Late last March, Panera Chairman Ron Shaich announced the company’s five-year, $42M investment in “Panera 2.0,” a digital ordering platform to enable guests to order and pay through new digital channels for a faster experience. Like many of its fast casual brethren, Panera had identified speed of service as a cause of customer dissatisfaction and a barrier to its continued sales growth. As Panera’s Executive Vice President and Chief Transformation and Growth Officer Blaine Hurst put it: “Nobody likes to wait in line, even for their favorite meal.”
Today, 47% of fast casual operators have embraced the digital ordering shift to become just as fast as their fast food competitors. As fast casual operators have made the digital ordering shift, they have seen the following additional benefits: larger average order size (guests no longer feel rushed and are given suggestive selling recommendations through the digital ordering channel 100% of the time); higher visit frequency (loyal guests return more frequently when given the convenience of getting to “skip the line” at pickup); reduced food waste (some operators mandate that guests must pay in advance at the time of their order, eliminating the risk of no-show guests); and improved order accuracy (removing the human element and potential for misheard/misunderstood orders or misentered orders, because the order is going from the guests’ PC or mobile phone straight to the prep line printer).
Fast casual brands (and brands in the quickservice and casual dining segments) have taken notice of the digital ordering trend. And if their executives have not, their equity holders and industry analysts certainly have. It is time for all restaurant brands to take action on digital ordering.
After making the decision to embrace digital ordering, a restaurant brand must make a key decision on digital ordering software: build vs. buy. Build means making a Panera-like investment in time (five years) and capital ($42M). Beyond these upfront costs, Panera was clear that its IT team had doubled since the beginning of this project and will require such expanded IT resources for maintenance, upkeep and upgrades of platform features and functionality over time.
If doubling your IT team and committing five years and $42M to building your own digital ordering platform doesn’t sound doable for your restaurant, I have good news for you. As one restaurant analyst recently explained “digital ordering is so important right now and the solution already exists off-the-shelf.”
The buy/rent path: Digital ordering as a service
Indeed, I started Olo nearly 10 years ago for exactly this reason: to give all restaurant brands (even those without five years to wait and $42M to spend) an off-the-shelf solution for digital ordering that could help them to maximize revenue per square foot and reinvent their service model for the digital guest. Today, we work with more than 150 restaurant brands and 10,000 individual restaurants to allow their guests to order and pay from anywhere and “Skip the Line(r)” (our trademarked tagline) at the restaurant for faster, more accurate, more personal service.
Instead of hiring IT professionals to build in-house expertise and develop software over half a decade and paying an enormous sum upfront, platforms like Olo enable brands to launch digital ordering in 90 days and with minimal upfront cost. The participating restaurants (i.e. corporate stores or franchised stores) pay a flat monthly fee for as long as they use the digital ordering platform. This “digital ordering as a service” is fully branded to look and feel like a part of your restaurant brand, is deeply integrated with your in-store technology and operations, and enables you to benchmark your digital program against the digital program of relevant competitors.
Recent financial articles suggest that Panera’s decision to “build” its own digital ordering program is in part responsible for investor discontent that could lead to activist investors in its near future, unhappy with a share price decline and a massive spending commitment on the Panera 2.0 initiative that has led to lower profit guidance. And while the company works hard to share news of the returns that their pilot cafes are seeing from the initiative in an effort to justify the massive outlay of capital to deploy Panera 2.0, no-one seems to be pressing them on the real question: “given that these capabilities exist off-the-shelf, what were you thinking when you decided to build this in-house?”
Nearly half of Panera’s Q4 2014 earnings call on February 12 was devoted to explaining the “unvarnished” and mixed results of several iterations of Panera 2.0. The same day saw the company’s stock price plummet more than 11%, with analysts citing disappointment with earnings, guidance, and “labor costs and expenses tied to the integration of Panera 2.0 across stores” as contributing factors.
Panera 2.0 serves as a cautionary tale for all restaurant chains: Embrace the digital transformation of your service model, but don’t go it alone and try to build it yourself.
Noah Glass is the Founder & CEO of Olo. Since 2005, Olo has helped restaurant brands increase revenue per square foot by delivering faster, more accurate, and more personal service through digital ordering. Today, over 9 million consumers use the Olo platform to order ahead and Skip the Line® at the restaurants they love.
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