There’s a case study happening before your eyes. It’s how a foreign company built upon a very different consumer culture is adapting to and growing in the U.S. It’s a story of Plan B’s, of bullishness and wound licking, revisions and measured growth. And it’s not over yet. It’s the story of Pret A Manger, the U.K.-based grab-and-go food chain that’s even more ubiquitous in London than Starbucks is in any U.S. city.
For more than a decade, Pret A Manger has been trying to get a foothold on American soil, at one point even summoning the help of none other than McDonald’s. But when it first docked in Manhattan in 2000, Pret met a consumer base uncomfortable with premade, prepackaged sandwiches and salads, preferring the city’s traditional delis and American burger chains. It lost sales and closed stores.
Today, Pret operates nearly 30 locations in New York and three in Washington, D.C. It broke into the Chicago market in 2010 with two stores, and it has partnered with mass retailer Target for a new downtown project in the Windy City.
Things are finally looking up for Pret’s U.S. growth. As this case study continues, two questions linger: What is the growth trajectory for a concept based solely on densely populated, white-collar locations, and what does Pret’s presence mean for how other retailers sell their sandwiches?
Bumpy Growth
Hip, industrial design, an emphasis on natural ingredients (Fair Trade coffee, Certified Humane chicken), a socialwelfare slant (leftovers donated to local food banks), a name that requires an accent to pronounce: It sounds like we’re talking about fast-casual phenomenon Chipotle, not a prepackaged grab-andgo sandwich chain from Great Britain— though both were onetime investment projects of the Golden Arches, so we may have a theme here. Pret A Manger came out of the minds of Sinclair Beecham and Julian Metcalfe, who met while studying property law at Polytechnic of Central London. Metcalfe was working as a surveyor when he got fed up with the “soggy sandwiches and mush” available from local sandwich shops, he told British paper The Indepen-dent back in 2008. They opened the first shop in 1986 in the Victoria neighborhood of London, with the pair buying ingredients in local markets and prepping food themselves. It took three years for the second store to open. By then, the concept was ready for takeoff.
Aside from the usual struggles of a start-up, Pret was in the right place at the right time. British retailers Marks & Spencer and Tesco had been peddling premade sandwiches to busy London businesspeople for some time, and Europeans in general were already more acquainted with purchasing ready-to-eat foods than their American brethren were. Pret’s healthy, natural slant was also a la mode for urban professionals of the 1990s.
“Pret came around and elevated significantly the quality of those sandwiches but was basically selling a very known commodity. And, of course, they were able to do this in very dense urban markets,” says Neil Stern, senior partner for Chicago-based research consulting firm McMillanDoolittle LLP.
By 2001, Pret was growing nicely, with about 100 stores in Britain and one shop in New York, when the company made a surprising move: It sold 33% of its share to McDonald’s for an estimated $43 million. Reaction to the deal among Pret staff was initially negative—a chain that hung its hat on natural, high-quality, humanely raised ingredients, pairing with McDonalds?! But it made sense. Americans ate burgers and fries, not packaged sandwiches. Pret needed the strength and leverage of the American giant to understand and enter the market.
And yet, the rest of the decade was a bumpy one. The McDonald’s investment forced Metcalfe and Beecham to expand aggressively stateside without considering the American consumer and the fact that they won’t eat packaged crawfish and avocado sandwiches and prefer drip coffee to lattes. Under the perplexed stare of American consumers, Pret’s sales slid, and doors were closed. (In 2008, McDonald’s sold its stake, and private investment firm Bridgepoint Capital became majority owner.)
Instead of giving up on the U.S. market, Pret reformulated its menu, adding more soups, hot sandwiches, drip coffee and the Slim Pret (half-sandwiches) to encourage mixing and matching—as Americans are wont to do. It also emphasized the freshness of its food in an attempt to overcome the grab-and-go stigma.
In 2004, Pret’s U.S. store count was seven. A year later, it was 10. Then 12, 14, 19, 24 and—at the end of last year—31 stores.
