Panera 2.0

An article in the St. Louis Post Dispatch, “From iPad to plate, technology speeding up food at Bread Co.”, highlights some of the early findings of some of the technology improvements being made, known as Panera 2.0. Here in St. Louis Panera is still called St. Louis Bread Company or Bread Co for short.

They are starting with rolling out ordering kiosks where patrons can order and pay for their food without talking to an employee. They have rolled out kiosks to 123 of their 1900 locations so far. Here are some stats:

  • Panera 2.0 cafes are reporting that 20% of their retail sales are digital meaning either online or a kiosk
  • Gross retail sales have increased nearly 6% since the rollout at 2.0 cafes

They have added a new position in the kitchen to help manage all the incoming digital orders to make sure everything is process correctly. Panera is saying that they are investing in more labor than what the kiosks are currently offsetting, but I’m sure that’s temporary. Once the staff and customers are comfortable with the new process they will be shedding labor as fast as possible. That statement in the article is a PR move. You don’t invest in technology to increase costs. Sure they are also making the customer experience a better one which is important and what their customers desired, but let’s be honest there’s a huge financial upside as well down the line through automating labor intensive processes.

Another huge benefit cited in the article are the upselling opportunities through the kiosk. Kiosks don’t fear upselling. You program to do and they just do it. Whereas with employees for most it’s outside of their comfort zone to upsell. That’s just human nature. Now with the automated system every single guest that uses the system will get asked if they want to add stuff to their order. That will pay off in no time.

Early survey results show that both frequency and satisfaction have increased among customers that use the kiosk. So take that for what it’s worth.

I have copied the full article below:

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As customers entered a busy St. Louis Bread Co. in Kirkwood, some made a beeline to a row of iPads set up just inside the restaurant’s doors. The tablet computers allow them to place orders and pay, avoiding the inconvenience of waiting in line during the lunchtime rush.

Soon their orders of chicken salad sandwiches, salads and fruit smoothies were ready, all without having to speak to a restaurant employee.

The new ordering kiosks are part of the “Panera 2.0” initiative by Panera Bread Co., the Sunset Hills-based chain that operates locally as St. Louis Bread Co.

So far, 123 restaurants have added the technology, including about a half dozen in the St. Louis region, since the initiative was announced a little more than a year ago.

The chain, which has 1,901 restaurants in 45 states and Ontario, Canada, is expanding kiosks at several hundred more restaurants this year.

While boosting digital ordering through kiosks, Panera also is testing delivery, although not yet in the St. Louis area. It views the digital expansion as an important part of growing its catering and delivery business.

Blaine Hurst, Panera’s executive vice president of transformation and growth, said the chain began developing Panera 2.0 in 2010 as a way to cut friction customers encountered while waiting to place their orders.

Panera surveyed customers and found out they loved the food and environment at cafes but didn’t like what CEO Ron Shaich has called the “mosh pit” ordering process at Panera registers.

“Panera 2.0 was really born out of a pursuit of how do we make it easier for our guests to get in and out, with the accuracy they desire,” Hurst said.

Panera first tested the use of a kiosk at a restaurant near Fenway Park in Boston in 2012, and added kiosks in Charlotte, N.C., the following year. In 2012 and 2013, Panera also added online ordering and debuted a mobile app that allowed customers to place orders on their smartphones.

The kiosks build on another element of Panera 2.0’s digital effort that launched last year, Rapid Pick-Up. The service allows customers to place orders through a smartphone or iPad app and pick up the food from a marked shelf at the restaurant.

Following the introduction of Panera 2.0 last year, digital sales are accounting for more than 20 percent of retail sales at Panera 2.0 cafes.

“We have seen tremendous growth in our digital properties,” Hurst said. “We went from virtually no online transactions to nearing 9 percent of our total sales.”

When it last released a breakdown of operating metrics for the converted 2.0 restaurants, for the period that ended Dec. 31, gross retail sales at those stores increased nearly 6 percent a few quarters following the addition of the technology.

While digital sales are increasing, Panera also has invested in new production equipment and systems and added staff to handle a large number of orders coming in at once from the registers, counter registers, kiosks and online. A new position has been added in the kitchen to ensure the accuracy of each order.

“We’re taking the labor that kiosks save and putting it back into the kitchen,” Hurst said. “We are increasing labor more than the kiosk offsets.”

The kiosks can make it quicker for a customer to place an order, but many customers are spending more time ordering by customizing the kinds of cheese and condiments they want on their food.

“We see a much higher propensity to modify orders,” Hurst said.

When customers customize their orders, there’s the option to tack on items that come with added fees. When ordering an $8.59 roasted turkey and avocado BLT, for example, customers can add Gouda cheese for an additional 75 cents or Thai style peanut sauce for 50 cents.

For those who prefer to have their order taken by a person and have the option of paying with cash, there are still several cashiers staffing cash registers at Panera 2.0 cafes.

As the chain seeks to introduce the technology, employees have been designated as “kiosk ambassadors” at restaurants to greet customers as they enter, point out the kiosks and walk them through how to use them.

Laura Fuller, 58, was one of several customers during the noon hour who placed her lunch order through two of the five kiosks at Panera’s Kirkwood restaurant on Manchester Road last Friday.

“It’s much faster,” Fuller said of the kiosk, as she bypassed a line several people deep at a cash register.

Panera isn’t alone in using kiosks for ordering food. St. Louis-based Hardee’s recently added self-order kiosks as a pilot in a handful of restaurants, and McDonald’s is testing them in a some restaurants.

Investors are wary of some of the upfront costs, however. On Feb. 12, the day Panera reported its fourth-quarter earnings that showed higher costs tied to the technology, its stock dropped 10 percent to $157 a share. The stock has since rebounded, closing Thursday at $183.

In its most recent quarter, CEO Ron Shaich said in a conference call with analysts April 29 that new initiatives hurt first-quarter results, but he said the tech upgrades would improve earnings in the long term.

While the upfront costs for technology and training are significant, Morningstar analyst R.J. Hottovy said the investment was paying off for Panera.

“With the increase in the number of transactions they’re seeing, the costs are warranted,” Hottovy said.

Through its MyPanera loyalty program that has 19 million members — accounting for nearly half of the chain’s transaction — Panera’s surveys on the new technology have received positive feedback, Hurst said.

“We’ve found that guests who use kiosks, the frequency of their visits goes up and guest satisfaction goes up.”

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