On first blush, it’s like learning Warren Buffett has changed his name to Moonbeam and moved into a commune, one sweat lodge over from Donald Trump’s. Panera Bread, one of the restaurant industry’s biggest financial successes, the proof of free enterprise’s potential, the pin-up above the headboard of so many arch-capitalists, isn’t sold on the whole profit-motive thing.
To hear management tell it, last year’s $1.8 billion in revenues and $136 million in net income were the by-products of a long-range drive toward something more profound than money for money’s sake. They talk about taking a broader approach where employees, guests and host communities have as much influence on business decisions as the shareholders—and this from a public company.
To many in the restaurant business, it’s as counter-intuitive as encouraging guests to pay whatever they want, if they pay at all—which Panera is already doing at a few outlets, with an ultimate goal of spreading the Panera Cares program to every city in the country.
But that’s the sort of noble gesture you can pull off at three units, or even 30. How does this new strain of capitalism work at 1,600 bakery-cafes, not to mention a headquarters answerable to a return-obsessed Wall Street?
“It’s not always formally stated, but it’s what Panera has always been about,” says CMO Michael Simon. “How do we infuse more humanity into what we do? It’s moving beyond our functional benefits, to our values, beliefs and philosophies. Why do we exist as a corporation?”
In the practical terms spelled out by Simon and his boss, co-CEO Ron Shaich (who shares duties with co-CEO William Moreton), that means focusing the lens of a kinder capitalism on four areas:
“We’re trying to be a change agent in fixing a broken food system,” says Simon. “First and foremost, how does a humanistic company go about sourcing? We want to go from field to fork as quickly as possible, so our food is as fresh, as tasty and as nutritious as possible.”
Three years ago, the chain adopted new procedures for how its lettuce was harvested and transported. The result, Shaich said at the time, was “much tighter quality and much tighter temperature controls over our lettuce, all the way from the field through distribution to the bakery-café.” He was addressing Wall Street analysts, not foodies or mommy bloggers, yet he spoke solely in terms of quality, not cost or margins. Indeed, he stressed that Panera’s salad would improve to $12 quality, but the chain would continue to charge in the neighborhood of $8.
Transparency is a big part of the food piece, adds Simon, stressing that Panera was the first chain to post calorie counts on menu boards nationwide. He voiced the brand’s intention to remain forthcoming about what’s in its food.
Even before Panera was Panera (the company grew out of Au Bon Pain and St. Louis Bread Co.), “I wanted to create a restaurant where I wanted to visit,” Shaich said in an interview with Restaurant Business.
Simon views it from a higher altitude: “How do you create a dining environment with a real human lens?” That means striving for customer comfort, a conscious departure from the quick-service imperative of churning bodies through a store as quickly as you can process transactions. Panera, says Simon, is committed to pursuing a residential look and feel, designed for people rather than throughput, with the pleasantness, comfort and amenities that invite longer stays. The idea, says Shaich, is to provide “a gathering oasis.”
Panera had an eye-opening experience during a research project where consumers were asked to assess a few changes under consideration for the brand. As Simon remembers it: “They told us loud and clear, ‘Don’t tell us what you intend to do. What do you value, what do you feel, what do you believe? We want to associate with companies that share some of our values.’”
The upshot, he says, was striving for “an elevated relationship, a deeper related experience with our customers. Today I think people hunger for a personal connection. We can effect that and differentiate ourselves on that sense of connection.”
Toward that end, he said, the company is switching to marketing methods that are less one-way. “There’s an opportunity to have a real-live dialogue through social media, so we’re taking a more aggressive stance there.”
Panera also wants to turn its affinity program into what Simon tags an “engagement program.”
“If you’re a customer who likes to bake, we can give you recipes,” he explains. “We can give you tips from our own bakers. Or we can put you in touch with other customers who have an interest in baking.”
He also cites the possibility of giving patrons a sneak peek at possible menu additions before they hit test units, not only to get their feedback but to give them a real influence over what they’re offered. It’s letting them determine what they want to buy, instead of copping competitors’ emphasis on cheapness.
