Panera for the masses in a flash
July 28, 2016
by Eric Schroeder
Panera's research has shown that delivery grows at a rate significantly faster than its eat-in and to-go business.
ST. LOUIS — For Panera Bread Co., delivery always was part of the plan. But what the St. Louis-based company has found over the past four years of prototyping and testing in multiple forms is that Panera is “perfectly suited for mass-market delivery.”
|Ron Shaich, founder, chairman and CEO of Panera
“Panera can offer a high self-esteem fast casual alternative to the low-end Asian and pizza offerings now flooding the delivery market,” Ron Shaich, founder, chairman and CEO Panera, told analysts during a July 27 conference call to discuss second-quarter financial results. “Indeed, we see a whitespace in delivery options for healthful high-quality salads, sandwiches, and soups. The fact is, delivery is a powerful initiative, and it will make a huge difference at Panera. It represents a significant sales layer. Indeed, delivery sales six months after roll-out approach approximately 5,000 per week on average.”
Shaich said Panera’s research has shown that delivery grows at a rate significantly faster than its eat-in and to-go business. Another benefit is that start-up costs for delivery at Panera are modest, primarily relegated to hiring costs. Panera only accepts digital orders for delivery, which fits in nicely with the e-commerce capabilities built for Panera 2.0. All in all, delivery has quickly become a “powerful profit generator” for Panera, Shaich said.
During the second quarter of fiscal 2016 Panera launched delivery in 52 company-owned bakery cafes, bringing the total number of company bakery cafes offering delivery to 122. Additionally, delivery is now available in 73 franchise bakery cafes across seven franchise groups. Approximately 10 percent of Panera’s system is offering delivery, Shaich said, which is ahead of the company’s delivery roll-out goal for 2016. As a result, the company has raised its goal for delivery to 15 percent of the system by the end of 2016.
Approximately 10 percent of Panera's system is offering delivery.
Describing delivery, Shaich, who has utilized running metaphors in the past, made the comparison to a sprint.
“We’ve come to believe delivery is the Usain Bolt (Jamaican Olympic sprinter) of initiatives at Panera,” he said. “It’s powerful, it moves very quickly, and it is getting out of the blocks fast. What else have we learned about delivery? We learned that over time, our sales will continue to grow in delivery as awareness goes up. Our profits will go up significantly with delivery as we generate more sales per cafe and thereby lower cost per delivery. And the effectiveness of our delivery operations will get better and economically more efficient as we gain more experience, implement new technological capabilities, and most importantly, move down the learning curve.”
Shaich said Panera’s confidence in the power of delivery continues to strengthen as the company puts more markets in operation for longer periods of time and gains more robust data. Panera’s ownership isn’t the only one excited about delivery; so, too, are the company’s franchisees, he said.
Panera's confidence in the power of delivery continues to strengthen as the company puts more markets in operation for longer periods of time and gains more robust data.
“Sam Covelli, owner and operator of our largest franchise group, Covelli Enterprises, has been operating delivery out of 10 of his bakery cafes for the past three months,” Shaich said. “He told us last week that he is seeing double-digit increases at those bakery cafes and that the customers have never been more excited. He went on to tell me that he has never been more excited; for this reason, he’s working to quickly put in place the physical and managerial capabilities needed so we can accelerate the roll-out of delivery to his other units.”
Net income at Panera in the second quarter ended June 28 was $34,501,000, equal to $1.46 per share on the common stock, down 18 percent from $41,929,000, or $1.60 per share, in the same period a year ago. Revenues increased 3 percent to $698,900,000 from $676,657,000.
For the six months ended June 28, net income totaled $69,589,000, or $2.92 per share, down 6 percent from $73,789,000, or $2.80 per share, in the same period a year ago. Revenues for the six months increased 4 percent to $1,384,053,000 from $1,325,161,000.