Blaine Hurst, the Chief Transformation and Growth Officer at Panera Bread, says that he and founder Ron Shaich both acknowledged that the fast casual restaurant chain had a problem. Panera, with $2.4 billion in annual revenue, had a vision of being “a comfortable place to hang out — an everyday oasis, with fireplaces and comfy chairs,” as Hurst puts it.
But the problem was that as volume grew at many of the company’s 1,800 locations, “it was no longer pleasant,” Hurst concedes. Customers were standing in line, and then standing around again in what Shaich dubbed “the mosh pit” waiting for their to-go or for-here orders to appear on a counter.
The duo embarked on an effort to radically upgrade the customer experience by redesigning the stores.
“We called it the ‘two old man project,'” Hurst says. “We’re two of the oldest people in the company, but we were working on the newest innovations.” It wasn’t just about installing kiosks and digital displays, though, or adding features to Panera’s mobile app. “We realized we needed a holistic solution,” Hurst says. “We needed to think about how people want to order and pay, how we could increase throughput and accuracy in making the food, and also, avoiding that mosh pit problem.”
Panera has now converted more than 40 of its cafes to the new “Panera 2.0” model, which cost about $42 million to develop. Here’s how it works, along with more insight from Hurst about how they tested the new designs at a single location in Boston before rolling them out more widely.
1. Customers choose the most convenient way to order. They can order online or with Panera’s mobile app, and have their to-go order waiting for them when they arrive. They can order using an iPad-powered kiosk (below), which enables them to swipe their own credit card to pay, or use one that is kept on file.
They can order at a cash register, where new customer-facing displays have been installed so that diners can check the order for accuracy. There, a Verifone-made device that attaches to Panera’s NCR point-of-sale system can accept credit cards, or the new “tap to pay” Apple Pay mobile payment technology that is built into iPhone 6s.
You can also sit down at a table and use Panera’s mobile app to order your food and pay. (See screenshot at right.) You enter the table number you’re sitting at, and a server brings the food over when it is ready. I sent in my lunch order at 11:46 AM, and it was on the table by 11:49.
2. Bigger, more enclosed kitchens with more “Kitchen Display Systems.”Panera enlarged and enclosed the kitchen so that it can fit two full production lines, each overseen by a quality control staffer, as well as the barista station for espresso drinks. Adding walls where there had been openings to the cafe let them increase storage space. Inside the kitchen are multiple flat-panel screens (Kitchen Display Systems) that show not only the current orders, but the recipes for each item and any substitutions requested by the customer. The only aperture to the kitchen is a window that expediters use; it’s small enough so that it doesn’t encourage customers to try to linger in front of it.
Two things happen once customers can order using mobile phones, a web site, and kiosks, says Rich Childs, who manages four of the Panera 2.0 cafes in the Boston area. First is that you get more modifications to the menu items. Second is that “there’s no governor on order volume.” Before, he says, the speed of staffers working the registers kept order volume fairly constant, and somewhat constrained. Online and mobile ordering blows that up. So the kitchen needs to be able to handle higher order volume.
3. Table delivery, rather than waiting in the mosh pit. Having your food delivered is a big part of the Panera experience, explains Childs. “It feels less like a cafe and more like a restaurant,” he says. “That better guest experience — less standing and waiting — means you come more often.”
Expediters verbally verify the orders with kitchen staff, before handing them to customers waiting for to-go orders, or giving them to runners who take them to tables. The RFID “locator” technology that helps the expediters know which customer is sitting at which table is below. (It’s different from Panera’s earlier pager technology, which buzzed to let customers know an order was ready for pick-up.)
4. A place for people to wait, and a monitor for them to look at. “People are more relaxed when they’re sitting,” says Hurst. “And we put a monitor up, which says, ‘Your order is being prepared,’ or ‘Your order is ready.’ My blood pressure goes down if I know where the order is.
5. Small order delivery is next. The newly-revamped cafes are beginning to offer delivery within an eight or ten-minute drive time of their locations, Hurst says. The minimum order size is just $5, and there’s a $2.50 delivery fee. “The target person is you sitting in your home office at lunchtime,” he says. “You can order Jimmy John’s, or a great Panera salad that’s healthy for you, along with maybe a chocolate brownie and an espresso drink. We’ll bring it all to you.” And most of these delivery orders so far, he said, tend to be slightly higher than the average in-store check.
How Panera 2.0 Happened
Panera founder Ron Shaich handed the CEO title to another executive in 2009, becoming executive chairman of the company, and later wrote a memo about how he would compete with Panera if he weren’t connected to Panera. Hurst joined the company in late 2010, and worked closely with Shaich on developing and testing the Panera 2.0 concept. (Shaich assumed the CEO role again in 2012.)
“We spent the first year trying to figure out what would make a difference,” Hurst says. “We prototyped the Rapid Pick-Up experience. We literally went to Home Depot and bought shelving, and double-sided Velcro to hold the sign up. Then we decided to build a kiosk, and we began testing the small order delivery experience.”
As their test-bed, they used a Panera cafe at the Landmark Center, near Boston’s Fenway Park. “I hardly ever came into the office,” Hurst says. “Ron and I spent a lot of time at the Landmark cafe. We’d be literally ordering everything on the menu online. I ran up a bill of about $4000 on my credit card ordering Panera food, because I wanted to make sure the system worked.”
It was a small team, Hurst says. “Early on, it was just Ron, me, one IT guy assigned to us, and one ops guy. We used third parties to help build some of the prototypes. We didn’t have a big IT team at that point. We said, ‘We will compromise back-end quality, we just want the experience to be good for the guest.’
The reporting didn’t need to be ready for the final roll-out — and we were OK with manually updating prices for new menu items — because we felt that if we solve for all of that, we’ll never solve for the guest experience.” Another key team member was the manager of the Landmark Center cafe, Hurst says. “We were going to throw anything at them, and he found a way to make it work, he helped us figure things out.”
Having the CEO spending so much time in a single store “was a big deal at first,” Hurst says. “But people adapt. ‘So what? He was here yesterday.’ As the team in the store begins to realize that you are counting on them to help figure it out, we got great work from them. They’d tell us, ‘Here’s what isn’t working, and here’s what guests are complaining about.'”
Rather than building prototypes at headquarters, Hurst says that the Panera 2.0 concept simply “had to be done in a store,” so that he and Shaich could see the impact of ideas like walling in the kitchen. And if things went awry during the testing, Hurst says, he’d pay for a guest’s lunch or dinner. “There was a lot of, ‘Sorry we blew that one — let me take care of you.’ But there are guests from Landmark and Braintree that I still stay in touch with. They became part of my testing team.”
