CASE 5

SARAH HU

DECEMBER 2021
 04. 04.
CLUSTERS (CLARITAS) PREDICT OPEN (MODEL 2)

06. 06.
PREDICT OPEN (MODEL 3)
DETAILED DNA (CLARITAS) 08.
CLUSTERS (ESRI) 08.
PREDICT OPEN (MODEL 4)
10.
S UMMARY

10.
12.
LOCATION TYPE (PANERA) HOLDOUT (MODEL 2)

COTENANTS (PANERA) 14. 12.

ECONVAR (PANERA) HOLDOUT (MODEL 3)

14.
CORRELATION MATRIX

14.
REGRESS (SEGMENTS)

14.
PREDICT OPEN (MODEL 1)
 The PRIZM segments that have at
least a 20% or larger relative frequency
associated with OPEN stores include
Upper Crust, Movers and Shakers,
Cruising to Retirement, Middleburg
Managers, Connected Bohemians, and
Aspiring A-Listers. This indicates that
Panera Bread appears to favor these
PRIZM segments based on the number
of stores they have chosen to open in
these types of areas. However, what is
also interesting is that these areas are
also the areas that have higher relative
frequencies of closed stores. Thus, this
dichotomy leads us to question if there
CLUSTERS
are any other variables that we should
perhaps look at in addition to the type
of cluster (such as location within the
United States to determine the perfor-
mance of stores within a certain area). In
regards to location strategy, we can ana-
lyze the similarities across these PRIZM
segments to determine this. The overlap
(CLARITAS)
in tthe majority of these segments occur
in the following categories: income/
income-producing assets, household
technologies, presence of kids, empoly-
ment levels, homeownership, and edu-
cation levels. Most of these segments
are wealthy, use modern technology, are
mostly without kids, are homeowners,
have a graduate plus level of education,
and are employed at the management
and professional level.
It should also be noted that there are
3 segments that are relatively more
important because their relative fre-
quency is at or above 25%, meaning
Panera Bread has opened 12+ stores in
these cluster types. These 3 segments
are Aspiring A-Listers (25%), Movers
& Shakers (25%), and Middleburg
Managers (27.1%). Across these 3 seg-
ments, we can determine the profile of
the type of consumer that Panera Bread
is trying to attract. Movers & Shakers
and Middleburg Managers are definitely
4 C ASE 5
more similar to each other in terms of
profile: both groups of wealthy in regards
to income/income-producing assets,
mostly homeowners, are employed
at the management and professional
level, and have graduate plus education.
Aspiring A-Listers represent a slightly
worse off group of people with lower
income/income-producing assets, rent-
ers as opposed to homeowners, and only
some college education. Panera does not
seem to discriminate in regards to the
urbanicity or age range: suburban, metro
mix, and urban areas are all represented,
as well as a wide range of ages from 25
all the way to 55+. Overall, we can say
that the type of consumer Panera Bread
is trying to attract is on the wealthier
end, is a savvy technology user, and pur-
sued secondary education. In terms of
employment, their target consumer is
mainly working at the management and
professional level, with potentially some
consumers working for management.
The Claritas segments that have the
