a consequence, salaries are predicted to climb at a 1.6 percent yearly pace to $4.0 billion during the next five years to 2025.

This sector is made up of businesses that create flour-based meals on-site in an oven for immediate consumption. Bread, cakes, pastries, pies, and bagels are typical goods, as are supplementary items such as sandwiches, soups, and salads. Purchases may be made on-site or to-go. The Bakery Cafes sector has reached a mature level of development.

Over the last decade, the sector has outperformed the larger foodservice category and has increased in the five years to 2020, despite the recession. Growth has been fueled mostly by shifting customer tastes toward convenience and high-quality, inexpensive, and healthful meals.

Operators have responded to this trend by developing menus rich in healthy and gourmet alternatives. Product development has been critical to the industry’s success, particularly as customer demand for healthy foods has increased as they reject high-fat, high-salt meals.

Industry value added (IVA), which quantifies an industry’s contribution to the entire economy, is expected to expand at a 2.1 percent annualized pace during the next decade through 2025. However, the US Gross Domestic Product is expected to expand at an annualized rate of 1.5 percent over the same time, showing that the sector is developing in lockstep with the economy, as is characteristic of a mature business. Additionally, industrial items have been widely accepted by the majority of customers for a lengthy period of time.