Panera Bread’s Strategy, 4 Keys to its Success
If you are looking for a soup and salad and a comfy place to eat then Panera Bread might be your next stop. The popular fast casual restaurant is one the largest restaurant chains in the United States. Since Panera Bread is a private company it doesn’t report its revenues but it is estimated that it made $5.9 billion in 2019. With competition hot on its heels in the restaurant sector Panera Bread is not shy about launching new and never seen before initiatives like its unlimited coffee membership. Like many retailers it is also focused on digitally enabled customer experiences as a way to stand out from the crowd. If you are curious about how Panera Bread is planning to stay ahead of the competition then consider these four elements of its strategy.
1. A digital first café. A silver lining in the COVID-19 pandemic is that it opened retailers’ eyes to doing things in a different manner. From curbside pickup to virtual appointments retailers realized there are opportunities to better serve customers using digital technologies. With this in mind Panera Bread recently launched contactless dine-in ordering. Customers using this service order using their Panera Bread app and don’t have to wait at a counter to submit an order. Instead, they can order in advance using Panera Bread’s app and when their food is ready they are sent a notification so they know it’s time to pick it up and bring it to their table. This eliminates the need for customers to hold on to pagers to alert them when their food is ready.
“This is part of a larger effort to create a digitally enabled café,” said George Hanson, chief digital officer at Panera Bread. “The guest controls the entire ordering experience,” “They know exactly where their order is, they don't have to touch a pager, they don't have to touch a physical receipt, and they don't have to hover by the counter. For some people, that experience is going to be attractive.” “We’re hoping this frees up our employees to provide more value-added services to our guests,” said Hanson.
Customers wanting to use this service have to download the MyPanera app which is another tactic Panera Bread can use to turn diners into digital customers. “Our guests are more digitally savvy than ever,” said Hanson. “They're voting more and more for digital to be a part of their ordering experiences, both within the restaurant and outside.”
2. A subscription service that works. How much would you pay for an unlimited coffee fix? Well, if $8.99 per month works for you then you should subscribe to Panera Bread’s unlimited coffee subscription plan, MyPanera+ Coffee. Panera Bread launched the monthly subscription in 2020 and subscribers receive unlimited hot coffee, iced coffee, and hot tea for that monthly fee. Panera Bread says customers enrolled in this plan can save up to $1,000 per year. But what the service really does for Panera Bread is it gives consumers a reason to go to Panera Bread on a frequent basis. This is akin to the reason why Walmart started selling groceries decades ago. When you sell groceries then your customers have a reason to shop at your store on a regular basis since we all need to eat. Similarly, many people need to have a coffee to get their day started.
If Panera Bread can tap into an organic need for a product then it can lure customers in. When the coffee subscription launched Panera Bread’s CEO Niren Chaudhary said the initiative is "challenging the status quo" and is "disrupting the coffee business."
To subscribe to MyPanera+ Coffee you must be a member of Panera Bread’s loyalty program, which is an effective way for Panera Bread to attract more subscribers to its loyalty program. Panera Bread found during the pilot phase of its coffee subscription service the frequency of visits to Panera Bread increased by 200% and nearly 70% of orders included food. “Through the coffee program, we feel we are giving a very compelling reason for consumers to come in and try the great food at Panera … particularly the breakfast daypart," Chaudhary said. Panera Bread also found during the pilot, 25% of subscribers were new members to Panera Bread’s loyalty program.
Anytime a company provides a product or a service that creates a habit, it’s going to win. Part of the reason social media apps like Instagram are so successful is because people have a habit of checking the app first thing every morning and throughout the day. It’s an incredibly powerful way to make a brand’s offering sticky and it cuts down on marketing costs. A subscription program like this also increases average basket size because most people ordering a coffee are going to check out the menu and see if there is anything else they should buy. “The subscription will encourage more frequent stops at Panera restaurants, with a higher likelihood that enrollees will try a breakfast or lunch item to pair with their daily coffee reward. Over time, it will rake in an abundance of helpful customer data, allowing the brand to uncover exactly what customers like the most,” said Tom Caposano, CEO of Clarus Commerce.
Panera Bread’s loyalty program, MyPanera has the highest number of members in the retail industry with over 40 million members and its coffee subscription add-on has only helped to boost enrolment in My Panera.
3. An elevated dine-in experience. Although on the go orders are increasing in popularity Panera Bread still believes in the importance of having a great dine-in experience. To that end Panera Brand announced last year it is launching a new restaurant design which features exposed ovens where customers can see Panera’s popular bread while its baking. "Having a classically-trained baker preparing bread in front of your guests and interacting with them and sampling what's coming out of the oven is a very unique element of Panera," said chief brand and concept officer Eduard Luz. Restaurants with this new design will also include updated ordering kiosks, contactless ordering, digital menus, a double drive-thru, and Panera’s signature comfortable seating and fireplace.
Improving the in-person experience is a smart move because as much as people love to get food on the go you can’t replace the experience of meeting with friends and family and enjoying a meal. If anything the pandemic has showed why these types of experiences are important. “Of course we are adapting to an off-premise world, with convenience and access and all that, but also we are doubling down on the dine-in experience, which makes Panera so special,” said Luz.
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4. More options for pickup. A few years now into the pandemic retailers have learned a lot about consumer preferences. One of the things that is now apparent is that consumers like to have options for how they receive their digital orders. While you may like to place an order for lunch at home you may want to pick it up in person to skip the delivery fees or to have more control over exactly when you receive your order as pickup is often faster than delivery. In light of this many restaurants from Shake Shack to Chipotle are investing in drive- thrus, in-store pickup and curbside pick.
Not wanting to be left out Panera Bread’s new store design also includes a double drive-thru with one lane dedicated to customers picking up mobile orders. Chipotle is also on a similar path with its Chipotlanes, drive-thru lanes where customers can receive digital orders. Last year Panera Bread began using geofencing technology so that it knows when a customer is nearby so an employee can bring out a customer’s curbside pick up order. This way a customer doesn’t have to leave their car to pickup their order.
By the middle of 2021 drive-thru, carryout, delivery and catering represented 85% of Panera Bread’s revenues up from 40% before the pandemic hit.