Panera Bread 2013 Annual Report Download - page 4

First, we’re moving from the development phase of Panera 2.0 to the rollout phase. Panera 2.0 is how we’re
living into a digital future in an omni-channel world. But it’s not just a new app, it’s an integrated and
comprehensive solution that brings together new capabilities for digital ordering, payment, operations, and,
ultimately, consumption. Since our first Panera 2.0 cafe went live in Boston in 2012, we’ve deployed the
technology in 13 other test cafes, 10 of which were introduced last year in Charlotte. Our prototype stores are
showing us that Panera 2.0 works – for our managers, for our associates and for our customers. Indeed, in the
Panera 2.0 cafes, we’ve bent the trajectory of transaction growth, with our Boston 2.0 cafes producing
comparable store sales that were among the highest in the company in 2013.
We have now begun rolling out the full Panera 2.0 experience to substantially the entire cafe system, which is
expected to be completed over the next 36 months. Rapid Pick-Up, which is just one component of Panera 2.0
and features a mobile order app with payment capabilities to better serve our “to go” customers, is expected to be
rolled out to substantially the entire cafe system by the end of 2014.
Second, in our efforts to improve our competitive position, we continue to be deeply involved in driving
operational excellence. This is about execution at the cafe level, pure and simple, and it’s about delivering to our
guests: speed, accuracy, clean and well-maintained cafes, and humanity. Operational excellence is critical to
Panera’s future, not only because true operational excellence is an essential component in Panera 2.0, but because
such initiatives drive throughput and eliminate potential governors to Panera’s sales growth.
Third, we understand that our competitive position ultimately rests on our ability to drive differentiation and
continually improve upon our customers’ desire for what we offer. Our work around how we compete, ongoing
innovation of both food and environment, and marketing, continues to evolve.
This year, for instance, we’ll introduce flatbreads as a new platform at Panera. We anticipate that on top of
opening up a more robust “snacking” platform, our flatbreads, together with our new menu boards and a number
of other initiatives, will amplify our “barbell pricing” structure.
Panera will also execute a more aggressive marketing strategy in 2014 that both reinforces our brand’s
differentiation and seeks to boost market share. We made the decision to launch our first national advertising
campaign for broadcast television. The campaign, which went live in late February 2014, allows Panera to more
efficiently deploy our advertising dollars. With an expected marketing spend at roughly 1.9% of sales in 2014,
however, our advertising budget remains below most of our peers.
Moreover, last year, we continued to develop our loyalty program. Roughly half of our transactions at our
company cafes are linked to MyPanera®. In 2014, we will continue to augment the program and capitalize on the
high usage of MyPanera – which we believe to be the best in the restaurant industry – to provide a more
“personalized” experience for our guests to drive transactions and frequency.
Expand Growth Opportunities
Beyond building our competitive position, we understand that future success for Panera requires expanded
opportunities for growth. First, we continue to believe that the best use of our capital is to build new, high-return
Panera Bread bakery-cafes. We and our franchisees expect to open between 115 and 125 additional new locations
this year.
Our second strategy within our initiative to expand growth is the development of new formats. Our traditional
store growth is working and working well, yet to fully capitalize on the power of our brand, we’ve also begun
exploring opportunities beyond our customary focus on suburban areas. We’re currently prototyping new formats
that can expand Panera’s reach. These efforts include prototyping cafes designed to handle the volume that
comes with high intensity, urban locations and the development of formats to bring our cafes to locations outside
of our FDF network, in more remote areas, which in turn require new processes around baking and dough
production.
Third, we also recognize that to expand growth, we have to seize on adjacent business opportunities with the
understanding that if we don’t, others will. To that end, we continue to refine our large- and small-order delivery