Q&A: Why Panera founder Ron Shaich hates the term ‘fast casual’

Ron Shaich is the founder and former CEO of Panera Bread, and before that was founder, chair, and CEO of Au Bon Pain, the bakery-café chain. Since leading a $7.5 billion sale of Panera in 2017, Shaich’s become the managing partner and CEO of Act III Holdings, which is a lead investor in companies including Cava, Tatte, and Level99.

Shaich also is the author of Know What Matters: Lessons from a Lifetime of Transformations, a new book about his approach to business and life.

We asked him about why he hates the term “fast casual,” the “aha” moment that led him to transform Au Bon Bain from a bakery to a bakery-café, and why the best time to grow a business is during a downturn.

This interview has been lightly edited and condensed for clarity.

How were you trying to distinguish Panera from fast food initially in the early ’90s?

All that existed was fast food and fine dining and they had very different currencies. And the currency of fast food was a lot of food for not a lot of money. [Consumers] didn’t feel special in fast food, in which the seats were plastered to the floor, you had employees in paper hats, and [it was] industrial food.

And we said…we could serve something that actually elevated people that made them feel better about themselves for not a lot of money.

You don’t like the term “fast casual” and yet Panera is often credited with helping to invent the format. How’d it come to be known as “fast casual”?

Analysts essentially called it fast casual. The truth of the matter is that I hated it and resisted that forever. And I did because I’ve yet to see a consumer—which is where I start everything—wake up and say, “I’m so excited; let’s go to a fast-casual restaurant today.”…To me, that’s “specialty food” and that’s why I was wanting to call it that, but after 20 years, I gave up fighting it.

You tell a story in the book of working at the counter of the Harvard Square location of Au Bon Pain, the chain you co-owned until you sold it to focus on Panera, which at the time was a traditional bakery. A woman bought a baguette, asked you to slice it lengthwise, and then made a sandwich with deli cheese and roast beef she’d brought. What was your response?

A light bulb went off. I’m watching this woman, and she doesn’t actually want the bread; she wants the bread as an ingredient in the sandwich. And I’m going, “Oh my God, I’m slogging trying to sell croissants here and bread…and what you really want is the sandwich.” Why don’t I serve her what she wants and let the croissant and bread be a platform, not the end?...Let the baked goods be the platform that gives us differentiation to sell soup, salad, and sandwiches …And so that created the bakery-café category.

Whatever happened with the pizza, Crispani, that Panera introduced in 2006?

We developed this product using fresh dough, fresh olive oil, fresh mozzarella—it was really artisan pizza…We were in love with it, [customers] were in love with it, and we actually did our first television commercials to support it. We basically rolled it out with this high price and this expectation that we’re going to build this evening business. And what happened is it worked, but we were spending all our media on the pizza product, Crispani. And now we weren’t supporting our lunch business with communications and our lunch business started to fall off.

And by the end of the year, I looked at it—and I still love the product—but I realized I didn’t have the staying power and I didn’t want to take on the investment community…so I pulled it and it was done.

If Panera had been privately held, would you have kept the pizza?

As a private company, with a very long-term perspective, I could afford to be flat for a couple of years. As a public company with public shareholders who are saying, “What are you doing for me next quarter?” I couldn’t afford to handle that, or I would get too much opposition.

What do you say when CEOs ask you if they should go public?

Like every decision, it all depends, nothing is absolute. But what I can tell you as a general rule is 80% or 90% of the CEOs that take a company public live to regret it because they’ve entered a world in which their business is not prepared for it, their growth curve is not prepared for it, their management team is not prepared for it, and the pressures that are going to come to bear on them are, frankly, huge… And the nature of being public is you now have investors that own a chunk of you and are making judgments every day.

You write in the book that the worst time to grow a business is during a boom and the best time is during a downturn. Why?

You’re in boom days. Everybody’s growing, development costs are going up dramatically, real estate costs are going up, everybody’s levering up. That’s the time to slow down.

What should you be investing in instead of growing if you are flush at that time?

You should be biding your time. You grow slowly, solidly, but you don’t chase it.

Just keep your powder dry?

Yeah, when you chase it when everybody else is chasing it, you’re chasing it at the most expensive point in time.

So where was Panera when the financial crisis hit 2008?

We’re growing 15% a year. Now the recession hits, everybody’s flipped out...They’re running to the analysts saying, “We’re ripping costs out…sales are going down, and we’re ripping out costs faster.” And you know what they’re really saying? “We’re putting a tax on the customer: the lines will be longer, the tables dirtier, the food will not have as high a quality.” That’s what they did.

And Panera opened new stores.

Real estate was under intense pressure, and development costs were down 10%. Real estate is locked in for, in our case, 10–15 years, but deals are essentially done at the spot market rate. This was the best time to develop and we doubled the growth rate. Those stores built in the recession—2008, 2009—they were the best, the highest ROI stores we ever built.