highest absolute value correlation
with Dum_OPEN is Money & Brains,
Fast-Track Families, Urban Elders, and
Mayberry-ville. These clusters have the
highest correlation with the variable and
all these clusters have a p-value of less
than or equal to 0.1, meaning that the
correlation between these clusters and
Dum_OPEN is significant. For all four of
these segments, there is a negative cor-
relation ranging from -0.16 to -0.234.
Because there is a negative correlation
in all of these stores with the open store
variable, this means that there would
be a positive correlation between these
segments and the closed stores variable.
Thus, we can ascertain that these closed
stores are located in neighborhoods
having the wrong DNA and therefore,
Panera Bread should avoid these areas.
The commonalities between all of these
clusters is that they are comprised of
people with higher incomes/income-pro-
ducing assets, located in rural and urban
areas, are mostly aged 55+, are mostly
without kids, and have graduate plus
levels of education.
The areas in which Panera Bread should
look into building more stores are the
ones where there is a positive correlation
between Dum_OPEN and the clusters.
These areas did not have a p-value less
than 0.1, but they include Empty Nests,
Park Bench Seniors, Bedrock America,
Kids & Cul-De-Sac with positive correla-
tion values ranging from 0.146 to 0.151.
These areas are typically comprised of
either low-income, low educated rent-
ers from the Kids & Cul-De-Sac and Park
Bench Seniors group or wealthier, retired
homeowners from the other two groups.
The key differences between the clusters
that have a positive correlation vs those
that have a negative correlation are their
urbanicity: the clusters that have a posi-
tive correlation are mostly wealthy sub-
urban homeowners whereas the clus-
ters that have a negative correlation are
mostly urban/rural homeowners. Across
the two categories of clusters, the dif-
ferences in age, education, technology
use, occupation, and presence of kids is
minimal. Therefore, the main difference
is in the urbanicity.
For restaurants that have relocated
within the same zipcode, there are 7
Claritas segments that have at least a
25% relative frequency meaning that
these segments represent Panera
Bread's inferred target market seg-
ments. These segments are Movers &
Shakers, Country Squires, Gray Power,
Cruising to Retirement, Middleburg
Managers, Toolbelt Traditionalists, and
Generation Web. Based on these seg-
ments, Middleburg Managers has the
highest relative frequency at 45.2%. The
CASE 5 5
next four highest segments are Movers &
Shakers, Cruising to Retirement, Toolbelt
Traditionalists, and Generation Web,
which are all tied at 29%. From these
segments, the primary overlap occur in
their income/income producing assets
which show that these are wealthy pop-
ulations of people, household technol-
ogy use which is either average or bet-
ter, are mostly without kids, are mostly
homeowners, and have a graduate plus
level of education. The majority of these
segments either reside in subruban
or metro mix areas. The exception to
income, homeownership, and education

