×
STAYING HUNGRY Panera fosters a community vibe with free Wi-Fi, fireplaces, and no time limit for dining. | Photograph: Courtesy of Panera Bread

Rising Dough: Why Panera Bread Is on a Roll

How Panera is thriving by selling real food -- and a gathering space -- in suburbia

Mention Panera Bread and fans are as likely to praise the free Wi-Fi as they are to gush about the Asiago cheese bagels. And that, execs at the $2.6 billion restaurant chain say, is the point. While its competitors scale back on upscale ingredients, trim portion sizes, and create value menus, Panera is selling fresh food and warm bread at full price, and encouraging customers to linger. That recipe is succeeding.

Financially, Panera has been on a roll: The St. Louis -- based company opens a new bakery-café every five days. Sales rose 16.2% in 2008. Profits were up 33% in the first half of this year. PNRA is the best-performing major-restaurant stock of the last decade, with annualized growth of 31.5%. Panera is proof that, in suburbia, there's a hunger for real food -- unfussy ingredients moved from farm to plate quickly and affordably. And the company has combined that menu with an unpretentious atmosphere -- there's no table service, but also no time limit. As a result, it has become as much community gathering space as a bustling lunch spot.

"In many ways, we're renting space to people and the food is the price of admission," says CEO Ron Shaich, over lunch at a three-week-old Panera in Walpole, Massachusetts. He's eating a new dish -- a chicken Cobb salad studded with Gorgonzola cheese, antibiotic-free chicken (Panera is the nation's largest buyer of the stuff), and applewood-smoked bacon ("the kind you'd find at the Four Seasons, not on the Baconator," Shaich sniffs).

A diverse stream of customers flows around him, settling throughout the airy café: a study group (with sandwiches, salads, and soda), a bride-to-be chatting with her wedding photographer (lattes, lemon Bundt cake), two businessmen with laptops (cinnamon-crunch bagels, lemonade), and a baker's dozen of couples and families feasting on roast beef tucked into Asiago demi-baguettes, sourdough-bread bowls brimming with creamy corn chowder, and grilled focaccia layered with pulled chicken, mozzarella, and fresh basil. "It's a classy place," says diner Betsy Cziria, a 58-year-old payroll manager whose college-age daughter turned her on to Panera five years ago. "You wouldn't sit in a McDonald's to have lunch."

Well, maybe some of us would, but Panera's target audience is more Food Network than fast food. "We hit a chord with people who understand and respond to food, but we also open a door for people who are on the verge of that," says chief concept officer Scott Davis. "We run an idea through the Panera filter and give it that twist that takes a flavor profile closer to what you'd find in a bistro than a fast-food joint."

You can trace the roots of most dishes on Panera's menu to its R&D team's twice-yearly retreats to the Adirondacks, where staffers take turns trying to one-up each other in the kitchen. For instance, Panera head baker Tom Gumpel went out and caught several fresh lobsters to bring with him to one retreat, giving him a decided advantage for the evening's feast. "We start with: What do we think tastes good?" says Davis, over the mid-experiment whir of a blender at the latest gathering. "We're food people, and if we're not working on something that really gets us excited, it's kind of not worth working on."

That passion has a trickle-down effect on the brand. "To consumers, the brand is family-oriented but also sophisticated," says Darren Tristano, executive vice president of food-industry research firm Technomic. "Panera's on-trend with what consumers are asking for: fresh, customizable, convenient, won't break the bank."

A message of freshness is the first thing customers see when they enter each café, with massive displays of bread -- all of it hand-formed and baked on-site throughout the day. The baguettes are tagged with what time they came out of the oven. Bakers wander through the café offering still-warm samples. New employees get dough training. And meetings start with the staff breaking bread together (no, really). "We start by paying homage to mother bread," says manager Mike Vasil, grinning. If the bread -- dotted with ingredients such as Brazil nuts and Korintje cinnamon -- feels like an afterthought in a new dish, the R&D team scraps the idea, no matter how mouthwatering. (They've never figured out a way to get buffalo chicken through the tasting gauntlet, but salmon salad, served with a crusty hunk of baguette, and macaroni and cheese, topped with bread crumbs, will hit menus in the next year.)