“It’s definitely a brand to watch; it’s gaining momentum,” says Darren Tristano, executive vice president of restaurant research firm Technomic, Chicago.
“When they brought it into New York the first time around, people didn’t get it,” says Stern of McMillanDoolittle. “Now, the second time around, they’re doing a much better job of communication of the proposition, that these sandwiches are made on site, they are made fresh, they are high-quality ingredients.”
Bespoke or Pret?
Today, Pret has begun to find its rhythm in the United States while still humming along in Britain. As of August 2011, sales in U.S. stores had increased 40% from the same period last year. Pret’s total profits rose about 37%, to £46 million (about $75 million) in 2010, and plans are in motion to expand further in the United States and even enter the Paris market, according to a recent New York Times report.
To Stern, Chicago and Washington, D.C., are much more of a litmus test of the scalability of the Pret concept, and so far things are looking good. “There’s dense, and then there’s London.
There’s dense, and then there’s New York,” he says. “The magnitude is still very different. What even a market like Chicago is compared to central London or midtown Manhattan is still a very different kind of thing.”
One thing the company won’t change for the American market is its “pret a manger” style. The name, which translates to “ready to eat,” comes from the French fashion term “pret a porter,” or ready to wear. Pret a porter is the opposite of “bespoke” clothing, in which the clothing article is specifically tailored to the customer’s specifications. The term is now used beyond clothing to mean anything made to order—even sandwiches. So, if this were an SAT exam, Pret a Manger is to pret a porter as Subway is to bespoke: premade vs. made to order.
In an interview with CSP in January, Pret A Manger USA president Martin Bates said the company will never go bespoke. “Our concept has always been based on fresh and natural ingredients, but also ultimate convenience for busy, working individuals who don’t want to sacrifice taste and quality,” he said. “These are factors we feel are distinguishable to the Pret brand. It’s good food sold fast, and we feel that experience can’t be replicated with made-to-order.”
So while Pret’s growth continues, the challenge of convincing Americans that premade can also mean “fresh” will likely keep that growth slow—a challenge not foreign to c-stores. “We have 20,000 Subways who say fresh means ‘I go there and they make it in front of me,’ ” says Stern.
“It takes time, clearly, and you begin in places that are going to be most receptive to it,” he continues, “which is an extremely time-starved location, places that put a premium on the ability to get a sandwich in 30 seconds vs. two minutes, [where] there’s value to it. And then over time, when people try it and understand that it’s fresh and high-quality, you can start to change perceptions.”
Food prep at Pret works like this: Each store has its own kitchen. Deliveries arrive nightly, and a team of cooks starts prepping food first thing in the morning. There are no sell-by dates: All leftover food is sent to a local food bank at the end of the day.
Stores are decorated with oversized photography of food posed in playful shapes. When they run out of sandwiches, a curtain—with a cute saying about the chefs being busy at work making more— is pulled down over the display.
One freshness cue many U.S. retailers believe to be sacrosanct is preparing the sandwich in front of the customer. That’s another thing Pret won’t do. “We have played around with open kitchens in the past and might do so again in the future, but for now we keep the doors to our kitchen closed to maintain the fresh, clean, ordered feel of our stores,” Bates said in January.
Another method Pret won’t be trying any time soon: commissaries. “A commissary,” Bates said, “would change our business model fundamentally. Having sandwiches shipped in would mean if we ran out, we couldn’t make any more. The team that serves you at lunch are the same people who were making your sandwich only an hour or so earlier.
“A commissary limits the flexibility of the business and the staff loses a connection with what they sell. The engagement between our products, our people and our customer is critical to Pret.”
Engaged and Empowered
Pret also delivers on its branding through its employees and the training they undergo—which also helps the chain maintain a 60% turnover rate. Compare that to the fast-food industry’s normal turnover rate of 300% to 400%. A few unique strategies ensure the right people are hired in the first place, while keeping existing employees engaged, empowered and even a little competitive. A recent New York Times business report sketched out such strategies:
Employees applying for a position must spend a day working, for pay, in a store. Fellow workers then vote on whether or not they should be hired. Ninety percent of prospects get hired; the rest are sent home with 35 quid and a handshake.