DETAILED
levels is Generation Web because this
is a group that mostly rents, has lower
income, and is less educated with only
high school education.

DNA (CLARI-
TAS)

6 C ASE 5 CASE 5 7
 CLUSTERS
(ESRI)

8 C ASE 5 CASE 5 9
There are no ESRI segments that Panera
Bread seems to favor based con ESRI
Tapestry that have at least a 20% or
greater relative frequency with open
stores. The three highest relative fre-
quency segments include Top Tier, City
Lights, and Enterprising Professionals.
City Lights population is comprised of
tech-savvy individuals who reside in a
mix of SFH, townhouses or multi-fam-
ily properties. There is also a wide range
of single/married, renters/homeown-
ers, and middle/working class. Top
Tier is a population that is comprised
of wealthier married couples living in
the suburbs. These are people that are
owners of property that have some of
the highest home values and are highly
educated with 1 in 3 having a postgrad
degree. Enterprising Professionals is a
population that is well educated and
are early adopters of new technology.
They are mostly married couples with
around 30% single person households.
There is a wide mix of types of homes
like City Lights from suburban SFH to
larger multifamily properties. There is
also a pretty even split between renters
and homeowners.
Based on these common segments, the
profile of the type of consumer Panera
is trying to attract seems to be one that
isn't necessarily tied down to a certain
profile/characteristics. As mentioned
before, there is quite a range of back-
grounds that comprise these three high-
est relative frequency segments includ-
ing whether or not they are a home-
owner, are married/single, what type
of house they live in, income levels, etc.
However, some general trends is that
these people are tech-savvy and have at
least some secondary education.
Based on ESRI Tapestry that have at least
a 20% or greater relative frequency with
closed stores, Panera Bread appears to
10 C ASE 5
be moving away from Urban Chic and
Metro Renters. For Urban Chic, this is a
group of people that are mostly home-
owners and are primarily married cou-
ples with older children. Financially, they
are very stable and are well educated
with 65% of residents holding a bach-
elor's degree or higher. They are envi-
ronmentally aware, employed in white
collar occupations, and know how to
use technology. Metro Renters, on the
other hand, are well-educated college
students and are also well acquainted
with technology. They are not home-
owners and typically, the households
are composed of singles. Most of the
time, they are taking publlic transporta-
tion and are very well versed in modern
social trends as socializing and social sta-
tus are very important to them.
Based on the common segments that
have high relative frequencies with
closed stores, we cannot necessarily say
that these numbers support the conclu-
sion that Panera is trying to move away
from these areas completely because
if we look at their relative frequencies
with open stores (for Urban Chic and
Metro Renters), these percentages are
also quite high at 12.5% and 10.4%
respectively. This means that there are
still a good number of stores operating
in these segments, compared to other
segments (given that the highest rela-
tive frequency within the open stores
column was 14.6%. However, it can be
noted that the rate at which they are
closing these stores is a lot higher than
the rate at which they are opening these
stores. Commonalities between these
two segments include using technol-
ogy and being well-educated. They are
around the same age group (30s to 40s)
and reside in urban and suburban areas.
The only ESRI segment that has a sta-
tistically signficiant correlation (positive
or negative) with the variable of inter- to middle income, varying levels of edu- index, occupation by earnings, income
est, Dum_Open, is Urban Chic which cation, varying levels of homeownership, and net worth, housing, etc. From these
has a p-value of 0.06. The correlation and varying levels of types of homes. profile characteristics, we can determine
with dum_open is -0.19, which means that neighborhoods Panera should avoid
that stores in Urban Chic segments are The ESRI segments neighborhoods are tend to be wealthier rural and suburban
more likely to close than to be open. useful in helping us understand the DNA areas. Panera is looking to break into
Urban Chic is a segment that represents of neighborhoods where Panera is either lower to middle income rural areas and
propserous older married couples that closing restaurants or continuing to keep urban areas with a mix of demographics.
live in the suburbs. They are primarily them open. They provide a more detailed
homeowners who know how to use profile of each type of segments with not
technology and are environmentally con- only lifestyle tendencies, but also race,
scious. This segment is growing slowly age by sex, average household budget
but steadily. The characteristics of this
particular segment coincide with those
of the ones we found in the preceding
question that also had higher relative
frequencies with closed stores because
they are comprised of older, married,
wealthier, suburban individuals. Stores
in the Urban Chic neighborhoods have
the wrong DNA. Thus, we once again,
