Panera Saved Customers 10 Lifetimes Worth of Waiting

Technology has transformed a number of industries, from retail to healthcare. At Panera, the implementation of tech fueled sales and foot traffic, and had a tremendous impact on the guest experience, shaving years off of customer wait time (but more on that later).

Investment in restaurant tech has the potential to transform how chains operate, manage staff, create value, and increase sales. We’re already seeing that transformation take shape in a few companies — Panera and Starbucks being prime examples — but it’s far from the industry norm. In fact, when surveyed, nearly half of restaurant operators describe their use of tech as “lagging.”

Lagging behind is understandable. The sheer scale of options, from upgraded POS systems to automated kiosks, makes it tempting for CEOs and other chain executives to leave tech to the experts. There are more obvious challenges, too. Namely, the cost and the time it takes to implement new systems (at which point the technology may have already become outdated). Increasingly, operators are worried about meeting the increased expectations of tech-savvy guests. In a 2015 survey, 38% of operators said that guests “expect greater technology than we can keep pace with.”

Why buy now when one could wait it out, see how other chains handle innovation, how guests respond, and eventually play follow the leader? For one thing, if you follow the leader, you’ll eventually have to play catch up. Technology moves fast and the urgency for innovation is growing. That pace of change will further widen the gap between industry leaders and those who still haven’t left the starting line.

For restaurants, tech = growth

Among the chains to offer a compelling case for the connection between innovation and growth is Panera. In April 2012, the fast-casual chain unveiled Panera 2.0: a series of integrated technologies for digital orders, payment, and operations. In a 2014 interview on CNBC, founder and CEO Ron Shaich expounded on the difference between Panera 2.0 and other restaurant chain apps: “In our industry, the food industry — the mobile apps — everybody’s talking about it. It’s one of the top ten things. The reality is everybody’s got a single purpose app or a piece of technology. This is different. What this is is an integrated guest experience enabled by the technology and ultimately powered by something else: operational execution and capability.”

The investment was big — $42 million, in fact — and so was the payoff.

By doubling down on digital, Panera increased sales, improved ordering times, and less friction throughout the process. Investors saw a 10% return on the investment. Customers saw the time to receive food cut from 6 – 9 minutes to under five minutes. Saving 1 – 4 minutes per order, when Panera serves an average 400 million guests per year, could equate to a savings of 6 million – 26 million hours of wait time. Taking into account an average life span of 75 years (657,000 hours), that means Panera 2.0 literally saved its customers 10 lifetimes worth of waiting.

But success didn’t come overnight. Sales in Panera 2.0 cafes gained momentum three to four quarters after being introduced — i.e. more than a year into the transition. Now, over four years later, the investment is still paying off. In fact, Morningstar named Panera its top restaurant pick for 2017.

Successful chains are utilizing tech in all aspects of their business

Too many brands take a “wait and see” approach, pausing for someone else to pave the path before they follow the leader. A handful of restaurant chains, however, have been allocating money toward tech long before they’re forced to. For them, innovation isn’t just a buzzword, but a mantra. It extends from the company hiring process to customer-facing technology, and everything in between.

Starbucks — already one of the largest tech employers in Seattle — is currently bulking up its tech department with positions ranging from entry- to senior-level. Currently, nearly a quarter of all transactions in U.S. Starbucks stores are made via mobile, and a growing number of transactions (at least 8%, more than 288 million per year) come via the chain’s mobile-order-and-pay feature.

Domino’s utilized tech to move beyond its reputation as a struggling pizza chain. Now it’s a tech behemoth that moved into e-commerce as early as 2008, with the introduction of the Pizza Tracker. Today, more than half of Domino’s sales are made via digital channels. Its stock has grown 44%, year-to-date. That’s more than double the restaurant-retail sector average (which has grown an average of 12% this year).

Leaders like Panera, Starbucks and Domino’s are staking out advantages thanks to their increasing reliance on tech. Meanwhile, chains that hesitate run the risk of being disrupted. 

VCs and consumers are still hungry for restaurant tech

2016 was a banner year for restaurant tech funding announcements. Restaurant e-commerce startup Olo received a $40 million infusion of cash in January. Point-of-sale company Toast raised $30 million in 2016. Atlanta-based restaurant event management startup raised $2.5 million. Hospitality startup ALICE took in $9.5 million to enable front of house, back of house, and guest communication in one platform. POS loyalty platform FiveStars got $50 million in Series C funding in the first quarter of 2016 alone.

Combined, food tech investments totaled more than $6.5 billion so far in 2016, building on the $6.8 billion that was raised last year. From labor modules to revamped POS systems, tech has a host of applications for the foodservice industry. It might not be as sexy a space as meal kits, but funding to startups that aid in restaurant operations is expected to reach $600 million (nearly 10% of the total restaurant tech investment) by the end of 2016.

Consumers love tech, too. According to a recent survey by the National Restaurant Association, one in four guests factors in technology when deciding where to eat. 32% percent of 18 – 34-year-olds say it factors into their choice of quickservice restaurant, and 28% say it helps them make their fullservice restaurant choices.

So what does this mean for the future?

As investor and consumer interest grows, startups will continue to unveil the capability to solve problems unique to the restaurant industry. The chains that best harness those capabilities will create significant value and differentiate themselves, while others will increasingly find themselves at a disadvantage.

The stats offer a provocative vision for future possibilities, but the best indicator of success is the commitment of company leadership. The challenge will be tying two very disparate industries — tech and food service — together. Chains that invest in tech will have to merge Silicon Valley capabilities with an understanding of what restaurant guests want (and what a particular business needs). As for those who wait it out? Well, they just might find themselves warming up, while their competitors make several laps around the track.

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