Every manager must spend four days per year on the floor.
The typical Pret has five to seven cashiers, with the goal of having no transaction take longer than 60 seconds—even if the shopper orders an espresso drink.
Bonuses are awarded based on the performance of an entire team, not just individuals.
Mystery shoppers visit stores weekly. If a store receives an “outstanding” review, all employees receive bonuses—emphasizing the importance of everyone pulling their weight.
When employees are promoted or pass training milestones, they receive £50 (about $80) or more in “shooting star” vouchers, which the employee doesn’t keep, but rather must give out to colleagues who have helped them out along the way.
Every quarter, the top 10% of stores, as ranked by the mystery-shop scores, receive about £30 (about $48) per employee for a party.
Pret is equally meticulous about its food prep and R&D. In his recently released book “Demand: Creating What People Love Before They Know They Want It,” author Adrian Slywotzky describes how the company constantly reinvents its offerings, even popular ones. Its pickle recipe has changed 15 times, the chocolate brownie 36. Pret’s carrot cake has undergone 50 tweaks. “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,” Metcalfe, now acting as creative director, told Slywotzky.
Damn Yankees
So from whom is Pret stealing sales? In New York, it’s likely neighborhood delis. In Chicago, it’s fast-casual chains such as Potbelly and Corner Bakery as well as 7-Eleven, which has a strong footprint in the Loop business district. Drug chains such as Walgreen’s, Duane Reade and CVS may also find themselves competing with Pret A Manger as they ramp up their own grab-and-go options.
As for Pret, it’s likely to stick to its current focus of densely populated locations with small footprints and low overhead. Technomic’s Tristano foresees those other urban sandwich chains, such as Corner Bakery and Au Bon Pain, enhancing their grab-and-go offering but sticking to their well-tested argument that fresh still means made-to-order.
Nonetheless, in the greater fast-casual sandwich segment, Pret won’t likely touch the front-runner, suburban-centric Panera, for some time. “I just don’t think you will see these restaurants in a suburban setting,” Tristano says. “I’m not sure that they’re going to be as appealing as a Chipotle or Panera, and certainly not in more rural setting, and I don’t think they’re designed for malls.”
But that’s not to say they’ll be stuck in the city for good. Stern points to Starbucks, which, upon its launch, was considered a strictly urban concept: “Maybe there’s an adaptation to the model that says we can make this work in suburbs.”
Like it or not, the blame for the uphill battle Pret has faced selling grab-and-go sandwiches is largely lobbed at c-stores, where endless shelf life and outdated packaging detracted the typical Pret shopper for years. Perhaps Pret’s growth in the U.S. market will actually help the acceptance rate of c-stores’ premade, grab-and-go foods—until they become a competitor.
Food-Prep Decision Making
Pret A Manger has changed a lot to better appeal to the U.S. market, but there are a few things it will not do—most of which fly in the face of U.S. grab-and-go philosophies. Here’s Pret’s take on a few operational decisions c-store retailers may be facing as well, from Pret USA president Martin Bates.
Made-to-Order or Grab-and-Go? “Our concept has always been based on fresh and natural ingredients, but also ultimate convenience for busy, working individuals who don’t want to sacrifice taste and quality. These are factors we feel are distinguishable to the Pret brand. It’s good food sold fast, and we feel that experience can’t be replicated with made-to-order.”
Commissary or On-Site? “A commissary would change our business model fundamentally. Having sandwiches shipped in would mean if we ran out, we couldn’t make any more. The team that serves you at lunch are the same people who were making your sandwich only an hour or so earlier. A commissary limits the flexibility of the business, and the staff loses a connection with what they sell. The engagement between our products, our people and our customer is critical to Pret.”
Food Prep in Front or Back of House? “We have played around with open kitchens in the past and might do so again in the future, but for now we keep the doors to our kitchen closed to maintain the fresh, clean, ordered feel of our stores.”
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