determine that Panera should stay out
of these types of areas.
The neighborhoods that Panera should
look into going into include those that
had a positive correlation with dum_
open. Although the segments Down the
Road and City Lights had p values that
were not statistically signficant, they had
some of the highest positive correlation
coefficients with dum_open of 0.14 and
0.15. City Lights is a densely populated
urban market comprising of a range of
individuals. There is a mix of married
couples/singles, a blend of homeown-
ers and renters, SFH and townhouses,
apartments, multifamily units, etc. Down
the Road is also a mix of individuals in
rural areas that have a mix of homeown-
ers and renters, mix of college and high
school education, primarily comprised
of family. In terms of income, the fami-
lies are on the lower side as they mostly
work in land occupations like agriculture
and live in affordable housing. In general,
we can say that Panera should consider
breaking into these segments with lower
CASE 5 11
 Free Standing Stores, Power Centers, and
Community/Neighborhood Shopping
Centers all have a positive correlation
with the variable Dum_OPEN. Therefore,
it seems that these types of locations
increase the probability that Panera will
keep their restaurants open in a given
zip code.
Super-Regional Malls, Lifestyle Centers,
Strip Centers, Residential/Retail, and
Office/Retail spaces have negative
correlation coefficients with Dum_
Open. This suggests that these types
of properties decreases the probabil-
ity that Panera will keep a restaurant
LOCAT IO N
open. Additionally, we can look at the
ratio of times a Panera has opened over
the number of times it closed within a
certain type of center to support this
conclusion. For instance, if we look at
Lifestyle centers, there are no Panera's
open and for Office Retail, there were
10 stores that closed out of the 11 that
T YP E ( PA N E-
were developed, leaving only one open.
A general trend that we see here is that
centers that do not perform so well have
lower ratios.
Some economic intuition as to why a
given location type matters is due to
R A)
the characteristics of certain proper-
ties. Panera prefers locations that are
12 C ASE 5
near major shopping centers that have
a prominent regional trade area and are
close to university and college campuses
as well as business centers. The types
of properties that seem to have a pos-
itive correlation with the open store
variable are ones that are anchored by
a large tenant like a supermarket for a
Community Shopping Center and large
specialty stores for Power Centers (as
opposed to your normal department
stores for retail centers and malls), which
are also a bit more upscale. These differ-
ences in anchors as well as those who
shop there could provide insight into
why these location types matter.
Using the arbitrary cutoff of 1.5 for the
ratio of the number of times Panera
open/closed within a type of center,
Free Standing Stores and Community/
Neighborhood Shopping Centers are
desirable. For these two types of centers,
this means that for every store closed,
there were at least 1.5 new stores that
opened. For Free Standing Stores, this
number was 2.3 while for the latter type
of center, it was 1.6. The other types of
shopping centers had ratios less than
1.5, and so they are undesirable. This
correlation analysis supports our pre-
ceding analysis where we found that
Free Standing Stores and Community/
Neighborhood Shopping Centers
have positive correlation coefficients
with Dum_Open, which increases the
probability that Panera will keep their
restaurant open in this type of cen-
ter. Thus, both analyses conclude that
Free Standing Stores and Community/
Neighborhood Shopping Centers are
preferred location choices.
However, there are cons/limitations
with a preferred location choice since
it limits the type of consumer that you
may find. For instance, the consumers at
regional malls vs those at a free stand-
ing store may have different tendencies
like how often they visit a Panera, why
they visit a Panera, the type of food that
they order, etc. Specifically, in malls, you
may find the reason for customers vis-
iting to be primarily because of conve-
nience vs those who visit a stand-alone
store may visit because they are looking
to have a casual lunch and want health-
ier food options. There may also be pat-
terns in regards to income, race, etc. that
would limit the type of consumer that
eats there. This could be a problem if
Panera were to try and implement a new
strategy to target different demograph-
ics. Obviously, if you only focus on one
type of center, this switch would be very
hard for Panera's business strategy team
to make down the line since there would
primarily be one type of consumer that
eats at these locations.
CASE 5 13
 Having at least one or more of these
big box tenants in the same zip code
as a Panera Bread restaurant increases
the probability that the restaurant will
remain open. This can be seen in the
positive correlation coefficients for all
of the big box tenants and the open
stores variable. Additionally, 9 of these
big box tenants had statistically signif-
icant p-values, with those being Dicks,
Ross, Walmart, TJ Max, Home Goods,
Target, Petco, Home Depot, and Kohls.
Panera Bread does take advantage of
