Here’s How Panera Bread Made the Omnichannel Shift with Panera 2.0

As consumers continue to expect digital solutions to be baked into nearly all aspects of their lives, the pressure for retailers of all stripes to deliver has never been greater. Which is why American bakery-café fast-casual restaurant chain Panera Bread has been making some serious moves to overhaul its operations in recent years.

Long priding itself on producing high levels of customer service – what the company calls “Panera warmth” – back in 2010, CEO Ron Shaich began to realize that there was a key area of the Panera Bread experience in which customers were being let down. Namely, the long queues and waiting times during peak periods – particularly lunch.

What the company started to acknowledge was that while 40% to 45% of customer orders at outlets were to-go, everyone was being treated as if they were an eat-in customer. “We had a one-size-fits-all system. Everybody came in and went in the same line, whatever their needs were,” Shaich said in Fortune in 2014.

This was the same year that Panera Bread’s digital solution to the problem began to roll out nationwide. Named Panera 2.0, the initiative consists of a series of integrated technologies that include digital ordering, payments and operations. With it, the company was finally able to start separating the experience for to-go customers and eat-in guests, and deliver a more powerful personalization program for all.

“Panera 2.0 is an investment in the customer enabled by technology and powered by operational excellence,” said Shaich in a press release at the initiative’s launch. “It’s more than a mobile-payment system or simply a digital-ordering process. 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 while creating a platform for an ever more personalized experience.”

A Better Guest Experience

Panera 2.0 was first tested in the Boston area in 2011, and, following favorable results, was quickly extended to a further 15 Panera Bread cafés in Charlotte, North Carolina.

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By 2013, the company had introduced fast lane kiosks to its test locations, which, in addition to its website and mobile app, enabled customers to place their order via mounted in-store tablets. This fully integrated solution is what would eventually roll out to nearly 450 of the Panera Bread’s company-owned restaurants over the following years. And the resulting uplift in sales has been impressive.

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Panera generated $2.8 billion in revenue 2016, and have just reported $727.63 million in Q1 2017 sales – up 6.2% over the same period last year. Importantly, digital sales now account for an impressive 24% of total sales in Panera Bread bakery cafes – up from 16% in 2015. Customers, indeed, are embracing the quick, digitally-enabled to-go options more and more. “Our view is essentially we are moving into an omnichannel world. As we built out 2.0, it is really a better guest experience,” Shaich told CNBC last year.

From Rapid Pick-up to Customization

Panera 2.0 works on a multiple-access-point basis. To-go customers can place their orders ahead of time on the company’s mobile app or via the website, and select a pick-up location and time.

Upon arrival, they head over to a designated area, where an order-status monitor informs them whether the food is ready and waiting or still being prepared. Alternatively, both to-go and eat-in customers can place their orders using the touch-screen tablets now available at the restaurants – and it’s still possible to do it the old-fashioned way and order from the register as well.

Combined, this rapid pick-up solution is having the desired effect – minimizing lines and improving the customer experience. Indeed, what’s particularly nifty for customers who choose the digital option is that everything is synced seamlessly with the MyPanera rewards program. This means that if customers like to customize their orders (which 50% do) – no tomatoes in their salads, extra cream on their coffee or what have you – this information is recorded in their order history, so customers need only customize once, and can select those specific orders again more quickly in the future.

"Do you know how long it takes me to say, 'I want this salad, no cheese, no dressing and no side choice'?" Blaine Hurst, Executive Vice President of Technology and Transformation at Panera Bread, says. The initiative shaves five seconds from the total ordering time – not a lot, you might think, but when multiplied hundreds of times over a day, the whole operation of each individual café begins to flow a lot smoother.

A Multi-channel Paradigm Shift

Furthering the options that Panera Bread has made available to customers is delivery. Although delivery began several years ago on a business-to-business basis – bulk orders delivered to offices for meeting and training sessions – as Panera 2.0 rolled out, it quickly became apparent that the technology would enable small order direct-to-consumer delivery as well.

What’s more, the company’s consumer packaged goods business Panera at Home is growing in popularity, generating market share in categories such as refrigerated soup, and Shaich sees this as a key area going forward.

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Indeed, Panera Bread’s transformation from a restaurant-only chain into a digitally-powered omnichannel business is what’s putting the company on such a strong growth trajectory. The retailer is beating earnings expectations as its Panera 2.0 investments begin to pay off in no uncertain terms. Now operating across four channels – eat-in, to-go, delivery, and Panera at Home – the company believes that soon the lion’s share of the business won’t come from the eat-in side of things, but the new options that Panera 2.0 has realized.

The last word goes to Ron Shaich. “These four channels, especially our digitally-enabled channels, are working and fundamentally changing our business. Indeed, we are increasingly selling more food and serving more customers through new channels than ever before. And we expect this will only accelerate as our initiatives mature.

“To put it in perspective, I will share with you this. At one time Panera was over 60% eat-in, but we can foresee a world in the not-too-distant future in which eat-in, while continuing to generate relatively stable sales volumes per cafe, will be about 40% of our total sales with the other three channels representing 60% or so of our sales. Ultimately we’ve shifted our thinking from a paradigm that used to ask how many new cafes can we open, to a new paradigm that is asking how many high ROI dollars can we vacuum out of a given ZIP Code.”

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