When you go to Panera, you’re probably just ordering a sandwich or maybe a bowl or cup of soup.
Why is it so expensive?
A simple meal at Panera can be equivalent to a sit-down restaurant—even though Panera is much closer to fast food.
There are a lot of theories regarding why Panera is just so expensive. Let’s take a look at a few of them.
Why Is Panera So Expensive? (Top 10 Reasons)
1. They Pay Their Employees More Than Fast Food
Many Panera employees start at around $10 for their cashier positions.
This is more than traditional fast-food workers make, and it needs to be folded in with the other costs associated with doing business.
Because Panera seeks to be more of a “higher class” chain, they try to pay their employees accordingly and give their employees better benefits than they would get at other fast-food restaurants.
Comparatively, the typical McDonald’s worker will make about $8 an hour.
Of course, the economies of scale that McDonald’s works with are far more significant.
While employee benefits and salaries don’t contribute a lot to the end cost of a product, they do have some impact.
Panera Bread often has a lot of employees working, because they need both front-of-house and back-of-house workers.
2. They Are a “Healthy” Brand
A healthy brand means a lot of things.
Panera prides itself on healthy ingredients, which are inherently more expensive.
Products such as quinoa, for instance, are going to be more expensive than rice.
Providing these healthier ingredients naturally leads to more expensive products, especially as compared to fast food.
Additionally, people are prepared to spend more money on something healthy.
Not only is Panera able to invest more in ingredients, but they’re also able to charge more because of the perception of health.
That doesn’t mean that Panera isn’t healthy or that the costs aren’t real, but rather that something that is “whole grain” is going to have a higher price point than regular white bread.
Healthy products can also be more challenging to source.
Because healthy products often come directly from farmers or from organic companies, there may not be enough product to ensure that certain menu items are always available.
It can be more difficult to get deliveries from these types of niche suppliers, and the niche suppliers themselves often inflate the costs of their goods.
Who cares about healthy food?
For the most part, it’s people with money.
Because everyone knows that healthy food is more expensive (even though it doesn’t always have to be), young professionals and educated individuals tend to be more likely to eat at Panera.
Because these individuals are also more likely to have higher salaries, it makes Panera a little pricier as well.
3. They Manage Their Deliveries In-House
This has a few consequences.
First, Panera had to invest in developing an app.
Panera had to hire delivery drivers.
Also, Panera needed to create processes by which delivery orders could be taken, made, and delivered.
The result was that Panera was able to retain complete control over their deliveries.
They don’t need to rely on a third-party service, and they don’t have to pay third-party fees.
Still, Panera only recently transitioned to managing a lot of their deliveries, and it was during a very disruptive time.
Panera undoubtedly invested quite a lot into their in-house delivery system, and likely needed to pass at least some of those fees along to customers who purchase food at Panera.
Many companies are very likely to start managing their own deliveries because meal services like DoorDash take such a large percentage.
Many meal delivery services will increase the prices that are viewed on the menu by the user, so they can charge more.
Others will charge the restaurant for the orders they send in.
Further, having no direct contact with the consumer can be damaging to a company’s brand.
4. They Spent A Lot of Money On Marketing
Panera spends about $100 million every year on marketing alone.
This makes sense.
Panera has to market to people not to tell people what they are—everyone already knows what Panera is—but to remind people that they are there and they’re available.
Fast food advertising is both unique and insidious.
Someone can see an ad for Panera and want to go to Panera immediately.
This isn’t the same for a lot of other areas of advertising, in which advertisers may need to wait months or even years for the customer to actually need the product.
Panera advertises digitally, in print, and on television.
All of this is very costly.
While they’re definitely seeing positive ROI when it comes to this marketing, that doesn’t make those advertising dollars unspent.
To support this advertising, Panera needs to take in more revenue from its restaurants.
These numbers aren’t entirely outlandish. In fact, they’re quite low compared to other companies.
Burger King spent $372 million on its advertising budget, with a revenue of $10 billion in the US.
Panera is willing to spend more than a quarter of that but only has an annual revenue of $2.7 billion in the US.
In other words, the size of Panera’s advertising expenditure is a lot when compared to other fast-food places.
Panera’s marketing is clearly doing well.
Panera has been making a lot of money, especially during the COVID pandemic when many people were ordering food to go.
However, this doesn’t mean that these marketing costs may not merit a review of the prices on the menu.
5. They Change Their Menu Quite Frequently
Panera is almost constantly changing its menu.
Not only do they have seasonal items, such as the soups that are released every season, but they are introducing new things like their “superfood bowls.”
Introducing new products is inherently expensive.
First, the products have to be developed and tested.
Once the food products have been approved, they need to go through the supply chain.
New processes need to be built and new vendors need to be contacted.
All Panera stores need to go through re-training.
Advertising dollars need to be spent updating media and ensuring that individuals know about the changes to the menu.
Changing their menu means that Panera is always “fresh.”
It means that people may go to Panera for a unique experience and that they will get excited about going to Panera to see the changes.
It further makes it possible for Panera to find new mainstay menu items that people will consistently be interested in.
Comparatively, most fast-food chains rarely change their menus.
Ninety percent of a fast-food chain’s menu is liable to be the same throughout the year.
The only change is usually a single product or two, which is largely composed of ingredients that the chain already has at hand.
6. They Have Their Own Line Of Grocery Products
Panera doesn’t just sell products in-house.
They also have a line of grocery products.
Go to your local grocer, and you’ll probably see “Panera Soup.”
Many of these products are actually fairly recent, which means the research and development, supply chain management, and processes involved are new.
