Understanding the Panera 2.0 Initiative

The long-awaited update from Panera’s (PNRA) July 28 earnings call was the progress of Panera 2.0. The company has made “significant” investments in Panera 2.0, and investors had hitched their expectations to this key strategic initiative, which was implemented in order to lift Panera from its difficulties.

Why Understanding the Panera 2.0 Initiative Is Critical

Capital expenditure includes investments in technology infrastructure, such as Panera 2.0, converting company-owned restaurants to Panera 2.0, and opening new company-owned restaurants and delivery hubs.

So what is Panera 2.0?

Geared more towards technology-driven initiatives, Panera 2.0 is intended to enhance customer experience through a digital initiative and through better operational efficiencies. Companies such as Starbucks (SBUX) and Domino’s Pizza (DPZ) have been highly successful in implementing their digital initiatives, whereas mature players such as McDonald’s (MCD) have lagged.

The Consumer Discretionary Select Sector SPDR Fund (XLY) invests about 4% of its holdings in MCD and 0.3% in Darden (DRI).

Panera 2.0’s digital access through web, mobile, and kiosk devices is intended to give customers options to customize their food, order food at their table, and place a takeaway order in advance to later pick up from a dedicated pickup station. The digital initiative should also integrate the MyPanera loyalty program’s ~20 million members. According to Panera, the company’s delivery and catering segments should also benefit from digital initiatives.

Operational efficiency is intended to increase throughput—in other words, reduced wait times along with an increasing capacity to serve more customers. The company has also upgraded its equipment along with a new kitchen display system to help achieve operational efficiencies.

2Q15 marks the tenth quarter since the company started testing Panera 2.0 at its stores. But only in 2Q15 did we get some color on Panera 2.0’s success. So has Panera 2.0 delivered? Read on to find out how Panera 2.0 is benefiting the company in the next part of this series.

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