Panera announces new ‘transformation strategy’: What to know

00:00 Josh

Panera is looking to turn its business around and redesign its operating model. Yahoo Finance’s Brooke DiPalma joins us now with the details. Brooke.

00:06 Brooke DiPalma

Josh, I had the chance to meet with Panera Brand CEO Paul Paul Carbone ahead of this announcement. They actually call it Ascension. They want to revamp the menu, they want to ignite value. They say they want to provide excellent service to our guests and ultimately expand their network. But there are a few key things Panera really needs to move forward on. When I talked to him, I told him that we are currently in an environment where the consumer situation is not very good. He said he wasn’t too worried about it because Panera brands are dying with thousands of outages and there are more focused things that need to be fixed, like your screen. They said they reduced the portions in some places. Their average salad had about five ingredients, the others had eight. They also said that they have put a great amount of effort out of their location and now they want to bring this hospitality back to their cafe. He said they are also testing value options. They look at how good Chili’s is doing right now and say, why don’t we have something like three for me? Also, Paul is an old Duncan man. He even said he goes to Duncan’s on the weekends to buy $6 meals. Also McDonald’s has extra value meals, Applebee’s holds up well for its value. He said Panera doesn’t currently have anything like that. And also the last thing here, they need to bring that warmth back into the cafe. He said they were the first ones to do this. And I said, isn’t that what Starbucks is trying to do right now? And he said what they’re trying to do and what Panera is trying to do is not a zero-sum game. But ultimately they want to bring back book clubs, they want to bring people back to Panera’s door.

01:21 Josh

Let me ask you a broader question. You’re looking at this fast casual space right now, how is it holding up? What do we need to know as investors?

01:29 Brooke DiPalma

Yes, the fast casual space that Panera competes in right now is not doing well at all. And as consumers pull back, they are competing for a small share of the outcome. Stepping back, we heard from Cava, we heard from Sweetgreen, we heard from Chipotle, and they’re not all doing well. In these latest results, as you can see on your screen, we saw that Sweetgreen was indeed leading the decline. They saw a 9.5% year-over-year decline in same-store sales growth. Chipotle was roughly flat. Additionally, Cava hasn’t seen as big an increase as it did last year, and that’s largely due to them competing for this consumer who is extremely distressed right now. Also consider that the people going to these restaurants are younger consumers, especially those facing student loan repayments, potentially trying to finance a home, and with much greater financial burdens than they did just a few years ago.

02:11 Josh

Yes, affordability is a big key issue. Thank you Brooke. Mhm.