these clusters. In our relative frequency
COTENANTS
analysis, we see that the number of
Panera locations in the same zip code as
some of these big box tenants have less
closed stores than open stores. In fact,
for every big box tenant, the percentage
of open Panera stores is a lot higher than
the percentage of closed. This indicates
that Panera is taking advantage of these
(PANERA)
clusters by opening these stores in the
same zip codes as these big box tenants
and keeping them open more frequently
than they are closing them. Additionally,
we see that there is more to the big box
14 C ASE 5
tenants that have high relative frequen-
cies with closed stores. Panera may be
closing stores in some of these zip codes,
but they are also opening new Paneras
in the same locations (relocating). For
instance, Chipotle had the highest rela-
tive frequency of closed stores at 54.2%.
However, Chipotle also had the highest
relative frequency for relocated stores
at 87.1%, meaning that Panera is actu-
ally adding stores at a faster rate to the
zip codes near Chipotles. They should
take and continue to take advantage of
these clusters because of the concept
of economies of agglomeration which
is when people and businesses benefit
from being close to one another in cit-
ies and industrial clusters.
Additionally, we can analyze the ratio
of number of Panera's open for every
store that closed. If we use the arbi-
trary cutoff of 1.5 again, we see that
the majority of the big box tenants have
ratios greater than 1.5 (besides Bed Bath
Beyond, Whole Foods and Chipotle).
This means that there are more Paneras
being opened and staying open in these
locations than there are closed, which
alludes to the success of these restau-
rants in these shared zip codes with big
box tenants.
Using our constructed variable, Stat
PosCorr Agglom (Cluster), we can
explain why there is a positive correla-
tion between this variable and the open
stores variable. Having these co-ten-
ants in the same zip code is a good thing
from a location perspective because it is
similar to the idea of anchor tenants in
malls driving in foot traffic. Since these
big box stores attract a large consumer
population, Panera Bread is able to feed
off of this foot traffic to these stores to
get consumers as well. For other restau-
rants, Panera is able to benefit because
of the consumers that are already look-
ing to get a meal. Panera Bread can thus
position themselves in an attractive way
from a marketing perspective to gain
those consumers looking to eat some-
thing as well.
CASE 5 15
 Comparing and contrasting Panera
Bread in terms of its open vs closed
restaurants, there are no obvious telltale
differences between these two groups
of stores.
In our two sample t-test, there were no
statistically significant p values because
they were all greater than or equal to 0.1.
However, differences that were more
prominent had higher absolute value t
scores and these variables were traf-
fic volume and walk score. While traffic
volume had a positive correlation with
the open stores variable, walk score did
not. To explain why this might be the
E C ONVAR
case, Panera might be more popular in
areas where there are major highways/
roads and rely more on customers that
go through the drive-through that visit
the restaurant in a vehicle. However,
to explain why there might not be any
telltale differences between these two
group of stores, we may be led to con-
( PA NE RA )
clude that this pool of variables were not
necessarily the major reasons behind
why Panera was unsuccessful at a cer-
tain location and more successful in
another, epecially since none of the
16 C ASE 5
variables had a statistically significant
p value with the open stores variable
either. Therefore, regardless of the dif-
ferences in these variables across loca-
tion, Panera's success may not be depen-
dent on them individually.
For the stores that Panera relocated
within the same zip code, there is one
telltale difference between stores that
are operating and stores that closed. This
variable is age with a p value of 0.002,
indicating that the difference is statis-
tically significant. The average age of a
consumer at a closed location is higher
than the age of a consumer at an open
location (37 years old vs 21 years old).
This would indicate that Panera should
probably target an area with a lower
average age or market themselves to
younger people in their twenties vs
those who are older since this older
population was associated with closed
stores.
Additionally, we see that this variable
along with traffic volume were both sta-
tistically significant when doing a simple
regression against the open stores vari-
able because the p value is less than 0.1
for both. For age, the correlation with
open stores is negative while for traf-
fic volume, the correlation is positive.
This makes sense because as we men-
tioned in the preceding part, traffic vol-
ume could be important to drive through
sales and may garner more traffic in com-
parison to foot traffic from walking. For
age, this makes sense because as we
saw in the preceding part, a higher age
was associated with a higher probabil-
ity of closed stores. Thus, it would be
in Paneras' best interests to target a
younger demographic and to open stores
near more traffic.
CASE 5 17
 CORRELA-
T ION MATR I X

