Panera bets on urban appeal

Panera is opening two new store formats in New York City with the goal of winning the hearts of a new kind of customer — the urbanite.

Why it matters: The pivot marks a new foray for the company into urban centers, where it expects much of its store growth in the coming years, the company tells Axios.

• “When you look at our incoming pipeline, things that we're going to open, then urban becomes a significant percentage,” chief brand and concept officer Eduardo Luz tells Axios, without disclosing exact figures.

Driving the news: The fast-casual food chain, known for its drive-thrus and sit-down spots in suburban shopping centers, is giving its NYC stores a new look.

• Panera is debuting a 2,000-square-foot flagship store in the Hearst building.
• It is also opening a Panera To Go location that is roughly half the size, designed for pick-up only.

Context: Inspired by its success with its digital-savvy customers (half of its total system sales comes from digital, it says), Panera developed new formats for these urban centers, Luz says.

• “We found a way now, with leveraging digital, to fit Panera into a much smaller footprint,” Luz says.
• This allows it to go deeper into urban neighborhoods without spending as much on real estate, he adds.
• “With those new formats, we believe we can be at the heart of downtowns in the top 25-30 metro areas in the U.S. in the next five to 10 years,” he says.

Of note: The company has been monitoring office occupancy for some time and has noticed an uptick in people returning to the office, especially after Labor Day. It expects those trends to continue.

• “In offices near cities, it’s all white space for us and that’s why it’s so enticing,” Luz says.

What’s next: The company will continue to invest heavily in the digital experience to improve its app and digital kiosks, Luz says.

• These digital investments — such as forecasting when a customer is about to arrive at a store, saving order customizations and allowing customers to order ahead — allow staff to better prepare food fresh and on time.
• “Maximum convenience, minimal friction is the number one thing that we want them [customers] to realize when they use us, digitally or in those new urban formats,” he says.

The bottom line: Panera plans to roll out both the smaller Panera To Go stores and the slightly larger “urban core” format stores in tandem in metro areas.

• Luz sees them as highly complementary to each other: Panera To Go drives sales without the costs of a bigger store while its urban core stores allow the company to build its brand and “feel like more of a presence in the neighborhoods.”