Any new process is essentially disruption, and disruption is costly.
Until the process becomes embedded, it’s going to be a little wasteful.
Therefore, developing new grocery products and supporting them is likely to cost Panera money short term.
This, in turn, means that the individual stores will likely need to do more to make a profit.
Often, they will do this by raising prices.
Like the in-house products, Panera’s grocery products include high-value ingredients.
Because of these high-value ingredients, they need to be more expensive for the consumer.
At the same time, many consumers spend money on Panera knowing that the ingredients are better and knowing that they are paying for the quality.
The more a company diversifies, the more overhead it’s likely to have.
This extensive overhead is naturally going to drive prices up, even if the core prices of the ingredients haven’t changed.
At the same time, Panera is likely to be able to streamline and optimize its processes moving forward so that it can reduce prices—at least on the core items that have been with Panera for a while.
7. They Can Charge What They Want
Consider this thought experiment.
You have two pieces of cake.
One is $3, and the other is $6.
Without knowing what they look like, which do you want?
You’ll probably want the $6 one.
For most people, a price is an indicator of quality.
It’s not so much a budget (most people aren’t choosing a sandwich based on budget), but the assumption that something that’s more expensive is going to be better.
Panera prides itself on quality, which means that it can charge what it wants in terms of most things.
People will see a higher-than-average sales price for a sandwich and will simply assume that this sandwich is better and more worthwhile.
If Panera couldn’t charge the prices that Panera currently charges, they would go out of business.
The very fact that Panera remains in business is an indicator that even though Panera is expensive, it isn’t charging too much.
If it were charging too much, it would be easier to see a growing disinterest in the store.
There are still limitations.
Panera may be able to charge $14 for a sandwich, but it would probably be laughed out of the business if it charged $20.
In many ways, the cost of Panera’s food is a sort of promise to the consumer that the food is going to be better than fast food.
If Panera were directly competitive with fast food, it would likely need to cut corners and reduce the quality and quantity of its ingredients.
When it comes to price, most prices are simply what everyone agrees on.
When people agree that Panera is expensive, Panera is allowed to become expensive.
8. They Have Produce In-Stock
Panera doesn’t just provide cooked foods.
Panera also has produce in stock.
Through the Panera app, you can order things like milk, eggs, and more.
Plus, when Panera has chefs making the food, they are often using fresh ingredients that are stored on site.
The truth is that fresh vegetables and fresh fruits are expensive.
There is a lot of waste.
If they aren’t used properly, they just get thrown away.
Most stores, Panera included, can’t perfectly estimate the things that they need.
Therefore, they’re going to have to throw a lot away, which, in turn, increases the amount that each individual item costs.
Furthermore, storing all this produce and dairy requires equipment and space.
Panera locations may need to pay additional rent because of the space used warehousing groceries.
Panera locations will also need to invest in coolers, refrigerators, and freezers to make sure that all the produce remains food safe.
Not a lot of people realize that Panera sells produce or that you can order produce through the app.
However, what most people do realize is that Panera uses fresh produce in all of its menu items, and this fresh produce has to be protected.
It just comes at a cost.
The fresh produce has to be regularly delivered, it has to be inspected and warehoused (and thrown out if it gets old), and it has to be properly processed.
9. They Have A Lot Of Waste
Most bakeries have a lot of waste.
Panera Bread may be seen as a restaurant or fast-food place, but it’s really a bakery.
All the baked goods and breads are produced in-house.
Bakeries have a lot of waste because it takes some time to bake.
They need to be able to overstock on their bread products so they don’t run out.
For instance, it takes a long time to proof a loaf of sourdough.
It’s better to make ten loaves all at once than try to make them one by one.
That also means that if people only eat two loaves of sourdough one day, eight loaves are going in the trash.
A lot of Panera’s products are fresh-baked, and these fresh-baked products are the most likely to get tossed out.
These waste issues are ubiquitous throughout Panera’s ingredients, including fresh apples and cookies.
Every item that is sold has to also compensate for items that are tossed away.
When you buy a single cookie, it’s possible that another three cookies were tossed.
Of course, business processes are designed to reduce the amount of waste that a business goes through.
However, because Panera frequently experiments with new products and has a very wide array of products on offer, it can be very difficult to pare down to exactly what the business needs.
Customers can be unpredictable.
Additionally, the constantly growing and constantly changing menu increases the likelihood that individuals may neglect certain ingredients—and that these ingredients could ultimately become waste.
10. They Are Often Compared To More Expensive Eateries
When you think of Panera, you probably aren’t thinking about fast food.
You’re not comparing a Panera sandwich to a Big Mac.
You’re probably not even comparing it to a Subway sandwich.
In many aspects, Panera is in a class of its own.
The truth is that Panera is “between” a fast-food restaurant and a sit-down restaurant.
Because of this, Panera can charge more.
It’s a little more elevated than fast food, so fast food is the “floor” of the price it can have.
It’s a little more casual than a dine-in restaurant, so it can’t charge that much.
If you’re going on a date night, you probably have a budget in mind more than a specific place.
As long as the food that you’re eating can come in under this budget, you may not even think about the food or the money as much.
People who are eating at Panera are often thinking about eating at a sit-down restaurant that might cost them $30 per head.
When they’re already thinking about that, purchasing a $12 sandwich at Panera might not be as much of an issue.
Thus, Panera can be expensive because it’s all relative.
While Panera is expensive compared to fast food, it’s not expensive compared to restaurants.
Panera is also often lumped in with other eco-conscious, casual food places such as Starbucks.
Starbucks is also expensive, in no small part because it caters to a specific demographic.