Question

Analyze and compare Darden Restaurants to Panera Bread

Darden Restaurants, Inc. (DRI) is the largest full-service restaurant company in the world. It operates over 2,200 restaurants under a variety of brand names, including Olive Garden, Bahama Breeze, and LongHorn Steakhouse. Panera Bread Company (PNRA) operates over 1,800 bakery-café locations across North America. It is one of the largest food service companies in the United States. The cost of food, beverage, and packaging and the beginning and ending inventory balances from recent annual reports for Darden and Panera are as follows (in millions):

		Darden		Panera
Cost of goods sold (food, beverage, and packaging)		$2,039.7		$715.5
Inventories:
Beginning of year		163.9		22.8
End of year		175.4		22.5

a. Compute the inventory turnover for both companies. Round all calculations to one decimal place.

		Inventory Turnover
Darden Restaurants
Panera Bread

b. Compute the number of days’ sales in inventory for both companies. Assume a 365-day year. If required, round all computations to one decimal place and use in subsequent calculations. Round final answers to one decimal place.

		Number of Days’ Sales in Inventory
Darden Restaurants		days
Panera Bread		days

c. Which company is more efficient in managing inventory?

  appears to manage its food, beverage, and packaging inventories more efficiently.

d. Based on the details provided in the question which of the following is correct?

1. The difference in inventory management efficiency may relate to the types of food the restaurants serve. Darden’s food turnover can be slower. Panera offers bread products that must be sold fresh. Panera must manage its inventory more carefully.

2. The difference in inventory management efficiency may relate to the types of food the restaurants serve. Panera’s food turnover can be slower. Darden must manage its inventory more carefully.

Answer 1

a. Inventory Turnover = Cost of Goods Sold / Average Inventory

Darden = $2039.70 / 169.65 = 12.0 times
Average Inventory = ($163.9+175.4)/2 = $169.65

Panera = $715.50 / 22.65 = 31.6 times
Average Inventory = ($22.8+22.5)/2 = $22.65

b. Number of Days Sale in inventory = 365 / Inventory Turnover

Darden = 365/12 = 30.4 days
Panera = 365 / 31.6 = 11.6 days

c.
Panera appears to manage its food, beverage, and packaging inventories more efficiently.

d.
1. The difference in inventory management efficiency may relate to the types of food the restaurants serve. Darden’s food turnover can be slower. Panera offers bread products that must be sold fresh. Panera must manage its inventory more carefully.