Special Report | May 2011 | By Daniel P. Smith

Moreton’s View from the Top

The Panera CEO has spent one year at the helm of the fast-casual industry’s biggest company. His one goal? To keep the company on top.

On the evening of May 12, 2010, Bill Moreton and dozens of his Panera Bread colleagues celebrated the career of Ronald Shaich, the bakery-café’s cofounder, departing CEO, and ultimate visionary. For 25 years, Shaich guided Panera’s growth from a 19-unit chain into a fast-casual giant claiming $3 billion in sales.

Like many, Moreton stood at the center of that room in St. Louis and rattled off Shaich stories alongside compliments and gratitude. The room was jovial and celebratory. Moreton didn’t know how different tomorrow’s tone would be.

On May 13, at the company’s annual meeting, Moreton again stood in that same room, for his first address and public moment as the new CEO of Panera Bread. Suddenly, life was different.

Although the transition from Shaich to Moreton was six months in the making, little prepared Moreton for the gravity of the situation, the moment in which he stepped out as

Panera’s leader. As Panera’s co-COO, Moreton could slide into the background; as CEO, he cannot hide.

“You feel it acutely,” Moreton says of the responsibility of shepherding Panera’s 1,400-plus cafés and 50,000-person workforce. “There’s a successful heritage that needs to be carried on at Panera, and there’s no escaping that reality.”

One year later and still settling into his seat at the head of Panera’s table, Moreton still feels the responsibility, yet remains confident that he—and Panera—will continue to deliver.

Panera’s New Leader

Although self-assured and bright, Moreton is neither a larger-than-life personality nor pompous. Above all, he’s pragmatic and a team player. In some ways Moreton even appears embarrassed to sit in Panera’s CEO chair, often sending praise the way of the company’s established senior leadership team.

In an hour-long one-on-one at Panera’s suburban St. Louis headquarters, Moreton never expresses a single desire to put his own stamp on the brand, never breaks character to tout his own accomplishments or espouse any smarter-than-thou ambitions. The task, he says, is simply to continue Panera’s charge with its company ethos and long-term outlook in mind.

“The companies that try to respond to the trend of the day easily lose their way,” Moreton says. “We’ve cemented our roots and know what needs to be done.”

Candid and articulate, the 51-year-old bispectacled Moreton speaks with energetic hand movements, often pointing—subconsciously, it seems—to the embroidered Panera logo on his blue dress shirt every time he mentions the phrase “Panera’s soul”—an occurrence that is as frequent as it is enthusiastic. It’s part company line, yet greater part unwavering belief in his corporate America team. Moreton’s at home with Panera, perhaps a result of a five-year hiatus from the brand in which objectivity and insight into the company’s distinctive qualities planted itself in his mind and compelled his return in 2008 as co-COO.

From 1998 to 2003, Moreton served as Panera’s executive vice president and chief financial and administrative officer. After a short-lived retirement, he held a pair of two-year leadership posts: CEO at Wendy’s subsidiary Baja Fresh, followed by a stint as president and CFO of Potbelly Sandwich Works. Both experiences reminded Moreton of Panera’s charm and reinforced a pair of industry lessons that will serve as central tenets of his Panera leadership.

“At Baja Fresh, I saw the absolute necessity of communicating your points of differentiation effectively. … At Potbelly, I learned the value of choice … and the fact that people want different things at different times,” he says.

Moreton returned to Panera in October 2008 and found a bigger, more robust company. The store count had doubled to more than 1,000 and Panera was no longer a minor player in the fast-casual game. Alongside record revenues and profits, Panera’s stock had climbed and sat in the top tier of all companies in the Russell 1000.

Above all, Moreton rediscovered the Panera culture he so admired, one difficult to explain when he was in the executive trenches each day, yet easy to recognize upon his homecoming.

“The company’s size and scale had changed, but we were talking about the same issues in the same way,” Moreton says. “Panera’s DNA—how you treat customers, how you improve, how you innovate—didn’t budge.”

