{"id":150,"date":"2015-11-27T23:47:09","date_gmt":"2015-11-28T04:47:09","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/panera-winners-in-fast-casual\/"},"modified":"2015-12-06T22:20:29","modified_gmt":"2015-12-07T03:20:29","slug":"panera-winners-in-fast-casual","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/panera-winners-in-fast-casual\/","title":{"rendered":"Panera: Winners in Fast Casual"},"content":{"rendered":"

Introduction<\/u><\/strong><\/p>\n

\u201cPanera 2.0 is an investment in\u00a0\u00a0the customer enabled by technology and powered by operational excellence \u2026 It\u2019s an integrated, comprehensive end-to-end solution that we believe will reduce friction such as wait times, improve order accuracy, and minimize or eliminate crowding \u2013 all will create a platform for an ever more personalized experience.\u201d<\/p>\n

With these words in 2014, Ron Shaich \u2013 Founder, Chairman, and CEO of Panera Bread Co. \u2013 launched the \u201cPanera 2.0\u201d project to improve Panera\u2019s competitive positioning, revitalize same-store sales, and help the company to enter adjacent markets like catering. Between 2014 and 2016, Panera is rolling out this program to all of its stores, and it is the single most important initiative ongoing at the company today.<\/p>\n

Panera has historically been a \u201cwinner\u201d in the fast casual food category, having returned 4,000% to shareholders over 15 years and vastly outperformed all of its peers. In this post, I will explore the facets of \u201cPanera 1.0\u201d which have enabled this past success, as well as \u201cPanera 2.0\u201d which will drive this success into the future. Both are predicated on great alignment between Panera\u2019s business and operating models.<\/p>\n

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About Panera Bread Co.<\/u><\/strong><\/p>\n

Panera Bread is a quick service restaurant operator of ~2K bakery cafes, with $4.5Bn of system-wide sales and an average of ~$2.5M of sales \/ unit. It serves breakfast, lunch, dinner, and take-home food options via both on-premise sales and off-premise catering. The breakdown of sales is 60% in-store, 30% take-out, and 10% catering. Panera\u2019s restaurants are located mostly in suburban strip centers and regional malls.<\/p>\n

Panera\u2019s Business Strategy<\/u><\/strong><\/p>\n

Panera operates in a highly competitive industry, but they seek to build a competitive advantage via (a) great, high quality, healthful food and (b) superior customer service. Their goal is to serve \u201cwellness that\u2019s craveable\u201d and deliver \u201can experience that\u2019s uplifting.\u201d Furthermore, the want to be \u201ca place that customers can trust,\u201d an \u201coasis from the rush of daily life,\u201d and \u201ca place worth crossing the street for to enjoy food.\u201d<\/p>\n

Panera refers to their strategy as its \u201cConcept Essence.\u201d The foundation of their food offerings is its artisan bread with its distinctive taste and quality, and they also serve a variety of other soups, salads, sandwiches, snacks, and beverages. Customers consume these products in an environment that is warm, friendly, comfortable, and embracing and can serve as a gathering spot for the community.<\/p>\n

Historical Operating Model<\/u> – <\/strong>Historically, Panera has driven alignment with its business strategy through its menu, design of its stores, and quality of employee training.<\/p>\n

Menu & Innovation: <\/strong>Panera\u2019s menu is based on a Food Policy which includes a commitment to clean, fresh ingredients and that always shows calories next to each food option. Panera also does not serve ingredients (e.g. chicken) that have been treated with antibiotics. These measures ensure customers eat natural, non-processed foods and also empowers them to choose healthy, low-calorie options.<\/p>\n

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Panera is also constantly innovating with its menu and introducing new products like half portions, flatbreads, broth bowls, and whole grains. Furthermore, it rotates items in and out of the menu temporarily via periodic \u201ccelebrations\u201d where they feature new taste profiles they believe customers want. The constant new product introduction ensures Panera stays in tune with its customer preferences and is serving the menu options that they want.<\/p>\n

\"Panera<\/a><\/p>\n

Layout & Experience: <\/strong>Each Panera bakery-caf\u00e9 is a distinctive environment using fixtures and materials which are complementary to the neighborhoods in which they are located. Restaurant staff are trained extensively individually and in small group settings to greet customer by name, display a cheerful personality, and use their expertise to recommend relevant menu items to customers. Together, the environment and customer service help foster customer\u2019s perception of Panera as a \u201cgathering place\u201d or \u201coasis.\u201d<\/p>\n

\"Panera<\/u><\/strong><\/p>\n

New Panera 2.0 Extension <\/u><\/strong>\u2013 Panera\u2019s 2.0 initiative is an extension of the historical operating model and, in particular, focuses on improving customer service by reducing hassle and wait times.\"Panera<\/p>\n

Ordering Systems: <\/strong>Panera has introduced new ordering methods for\u00a0both to-go and dine-in to facilitate ordering, lower wait times, and increase convenience for customers. People ordering to-go can order in advance via phone or mobile app and pick up from a separate \u201crapid pick-up\u201d line in the store. People ordering in-store can either use a cashier, iPad kiosk, or order at their table via phone or mobile app. All orders for dining in are delivered directly to guests\u2019 tables.<\/p>\n

Operational Excellence: <\/strong>Panera upgraded its kitchen display system, introduce load balancing for its employees, and added customer facing order displays so customers can prevent data entry errors. Additionally, Panera has created dedicated delivery hubs outside of its bakery-cafes to handle catering. All of these actions have helped reduce strain\u00a0on stores\u2019 kitchens and increase delivery speed for customer orders in-store.<\/p>\n

Conclusion <\/u><\/strong><\/p>\n

Panera starts with a base of high quality, great food \u2013 but in the highly competitive fast casual industry that is just the price of entry not a guarantee for success. Panera uses the other components of its operating strategy \u2013 its layout & experience, ordering systems, and operational excellence \u2013 to make each customer visit a differentiated experience, not just a meal, which helps to separate them from the competition and make them \u201ca place worth crossing the street for.\u201d<\/p>\n

Sources of Information<\/strong><\/span><\/p>\n