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Relations sour between Panera and Ron Shaich

Shaich’s new investment firm is suing the bakery-cafe chain over a recruitment agreement.
Photograph: Shutterstock

The new investment firm headed by longtime Panera Bread CEO Ron Shaich is suing its principal’s former employer in a second dust-up over recruiting each other’s executives.

The suit, filed Tuesday, accuses Panera of violating a written agreement that was drafted specifically to avert personnel disputes between the fast-casual chain and Shaich’s new company, Act III Management. The new firm’s holdings include Tatte Bakery & Cafe, an 11-unit chain in which Shaich owns a stake he acquired from Panera after exiting that operation.

According to Act III, it is permitted under an agreement with Panera to recruit the latter’s employees without violating their noncompete agreements if it provides written notice of a hiring at least two weeks before the intended start date. 

Act III said in its complaint that it did exactly that before offering positions to three technology specialists employed by Panera. It asserted that the notice was given in part to work out a transition plan with Panera. 

Instead of blessing the hires, the complaint continues, Panera personnel “immediately interrogated and challenged the employees about their decision to leave Panera,” threatened to sue the three for violating their noncompete agreements, and then fired them. The actions were taken within two hours of receiving the heads-up from Act III.

The suit identifies the three executives in question as Jim Dobson, James Kyle Phillips and Kris Gopalakrishnan. 

The action alleges that Panera’s reaction is part of “a scorched-earth campaign to intimidate employees from joining Act III.” It asks Delaware’s Court of Chancery to order Panera to abide by the agreement it negotiated with Act III regarding the recruitment of each other’s employees.  

That agreement, according to the suit, was struck Dec. 6 after Panera recruited Tatte’s president, Karen Kelley, to join the larger chain as chief restaurant operations officer. Act III said it was not informed about Panera’s interest in hiring Kelley, even though Shaich was still chairman of Panera and a consultant to its parent, JAB Holding Co., at the time she was being recruited. 

The suit suggests that Shaich’s relations with Panera, a chain he founded and parlayed into one of the restaurant industry’s outstanding successes, have cooled considerably since the brand was acquired by JAB in mid-2017. 

Like JAB, Shaich’s Act III Management and an affiliated firm, Act III Holdings, have become investors in restaurant concepts. Act III Holdings financed Cava Group’s $300 million acquisition of Zoes Kitchen in November. Shaich serves as chairman of the combined concern, Cava/Zoes.

It is not clear if he still holds a position with JAB.

 

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