Will Panera Bread be more successful as a private company?

Discussion
Photo: Wikipedia/Miosotis Jade
Apr 06, 2017
George Anderson

In a deal that seems to have materialized almost overnight, Panera Bread Company announced yesterday that it had reached a definitive agreement to sell its business to JAB Holdings in a deal valued at $7.5 billion. Speaking on CNBC’s “Squawk on the Street” program, Panera Bread CEO Ron Shaich said the deal would benefit the company’s shareholders and that going private would give the chain a competitive edge moving forward.

Mr. Shaich said Wall Street’s emphasis on short-term results made it more difficult to run the business properly.

“When I started 25 years ago, I will tell you that a third of our investors were looking at this for a year longer,” he said. “Today, I will tell you two-thirds of our investors are thinking literally quarter to quarter.”

Mr. Shaich said JAB, which owns Caribou Coffee, Einstein Brothers Bagels, Keurig Green Mountain, Krispy Kreme, Peet’s Coffee & Tea and Stumptown Coffee Roasters, is the right “partner” for his company.

“They’re long term investors,” said Mr. Shaich. “They measure their investments in centuries, not decades. They are committed to our strategy. They’re committed to our company franchise model. They’re committed to our team.”

Jack Russo, an analyst at Edward Jones, supported Mr. Shaich’s assessment of JAB.

“I think they’re just going to let Panera run themselves for a while and get to know the business,” he told the St. Louis Post-Dispatch. “That’s kind of been their style.”

Panera Bread comes off a first quarter in which comp sales increased 5.3 percent at company-owned locations and the chain claimed market share gains.

Mr. Shaich will continue to lead the company under JAB, and Panera Bread will continue to be headquartered in St. Louis.

DISCUSSION QUESTIONS: Will Panera Bread be more successful as privately held than it was as a publicly traded company? Why or why not? Which competitors to Panera Bread do you think should be most concerned about this deal?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The emphasis on long-term growth strategies instead of quarterly results will help a company with a unique niche in the fast-casual marketplace."
"The QSR segment is in the throes of change and evolution. Panera has the opportunity to lead the pack and set the bar for competitors."
"Panera will likely be more successful as a private company. This will not only be due to removal of the investor-driven quarterly thinking..."

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9 Comments on "Will Panera Bread be more successful as a private company?"


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Mark Ryski
BrainTrust

Panera has a proven, successful model and I believe it will continue to flourish as a private company. Taking a public company back to private affords management more latitude to make decisions and experiment without the scrutiny of market analysts and the pressure of delivering quarterly results. Net-net, I think this is an interesting and good move for Panera and a solid acquisition for JAB.

Dick Seesel
BrainTrust

I agree with Mark’s assessment of the private vs. public outlook for Panera, provided, of course, that the new owners really intend to be hands-off investors. The emphasis on long-term growth strategies instead of quarterly results will help a company with a unique niche in the fast-casual marketplace. But it will also pay to see if there are any cross-branding strategies, especially between Panera’s bakery business and the Peet’s Coffee business. That’s another positive as long as the two co-brands reinforce each other’s strengths.

Tom Dougherty
BrainTrust

Private companies have many advantages. They can take the long view and build a brand that has the ability to adapt to market changes. Public companies are often held hostage to shareholders who only care about today.

The QSR segment is in the throes of change and evolution. Panera has the opportunity to lead the pack and set the bar for competitors.

Brandon Rael
BrainTrust

Why change a good thing? Panera has a proven a successful healthy first model and has built significant loyalty among their fans with their mobile app, personalization options, seamless ordering experiences, etc. If anything, Panera has already done a solid job of distinguishing the brand as the healthier and more sustainable fast-casual dining option. The financial stability and commitment to the Panera brand will enable the company to only improve from here.

Ricardo Belmar
BrainTrust

Panera has proven itself to be an innovator in the fast-casual restaurant segment they helped to define. By going private, presumably this will give them more flexibility to experiment and innovate. They were one of the first to pioneer mobile ordering and pickup and have flourished under this model. It will be exciting to see what they come up with next if they follow a more experimental path to innovation.

Harley Feldman
BrainTrust

Panera will likely be more successful as a private company. This will not only be due to removal of the investor-driven quarterly thinking but because JAB will take the long-term view and likely use its well known brands to cross-sell to each other. Panera competitors will have to implement strategies that are focused on delivering the product and service they do extremely well as they will be at a competitive disadvantage as JAB perfects its long-term view of the evolution of Panera Bread blended with its other holdings.

Michael Blackburn
Guest
2 years 4 months ago

Seems like to be able to answer this question we first need to know — how much debt are they assuming and what will that do to their cash flow?

gordon arnold
Guest

We need to see value in any transaction in order for there to be motivation for investment. The change in ownership described in this discussion might do little for increasing the consumer interest in paying $10 – $15 for a cup of soup, a half of a sandwich and an iced tea. Maybe the new and improved ownership can figure out how to expand the seemingly weekday lunch-only peak performance. No matter how much I think about this, there isn’t much to get excited about. Just sayin’…?

Craig Sundstrom
Guest

The formulaic response is that going private “allows one to operate long term, freed from the prying eyes — and demands — of Wall Street.” But is that really true? Management still has to answer to shareholders, and it’s naïve to think they will all be of one mind as to what they want. And if the move involved debt, there will be answering to the creditors. Indeed debt has been the torpedo that sunk many of the most publicized retail buyouts.

Panera is obviously in a highly competitive industry, and while I think their name is respected, I don’t think it really has a “Wow!” factor that gives them a particular competitive edge. I wish them all good luck (unfortunately I think they may need it).

wpDiscuz
Braintrust
"The emphasis on long-term growth strategies instead of quarterly results will help a company with a unique niche in the fast-casual marketplace."
"The QSR segment is in the throes of change and evolution. Panera has the opportunity to lead the pack and set the bar for competitors."
"Panera will likely be more successful as a private company. This will not only be due to removal of the investor-driven quarterly thinking..."

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