The real problem with Panera Bread

Panera Bread has been lost since the departure of longtime CEO Ron Shaich. | Photo: Shutterstock.

This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.

As journalists, we tend to appreciate blunt, honest assessments from executives. But it’s been a while since we’ve had the type of diagnosis that Panera Bread CEO Paul Carbone provided to the media, including Restaurant Business. 

In short, he said that once Panera’s traffic started to struggle, the company cut labor from its restaurants and decreased the quality of its food. That ultimately hurt Panera’s reputation—just check out social media, where some users compare it to “hospital food”—and ultimately its sales.

The real problem dates to 2017, when the investment firm JAB Holding bought the fast-casual chain for $7.5 billion. Shortly thereafter, CEO Ron Shaich left the company. 

Acquisitions are always dangerous. Because new owners and new management comes in, which results in plan and strategy changes, which can create numerous headaches that ultimately reveal themselves in sales and profit numbers.

But it can be worse when the deal leads to the departure of a company founder or, in the case of Shaich, a driving force behind much of what the brand did. Driven by a different owner and different management, Panera made compromises that hurt its brand reputation and led to its sales challenges.

Company founders can be important that way. They demand standards and can help maintain the soul of the brand. We do not always agree with the way Howard Schultz does things but there is little question he keeps Starbucks’ eye on the in-store experience ball.

Panera Bread has a plan to fix its issues, all of which sound like a sound strategy. But the company might have been better off finding a way to keep Shaich around in some capacity, or at the very least keep his playbook handy.

This week’s financial news

I spent the week in Barcelona for the Global Restaurant Leadership Conference (yes, my life is hell). We’ll have more to say about it. But we learned a lot from our conversation with Five Guys. And we wrote about why it can take a while to make a return on the international investment. 

One interesting thing to watch: Who, if anybody, will buy MTY Food Group? Franchises can sell for high multiples. But a lot of MTY’s brands are not quite at that level. 

But hey, somebody did buy Topgolf. Its valuation fell, but maybe not as much as I expected to be honest. 

Mind-blowing stat in this story: One out of 10 social media interactions in Spain involve KFC. 

Jack in the Box started to make some progress, and then the shutdown happened. 

I listened to President Trump’s speech to McDonald’s franchisees so you do not have to. 

Big won a proxy fight at Cracker Barrel. It’s not a complete win. But after seven previously failed attempts, it’s something.

Jeff Crivello. Still buying restaurants.

 If you read the AI-generated nonsense out there, you’d think that Freddy’s was filing for bankruptcy. It’s not. But one of its franchisees is, and it blamed the acquisition of a struggling market for the filing. 

Number of the week

Our Technomic colleague David Henkes presented this data at the Global Restaurant Leadership Conference last week, showing the chains that added the most net new restaurants globally last year. Check out the top three. Sheesh.

Quote of the week

“This is not a get-rich-quick scheme.” -TGI Fridays CEO Ray Blanchette, on international development at the Global Restaurant Leadership Conference.

On the blog

I wrote about managing for the long-term and restaurants leaving Wall Street. Check out all my blog posts on The Bottom Line.

On the podcasts

On A Deeper Dive we continued our look at AI in the restaurant space, in this case the drive-thru. On The Week in Restaurants my colleagues Lisa Jennings and Joe Guszkowski talked Panera Bread.

For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.

Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.

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