Panera Bread has been a victim of its own success, co-founder, executive chairman and CEO Ronald Shaich indicated yesterday, and, after a period of “intense self-examination,” it intends to address its customers’ No. 1 complaints of slooooow lines, screwed-up orders and a multipart plan to “bend the arc of our sales growth trajectory.”
“If Panera Bread was a college graduate, it would have spent the last three months backpacking across India,” quips the Wall Street Journal’s Tom Gara.
On a third-quarter conference call with investors transcribed by Seeking Alpha, Shaich discussed Panera’s performance against “the all-industry composite called Black Box” and found that although it still scores considerably better than most competitors, it isn’t doing as well as it did just a few years ago.
Despite its $43 million profit for the quarter, “officials are focused on a less rosy number: the 1.7% increase in comparable same-store sales,” writes E.B. Solomont in the St. Louis Business Journal. Her story aptly summarizes a seven-step plan the company is instituting to improve the “experience” of its customers.
“Folks, we get it,” Shaich said on the call. “The trajectory of comp growth and the trajectory of transaction growth are headed in the wrong direction.” As strong as the brand is, as positive as store-level margins may be, as upward-trending as average unit volume growth has been over the past five years (20%-plus), it realizes that potential customers are just walking away.
“We’ve directly surveyed our customers, and the top reason they cite for coming less often is the diminished in-café experience,” Shaich revealed. “More than a quarter of those polled identified slower service, less comfort and the accuracy of orders, among other experience issues, to explain why they aren’t visiting our cafes more frequently.”
Some devotees — about 10% — have the nerve of using something called a telephone to place their order, and that wreaks havoc with the operating procedures.
“We have to drop everything,” groused Shaich. “We have to actually leave the counter to take that call, and then they waltz in, and they come up to the counter and expect us to come over to them and bring the food to them at that moment.”
The company intends to fix that particular annoyance by nudging those folks toward that there Internet thingy, which “will cause significantly less disruption and cost significantly less,” Shaich maintained, although he did not specify when the transition would take place.
Marketing spend has been on the increase — from 1.4% of sales in 2012 to 1.7% this year and a projected 1.9% in 2014, when Panera intends to launch a national broadcast campaign in the second quarter. But the “product and brand communication,” Shaich cautioned, “will be relatively light when compared to many national advertisers.”
Shaich also revealed that just under 50% of its transactions are attached to a MyPanera loyalty card, which he believes is the highest participation rate in the industry and “a powerful weapon in Panera's arsenal.” Loyalogy blogger Dennis Duffy pointed out earlier this year that “when this program rolled out a few years ago, it introduced an alternative concept for restaurant rewards programs built around the concept of surprise.”
Competitors, meanwhile, have found other ways to add speed to the fast-food process. Chipotle, for example, has added “‘expeditors,’ who make sure you have everything you need before you pay, and ‘linebackers’ tasked with restocking ingredients,” reportsBloomberg Businessweek’s Vanessa Wong. “It’s one of the key ways in which we distinguish ourselves from competitors,” Chipotle co-CEO Monty Moran said during an investor’s call last week. “Because we are so much faster, it’s really a huge advantage to us.”
In other news on the fast-food front, McDonald’s Dollar Menu will soon be “more like the neighborhood dollar store,” writes Wong in a separate story. “The name refers to the starting price.” Now in its 12th year, it has been rebranded as The Dollar Menu & More in five test markets and will roll out nationally Nov. 4 with advertising to follow on Nov. 11.
“The new menu will consist of existing Dollar Menu items along with two additional tiers of pricing,” reports Jenn Harris in the Los Angeles Times. “Sandwiches and other items will be priced at $1 to $2 while more expensive items such as a 20-piece order of McNuggets will cost about $5.”
Marketing Daily’s Karlene Lukovitz has more details in her story.
Those McDouble cheeseburgers for a measly buck are apparently another victim of climate change. Rising temperatures leading to droughts have driving up the wholesale price of cattle, as Tim Fernholz points out in Quartz.com, which means that ground beef costs more, too. Ah, so that’s what they put between those buns.