Pret A Manger (Pret) began in 1986 when two friends borrowed £17000 to open up a sandwich shop in London. Their idea was to sell freshly made, organic sandwiches. Today, there are over 160 branches in the UK, mainly in London.Pret created a niche market, adding quality and unusual fillings to a previously predictable and stagnant segment. In 2007, Pret’s annual sales were £220 million and it recorded a net profit of £23 million. According to Jim Winship, Director of the British Sandwich Association, Pret set the standard but other brands have, to some degrees, caught up- ‘it is a highly competitive market, particular with the coffee bar sector having a great deal more activity recently. It is a tough market and not so easy to innovate any more’.
In the UK, Pret is growing strongly, with 45 new outlets opened in the last two years. It has also recently launched a new concept- the ‘Pret Pod’. This is a kiosk style satellite branch, in busy locations such as stations and airports. These Pods will use kitchens at nearby branches to prepare their stock. There is no seating area, and Pret hope to capitalise on ‘passing trade’. It is currently unknown if the pods will grow to become a major key player in their product portfolio due to its infancy.
Pret works on a relatively new marketing budget - it amounts to just 0.4% of total sales. There are only 3 people in the marketing department, not much for a company whose financial target is a net profit of 9%.
Promotions largely consist of posters in shop windows, chatty copyrighting on the packaging and a brochure.
Commercial director, Simon Hargraves, says that ‘we don’t do advertising and we have no press office- we sell sandwiches. We try to keep it as simple as that. All of our sandwiches are made on the day of purchase and at the location of sale: consequently there are no ‘sell by’ dates’.
Hargraves is considering whether to adopt a skimming pricing strategy next year.
Typically, an average store of 14 workers serves approximately 364 customers a week. With the introduction of new technology and up to date working practices, a typical store hires 18 workers who serve approximately 450 customers a week.
In an industry where average staff turnover is 265%, Pret selects its workforce very carefully, picking only one in every 14 job applicants.
Potential recruits are sent on a one day experience in a branch, where staff members vote on whether to employ the applicant or not. Employees are encouraged to take responsibility for their own role within a branch and there is a strong emphasis on teamwork, both with in shops and between neighbouring shops.
Some training, emphasising the aims and values of Pret, is run at the company’s specialist training Academy in Victoria, but most is on the job. Internal recruitment is used a great deal for positions of responsibility.
Customer service is very important. Mystery shoppers are used to check service, such as the target to serve coffee within 60 seconds of the order. In addition, stores are regularly checked for safety, hygiene and quality.
Staff are encouraged to suggest ideas to improve the company, and financial rewards are given for good ideas. Twice a year, a massive party is organised for the workforce. Pay is set at a level of £1 per hour higher than the industry standard, and hours are flexible to suit staff needs.
Pret was rated as the best catering employer by the ‘Sunday Times’. Pret’s labour turnover is high at 90%. For managers it is only 14%.
(1) Based on the figures in the case study, did Pret achieve its financial target of a 9% net profit margin?
(2) Evaluate the motivational strategies used by Pret in order to develop and retain its workforce. (15)
