The Founder of Panera Bread Explains the Economic Forces That Led to Trump

["Dave Farber" <farber () gmail com>]

Begin forwarded message:

> From: Dewayne Hendricks <dewayne () warpspeed com>
> Date: November 27, 2018 at 9:35:56 PM GMT+9
> To: Multiple recipients of Dewayne-Net <dewayne-net () warpspeed com>
> Subject: [Dewayne-Net] The Founder of Panera Bread Explains the Economic Forces That Led to Trump
> Reply-To: dewayne-net () warpspeed com
>
> [Note:  This item comes from friend David Rosenthal.  DLH[]
>
> The Founder of Panera Bread Explains the Economic Forces That Led to Trump
> By Sheelah Kolhatkar
> Nov 23 2018
> <https://www.newyorker.com/business/currency/the-founder-of-panera-bread-explains-the-economic-forces-that-led-to-trump>
>
> The North American sandwich chain Panera Bread began as a single cookie shop called the Cookie Jar, which opened in 
> downtown Boston in 1981. The next year, the shop’s founder, Ron Shaich, merged the Cookie Jar with a struggling 
> French bakery called Au Bon Pain. In 1985, the combined restaurants started selling homemade soups and sandwiches 
> made with freshly baked baguettes. At the time, the weekday-lunch landscape was limited mainly to fast-food chains 
> such as McDonald’s, and formal sit-down restaurants. Shaich’s elevated-sandwich concept fit right in the middle, 
> serving office workers who were in a rush, but also increasingly health conscious. By the nineteen-nineties, the 
> company had expanded to include four different divisions, including a new bakery-café franchise called Panera Bread. 
> At the time, the food industry, which had previously been dominated by mass-market brands such as Coca-Cola, 
> Budweiser, and Maxwell House, was being taken over by companies like Vitamin Water, Sam Adams, and Starbucks. Shaich 
> believed that the burgeoning category of higher-end restaurant chains, which came to be known as fast casual, was 
> about to explode. “When the world is changing, you need to transform,” Shaich, who is sixty-four and bright-eyed, 
> told me recently, over coffee in Manhattan. “But transformation doesn’t occur in thirty minutes.”
>
> The company went public in 1991 and continued expanding at a brisk pace. In 1999, Shaich decided to sell Au Bon Pain 
> to focus on Panera, which he felt was best positioned to take advantage of the direction in which the industry was 
> moving. His goal was to build a chain of restaurants that served food that customers could eat without guilt, in cozy 
> cafés where they could hold meetings or Bible-study groups. “They wanted food that they felt good about, they wanted 
> environments that engaged them, they wanted people that cared,” Shaich said. “Basically, they wanted to feel 
> respected by their food. And what fast food had become was a commodity. It had become nutritional cocaine.” Shaich 
> said that when he told people what he was trying to do, they were skeptical, “because whenever you’re going through 
> transformation, nothing is proven until it’s done.”
>
> By 2010, Panera was opening a new store approximately every three days, and had more than a billion dollars in annual 
> sales. But the financial crisis had made consumers more cautious with their spending. To keep them coming, Shaich 
> developed a system for digital ordering, a catering and delivery service, and a loyalty program. These programs 
> required significant investment, but they paid off. By 2017, Panera had become one of the most successful restaurant 
> chains in the United States, and much of the industry adopted its innovations. It now has more than two thousand 
> locations, and more than a hundred thousand employees. It also has one of the industry’s best-performing stocks. “I 
> made an awful lot of money, personally,” Shaich told me.
>
> Over the last few years, however, Shaich has come to believe that the current business environment is far less 
> amenable to the process of building companies like his. Wall Street has embraced the idea that companies exist solely 
> to serve the holders of their stock. Under this way of thinking, managers of companies should focus their actions on 
> driving short-term value for their shareholders, and should pay far less (or no) regard to other constituents who may 
> have a stake in the business, such as employees, customers, or members of the community. Shaich partly blames 
> activist hedge funds, many of which buy shares in companies with the aim of pushing their management to make 
> decisions that drive their stock prices up within a few months. According to Shaich, this makes it more difficult to 
> invest in long-term projects, and create sustainable jobs.
>
> Panera had its own encounters with activist investors. In 2007, the Shamrock Activist Value Fund bought a stake in 
> the company, and, in 2015, Luxor Capital did the same thing. “I had activists twice—I almost lost this company,” 
> Shaich told me. Panera was still in the midst of its transformation, and was spending a hundred and fifty million 
> dollars to develop new technology for online and mobile ordering. The efforts hadn’t shown results yet, but the 
> investors wanted him to outsource the project or shut it down. They also wanted him to step down as C.E.O. “When you 
> have activists attacking you, the very things you’re sworn to protect—the vision, the organization, other 
> shareholders—your ability to protect them, like your children, are at risk.” Almost all public companies now face 
> similar pressure, though Shaich points out that the most successful new businesses, such as Facebook and Amazon, have 
> stock structures that make it difficult for hedge-fund investors to buy shares and tell the managers what to do. In 
> 2017, Shaich took Panera private to protect it from short-term pressures, and sold it to a European fund called JAB 
> Holding Company, which also owns Pret A Manger, Krispy Kreme, and Keurig Dr Pepper. He believes that the fixation on 
> short-term profits is jeopardizing the future of American business, and creating social instability that has 
> contributed to our current state of political polarization.
>
> [snip]
>
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