{"id":20500,"date":"2016-11-18T17:59:24","date_gmt":"2016-11-18T22:59:24","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/digital-ordering-curse-or-cure-for-struggling-restaurant-concepts\/"},"modified":"2016-11-18T17:59:24","modified_gmt":"2016-11-18T22:59:24","slug":"digital-ordering-curse-or-cure-for-struggling-restaurant-concepts","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digital-ordering-curse-or-cure-for-struggling-restaurant-concepts\/","title":{"rendered":"Digital Ordering \u2013 Curse or Cure for Struggling Restaurant Concepts?"},"content":{"rendered":"<p>As American consumers continue to embrace technology into all aspects of their lives, digital ordering may seem like an obvious choice for any retail restaurant company looking to grow its customer base, but this transition could result in a number unanticipated challenges for the industry.\u00a0 Fast casual restaurants, which have seen their popularity increase dramatically in the last decade, face a particularly difficult trade off as they balance increased access with the promise of high levels of customer service.<\/p>\n<p>Panera Bread, a popular fast-casual restaurant in the United States that has long prided itself on providing high levels of customer service, is facing this challenge head on.\u00a0 Known within the company as \u201cPanera warmth,\u201d employees are taught to provide a welcoming and friendly experience, offering Panera as an \u201ceveryday oasis\u201d away from life\u2019s many stresses [1].<\/p>\n<p>Delivering on this customer promise has rewarded both guests and shareholders.\u00a0 As of May 2016, Panera served ~8.3 million customers a week, had ~97,000 employees, operated in 46 states and Canada and had nearly $5 billion in annual system sales [1].\u00a0 For shareholders specifically, the company\u2019s stock (PNRA) has outperformed the industry over the past 20 years [1].<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-stock-performance.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-20406 aligncenter\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-stock-performance-300x131.png\" alt=\"panera-stock-performance\" width=\"793\" height=\"346\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-stock-performance-300x131.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-stock-performance-768x336.png 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-stock-performance-1024x448.png 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-stock-performance-600x262.png 600w\" sizes=\"auto, (max-width: 793px) 100vw, 793px\" \/><\/a><\/p>\n<p>After weathering the financial crisis well, many Panera cafes faced the issue of long order lines and long production wait times during peak traffic periods; mainly during lunch [2].\u00a0 In 2010, CEO Ron Shaich began to view digital ordering as a solution and the company began investing in and testing a variety of platforms.\u00a0 Ultimately, the company envisioned customers placing orders across a range of digital platforms including, web, mobile and in caf\u00e9 kiosks.\u00a0 This initiative became known as \u201cPanera 2.0.\u201d<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-lines-at-Paner-Bread-2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-20423\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-lines-at-Paner-Bread-2-300x200.jpg\" alt=\"long-lines-at-paner-bread-2\" width=\"447\" height=\"298\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-lines-at-Paner-Bread-2-300x200.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-lines-at-Paner-Bread-2-768x512.jpg 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-lines-at-Paner-Bread-2-600x400.jpg 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-lines-at-Paner-Bread-2.jpg 825w\" sizes=\"auto, (max-width: 447px) 100vw, 447px\" \/><\/a>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0<a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-20428\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed-300x225.jpg\" alt=\"long-lines-at-panera-breaed\" width=\"395\" height=\"296\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed-300x225.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed-768x576.jpg 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed-1024x768.jpg 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed-600x450.jpg 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Long-Lines-at-Panera-Breaed.jpg 2048w\" sizes=\"auto, (max-width: 395px) 100vw, 395px\" \/><\/a><\/p>\n<p>Panera 2.0 began testing in the Boston area in 2011 and quickly expanded to an additional 15 cafes in Charlotte, North Carolina [3].\u00a0 By mid-2013 the company was testing its fully integrated platform, allowing customers to order in caf\u00e9 via Kiosks, online via the web or through a mobile app.\u00a0 The idea of providing so many access points to customers was twofold:<\/p>\n<ul>\n<li>Allow greater customer access to help reduce order times during peak periods<\/li>\n<li>Provide customers with a superior customer experience by allowing increased customization and access to previous orders and loyalty rewards.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Kiosk.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-20433\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Kiosk-300x158.jpg\" alt=\"panera-bread-kiosk\" width=\"458\" height=\"241\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Kiosk-300x158.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Kiosk-768x403.jpg 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Kiosk-1024x538.jpg 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Kiosk-600x315.jpg 600w\" sizes=\"auto, (max-width: 458px) 100vw, 458px\" \/><\/a>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-bread-fast-lane-Kiosk.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-20419\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-bread-fast-lane-Kiosk-300x169.jpg\" alt=\"panera-bread-fast-lane-kiosk\" width=\"430\" height=\"242\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-bread-fast-lane-Kiosk-300x169.