18 C ASE 5 CASE 5 19
In order to determine why Panera has
been successful in certain locations and
not in others, we can look at different
variables to help explain the success or
the lack thereof. There are some vari-
ables that we have determined to have
a high correlation with one another
(greater than 0.4 or less than -0.4). The
relationships between these two vari-
ables are outlined and explained below.
Cluster 7 and Cluster 27 are positively
correlated because they represent very
similar populations of people. These
populations are quite wealthy, without
kids, mostly owners, work at the man-
agement/professional level, and are
college educated. Thus, we can expect
Paneras to perform about the same in
these clusters.
StatNegClus and Clus7 are positively
correlated because statnegclus rep-
resents the clusters that have a nega-
tive correlation with the open stores
variable. Because we found that cluster
7 also had a negative correlation with
the open stores variable, it makes sense
ex-ante that these two variables have a
positive correlation.
Walk Score and Clus7 are positive cor-
related because populations in cluster 7
are located in urban neighborhoods. In
urban settings, the walk score would be
quite high because everything is closer in
20 C ASE 5
proximity to each other given the nature
of urban neighborhoods.
Cluster 11 and Cluster 18 are positively
corelated because they represent very
similar populations of people. The indi-
viduals are located in rural areas, have
upscale/high income producing assets,
are mostly homeowners, and have some
level of college education. Thus, we can
expect Paneras to perform the same in
these two types of clusters.
Cluster 17 and Cluster 7 are positively
correlated because they represent very
similar populations of people. They are
mainly 55+ years old, live in urban neigh-
borhoods, are mostly without kids, and
have graduate plus levels of education.
Thus, we can expect Paneras to perform
about the same in these clusters.
StatNegClus and Clus17 are positively
correlated because StatNegClus rep-
resents the clusters that have a nega-
tive correlation with the open stores
variable. Because we found that cluster
17 also had a negative correlation with
the open stores variable, it makes sense
ex-ante that these two variables have a
positive correlation.
Avg HH size and Clus 17 are negatively
correlated because this cluster mainly
represents older people ages 55+
without any kids. Thus, their average
household size would be smaller since
they don't have any kids.
Walk Score and Clus 17 are positively
correlated because populations in clus-
ter 17 are located in urban neighbor-
hoods. In urban settings, the walk score
would be quite high because everything
is closer in proximity to each other given
the nature of urban neighborhoods.
Middleburg Managers and Clus27 are
positively correlated because they rep-
resent very similar populations of peo-
ple. They are wealthy, mostly homeown-
ers, work at the management and pro-
fessional level, have some sort of col-
lege education, and have an average
use of technology. Thus, we can expect
Paneras to perform about the same in
these clusters.
StatNegClus and Avg HH size are neg-
atively correlated because as we saw in
the preceding analysis, Panera Breads
should target demographics with
younger populations as the average
age was much higher for those of closed
stores. Thus, it makes sense ex-ante that
there is a negative relationship between
these two variables.
Urban Chic and Edu Undergrad + have a
positive correlation because the popula-
tion in Urban Chic is well educated, with
over 65% holding a bachelor's degree or
higher. Therefore, it makes sense that negative correlation because Walmarts
there is a positive relationship ex-ante. are usually stand-alone or one of the
largest big box tenants in a strip mall
CT_Walmart and StatPosAgglom that are not located in walkable areas
(Cluster) have a positive correlation as they are usually found near highways
because StatPosAgglom (Cluster) rep- and other roads so that people from
resents the stores that have a statisti- nearby can travel to this supercenter.
cally signficant correlation with open Thus, it makes sense that there is a neg-
Panera stores. Since we used the number ative correlation ex-ante.
of Paneras near this big box tenant in the
calculation for StatPosAgglom (Cluster), Edu Undergrad + and 2020 Median HH
it makes sense that there is a positive Inc have a positive correlation because
correlation ex-ante. those who have pursued higher educa-
tion are more likely to be employed at
CT_TJMaxx and StatPosAgglom (Cluster) higher level jobs which pay more. Thus,
have a positive correlation because this relationship makes sense ex-ante.
StatPosAgglom (Cluster) represents the
stores that have a statistically signficant Edu Undergrad + and Pct Asian (5 mi)
correlation with open Panera stores. have a positive correlation because this
Since we used the number of Paneras demographic/ethnicity of people tend to
near this big box tenant in the calculation pursue higher education as a result of
for StatPosAgglom (Cluster), it makes this culture's values. Thus, this positive
sense that there is a positive correla- relationship makes sense ex-ante since
tion ex-ante. secondary education in this population
is common.
CT_Barnes&Noble and StatPosAgglom
(Cluster) have a positive correlation
because StatPosAgglom (Cluster) rep-
resents the stores that have a statisti-
cally signficant correlation with open
Panera stores. Since we used the number
of Paneras near this big box tenant in the
calculation for StatPosAgglom (Cluster),
it makes sense that there is a positive
correlation ex-ante.
CT_BedBathBeyond and StatPosAgglom
(Cluster) have a positive correlation
because StatPosAgglom (Cluster) rep-
resents the stores that have a statisti-
cally signficant correlation with open
Panera stores. Since we used the number
of Paneras near this big box tenant in the
calculation for StatPosAgglom (Cluster),
it makes sense that there is a positive
correlation ex-ante.
CT_Walmart and Walk Score have a
CASE 5 21
 R E GR E SS
( SE G ME N TS)

