Will two digital-first concepts prove more successful than one for Panera Bread?

Discussion
Photos: Panera Bread
Nov 15, 2022

Panera Bread has announced plans to roll out two smaller concepts to reach to-go customers in dense urban areas.

Urban Core, at about 2,500 square feet, is about 40 percent smaller than Panera’s traditional bakery-cafes. With limited counter seating, the concept is geared to support rapid pickup and is designed with shelves dedicated to pickup and to-go orders.

Panera To-Go, at approximately 1,000-square-foot, doesn’t have any dine-in seating and features all-digital ordering. Panera wrote in a press release, “With less front-of-house duties and simplified operations, Panera To-Go associates can focus on crafting freshly prepared meals to meet the needs of a guest on-the-go.”

Panera’s digital sales now make up half of total system sales. Beyond urban markets, the smaller concepts are expected to help Panera reach hospitals and universities.

Panera will not be replacing its traditional bakery-cafés or the double-drive-through locations.

“For us, it’s ‘and’, not ‘or’,” Eduardo Luz, Panera’s chief brand & concept officer told Nation’s Restaurant News. “We love our suburban markets and we know they resonate with people and they like this brand. We want to keep that but we also want to be present in urban downtown neighborhoods and you just can’t do that and show up 4,000-square feet.”

Sweetgreen, Schlotszky’s and Wingstop this year joined Chipotle, Starbucks, Dunkin’ and Taco Bell in opening digital-order only locations as online orders surged during the pandemic.

In a press release announcing its first digital-only store last fall in Boston, Dunkin’ said, “Because guests are in control of the ordering experience, the on-site crew can focus on fulfilling orders with heightened speed and accuracy.”

On Wingstop’s recent third-quarter call, Michael Skipworth, CEO, said digital orders have held above 60 percent, although sales in other digital channels, including e-commerce, have moderated as pandemic restrictions have eased. He said, “We’re committed to our aspirational goal of 100 percent digital transactions where we enjoy a $5 higher average check. This continued expansion of our digital business allows us to continue to build upon our first-party database that’s over 30 million strong.”

Drive-throughs are also being added by chains to support mobile ordering.

DISCUSSION QUESTIONS: Are digital-only or digital-first restaurants the future of fast food and fast casual? Will Panera likely find more expansion success with its digital-only Panera To-Go or hybrid digital-first Urban Core concept?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Digital-only and digital-first concepts are a great way for trusted restaurant brands to build sales and create more efficient experiences for customers. "
"Panera has found a way to expand their reach to various target audiences while continuing to stay within their brand."
"Panera should be able to find success in this model, especially if they can get more momentum around their Sip Club."

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13 Comments on "Will two digital-first concepts prove more successful than one for Panera Bread?"


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Katie Thomas
BrainTrust

It’s an interesting concept but not without risk. And it sounds like they are trying to reduce labor and overhead costs while couching it as a consumer/convenience benefit.

First of all, we’ve seen many tech companies struggle post-pandemic due to assumptions that certain pandemic digital behavior would continue/keep growing at a certain clip – so I would be thoughtful about that. Additionally, what happens if there’s an issue with an online order? How is it resolved?

Lastly, Panera largely makes food that people need to sit to be eating. The lack of seating is concerning to me. Even in New York, where space is at a premium and many people grab and go, every seat in a fast casual restaurant is often taken.

Melissa Minkow
BrainTrust

It seems that the same erosion of the mid-range in apparel retail is now happening in food/dining. Fast casual sat in between fast food and high-end dining experiences. As the gap between lower and higher income widens, retail category offerings tend to as well. Low-contact, digital-first experiences in fast casual make complete sense given the direction retail in general is headed.

Ken Morris
BrainTrust

The push into smaller footprint concepts makes total sense for Panera. I’m not going to bet on either concept winning the digital-first race, because they both leverage momentum in digital sales while solving multiple limitations: workforce and urban real estate. Panera has found a way to expand their reach to various target audiences while continuing to stay within their brand. 

David Naumann
BrainTrust

Great points Ken! It is a great way for Panera to customize its store format for different markets. As consumers and diners, we are getting accustomed to placing our orders from our phones and it is a natural evolution to digital-first or digital-only store formats.

Lee Peterson
BrainTrust

A great test. Smart. A little later than optimal, but better now than not.

Dion Kenney
BrainTrust
2 months 24 days ago

If only digital-only and BOPIS had been developed before the Automat disappeared.

Carol Spieckerman
BrainTrust

Digital-only and digital-first concepts are a great way for trusted restaurant brands to build sales and create more efficient experiences for customers. The key word is “trusted,” as familiarity with menus and confidence in quality based on previous experiences will drive adoption. Choice and convenience are synonymous for consumers so in-person options need to stay in the mix, at least for now.

Gene Detroyer
BrainTrust

The statistic that half of Panera’s sales were digitally initiated surprised me. To me, Panera has always been a place to go to eat. Is Panera planning to join the QSR category?

Evan Snively
BrainTrust

Panera should be able to find success in this model, especially if they can get more momentum around their Sip Club. They also should consider overhauling their loyalty program to greater incentivize habitual behavior.

Doug Garnett
BrainTrust

My question for Panera is whether there is growth opportunity using this approach. We now see clearly in retail that much of the digital hype was only hype – not an opportunity for growth. There is serious risk that Panera is spending all this money on a loyalty program for some customers without either increasing their purchases or bringing in new ones.

Ryan Mathews
BrainTrust

Digital-only and/or digital first restaurants are part of the future of fast food/fast casual, but not the whole future. If the 50 percent of revenue figure is correct that means Panera consumers are as fond of eating outside the restaurants as inside. My own experience with digital Panera orders has been poor. I quit after my chicken sandwich came with splotches of crushed chick peas, But they are clearly making other people happy. Fast food/fast casual dining is evolving as the market evolves. This is a perfectly reasonable test. As always, time will tell.

Brandon Rael
BrainTrust

Considering the clear conflicts and friction between customers who want to dine in and those who want to grab and go, Panera Bread is strategically establishing a digital-first operating model and a smaller format store. In a post-pandemic world, there are customer segments that enjoy eating in a Panera cafe and the experience that goes along with that. However some customer behaviors since the pandemic have stuck with the digital-first crew that wants a contactless and cafe-free experience.

Other fast casual restaurants should notice what Panera has achieved, including Starbucks, where the grab-and-go segment is outpacing the cafe customer segment. We have seen restaurants that have a mixed model, with customers who only want a BOPIS transaction, struggle to serve the customers who wish to dine in.

Separating the operating models and opening a digital-first dining free option is a logical evolution of the customer experience.

Anil Patel
BrainTrust

Both the concepts “Panera To-Go” and “Urban Core” have their own set of benefits. Moreover, these two approaches have been designed for distinct types of localities, so comparing them would be a little counterfactual. In my opinion, Panera Bread has come up with an excellent strategy and it would definitely help them align their offerings with the customers’ needs.

wpDiscuz
Braintrust
"Digital-only and digital-first concepts are a great way for trusted restaurant brands to build sales and create more efficient experiences for customers. "
"Panera has found a way to expand their reach to various target audiences while continuing to stay within their brand."
"Panera should be able to find success in this model, especially if they can get more momentum around their Sip Club."

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