Panera's balance sheet shows how its obsession with fresh bread has been good for that other kind of bread. "Panera is an outlier," says Nicole Miller Regan, a senior research analyst at Piper Jaffray. She applauds the company's "pristine balance sheet," which has allowed it to score sweet real-estate deals in the downturn. Panera opened 102 bakery-cafés in 2008 and is on schedule to launch 70 in 2009. And though same-store sales were flat in the second quarter of this year, most analysts blame the economy rather than the company's strategy. "When the consumer rebounds, I think Panera can benefit just as much as, if not more than, others in the industry," Miller Regan says.

In part, that's because the $4.3 billion bakery-café segment is a growth sector, and even with more than 1,300 locations, Panera still has plenty of room to grow. As the dominant player in the market -- add up the sales for the next four biggest bakery-café chains, including Einstein Bros. Bagels and Corner Bakery Cafe, and they'd still have less than half of Panera's sales -- it's in the best position to capitalize on the potential of bakery-cafés in the broader restaurant business. That means there's plenty for Panera to eat up -- including its competitors' lunch.

STAYING HUNGRY Panera fosters a community vibe with free Wi-Fi, fireplaces, and no time limit for dining. | Photograph: Courtesy of Panera Bread

Add New Comment

7 Comments

  • Lowongan Terbaru

    My friend genuinely enjoyed your NegeriAds.com Solusi Berpromosi. It seems like you have placed a lot of your post and this world need a lot more of these on the web these days. I do not have a bunch to to say in reply, I only this minute wanted to comment to reply well done.

  • Jeff Dieterlen

    I love Panera Bread. BUT, my wife's wallet was stolen at their Castleton restaurant in Indianapolis and the manager was as lukewarm about it as a day-old French loaf - to the point one would think he was in on the scam! I sent a note to corporate expressing my displeasure with their attitude and received a form letter response from "Isabella" saying, "they'll get back with us." Funny...I have a bad experience at McDonald's and send them an email and within a day get a call from the manager/owner asking what he can do to improve. This article talks about how they are moving forward with great ideas and trend-setting concepts. But my recent experience seems more like one of their bagels - substance surrounding by a hollow center. I hope they can get their focus back on the customer.

  • Jeff Dieterlen

    I love Panera Bread. BUT, my wife's wallet was stolen at their Castleton restaurant in Indianapolis and the manager was as lukewarm about it as a day-old French loaf - to the point one would think he was in on the scam! I sent a note to corporate expressing my displeasure with their attitude and received a form letter response from "Isabella" saying, "they'll get back with us." Funny...I have a bad experience at McDonald's and send them an email and within a day get a call from the manager/owner asking what he can do to improve. This article talks about how they are moving forward with great ideas and trend-setting concepts. But my recent experience seems more like one of their bagels - substance surrounding by a hollow center. I hope they can get their focus back on the customer.

  • Jeff Dieterlen

    I love Panera Bread. BUT, my wife's wallet was stolen at their Castleton restaurant in Indianapolis and the manager was as lukewarm about it as a day-old French loaf - to the point one would think he was in on the scam! I sent a note to corporate expressing my displeasure with their attitude and received a form letter response from "Isabella" saying, "they'll get back with us." Funny...I have a bad experience at McDonald's and send them an email and within a day get a call from the manager/owner asking what he can do to improve. This article talks about how they are moving forward with great ideas and trend-setting concepts. But my recent experience seems more like one of their bagels - substance surrounding by a hollow center. I hope they can get their focus back on the customer.

  • Jensen Gelfond

    good article about a fascinating company. I love going into Panera - great food, nice atmosphere considering how many people are often there. I only wish they would follow up their rhetoric about how people stay for hours by discontinuing their policy of disconnecting wireless users who are logged on for more than x minutes (depending on the Panera) - that is a turnoff, especially when they don't tell you beforehand that that's their policy.