Panera Bread unveils transformation plan with larger portions and more employees

When Panera Bread started cutting back on its sandwiches and eating less salads, it started shedding customers.

In order to win them back, the chain plans to reinvest in the business and roll back many of the same cost-cutting measures, she said Tuesday.

After being the number one fast casual brand in the United States, Panera has fallen to third place, giving up the top spots to Chipotle Mexican Grill And Panda Express. Last year, its sales fell 5% to $6.1 billion, according to Technomic estimates. For years, the chain’s traffic has dwindled, according to CEO Paul Carbone, who took the reins earlier this year. Controversy following the chain’s foray into energy drinks didn’t help matters either.

Panera’s woes coincided with a difficult year for fast-food restaurants. chipotle, Sweet green and reward All have lowered their full-year forecasts as they see younger consumers eating out less.

Carbone has a plan to bring customers back. Under the strategy, called “Panera RISE,” the company aims to modernize its menu, focus on value, improve its service and build new restaurants. He said the plan has the support of franchisees who operate nearly half of its 2,200 U.S. locations, along with the backing of JAB Holding, the investment arm of the Reiman family that owns the company.

The Panera segment was poorly timed for JAB. The company was planning an IPO for the chain’s parent company, Panera Brands, which also owns Caribou Coffee and Einstein Bros. Coffee. Bagels.

In 2021, four years after taking the chain private, JAB struck a deal With Danny Meyer’s special purpose acquisition company for a merger that would take the company public again. But Panera canceled those plans after a year, due to market conditions. In late 2023, the company secretly filed for an initial public offering, which has not yet happened.

When asked about the status of Panera’s IPO plans, Carbone told CNBC that the chain’s management team is currently focused on driving traffic and implementing Panera’s RISE strategy.

The first phase of Panera’s plan is to improve the quality of its food and reverse cost-cutting measures imposed in the face of high inflation, according to Carbone.

“We’ve reduced food costs. We’ve reduced labor,” he said.

Some of these changes occurred while Carbone was CFO. He now calls himself a “reformed CFO” — albeit one who still listens to earnings conference calls.

“It’s about dying by a thousand pieces of paper, it really is,” Carbone said of the chain’s decline.

Take Panera salads, for example. In the summer of 2024, Panera began using a combination of half romaine and half iceberg lettuce to make its salads, saving the chain money compared to when it used romaine alone. This summer, it was once again fully returned to Romanian authorities.

“You know what the guests told us? Nobody likes an iceberg, and nobody gets it and says, ‘Oh my God, that white salad, that looks so delicious,'” Carbone said.

Then there are cherry tomatoes. Panera is one of the few restaurant chains that does not cut small tomatoes in half, a decision made to save on labor costs, Carbone said.

“We have the guest chase the cherry tomatoes around the bowl,” he said.

And when the salad comes with avocado, customers have to cut the fruit in half themselves, rather than cutting it beforehand. The chain will begin chopping cherry tomatoes and avocados early next year.

Additionally, Panera salads typically contain five ingredients, while competitors’ salads like Sweetgreen contain up to eight.

But it was not only the authorities who were affected by cost-cutting measures.

“In some cases, we reduced portion sizes, so guests would walk into our café to buy a sandwich that was significantly more expensive, with lower-quality ingredients, and in a smaller size,” Carbone said.

The menu update will also include new items. Last month, the chain announced it was testing new Fresca and Energy Renewal drinks.

Panera previously offered high-caffeine energy drinks, but discontinued its product line, which included Charged Lemonade, after two wrongful death lawsuits and related negative publicity. Panera has denied any wrongdoing and settled the lawsuits earlier this year.

When it comes to value, Panera plans to rely on a menu strategy, offering customers low- and high-priced options. This approach has worked particularly well for fast-casual chains like Chili’s, but Panera doesn’t offer the same appetizer offerings as a full-service restaurant.

“We haven’t been able to crack the code yet,” Carbone said. “We do a lot of testing.”

Restaurant chains across the restaurant industry have embraced value propositions, from McDonald’s Extra Value Meal to Applebee’s “2 for $25” deal, igniting the so-called value wars. However, restaurants must balance the desire to attract cash-strapped diners while maintaining their profit margins.

To improve the customer experience, Panera plans to invest more in labor. Like many restaurants, Panera in recent years has hired fewer workers and relied more on the self-ordering kiosks that it pioneered in the industry. This approach saved money, but customers often walked into the café and couldn’t find an employee in sight, according to Carbone.

Panera will also invest again in its kiosks, which it has not significantly upgraded since it first entered its restaurants nearly a decade ago. Its dining rooms will get a facelift, too.

If these changes succeed in bringing back estranged customers, Panera restaurants will become more profitable, fueling future restaurant growth. These new bakery cafés may look different.

“What does the café of the future look like? We’re doing a lot of work around that, and we’re going to test different things,” Carbone said.