Panera Bread has been a very successful company focused on its loyal customer base – earning a No. 1 ranking in the Fast Casual category in dunnhumby’s first-ever Customer Centricity Index (CCI) released in June. But for Panera Bread CEO Ronald Shaich, a “diminished” customer experience has hit home with the company brass.
Slow lines and inaccurate orders were prominent among Panera customer complaints.
“We’ve directly surveyed our customers, and the top reason they cite for coming less often is the diminished in-café experience,” Shaich said during Wednesday’s third-quarter conference call with investors. “More than a quarter of those polled identified slower service, less comfort and the accuracy of orders, among other experience issues, to explain why they aren’t visiting our cafes more frequently.”
Despite its $43 million profit during the third quarter, Shaich was not pleased with the 1.7% increase in same-store sales – compared to the 6.2% growth in same-store sales for the third quarter last year.
“Panera generated the highest system wide year-to-date average weekly sales in its history,” Shaich said during the call. “As well, new cafes in the class of 2013 generated sales volumes that are among the highest in our history. This speaks to the extraordinary affection customers have for Panera. However, it is also true that in the third quarter comparable store sales rose just 1.7%. While these comparable store sales continue to be above average for the industry, they are below our expectations. As one might expect, our recent comp performance has led to a great deal of self-examination and a thorough review of how we compete and how we operate our business.”
Based on an internal review, Shaich said that operational friction, “including capacity and throughput constraints, along with a less differentiated experience not only limits our ability to grow transactions today, but could also inhibit our ability to benefit from a number of potentially significant transaction-driving initiatives, including national advertising and enhanced access for customers, that are being readied to begin roll out in 2014. Thus, we are taking a number of deliberate steps to improve our operational capabilities and our competitive position and that we believe will allow us to best meet the demand that exists for the Panera experience today and in the future.”
Shaich also said during the call that just under 50% of company transactions are attached to a MyPanera loyalty card – a statistic he refers to as “a powerful weapon in Panera’s arsenal.”
According to dunnhumby’s CCI, Panera scored very high in loyalty and customers indicated an appreciation for the retailer’s personalized rewards and surprise and delight features included in the MyPanera loyalty program
In response to a diminished customer experience, Panera will take the following steps, Shaich outlined:
Refocus operations on key metrics, such as speed and accuracy
Increase labor -- adding 35 hours per week at each café -- at a cost of $15 million
Add production equipment to cafes – 10% of which are currently strained by the volume of transactions
Ensure there is a proper number of high-quality employees
Introduce process improvements, including kitchen display systems to increase accuracy
Improve back-of-house forecasting and labor scheduling to remove administrative burden from managers during shifts
Modify menu to reduce the complexity of operating high-volume cafes