When it comes to delivery, Panera Bread has always done its own thing. The fast casual began implementing the service in 2016. By April 2017, it was looking to hire 10,000 new employees and expand coverage—an initiative that, at the time, would affect 35–40 percent of total locations. Roughly a year later, Panera expanded nationwide to 897 cities and 43 states.
To that point, Panera’s delivery program created more than 13,000 jobs. All the while, not engaging third-party platforms.
While bucking industry norms for a brand not in the pizza space, staying in-house made strategic and financial sense for Panera at the time. However, partnering with third-party aggregators was never completely off the table. As the company just proved on Tuesday.
Panera announced August 27 a new partnership with DoorDash, Grubhub, and Uber Eats to expand its delivery capabilities across 1,600 locations. Panera has roughly 2,300 total restaurants (2,093 at the end of 2018).
Along with its current online ordering process, customers will now find Panera on all three platforms, and have the ability to order directly through those companies.
IS PANERA JUST BEGINNING TO REACH ITS POTENTIAL?
“If you look at what we've been doing with a lot of our announcements this past year, whether it’s around breakfast or extending into non-traditional airports, there's a common theme to it and this announcement is the same,” says Dan Wegiel, Panera’s EVP chief growth and strategy officer. “It's about increasing access of Panera to meet demand.”
The third-party conversation goes back years. In 2012, Panera expanded its menu to make the dining experience more convenient with to-go options. Under the Panera 2.0 plan, digital assets also got an upgrade. However, it wasn’t until 2014 when the brand really started to think about delivery.
The brand began testing with its own drivers and third-party services. At the time, though, third-party delivery was in its infancy. Companies were highly focused in major cities while Panera locations were largely suburban. Wegiel says outside services only covered 7–14 percent of its restaurants. Pilots also showed in-house drivers could do 10 times the volume.
“We were testing in parallel to try to figure out what’s the best model for us,” Wegiel says. “It became really clear that we could drive a lot more volume doing it ourselves, and we could do so profitably with full end-to-end control of the integrity of the customer experience, which is critical.”
Over the past five years, third-party delivery has exploded. And it’s only expanding. Investment firm William Blair & Co. estimates sales of online restaurant delivery will grow to $62 billion in 2022 from about $25 billion today. Restaurants’ delivery sales are projected to scale at more than three times the rate of on-premises revenue through 2023, with the majority of the growth will be in digital orders, according to a report from L.E.K. Consulting.
More than half of delivery consumers now order food directly from the restaurant’s app or website, L.E.K. added.
To keep pace, 37 percent of restaurants are offering online ordering and 32 percent accept mobile payments, according to industry statistics. Much of the rest of digital delivery orders are through third-party platforms like Grubhub, which reported 16.4 million active diners in the U.S. last year.