Breaking Into Bread

Breaking Into Bread

RICHMOND HEIGHTS, Mo. -- Panera Bread CEO Ron Shaich likes to joke that it's harder to become a Panera franchisee than it is for a woman to play at Augusta National. Indeed, it's said that it takes up to two years for the company to sign on each franchisee, thanks to its rigorous standards.

And yet with more than 60% of Panera's 1,100 bakery-cafes franchisee-owned and operated, it's an operating model that the chain clearly embraces as a key to its future.

If you want to grow your brand and generate those economies of scale, and have a national brand and maybe even one day a global [image-nocss] brand, franchising is way to do it, said Darren Tristano, executive vice president with foodservice research firm Technomic Inc., Chicago. For Panera, franchising has given it the opportunity to not only grow quickly but also efficiently.

Most franchisees commit to initial agreements that include at least 10 bakery-cafes, and many have more than 50 under their wing. It's a greater investment on their part, and it's almost like they're operating a business within a business, said spokesperson Mark Crowley. It's given us an opportunity to really enter a lot of markets where we may not have had a lot of knowledge of the landscape of the market.

The West Coast is one of the more recent arenas for Panera's expansion, although Crowley said even saturated markets such as St. Louis and Chicago offer growth opportunities, especially in urban locations.

Ken Rosenthal, head of Breads of the World LLC, Columbus, Ohio, is one such franchisee. Granted, Rosenthal had an immediate in to Panera he founded its predecessor, St. Louis Bread but he has enough business acumen to have built Breads of the World up to nearly 70 Panera locations in Colorado and Ohio.

They're very protective of the culture, said Rosenthal of Panera's standards. Unless someone is of that same culture, understanding, professionalism, integrity all those attributes they would reject that person. They not only want a person who can afford to open a bakery-café and have expertise to run it, but they also want someone who comes from the same place as the organization. Although Rosenthal said Panera affords its franchisees some flexibility to experiment with new products or processes, Most everything we do is what the system is doing.

Of course they also don't want people changing things, because it's not broken. And thanks to Panera's strict control of the quality of its operators, consistency reigns. I've probably been in 50 to 60 different Paneras and the consistency has been incredible, said Tristano. The quality of the food, the cleanliness of the restaurants, the décor, just the overall consumer experience has been incredibly consistent. I think they're doing really well in terms of managing their franchisees and keeping the consistency, especially when it comes to the food.

[CSP magazine will take a broader look at Panera's operating strengths as part of its Competitive Watch series in the August issue.]

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