Will unlimited free drinks pay off for Panera?

Discussion
Photo: Panera Bread
Apr 22, 2022

For $10.99 a month, visitors to Panera can now get all the self-serve beverages they can drink.

Panera’s Unlimited Sip Club is the newly launched revamp of the QSR chain’s coffee/tea subscription club that allows customers to get unlimited amounts, not just of coffee and tea, but of self-serve fountain beverages. (Customers can serve themselves one beverage every two hours with unlimited refills of the same cup.) The subscription’s launch coincides with the introduction of Panera’s line of “Charged Lemonades,” caffeinated, fruit-flavored beverages.

The MyPanera+ Coffee program, launched in March 2020, allowed customers to get unlimited coffee and tea for $8.99 per month. Subscribers in test markets prior to launch went from visiting Panera four times a month to 10, and spent 70 percent more on food.

While the Unlimited Sip Club may be the first all-you-can-drink subscription program, others have launched similar programs, both in QSR and convenience. In both spaces, there have been successes and failures.

In January, Taco Bell rolled out a subscription club, Taco Lover’s Pass, offering a taco a day for $10 monthly. The program has a 21 percent renewal rate. Tracee Larocca, Taco Bell’s head of brand creative, told The Wall Street Journal, “Consumers are showing us that they are interested in subscription models, as it eases decision-making.”

In May 2021, convenience chain Circle K introduced its Sip & Save subscription program offering one tea, coffee, slushy or fountain soda every day for $5.99 per month.

In a mid-March quarterly call, Brian Hannasch, CEO at Alimentation Couche-Tard, Circle K’s parent, said the program has 400,000 active subscribers. He said, “We have very strong positive feedback from our customers and we continue to look for opportunities to make it even easier for our customers to benefit from this program. While it’s certainly in the short term, probably impacts our sales in the expense category, we think the on-going loyalty and increase in traffic that we’re seeing is a good move for us over the long term.”

On the other hand, Burger King’s $5 monthly coffee subscription program, which launched in 2019, was quickly discontinued.

DISCUSSION QUESTIONS: Will adding an all-you-can-drink element and “Charged Lemonades” increase the effectiveness of Panera’s subscription program, even at a higher price? Do you see more pros than cons in subscription schemes at QSR chains and expect more in the future?

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"Subscription is a fancy way of saying 'you’re pre-paying for your own discounts,' but for some, that value proposition is worth it. "

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18 Comments on "Will unlimited free drinks pay off for Panera?"


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Richard Hernandez
BrainTrust

One size does not fit all. Unfortunately, you have to look at these type of promotions on a case by case basis. What I want to know is who is going to monitor customers being able to re-fill their cup every two hours with unlimited refills.

Georganne Bender
BrainTrust

I wonder if the cups will have tags that are similar to the ones used by Disney to monitor use?

Peter Charness
BrainTrust

For those customers who are close enough to a Panera to enable frequent visits, this is a great idea. A loyalty program that isn’t the mundane “get a discount” when you shop here. Now throw in one of those incredible Panera cookies with every visit and you have one sweet deal.

Gene Detroyer
BrainTrust

When we initially discussed the first QSR subscription models, I was on the negative side of the ledger. The data tells another story.

If customers like it and participate regularly, the trade-off of a free drink will well be worth purchasing a meal. The ROI for a restaurant like Panera’s seems to be relatively high.

My negative was that someone who usually goes to a specific QSR 3 or 4 times a month would have to convert their habit to multiple times more. I assumed that people like variety.

The downside, of course, is the universal adoption of such programs. How is the restaurant going to keep its program competitive against others? Increase the giveaway?

Mohamed Amer, PhD
BrainTrust

Panera is striving to capture more dwell time per visit. It’s a hybrid between Starbucks’ Third Place philosophy and the QSR model. The unlimited drinks offer adds another reason to visit, linger longer, and potentially increase the number of food purchases or try a new menu item. Panera needs to continue to invest on the menu side to generate demand excitement to increase topline growth.

Mel Kleiman
BrainTrust

It starts with it all being about location, location, location. It being easy to visit a store makes it a great deal. Some customers will just drop in to pick up a beverage but most likely will buy additional items on many of those visits. The second item is making sure they keep up the quality of the offering. Third, it becomes a real value offering for the people who visit their stores because of the cost of beverages today. It’s a win for Panera and a win for the customer.

