Panera to double down on delivery

by Eric Schroeder
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Panera Bread delivery
Panera plans to expand delivery to 35% to 40% of the system by the end of 2017.

ST. LOUIS — Panera Bread Co. has some ambitious plans for its delivery business, hoping to expand from 15% of the system currently to 35% to 40% of the system by the end of 2017, company executives said.

In a Feb. 8 conference call with analysts, Blaine Hurst, president of Panera, said the St. Louis-based company is “highly confident” it can meet its target of 35% to 40%.

Blaine Hurst, Panera
Blaine Hurst, president of Panera

“We see the potential to change the delivery paradigm by offering a fast-casual, higher self-esteem experience through our menu offerings and our service,” Mr. Hurst said. “That makes us very different from the typical commoditized pizza players and Asian offerings that are widely available for delivery in most of America.

“We believe Panera has moved extremely quickly to capitalize on that white space for healthful, high-quality salads, soups and sandwiches in the $40 billion delivery market, and that our opportunity is to be a premium, but mass market restaurateur delivering our great food to our customers.”

News of Panera’s headway on delivery and other technology initiatives sent the company’s shares to a record high on Feb. 8, closing at $232.90, up nearly 9% from the close a day earlier. It was Panera’s biggest one-day move in almost two years.

Panera Bread delivery
 For the year, Panera ended 2016 with cafe-based delivery in 306 cafes.

During the fourth quarter of fiscal 2016, Panera launched delivery in 22 additional company bakery-cafes and an additional 17 franchise bakery-cafes. For the year, the company ended 2016 with cafe-based delivery in 306 cafes system-wide, Mr. Hurst said. 

Touching on some of the lessons learned within its delivery business during 2016, Mr. Hurst said Panera found the fully integrated digital investments that the company bet on a few years ago are foundational to its ability to be successful with delivery and are key to the rapid deployment of delivery across the Panera system.

“Because we’ve already made this investment in our digital capabilities, delivery requires de minimis capital expenditures and a modest start-up investment of about $25,000 per cafe, primarily related to hiring, training and the grassroots marketing efforts to build customer awareness,” he said. “We’ve also seen that our soup, salad and sandwiches are truly an ideal solution for customers looking for higher quality, healthy options.”

Panera delivery driver
Panera learned that hiring and training drivers is the largest hurdle in the market roll-outs.

Panera also learned that hiring and training drivers is the largest hurdle in the market roll-outs. Mr. Hurst said Panera believes it has a competitive advantage in hiring drivers, though, because the restaurant chain has better working hours and because deliveries primarily go to office workers, which tends to lead to bigger tips. 

Building on Mr. Hurst’s comments, Ron Shaich, founder, chairman and chief executive officer of Panera, said he believes delivery can be a game changer for the company.

Ron Shaich, Panera
Ron Shaich, founder, chairman and c.e.o. of Panera

“I think it was ambitious getting to 15% in one year,” Mr. Shaich said. “That was tough, because we had to start the machine up. I think Blaine and the team have built an extraordinary capability now. There’s tremendous enthusiasm as results are coming in. This is probably as powerful initiative as we’ve seen in Panera in a long, long time — maybe the initiative of the decade in Panera. It’s really the big deal. So there’s tremendous capability, tremendous traction, and tremendous enthusiasm behind getting this done. And most importantly, getting it done right.”

Net income at Panera in the year ended Dec. 27, 2016, totaled $44,010,000, equal to $1.93 per share on the common stock, up 2% from $43,160,000, or $1.75 per share, in the same period a year ago. Net revenues increased 5% to $727,106,000 from $691,765,000. 
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