Will Panera 2.0 Be Better Than Panera 1.0?

Panera's move to Panera 2.0 could just be the trick to get same-store sales moving in the right direction and allow the chain to better compete with Chipotle Mexican Grill.

May 12, 2014 at 7:00AM

Panera Bread's (NASDAQ:PNRA) first-quarter results disappointed investors, especially when it announced that same-store sales rose only 0.1% systemwide. This is not the growth investors have come to expect from Panera. CEO Ron Shaich knows this, and that's why he is rolling out Panera 2.0. After all, if Chipotle Mexican Grill (NYSE:CMG) can continue growing same-store sales at a double-digit pace, why can't Panera do the same?

Panerabread Primary Logo Hr

Source: Panera Bread

First-quarter results
Panera Bread blamed the winter weather for its weak same-store sales in the first quarter. Total revenue did manage to grow 8% to $605 million on the back of new store openings, while earnings per share came in at $1.55 compared to $1.64 last year.

Chipotle Mexican Grill reported strong first-quarter results. The weather was not a factor for the company like it was for Panera. Same-store sales rose an impressive 13.4%. Revenue increased more than 24% to slightly more than $904 million. Earnings per share increased almost 8% over last year's first quarter to $2.64.

Plenty of restaurant growth ahead
In the first quarter, Panera Bread opened 16 new restaurants and its franchisees opened 11 new locations. As of April 1, Panera operated 1,800 restaurants. This year, Panera expects to open a total of 115 to 125 new restaurants.

Chipotle Mexican Grill is looking to catch up to Panera Bread in terms of total restaurant count. During the first quarter, Chipotle opened 44 new restaurants that brought its total restaurant count to 1,637. This year, Chipotle plans to open 180 to 195 new restaurants.

What is Panera 2.0 and how is it different?
The goal of Panera 2.0 is to speed up and simplify the ordering process for customers. Panera's problem has not been in the quality of its food or the merits of its concept but rather the long lines customers have experienced during rush hour. What ended up happening was the long lines discouraged customers from coming in and placing their orders. Instead, they went elsewhere. Shaich summed it up in the press release:

It's more than a mobile-payment system or simply a digital-ordering process. It's an integrated, comprehensive, end-to-end solution that we believe will reduce friction such as wait times, improve order accuracy, and minimize or eliminate crowding -- all while creating a platform for an ever more personalized experience.

Panera customers can now order from their mobile app, at the counter, or at an iPad kiosk inside Panera. In the kitchens, there's a new Kitchen Display System to improve order efficiency and accuracy. From the kitchen, orders are then delivered to customers at their tables; this eliminates the long lines and waits that were seen before.


Source: marketingadvice.biz

The other feature is called Rapid Pick-Up. This allows customers to place orders up to five days in advance and schedule the time they would like to pick up their orders. This will hopefully improve its to-go business and help with larger orders, especially from offices during the lunch hour. There's also a dedicated pick-up area for to-go customers to get their orders.

New menu items coming from Panera
Panera is also looking to boost same-store sales with new menu items, notably flatbreads. Panera plans to make the flatbreads using fresh dough using Indian-style influences. The flatbreads will come in three varieties to start: Southwest flatbread, Thai flatbread, and Mediterranean chicken flatbread.


Source: Panera Bread

How do shares compare?


Market Cap

Forward P/E


1 Year Return

Panera Bread

$4.34 B




Chipotle Mexican Grill

$15.60 B




Source: Yahoo! Finance

Foolish final thoughts
I applaud Panera's move to Panera 2.0. The ordering process has been chaotic at times and led many customers to go elsewhere during rush hour, including this Fool. I think the move will boost same-store sales over time. Panera is expecting same-store sales to pick up and forecasts full-year same-store sales growth of between 2% and 3.5%.

Shares are starting to look attractive and trade at 20 times next year's earnings compared to 31 times for Chipotle. With shares down more than 11% in the past year, this Fool is going to start keeping a closer eye on Panera. Panera 2.0 could just be the ingredient this restaurant chain needs to start growing again.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers