When Panera Bread (NASDAQ: PNRA) reported their latest quarterly earning on July 26, 2016, they handily beat estimates with an adjusted EPS of $1.78. They also announced 3.3% year-over-year revenue growth and 4.2% same-store sales growth. The company raised its adjusted earnings guidance for the full year, even as other restaurant chains report declining traffic and caution that business could continue to slow.
So what’s up with Panera? How are they getting it right when so many others are getting it wrong?
Panera’s recent quarterly profits were not an invention of some hip current trend in restaurant management. Rather, they were set into motion many years prior. Five years ago, to be exact, as Ron Shaich, CEO and Founder of Panera Bread, tells it. That’s when he and the top brass at Panera met to discuss what they would later term "Panera 2.0."
Panera 2.0 was an examination of their business and the hospitality space, not at that moment, but the projections for the future trends of the industry over the next 10 years. In fact, Ron’s commitment to innovation and what he calls taking a “leap-of-faith” is baked into (sorry, couldn’t help it) the company’s corporate fiber.
As Ron stated in an interview in 2014, “I view my role as CEO as protecting those that discover ways to build competitive advantage. Often, when businesses first start up, they're driven by people who discover new ways of doing things. They're able to best the competition because they're clearly disruptive and better. Then they get larger, and behind Discovery People come Delivery People, and they speak a different language. Discovery is the language of what could be, of where the world is going. Delivery is the language of what happened yesterday, of limited risk. And in most companies that scale, you eventually wake up and realize you have tremendous delivery muscle and no discovery muscle, no ability to regenerate competitive advantage. Our job as leadership is to protect and enable leaps of faith, making sure the company is there when the future arrives.”
Panera 2.0 is about 4 key trends: access, guest experience, technology and operational integrity. These are the major focuses Panera outlined in that meeting so long ago that they believed were going to be the big areas to bet on for the future innovation and success of the company. “Good strategy is continually changing” Ron recognizes. “Strategy begins with where we think the world is going. Innovation begins with understanding what job you're trying to complete for whom, and then determining what matters to that audience, looking for patterns, and trying to understand it. That's hard work; that's in the details.”
One recognition that came out of Panera 2.0 was that although technology was the future of hospitality, pursuing technology was not an end in itself. Technology needed to work side-by-side with the other major trend they identified, the guest-experience. In a recent interview, Ron recognized this important distinction stating, “What customers want are things that add joy and value to their lives. They don't want another app; they don't want more technology. What they want are things that make their lives easier.”
And Panera Bread is giving their customers just that: Innovating and moving aggressively into the digital realm but always with the guest’s experience as the centerpiece for beginning a new technological initiative. To this end, Panera has been adding technology that streamlines the guest experience, making it easier to order ahead through your mobile device, adding kiosks and table service for in-store dining convenience, building catering centers so orders do not have to be filled onsite, and adding Apple pay for a convenient one-swipe payment system. All of these innovations are routed in the singular mindset of improving the guest’s overall experience.
“Anything that offers convenience to our guests would only be good. We already have a very significant digital presence, and we're moving aggressively in that direction.” With 80,000 employees, Panera is serving approximately 10 million people per week. Their revenue is on the incline and they are looking to add another 80 to 100 new stores over the next 12-months. Now that they have put another robust quarter under their belt, we can surely say that Panera has nailed technology as a solution to a simple question. One they continue to ask each and every year: How do we make the guest’s experience even better?