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-bread-fast-lane-Kiosk-600x338.jpg 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-bread-fast-lane-Kiosk.jpg 604w\" sizes=\"auto, (max-width: 430px) 100vw, 430px\" \/><\/a><\/p>\n<p>After rolling out web and mobile ordering to all company owned caf\u00e9 and installing kiosks in over 450 company owned cafes, digital utilization rates reached 22% in Q3 2016 with the company claiming to fill 125,000 \u2013 130,000 eCommerce orders daily.\u00a0 By 2017 Panera expects to have $1 billion in annual digital sales, up from current digital sales of $650 million, representing a dramatic transformation from five years prior when it began testing the first version of Panera 2.0 [4] [1].<\/p>\n<p><u>Challenges:<\/u><\/p>\n<p>Although the success of Panera\u2019s digital transition is impressive, it has come at a cost.\u00a0 Developing such a complex web and mobile ordering system and designing and installing a network of kiosks cost tens of millions of dollars, required additional training for employees and created unforeseen friction within the cafes.<\/p>\n<p>One of the biggest concerns for the company has been ensuring customers feel the same level of \u201cPanera warmth\u201d they had prior to the rollout of Panera 2.0.\u00a0 Most digital orders are to-go orders, which means more and more customers have limited contact with friendly cashiers or time to take advantage of the cafes relaxed and cozy atmosphere.\u00a0 Customers feel more like simple transactions than valued customers and any accuracy issues that could have been easily fixed by a caring associate are now only angrily voiced via social media and word-of-mouth.\u00a0 Equally as important, as customer orders have increased during peak hours, production times have also increased, causing frustration for customers who were promised that the new digital ordering system would save them time and stress.<\/p>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-20420 aligncenter\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area-300x202.jpg\" alt=\"panera-bread-production-area\" width=\"454\" height=\"306\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area-300x202.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area-768x517.jpg 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area-1024x689.jpg 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area-600x404.jpg 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera-Bread-Production-Area.jpg 1200w\" sizes=\"auto, (max-width: 454px) 100vw, 454px\" \/><\/a><\/p>\n<p>Employees are also increasingly concerned about losing their jobs to technology, although for the time being, Panera claims that its digital order platform will actually require it to hire more workers [5].\u00a0 With the push for a $15 minimum wage gaining momentum, the company may have to change its position as it looks for labor savings to spare consumers from dramatic price increases.<\/p>\n<p>For Panera to succeed as it continues its transition into the digital world, it will have to radically re-think its fundamental caf\u00e9 design and labor deployment.\u00a0 Many of its locations are restricted by physical kitchen space, limiting production capacity during peak times and increasing order errors [6].\u00a0 Will Panera have to pull back on its commitment to digital orders? Or will it fully embrace the digital world and once again look to technology to solve its most pressing problems?<\/p>\n<p>[769 Words]<\/p>\n<p>[1] <a href=\"https:\/\/www.panerabread.com\/panerabread\/documents\/press\/2016\/2016-annual-shareholder-presentation.pdf\">https:\/\/www.panerabread.com\/panerabread\/documents\/press\/2016\/2016-annual-shareholder-presentation.pdf<\/a><\/p>\n<p>[2] <a href=\"http:\/\/www.wsj.com\/articles\/SB10001424052702303615304579153450909661702\">http:\/\/www.wsj.com\/articles\/SB10001424052702303615304579153450909661702<\/a><\/p>\n<p>[3] <a href=\"http:\/\/fortune.com\/2014\/03\/27\/with-digital-ordering-panera-makes-a-big-bet-on-tech\/\">http:\/\/fortune.com\/2014\/03\/27\/with-digital-ordering-panera-makes-a-big-bet-on-tech\/<\/a><\/p>\n<p>[4] <a href=\"https:\/\/www.panerabread.com\/content\/dam\/panerabread\/documents\/press\/2016\/third-quarter-2016-earnings-release.pdf\">https:\/\/www.panerabread.com\/content\/dam\/panerabread\/documents\/press\/2016\/third-quarter-2016-earnings-release.pdf<\/a><\/p>\n<p>[5] <a href=\"http:\/\/www.fastcasual.com\/articles\/paneras-self-service-kiosks-provide-key-to-growth\/\">http:\/\/www.fastcasual.com\/articles\/paneras-self-service-kiosks-provide-key-to-growth\/<\/a><\/p>\n<p>[6] Company insider<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Panera Bread bets on expensive eCommerce platform to lift sales and improve customer service<\/p>\n","protected":false},"author":1871,"featured_media":20652,"comment_status":"open","ping_status":"closed","template":"","categories":[1036,33,1023],"class_list":["post-20500","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digital-retail","category-food","category-restaurant"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Digital Ordering \u2013 Curse or Cure for Struggling Restaurant Concepts? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digital-ordering-curse-or-cure-for-struggling-restaurant-concepts\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Digital Ordering \u2013 Curse or Cure for Struggling Restaurant Concepts? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Panera Bread bets on expensive eCommerce platform to lift sales and improve customer service\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digital-ordering-curse-or-cure-for-struggling-restaurant-concepts\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Panera_Bread-2.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"800\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/digital-ordering-curse-or-cure-for-struggling-restaurant-concepts\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/digital-ordering-curse-or-cure-for-struggling-restaurant-concepts\\\/\",\"name\":\"Digital Ordering \u2013 Curse or Cure for Struggling Restaurant Concepts? 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