Panera Launches A Digital-Only To-Go Model To Meet Changing Consumer Demands

It’s not news that consumer behaviors changed for good from the Covid-19 pandemic. In the restaurant space, that essentially means off-premise habits like delivery and takeout are here to stay.

Consider NPD Group data which shows that digital orders grew by 117% from February 2020 to February 2022. These growth numbers registered despite the easing of restrictions and a return to dine-in business. For Panera, 81% of sales are now generated from off-premise channels, including drive-thru, pickup, delivery and catering, while 49% of sales were digital in Q1 2022.

This shift in behavior has driven several chains to rethink their real estate strategy, for instance experimenting with smaller formats, delivery-only kitchens and off-premise only locations. Panera has now joined the ranks, introducing a new format, called “Panera To Go,” which is 100% digitally enabled and services just delivery, pickup and catering orders.

The model is significantly smaller than a traditional Panera bakery-café–2,500 square feet versus 4,500 square feet. Much of that square footage is taken up by the kitchen, with an additional space for pickup shelves. There is no seating or even cashiers. Panera’s first such location opened in Chicago in May, with two more planned this year in Southern California and Washington, DC.

Chris Correnti, Panera’s SVP and off-premise lead, said the new model allows the chain to extend its footprint into urban trade areas that have historically been a challenge, whether due to space or cost constraints.

“There is a significant growth opportunity for us in urban markets. We had 86 bakery-cafés in urban markets at the end of 2021 and we’ve identified 100 more potential locations, so we can more than double our presence in these markets. We see the To Go format being one of a few solutions to enable us to have a greater presence in urban markets,” Correnti said during a phone interview this week.

The model adds to a growing real estate portfolio for the brand, which counts about 2,100 locations in the U.S. That portfolio includes traditional bakery cafés; next generation cafés, which have double drive-thru lanes; urban cafés that include some seating; five ghost kitchen locations, with a sixth opening soon; and now, this digital-only, off-premise-only format.

Correnti said the new model differs from its ghost kitchen locations because it provides more of a customer (and Panera branded) experience versus an off-premise order fulfilment location, as has been the main function of ghost kitchens.

Notably, Panera experimented with a delivery/carryout (delco) model about eight years ago (including in my market) and Correnti said the new To Go model is an evolution of that. Indeed, in 2014, Panera was just getting started on its digital journey and delivery was a nominal part of the business industry-wide.

Now, however, Panera has a robust digital infrastructure in place that has helped facilitate a material sales mix and one of the largest loyalty programs in the space at nearly 47 million members.

In other words, its customers are used to accessing the brand via their phones and Correnti expects high usage of these off-premise-only locations accordingly.

“We’re in a good position when it comes to this type of format. We’re seasoned vets in digital, so it wasn’t a heavy lift for us to leverage operations and our digital infrastructure. This was a natural extension for us,” he said. “We will continue to build on our capabilities. Based on our first location, we are optimistic.”

Part of that optimism comes from the opportunity to penetrate markets that were previously less accessible for the brand. Correnti expects to generate even higher levels of digital adoption (and check sizes) from this presence.

Perhaps the biggest opportunity, however, comes from simply meeting the needs of a changed consumer.

“There is an expectation that we are creating new access points for existing and new guests to come into. We’re agnostic on how our customer wants to be served and we’re building a model that works well for them however they want, whether pickup, delivery or catering. We want to make sure we earn and keep their business and we do that by responding to their changing needs,” Correnti said.

The Chicago To Go restaurant features a menu that has been slightly altered to fit its operational model. The intention with these models going forward is to learn and adjust to get the menu and hours as close to a traditional café as possible, including for the breakfast daypart. Doing so, however, will require sufficient staffing levels. The model should be able to achieve such levels as it requires significantly less labor.

“This is a labor-light model with no cashiers and no front-of-house to maintain and it doesn’t have a drive-thru,” Correnti said. “For us, it is multiple times smaller (on staffing) than a traditional café. As we go into this test, labor will be predicated on volume, but it is multiple times less.”

That’s an attractive feature given the ongoing staffing shortages in the restaurant industry. It’s not the only attractive feature, however.

“As we create these types of formats, it creates more opportunity for us. Coming out with a digitally-enabled location is very exciting,” Correnti said. “The learnings we’re going to get and the ability for brand recognition and the Panera experience from these locations, we think will help us continue to evolve.”