When I first heard that Panera Bread was launching its own delivery service, I had a measured, tempered, serious business writer's response: What are they, crazy?

It's no small endeavor, with an entire cadre of delivery people to hire across the country, plus a $15,000 price tag for each of its roughly 2,000 stores.

It seemed risky. But drill down a bit and it makes more sense--especially compared with what some of the chain's competitors are doing, namely outsourcing delivery by signing on with Uber Eats, Postmates, DoorDash, Caviar and Grubhub, or any of the other off-the-shelf delivery services. 

Plus, it means creating 13,000 jobs--seven or eight for each Panera Bread that has delivery--according to a company press release announcing the expansion of the  program this week to Panera Bread locations in almost 900 U.S. cities.

Money, data, and actually doing the work

There are three reasons why this actually makes a lot more strategic sense for Panera than simply signing on with Uber Eats or one of the other competitors.

First, economics. As Bloomberg points out, "[u]sing a company like Uber Eats allows restaurants to quickly jump into online ordering and delivery ... But the third-party providers also take a cut of each order and can sometimes control the consumer data that comes with it."

("The economics are brutal" for working with a third party service, said Michael Halen, an analyst at Bloomberg Intelligence.)

Next, about that data. Panera wants it. As Barrons reported:

Panera, which says more than 31% of its sales are currently digital, representing $1.75 billion in revenue last year--which also includes online pickup and kiosk orders--decided its trove of customer data represented an opportunity to learn about and target customers they were unwilling to share.

Finally, there's the issue of whether third party delivery services could actually be counted on to handle Panera's customers, given that the chain skews toward lunchtime orders rather than dinner. For Panera, there's just too much at stake.

Kind of like pizza

Of course, there's one type of restaurant that's a similar kind of delivery system in place for decades: Pizza chains and other independent restaurants. As Today.com pointed out:

Like Domino's, Panera's delivery service is an entirely digital process since customers can order through the Panera website or app, and watch as their driver makes his or her way to the final destination. But the bakery-cafe has no plans to launch self-driving delivery trucks like Pizza Hut anytime soon.

And, perhaps not surprisingly, it turns out Panera's CEO, Blaine Hurst, was formerly an executive at Papa John's.

He "helped the pizza chain launch online ordering in the late 1990s," as Bloomberg put it, and says that 80 percent of customers who order online for delivery from Panera would not have come into the store otherwise.

"Giving away that kind of volume [to a third party service] doesn't make sense," Hurst said. "It lets us manage and maintain that experience.

Published on: May 8, 2018