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Will Panera add small order delivery as part of 2.0 push?

During the company’s shareholder meeting last week, CEO Ron Shaich talked about expanding growth vehicles.

June 16, 2014 by Alicia Kelso — Editor, QSRWeb.com

The big story from Panera is its comprehensive 2.0 rollout to “reduce ordering friction” for customers by implementing a variety of ways to order more quickly.

On Friday, the company announced it had secured a 5-year, $100M term loan to support the initiative. During last week’s shareholder meeting, CEO Ron Shaich told investors the digital investment is necessary and asked them to be patient through an expected slowing in earnings growth.

“We need to figure out where the world is going and make sure we’re prepared for it. We have a big ship to move. It can take several years before we get traction,” he said. “We must expand our vehicles for growth.”

In addition to mobile/online ordering, kiosk ordering and large-scale catering, another “vehicle for growth” Panera is looking at is small check delivery, which it is already doing in some locations. Shaich said the company began understanding the power of large and small order delivery in 2013, when it began building a “world-class IT function.”

“I work from home sometimes and there is a Panera two blocks away in every direction. I often ask, do I really want to get in a car, get in line, order and wait? It’s a long process, so I usually end up in the fridge scrounging around for leftovers,” he said. “There are millions of people out there who want Panera but why aren’t we serving them? Shouldn’t we be in the delivery business?”

Panera 2.0, he added, is a vision to offer more than one service because every customer wants to interact with the brand differently.

“Our goal is to improve Panera’s competitive positioning,” he said. “We are trying to figure out how to bring Panera to you; trying to figure out this small order delivery.”

The company has built hubs in its heavier markets to help facilitate delivery on both a large (catering) and small-ticket scale. Shaich said the team has to “get the physical aspects” down before they can move forward with the service.

In addition to its no-line 2.0 features and delivery tests, Panera is also “working on” new footprints and opening in hospitals, universities, urban areas and small towns.

“Right now these are places that are far away and hard to get to distribution-wise, but we’re looking at a range of different footprints,” Shaich said. “It doesn’t always have to be the same café.”

The financial nuts and bolts

All of these initiatives are going to take more capital, and CFO Roger Matthews said the company will spend about $60 million this year for its IT efforts, compared to about $34 million last year.

“Five years ago, IT was not considered critical in this company. We needed it, but it wasn’t critical. Any company today has to be pretty good at IT,” he said. “If we’re going to pull off 2.0, it’s critical. To make it work – the kiosks, iPads, mobile – we can’t do it on second-hand equipment and with second-rate people.”

Matthews said with its investments, Panera should become one of the top e-commerce processors.

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