22 C ASE 5 CASE 5 23
24 C ASE 5 CASE 5 25
In Model 1, we find that all of the inde-
pendent variables are significant. These
include: Stat PosCorr Agglom (Cluster),
Clus18 (Mayberry-ville), Clus27 (Big Sky
Families), Dum_OfcRtl, and Total GLA
(ShopCtr). The only variable that has a
positive correlation coefficient is Stat
PosCorr Agglom (Cluster). All other vari-
ables have a negative correlation with
the open stores variable.
In Model 2, we find that all of the inde-
pendent variables are statistically sign-
ficant except for CT_BedBathBeyond,
Traffic Volume, and Walk Score. The
variables that are statistically signf-
icant are: Clus07 (Money & Brains),
Clus18 (Mayberry-ville), Clus27 (Big
Sky Families), Urban Chic, Stat PosCorr
Agglom (Cluster), Dum_OfcRtl, Total GLA
(ShopCtr), 2020 Median HH Inc, Avg
HH Size, Edu (Undergrad+)(5 Mi), and
Pct Asian (5 Mi). Out of the signficant
variables, the ones that have a positive
correlation with the dum_OPEN variable
are Stat PosCorr Agglom (Cluster), 2020
Median HH Income, and Pct Asian (5 mi).
In Model 3, we find that all of the inde-
pendent variables are statistically sig-
nificant. These variables are: Clus07
(Money & Brains), Clus18 (Mayberry-
ville), Clus27 (Big Sky Families), Urban
Chic, Stat PosCorr Agglom (Cluster),
Dum_OfcRtl, Total GLA (ShopCtr), 2020
Median HH Inc, and Avg HH Size. The
variables that are both signficant and
have a positive correlation with the
dum_OPEN variable are once again, Stat
PosCorr Agglom (Cluster), 2020 Median
HH Income, and Pct Asian (5 mi).
In Model 4, we find that all of the inde-
pendent variables are statistically sign-
ficiant except for Edu (Undergrad+) 5
miles. The variables that are statistically
significant are: Clus27 (Big Sky Families),
StatNegClus, Urban Chic, Stat PosCorr
26 C ASE 5
Agglom (Cluster), Total GLA (ShopCtr),
Avg HH Size, Edu (Undergrad+)(5 Mi),
and Pct Asian (5 Mi). The two significant
variables that have a positive correla-
tion with dum_OPEN are Stat PosCorr
Agglom (Cluster) and Pct Asian (5 mi).
Not all of the independent variables are
statistically signficant even though these
variables were significant in the case of
the simple regression because of the
type of regression we are running. In
the case of the simple regression, we
are only looking at two variables: Dum_
OPEN and one of the independent vari-
ables. However, when we begin to add
in other variables into the regression
to make a multivariable regression, the
signficance and weight these indepen-
dent variables have on Dum_OPEN will
change, either increasing or decreas-
ing, which sometimes leads to a vari-
able whose impact is not statistically
significant.
The signs of the statistically signfici-
ant variables (positive or negative) con-
tinue to be correct from an economic
standpoint. To summarize, these vari-
ables are Stat PosCorr Agglom (Cluster),
StatNegClus, Clus07 (Money & Brains),
Clus18 (Mayberry-ville), Clus27 (Big
Sky Families), Dum_OfcRtl, Urban Chic,
2020 Median HH Inc, Avg HH Size, Edu
(Undergrad+)(5 Mi), Pct Asian (5 Mi), and
Total GLA (ShopCtr).
For the clusters (7, 18, and 27) as well as
Urban Chic, the correlation coefficient
with Dum_OPEN is negative. This makes
sense considering that these clusters
were the wealthier urban and rural areas
that Panera Bread had a high number of
stores close down in (which we saw in
preceding parts of this case).
Office Retail and shopping centers with
high amounts of square feet should also
have a negative correlation given the f-statistics for our models are all quite
type of consumer that would pass by low, which means that our models do a
and the lack of opportunity Panera has good job of explaining why Panera stores
to attract customers in these areas. remain open. Across our 4 models, model
3 has the lowest f statistic and incopo-
Traffic volume is still positively cor- rated the most variables which were all
related and walk score is still negatively statistically significant to explain the
correlated because of the accessibility dependent variable (open-stores).
and type of consumer that eats at Panera
with the drive through option as well as
being closer to major roads as opposed
to sidewalks.
For average HH size, there is a neg-
ative correlation with Dum_OPEN,
which coincides with what we found
previously where there were more open
stores with younger consumers and the
smaller sized households that come with
young individuals.
An analysis of the four regressions taken
together suggest that Panera Bread's
location strategy is to develop stores in
areas with high median HH income, high
traffic volume, and high percentages of
Asians within the nearby population as
these variables all had a positive correla-
tion with the dum_open variable in the
models. Panera Bread should avoid areas
with office retail, large retail spaces, and
areas that have high walk scores.
The f-statistic is simply a ratio of two
variances and thus, when we run a
regression/f-test, our null hypothesis
is that the variances of the two groups
are equal (f statistic is 1). Low f-statis-
tics indicate that there is low variability
within each group while high f statistics
indicate that there is large variability of
the group's mean relative to the vari-
ability within the group. We should also
look at the F-statistic in choosing which
regression models to use in constructing
a model to predict which Panera Bread
restaurants to keep open and which
to close because we would want. The
CASE 5 27
 Model 1 accurately predicts to close a
store 91.67% of the time, while Model
2 accurately predicts this 93.75% of
the time, Model 3 91.67%, and Model
4 87.5% of the time.