Brian Delp
BrainTrust
3 months 26 days ago

What? You mean it wasn’t already? It will likely have benefit to existing frequent visitors, but there is likely a point of diminishing returns on these discounts and I am curious if there are any new customer acquisitions. Seems like a big whoop-de-do to me but then again, now I’m craving a quiche.

Dick Seesel
BrainTrust

Interesting to note the $10.99 price, because Panera has been testing this heavily in Milwaukee for $9.99. (Lots of TV backing it up for the past few months.) I’m assuming that Panera has found more frequency of visits over a month (not necessarily in a single day), and has noticed an uptick in sales of other food, too.

Jenn McMillen
BrainTrust

Subscription is a fancy way of saying “you’re pre-paying for your own discounts,” but for some, that value proposition is worth it. Prepaid, after all, is the highest form of loyalty. My only reservation is that this worsens the trend of turning every Panera into an office for the masses if it’s really popular.

Georganne Bender
BrainTrust

A venti iced tea at Starbucks is close to $3, so this is a great deal. And one I will happily subscribe to and promptly forget about. Which is what I bet most subscription services bank on.

Rich Kizer
BrainTrust

It you’re really thirsty, you’re going to spend at least two hours doing nothing. Oh yeah, go get a free coffee. I know the coffee deal has been successful, at least for my neighbors, but I question the benefit given having to wait two hours to sip again. It’s a bit too long. Or maybe the sales in bakery will escalate during the waiting process. Or will this timed program generate potential complaints?

David Spear
BrainTrust

Panera has the type of menu offering and consumer following that enables this type of program to be highly successful. For nearly all fast food and fast casual restaurants, beverages and french fries are the two items that drive the most profit. So who cares if a guest pops in one day and fills up her cup three times in an hour, and orders a bagel and soup? This won’t happen every day, but it definitely will drive higher ticket food sales and store traffic. Will this work for all QSRs? Absolutely not, which is why it cratered at Burger King. But for Panera, it will.

Steve Montgomery
BrainTrust

Subscription programs for drinks work well if you are a thirst destination. The customer must anticipate being in your location consistently more times than the cost of the individual drinks. Programs like this work reasonably well in c-store because they are a thirst destination. I don’t believe on a standalone basis Panera is a thirst destination. It may work in some locations but not in all.

Ken Morris
BrainTrust

More than doubling the store visits and getting a 70 percent lift on food purchases is pretty much off the charts. Especially when you consider the huge margins on coffee and fountain beverages. If every QSR uses this subscription model, look for the Super Size Me 3 movie some day soon.

You can also see that a coffee subscription won’t work for every chain. I’m not saying that Burger King’s coffee is sub-par, but who goes to Burger King to get a Whopper-with-a-coffee combo? That’s a giant soda club for sure.

Shep Hyken
BrainTrust

I’m a big fan of the subscription model. The “all-you-can-drink” subscription is an excellent way to get customers back through Panera’s doors. The numbers will help them make the decision if it’s working or not. I’m a fan of the subscription model for both the customer and the retailer. It’s a win/win when executed properly.

Roland Gossage
BrainTrust
3 months 26 days ago

This is a classic tactic; a classic loss leader. By offering customers a high-margin product at a perceptibly low price — even below cost, the restaurant expects to benefit by having the patron buy the rest of her meal while in the store. Most customers do not visit five different bakery-café fast-casual restaurants in a given week or even month. What brings them into the store tends to keep them in the store. This loyalty offer gets them in, and ensures they keep coming back, and likely more often than they would normally.

Craig Sundstrom
Guest

I’ve never been to a Panera, but my impression is they’re supposed to be a somewhat trendier/upscale version of, say, Subway; so the phrase “unlimited drinks” struck me as counter-productive: aren’t they supposed to be about quality, not quantity? I was relieved to see the promo isn’t quite what I thought.

That having been said, I’m not sure how useful the concept is as it actually exists: food is the main draw at a restaurant, isn’t it? (With the beverages kind of an afterthought … or maybe we should say “add-on.”) I have trouble picturing someone’s thinking/saying “where do I want to eat today for lunch?” becoming “where can I get a cheap soda?”

Kai Clarke
BrainTrust

This is a great idea that will drive “Go to Store” business for Panera. It is better defined than other low cost attempts at this, because of its price point. Also, since Panera is not a gas station extension, or a drive through type of QSR, it will expand its reach and direction in a stronger way that should appeal to both their core market and new markets.

wpDiscuz
Braintrust
"Subscription is a fancy way of saying 'you’re pre-paying for your own discounts,' but for some, that value proposition is worth it. "

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