“Our inspiration is not just how do we get them in more often, but how to maintain and further that affinity so it’s more of a conversation,” Simon says.
Panera executives say the cornerstone of their variant on capitalism is a pledge that employees be treated by every member of the organization with at least as much kindness, consideration and respect as guests and investors.
“We want an environment that’s family-like, compassionate and caring, that makes me feel like I’m part of something much larger than myself,” says Simon. “Ideally you feel like part of something that’s in line with your values, that you don’t have to separate your personal life from what you do at work.”
“People come to work, and they leave themselves at home. That’s really crazy,” says Shaich. “What I’m talking about is a much more natural way to operate organizations.” Less role-playing, less awareness of who has to fear whom, and much more of a concerted effort with common objectives.
That high-care, anti-caste attitude translates into practices like offering healthcare coverage and other benefits to all employees, down to the crew level.
“If you’re not going to take care of your people, how are you going to deliver on your higher purpose?” asks Shaich.
And to make sure they are people the company actually wants to take care of there is a strict “No Jerks” hiring policy written into the restaurant’s cultural values statement.
The company’s cultural values statement helps guide things, as does a formal document known as Concept Essence. “Eighteen years later, that’s still our vision,” Shaich says. “People are always asking me, ‘What’s new and different for Panera?’ You know what I want to say? ‘Nothing. We’re doing the same thing. We just want it to be better.’”
“Over the last six months, we rethought how we impact society in a more meaningful way,” says Simon. “We’ve supported hundreds of small groups and charities over the years.” Now, he says, Panera is looking at such steps as harnessing that force for good into a nationwide mega-program, run in collaboration with a “good strategic partner.” Several are under consideration, but he begged off revealing them.
He indicated the chain would try to harness its nationwide might to complement the various local programs in which the brand is involved, not supplant them. It fits what Shaich calls “leveraging our scale for more good.”
To further harness that strength in numbers, Panera is considering the formation of what Simon calls a “volunteer corps,” a change army of employees and customers whose numbers and contributed time would be a considerable force for social good.
And, he indicated, the chain is reminding vendors that it prefers to do business with companies that share its values and goals. Among those objectives is alleviating food insecurity, the gnawing uncertainty that sociologists say a surprising number of Americans feel about the source of their next meal.
Panera has several programs in place to serve the hungry. Unsold breads, pastries and bagels are donated at the store level to local charities through an initiative called Day-End Dough-Nation.
And then there’s Panera Cares, the non-profit venture launched in 2010 with the objective of feeding anyone who needs a meal. At the three Panera Cares Cafes currently open, consumers can order from virtually the same menu used at a regular Panera unit and consume it in the same sort of setting. But they pay whatever they feel they can afford.
A recommended donation is provided for each item, but the outlay is purely at the discretion of the guest. About 20 percent of customers pay more, about 20 percent pay less, and the other 60 percent pay the recommended amount.
Two more of the non-profit restaurants are under development. “The goal is to have a Panera Cares Café in every city,” says Simon.
What about the shareholders?
Not on the checklist for serving Panera’s higher purpose is the capitalism part of conscious capitalism. And that’s by careful calculation.
Indeed, the dollars-and-cents cost of any initiative is a lesser priority than its effect on guests and employees. “This isn’t anti-profit, it’s how you get it,” says Shaich. “We align the concept with the higher purpose, and we have stronger unit-level performance as a result. The by-product of that is growth, and the byproduct of growth is corporate performance.”
Traditionally, “our higher purpose was very simple: To make a difference in the lives of our guests and our people,” says Shaich. “Profit is not the end, but it is a byproduct.” He pauses. “We also deliver in the short-term. It is the ante that allows us to make long-term commitments.”
Shaich says his company has operated that way since he opened a bakery-café in the Boston area in the 1980s. “How did we create Panera from this? We used Conscious Capitalism, not knowing those words.”
Panera is becoming “a little more overt” in using the philosophy of Conscious Capitalism to frame its activities, according to Simon and other executives. “Only in the last year have we articulated that matter of why we exist as a company,” he says.
Says Shaich: “For us, this clear vision has become like the North Star.”