Panera Bread vows to invest in its stores

Panera Bread has made upgrades to its menu as part of a brand transformation. | Photo courtesy of Panera Bread.

Paul Carbone has a simple explanation for Panera Bread’s sales challenges in recent years: It didn’t focus on what makes a restaurant a restaurant.

“We didn’t focus on the food and we didn’t focus on the experience,” Carbone said in an interview. “We are a restaurant company. It all comes down to the food and the experience.”

The CEO of the fast-casual bakery/café chain believes it has a plan to change that. Panera on Tuesday announced a broad transformation plan that, in simple terms, vows to invest behind improvements to the menu and service in a bid to lift sales.

The transformation plan, called Panera Rise, features a four-pronged strategy to improve its performance, including investments in menu upgrades, improved value with better service and store upgrades and expansion. 

It follows a difficult stretch for the chain, whose system sales in 2024 declined more than 5%. The company struggled with lawsuits over Charged Lemonade energy drinks and a data breach. It overhauled management. 

Carbone was named CEO earlier this year and the company created a new office of transformation and strategy. It also overhauled its board, with former Restaurant Brands International CEO José Cil named chairman. The company is now on its third chairman, and third CEO, since 2023.

It was a tough spot for Panera, which JAB Holding took private in 2017 for $7.5 billion, at the time an eye-popping price for the brand. The chain’s problems in recent years have prevented an IPO, which JAB has publicly sought for its fast-casual chain for at least four-plus years. 

Carbone said that the company spent too much time cutting costs at corporate stores after traffic started declining, which created further problems. 

“I think our food lost its distinctiveness, and with that, transactions started to decline, so we had to go to the middle of the” profit-and-loss statement, he said. “Then the pandemic happened, and like many restaurant companies, we took price and didn’t reverse that transaction slump.” 

The cost cuts included food and the labor inside restaurants. “We also took labor out of the café,” he said, “so when guests walked in, it was hard to find someone front of house. So overall, the food and the experience declined, which led to a decline in transactions.”

The transformation plan effectively reverses that. It promises investments in store labor at company locations—Panera operates about half of its more than 2,200 locations—to improve service. 

Another cost cut was the quality of the menu. Panera shifted from all romaine lettuce in salads to a mix of romaine and iceberg. The company is shifting back to all romaine. A flatbread pizza, meanwhile, worked well inside the restaurants but lost much of its quality when customers ordered it for delivery or brought it home.

Carbone said the company didn’t adequately test many of its menu items and also didn’t talk with franchisees enough about its strategies, something the company said that it has corrected.

“We’ve worked on Panera Rise for the last six months,” Carbone said. “We’ve talked to thousands and thousands of our guests. We are heavily testing. We’ve brought the franchisees along. Overall, the food and experience has declined. Panera Rise addresses those two main bullets.” 

Some of the menu tests involve beverages. The company removed several beverages last year, despite the company’s heavy morning sales. It is now testing new drinks to regain those sales, including Refreshers, Frescas and new energy drinks. 

Panera has already taken aggressive steps to change its baking process. It closed its dough-making facilities and is now working with suppliers to provide par-baked goods that are finished in units, like breads and cookies, along with special items such as Irish soda bread around St. Patrick’s Day. 

Carbone said that it will enable the company to better keep supplies on hand while ensuring that bread is baked all day. “When you come in at nine o’clock in the morning you should smell fresh bread being baked,” he said. “As we get closer to lunch, you’ll smell chocolate chip cookies being baked. It is baking on demand to satisfy the consumer and to have that accessibility.” 

He added that the quality is better and “the customer loves that it’s available.” 

As for the franchisees, they are on board. Carbone said that the company cut more labor in its restaurants than the franchisees did, so they didn’t have a problem committing to the plan.

“We told them we’re going to invest in food, we want them to invest in food and labor, and we have over 20 franchisees, over 1,100 restaurants,” Carbone said. “They all raised their hand and said, ‘we’re all in.’”

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Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.

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