Introduction “Panera 2.0 is an investment in the customer enabled by technology and powered by operational excellence … It’s 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 – all will create a platform for an ever more personalized experience.” With these words in 2014, Ron Shaich – Founder,
Chairman, and CEO of Panera Bread Co. – launched the “Panera 2.0” project to improve Panera’s 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. Panera has historically been a “winner” 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 “Panera 1.0” which have enabled this past success, as well as “Panera 2.0” which will drive this success into the future. Both are predicated on great alignment between Panera’s business and operating models. About Panera Bread Co. 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’s restaurants are located mostly in suburban strip centers and regional malls. Panera’s Business Strategy 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 “wellness that’s craveable” and deliver “an experience that’s uplifting.” Furthermore, the want to be “a place that customers can trust,” an “oasis from the rush of daily life,” and “a place worth crossing the street for to enjoy food.” Panera refers to their strategy as its “Concept Essence.” 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. Historical Operating Model – Historically, Panera has driven alignment with its business strategy through its menu, design of its stores, and quality of employee training. Menu & Innovation: Panera’s 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. 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 “celebrations” 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.  Layout & Experience: Each Panera bakery-café 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’s perception of Panera as a “gathering place” or “oasis.”
New Panera 2.0 Extension – Panera’s 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. Ordering Systems: Panera has introduced new ordering methods for both 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 “rapid pick-up” 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’ tables. Operational Excellence: 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 on stores’ kitchens and increase delivery speed for customer orders in-store. Conclusion Panera starts with a base of high quality, great food – 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 – its layout & experience, ordering systems, and operational excellence – to make each customer visit a differentiated experience, not just a meal, which helps to separate them from the competition and make them “a place worth crossing the street for.” Sources of Information
What is Panera's competitive advantage?Panera's Business Strategy
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.
What are Panera Bread's primary sources of competitive advantage in your judgment are these sources of advantage sustainable Why or why not?Answer: Panera's primary sources of competitive advantage are: – (1) its position in the restaurant industry, – (2) its brand strength, – (3) the atmosphere of its restaurants, and – (4) the distinctive nature of its bakery products. Most students will argue that these sources of competitive advantage are sustainable.
How does Panera Bread attract customers?Panera Bread wants to be a comfortable place for their customers to gather. Their stores have been designed to invite and welcome customers to enjoy relaxing, conversation, reading; all in a casual atmosphere and creating an engaging customer experience.
Why Panera is so successful?The reason for Panera's success is simple: The chain has pursued a niche strategy, differentiating itself as a fast food restaurant that serves healthy, tasty, affordable food, according to Lawrence Hrebiniak, a Wharton management professor.
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