Panera Bread Co. executives have pulled the wraps off upgrades they are calling “Panera 2.0,” which include an emphasis on kiosk and mobile ordering, operational modifications and plans for smaller restaurants.
The St. Louis-based company unveiled the plans Tuesday during an Investor Day conference in Charlotte, N.C., a 10-unit test market for the chain’s new bakery-café format. The new format, which was tested in four units in the Boston area, includes a two-pronged effort that for some locations means the addition of “Rapid Pick-Up” mobile and online ordering, and for others an in-store kiosk ordering system.
Panera will spend about $42 million on technology alone, an expense shared with franchisees, who operate about half of the chain’s 1,777 units. The company estimated new technology costs per bakery-café unit at about $125,000.
“What Panera 2.0 is a vision for is not technology,” cautioned Ron Shaich, Panera’s chairman and chief executive. “A lot of people want to think like that, but what it really is a vision for is how we evolve the guest experience at Panera.
“It’s how we care for the individual needs, the specific needs, of our to-go customers, of our eat-in customers and those customers who want it wherever they are, not where we are,” Shaich said in the webcast presentation.
Blaine E. Hurst, Panera’s executive vice president of technology and transformation, said the new technology is being rolled out on two levels:
• “Rapid Pick-Up” iOS mobile or web ordering, which allows customers to order, select a time and pick up from shelves, has rolled out to about 149 locations in Minnesota, St. Louis and Detroit.
“The object is by the end of the year to have this completely rolled out nationwide,” Hurst said.
• “Enhanced To-Go and Eat-In,” which includes in-store kiosk ordering, has rolled out to four units in Boston and 10 locations in Charlotte, N.C. Rollout plans include six more restaurants in Charlotte and the new market of Dallas this year. Executives said about 100 additional cafés will be added later this year, and the rest of the system will adopt it in 2015 and 2016.
Hurst said technology expenditures initially total about $42 million, with a $22.5 million investment in commerce software, $8 million in network security, $6 million in content management, $4.6 million in café management software and $700,000 in consumer support. The security investment was a high priority.
“We have to take security very seriously,” Hurst said. “It’s a matter of trust with our customers.”
Shaich said in test units, about 20 percent to 30 percent of orders are through the kiosk, Web and mobile platforms. The figures still pale in comparison to pizza chains’ reports of nearly 50 percent digital orders.
“The numbers out of the kiosks are something we are extremely excited about,” Hurst said, and guest frequency has increased. “All of this is without mobile, which is just starting to roll out to the market.”
Executives said in locations like a test unit in Braintree, Mass., sales can reach $2,000 an hour, and the new systems allow workers to focus and reach those levels. In addition, Panera has created a “kiosk ambassador” to help customers unfamiliar with the technology.
“Everything we are doing is to make it less complex for our operators,” Shaich said.
In addition, Shaich said the technology helps increase order accuracy, which in many restaurant operations can have one out of seven orders coming out wrong.
“We’ve done a little better than most people, but it’s not good enough,” Shaich said.
The company is also looking at smaller footprints for new Panera units, at 1,500 square feet and below, Shaich said.
“We can’t assume that the same store we open in Lincoln, Neb., is going to work in Lincoln Center in Midtown Manhattan. It is different. It has different economics,” he said.
Panera executives also unveiled a new India-style flatbread similar to naan that will debut nationwide this year.
“In the process of talking about different sandwiches a year or two ago, we realized we needed something that felt a little lighter,” said Scott Davis, Panera’s chief concept and innovation officer.
The bread is unfinished on one side and grilled to order.
“It creates a wonderful flavor,” Davis said. “The great news is, if you want to use this cold, make it into a regular sandwich, you can do that too. It folds up nicely.”
For the fourth quarter ended Dec. 31, Panera Bread Co. reported that profit increased 5.1 percent to $54.2 million, compared with $51.6 million in the prior-year period. Revenue increased 15.8 percent in the quarter, to $661.7 million from $571.5 million.
Same-store sales increased 1.1 percent systemwide in the fourth quarter, with same-store sales at company-owned units rising 1.7 percent over the prior year, and franchised units increasing 0.5 percent.