Pret A Manger's Turn Around and Recovery and Cost-Cutting Measures

CASE STUDY: PRET A MANGER
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Case Study: Pret A Manger
Case Study Description
Overview
Pret A Manger, commonly known as a Pret, has been on a simple mission since it was first established in 1986. The mission has been “to serve freshly made food and good organic coffee, whilst also trying to do the right thing (Pret, n.d.).” Pret has been a go-to food chain for most workers in the city. In recent years, Pret restaurants and outlets have become a common sight in the city of London and across the United Kingdom (UK). Exhibit 1 shows the number of stores that Pret has had in the UK since 2014. Between 2014 and 2018, Pret opened up over 100 additional stores in the UK alone. It also had outlets in other countries. However, the number of stores has declined considerably in 2021 due to the effects of the COVID-19 pandemic. There have been changes in the market demand as a result of the pandemic. When the pandemic hit, a lot of people were forced to work from home. As a result, the number of Pret’s customers, who were mostly office workers in central London, declined significantly.
Past Responses to Changes in Market Demand
In 2019, Pret had to make certain changes in strategy because of changes in market demand as well as competition. More customers have become health-conscious and are interested in menus that are healthier. In the UK, restaurants and fast-food chains are known as the main sources of unhealthy food (Commetric, 2019). As more consumers began realising this, restaurants and fast-food chains were forced to re-evaluate their menus. According to an article published in the Guardian by Butler (2019), about 12.5% of Britons are vegan or vegetarian and 21% prefer a diet that is more vegetable-based than meat-based. Given that Pret’s main diets were mainly meat-based, the company had to make certain changes to accommodate the changes in consumer preferences. At the beginning of 2019, Pret had four vegetarian outlets, one in Manchester and three in London (Butler, 2019). In response, to changing market demands, Pret acquired one of its smaller competitors, known as EAT. The plan was to change all the EAT outlets, mostly based in London, into vegetarian outlets (Sangameswaran & Hussain, 2019). This move was set in motion to allow Pret to meet the needs of health-conscious customers.
The COVID-19 Pandemic and its Effect on Market Demand
In 2020, many businesses were hit hard as the world came to a standstill due to COVID-19. As people tried to observe health measures of social distancing and working from to limit infection rates, businesses had to re-evaluate their strategy.
Pret suffered greatly as a result of market changes due to the pandemic. According to an article published by Bedingfield (2020) in the Wired UK, the company closed 28 shops in 2020 and lost a third of its workforce as a result of job cuts. The company announced that within a few weeks, it had lost years of growth and expansion. In the past several years, the company had experienced significant growth by opening up new outlets as well as acquiring smaller rivals such as EAT. However, EAT outlets, which had been designated as vegetarian outlets for Pret, were all closed down in 2020. An article by Smithers (2020) published in the Guardian reveals that Pret closed down 90 EAT outlets permanently, unlike other Pret outlets whose closure was termed as temporary. In response to rapidly declining sales, which were 60% lower than 2019 sales (Bedingfield, 2020), Pret had started taking cost-cutting measures. Also, Pret’s was already struggling with its revenues before the pandemic, as shown in Exhibit 2. However, in 2020, its high dependency on the city’s workforce as its main clientele was its downfall. Most of Pret’s customers were walk-in office workers on their way to work in the morning or during their lunch break. However, when more people started working from home, Pret had to change its business model to ensure that it reached more people during the pandemic.
New Ways of Doing Business during the Pandemic in the Restaurant Industry
New ways of doing business during the pandemic included incorporating more delivery options and installing click and collect options (Brady, 2020). Establishing a reward app where customers get rewarded for downloading and ordering food via the app was also an option available to restaurants and food chains across the globe. In addition, since some restaurants such as Pret had menus that originally included breakfast and lunchtime meals only, they could also start preparing evening meals (Davey, 2020). Also, restaurants that were located in cities and focused more on city workers could relocate their businesses close to homes. Shifting the focus to individuals working from home by bringing outlets near their homes would help increase sales. Additionally, restaurants could collaborate with other businesses such as retailers to reduce costs and increase revenues (Resendes, 2020). Laying off employees reduced labour costs, but it was not enough and restaurants had to employ other measures. Some, such as Pret, were in the process of renegotiating their leases with landlords (Bedingfield, 2020).
What Next?
Now that vaccines against the virus have been rolled out, many businesses are hopeful. However, the question remains on whether most will ever recover from the losses and other effects of the pandemic. In 2021, many businesses will either break completely or survive through and engage towards a road of sustainable recovery. Pret A Manger is no exception and its ability to survive through 2021 will be instrumental in its future success.
Questions
Pret has to address two major questions:
* Turn around and recovery- How can Pret recover from the effects of the pandemic? Should it focus more on delivery options or should it consider establishing more outlets in the suburbs? If the latter was favourable, what would happen to the city outlets? Would they stay closed and be opened up again after the vaccines take effect and more people start going back to work in their offices?
* Cost-cutting measures- What other cost-cutting measures can Pret apply to maintain its standing amid the pandemic and its challenges? Should it partner with other businesses to increase sales? Should it change its menu to incorporate more meals? Or should it just focus on managing rental costs through lease re-negotiation?
Teaching Note
Pret needs to make a turnaround to recover from the effects of the pandemic and ensure future sustainable recovery and growth. Below are the two most suitable responses to the first question:
1 It should open up outlets in the suburbs and out-of-town locations and close down some of the city outlets. This is a type of turnaround strategy. It involves getting rid of non-performing business units or resources and adding new strategic business units or resources, thereby renewing the firm's portfolio (Gotteiner et al. 2019, p.1262). Currently, Pret’s outlets located in London and other cities are non-performing resources because very few customers are walking in as they used to before the pandemic. As such, getting rid of these non-performing outlets is the first step towards recovery. Then, Pret needs to open up new outlets in out-of-town locations near residential areas. A majority of people are now working fr...