Model 1 accurately predicts to open a

store 58.33% of the time, while Model
2 accurately predicts this 66.67% of
the time, Model 3 68.75%, and Model
4 64.58% of the time.

Model 1's overall success rate is 75%,

Model 2's is 80.21%, Model 3's is
80.21%, and Model 4's is 76.04%.

PR E D I CT
Across all of the different models, the
accuracies are all better than flipping a
coin because they are all greater than
50%. However, it should also be noted
that this model seems to do a better job
of predicting closed stores rather than
open stores because of how high the

OPE N (M O D-
models' accuracies are for the percent
correct for closed stores vs open stores.

EL 1 )

28 C ASE 5 CASE 5 29
 PREDICT
OPEN (MO D-
EL 2)

30 C ASE 5 CASE 5 31
 PREDICT
OPEN (MO D-
EL 3)

32 C ASE 5 CASE 5 33
 PREDICT
OPEN (MO D-
EL 4)

34 C ASE 5 CASE 5 35
 HOLDOUT
(MODEL 2)

36 C ASE 5 CASE 5 37
 Using our Model 2 to determine whether
or not Panera should have closed or kept
open the 8 stores in the holdout sample,
we suggested that 6 out of the 8 stores
remain open while 2 of the stores close.
In reality, 4 of the stores remained open
and the other 4 closed. Thus, we were
75% correct in determining the open
stores and 25% correct in determining
the closed stores with an overall accu-
racy of 50%. Based on this sample set,
our model does a better job of correctly
predicting restaruants to keep open than
to keep close since we were right 3 out
of the 4 times with open stores and only
38 C ASE 5
1 times out of the 4 correct with closed
stores. This overall accuracy is quite low,
and is similar to flipping a coin or guess-
ing randomly with each choice having
equal probability of being chosen. Thus,
this model is not very accurate.
For restaurants that Panera Bread chose
to relocate in the same zip code, Model
2 was correct 9.67% of the time in sug-
gesting to close the existing restaurant
and choosing another place in the same
zip code to reopen a new restaurant.
Model 2 suggested 41.94% of the time
to exit the zipcode completely where
the existing store was closed and not
to open a new store. It was incorrect
48.39% of the time where the model
predicted that the existing restaurant
should close even though the store was
kept open in reality. Lastly, our model
suggests to operate in either the new
location or the old location or both loca-
tions 58.07% of the time.
HOLDOUT
(MODEL 3 )
CASE 5 39
 Using our Model 3 to determine whether
or not Panera should have closed or kept
open the 8 stores in the holdout sample,
we suggested that 6 out of the 8 stores
remain open while 2 of the stores close.
In reality, 4 of the stores remained open
and the other 4 closed. Thus, we were
75% correct in determining the open
stores and 25% correct in determining
the closed stores with an overall accu-
racy of 50%. Based on this sample set,
our model does a better job of correctly
predicting restaruants to keep open than
to keep close since we were right 3 out
of the 4 times with open stores and only
40 C ASE 5
1 times out of the 4 correct with closed
stores. This overall accuracy is quite low,
and is similar to flipping a coin or guess-
ing randomly with each choice having
equal probability of being chosen. Thus,
this model is not very accurate either.
For restaurants that Panera Bread chose
to relocate in the same zip code, Model
3 was correct 9.7% of the time in sug-
gesting to close the existing restaurant
and choosing another place in the same
zip code to reopen a new restaurant.
Model 3 suggested 35.5% of the time
to exit the zipcode completely where
the existing store was closed and not to
open a new store. It was incorrect 54.8%
of the time where the model predicted
that the existing restaurant should close
even though the store was kept open
in reality. Lastly, our model suggests to
operate in either the new location or the
old location or both locations 64.5% of
the time.