Building A Steep Trajectory Of Improvement: The Pret A Manger Case

Building a magnetic product is never a one-shot deal. Without a steep trajectory of improvement, entropy sets in and demand withers. If you hope to attract enduring demand, you need to begin improving the same day your product goes on sale. Pret a Manger, the worldwide chain of fresh-food, urban sandwich stores, shows how it’s done.

Pret was founded in Britain in the late 1980s by Julian Metcalfe and Sinclair Beecham. After a few miserable, money-losing years, the pair hit on a menu that worked. When their first shop turned a profit in 1990, they opened a second that was profitable in 15 months. Pret was on its way. By 2010, with 250 stores worldwide and revenues of £320 million, per store revenues hover around £1.2 million, more than 50% higher than any of its rivals (Eat, Greggs, Starbucks).

Pret’s success is a function of its relentless improvement over a 20-year period, with a focus on three dimensions. One involves steadily improving the quality, taste, affordability, and overall appeal of its food offerings. Another centers on maintaining and elevating its already high standards of customer service. And the third focuses on expanding store outlets so that Pret becomes a convenient option for more and more people around the world.

The first two challenges are in the hands of founder Metcalfe, now acting as Creative Director. His obsession with improvement is quite real and a source of some exasperation even to himself. “That’s the difference between mediocre and great and it’s extremely elusive and some of our sandwiches are bloody great, they really work. It takes years of relationships with the suppliers to get the right cheese, to get the right seasoning mix in the mayo. You can’t just go and buy Hellman’s and bung it together.”

Pret constantly reinvents its offerings, even those that are popular. Pret’s pickle recipe has been revised 15 times, the chocolate brownie 36 times, and the carrot cake 50 times. Metcalfe also keeps pushing to improve quality in other ways. In 2009, after watching the documentary film The End of the Line, about the dangers of overfishing, he promptly banned the use of bluefin tuna in sandwiches and sushi. In 2010, Pret began posting basic nutritional information, including calorie counts and fat content, in every store.

To keep customer service on an upward trajectory, CEO Clive Schlee has been working to devise managerial, organizational, and training systems to replicate Metcalfe’s cheery obsessiveness in store locations around the world. Prospective recruits are asked to spend a day working, for pay, in a Pret shop; then their fellow workers vote on whether or not they should be hired. Democracy in business? To maintain a connection between the front lines and the back office, every Pret manager is required to spend four days a year on the shop floor. Pret pays well, and hands out bonuses and prizes. Pret’s policy: “We hire happy people and teach them to make sandwiches.”

The third dimension of Pret’s trajectory involves expanding the store’s network. Flush with early success, Pret entered the U.S. market in 2000, then moved into Japan, Hong Kong, and Singapore, with plans for the Continent. But the wheels almost came off. With hasty expansion, quality suffered, and the Japanese stores were closed. The company lost £20 million in 2002.

Metcalfe and Schlee decided to eschew franchising and expand more methodically. “When you begin to franchise out,” says Tracy Gingell, a manager at New York’s Broad Street shop, what’s to stop a store manager from buying the five-dollar case of chicken instead of the $35 case that’s organic. No one’s going to know the difference. That why we don’t franchise.”

The strategy seems to be working. In 2009, the chain enjoyed a same-store sales increase of 11%, which Pret believes is the highest in the food business. The intensity of demand that Metcalfe discovered two decades ago is as strong as ever. But beating back the risk of entropy, not to mention the competition, and continuing to improve the fresh food and friendly employees, is a daunting trajectory challenge. Whatever business you’re in, winning that challenge leaves less open space for imitative competitors.

Adrian Slywotzky is a partner at the global management consulting firm Oliver Wyman and a best-selling author. This article is based on material from his new book, Demand: Creating What People Love Before They Know They Want It (Crown Business), to be released on October 4, 2011. Follow the Demand blog at www.demandthebook.com.

[Image: Flickr user mirkuz]