Dive Brief:
- Pan American Group, a subsidiary of Flynn Restaurant Group and Panera’s second largest franchisee, will test beer and wine sales at five of its Kansas City locations. The test is part of the “Panera Tonight: Beer, Wine & Dine” program and debuted Oct. 28 alongside the chain’s new flatbread pizzas. Nation’s Restaurant News reports this is the first time in Panera’s 33-year history that any of its bakery-cafes have sold alcohol.
- The franchisee has partnered with Boulevard Brewing Co. and Napa Valley’s Ménage à Trois Wines. The alcohol menu, which includes a variety of wines, beers and hard seltzers, is currently only available for dine-in customers.
- Panera will offer drinks for purchase after 4 p.m., potentially boosting its dinner sales, a daypart the chain has worked to enhanced since last year.
Dive Insight:
Now seems like the right time for Panera to test alcohol sales. Not only is the chain actively making a push to gain more dinner guests, but alcohol sales have skyrocketed since the beginning of the COVID-19 pandemic.
The chain began focusing on dinner in June 2019 with a new menu — including bowls and flatbreads — created specifically for the evening crowd. The 10-item menu is only available after 4:30 p.m. At the time of its launch, Dan Wegiel, chief growth and strategy officer, said dinner was a way to make Panera more relevant. Adding alcohol to the menu could do that as well, as wine sales for example are up about 30% compared to the same period last year.
Panera has since pushed the gas on its dinner focus, introducing three new flatbread pizzas last month. But the pizza launch comes at a decidedly different time for Panera, as the chain scrambles to make up for a significant loss in dine-in sales, or almost half of the business.
While the alcohol test seems to be well timed to meet consumption demands, its dine-in-only availability may struggle to generate a large swath of customers who are not only drinking more at home but are also consuming Panera more at home. During the pandemic, Panera’s delivery sales alone have grown by triple digits, according to Eduardo Luz, chief brand and concept officer.
That said, Panera’s dinner business also represents the most growth for the chain, which means the potential on-premise alcohol sales could unlock is significant once customers are comfortable dining out again. Pan American Group could be waiting some time for that scenario, however. Nearly one in four consumers say they won’t be ready to dine out until there’s a COVID-19 vaccine.
As it focuses more on dinner, Panera could arguably have a hard time gaining share against casual dining chains that offer alcohol sales. This test could change that notion while also generating higher traffic and check. Indeed, high-margin alcohol sales can provide quite a lift for restaurants — about 75% for beer and 60% to 70% for wine. That’s compared to the general profit margin of a restaurant that only sells food, which is about 3% to 6% on average.
Still, there’s a reason few limited-service chains sell alcohol. For starters, liquor licenses are expensive, extra insurance is required and regulations are complex. If Pan American Group’s test locations have employees under the age of 21, for example, they would be prohibited from even touching the inventory. But if this test proves successful, it could translate to additional Panera locations and help the chain build back its dine-in traffic that’s been compromised since the start of the pandemic.