The succession plan from Shaich to Moreton was officially announced in November 2009 and many wondered how Panera would fare as Shaich, the brand’s only CEO, ceded control to Moreton.

Shaich was a gut-trusting mover and shaker, an industry legend in many quarters for turning the then-modest St. Louis Bread Company into the fast-casual behemoth that is today’s Panera. But Moreton possesses a blue-collar vibe, a clear product of his Chicago roots and a nod to the Midwestern city long known for fostering lunch-box-and-hard-hat characteristics and matter-of-fact sensibilities even in its most polished professionals.

“Let’s face it, this isn’t the fashion industry. We’re selling soup, salad, and sandwiches, which don’t go out of style.”

“Let’s face it,” the father of two youngsters says, “this isn’t the fashion industry. We’re selling soup, salad, and sandwiches, which don’t go out of style.”

Unlike Shaich, who remains involved as Panera’s executive chairman, Moreton doesn’t face the task of building a national brand from the ground up. But Moreton does inherit the burden of a company on top of the fast-casual category. Few cared what St. Louis Bread Company did in the mid-1990s; now in 2011, competitors and customers watch Panera with earnest eyes. The company’s movement throughout Moreton’s tenure will be analyzed, critiqued, studied, and judged. Moreton acknowledges the attention, but doesn’t seem at all concerned.

“There’s a big target on our back. People watch to see what we do with our menu, our environment,” he says. “But I don’t think people realize that it’s the combination of so many factors that have made Panera what it is.”

Of course, Moreton recognizes some of the company’s inherent advantages, all of which provide him the confidence to believe that Panera will remain an industry leader. He points to Panera’s size and scale as particular advantages. With $3 billion in systemwide sales, the company exhibits purchasing power and leverage rare in the fast-casual category. Furthermore, Panera’s national name recognition attracts customers and quality staff, while longstanding relationships with vendors lead to proprietary equipment capable of increasing the bakery-cafés’ efficiency and throughput.

“While some would use that leverage to cut costs, we’ve chosen to use it to come up with quality and innovation that others cannot match,” Moreton says.

One Year Down

When Moreton entered the CEO’s office, he viewed his new role as a relay race. Shaich handed the baton; Moreton is required to keep the pace.

“We’ve been lucky to be successful for so long,” Moreton says. “Every decision we make now is about continuing that streak with the same philosophical moorings and bent.”

Moreton’s first objective as new CEO was as clear as it was quiet: to not disrupt Panera’s culture and surging momentum by asserting his presence and sparking a corporate soap opera.

“If I wanted to accomplish anything in my first year, that was it,” Moreton says, adding that leadership development throughout the Panera ranks remains a foremost priority.

As promised, Moreton’s first year has been about solidifying Panera’s reputation as an industry leader. He placed a priority on reducing customer hassle and friction, attacking the ordering system, and testing table service in dozens of the brand’s bakery-cafés.

“We obsess about ways we can improve the customer experience,” Moreton says. “We look at every decision first through the customer lens, then through the operator lens, and finally through the cost lens.”

Moreton’s first year has witnessed its share of newsworthy items, highlighted by the launching of the MyPanera customer loyalty program in November 2010.

Distinct from a discount program, the MyPanera program seeks to deepen customer relations. Driven by sophisticated consumer-habit tracking systems, MyPanera doesn’t look at what customers say they do, but rather what they really do, a critical R&D distinction that captures behavioral-based data rather than self-reporting. The longer a customer frequents Panera, the more personalized the interaction becomes, leading to preview tastings of new products, exclusive events, and surprises such as free menu items.

“It’s as close to one-to-one marketing as we can possibly get,” Moreton says. “We’re going to make it special and make it another point of differentiation.”

By the end of 2010, Panera hit the news again with its voluntary decision to post full calorie counts on menuboards, the first national chain to take the step. As much as the operational move might have been about looming legislation, Moreton insists the decision was made with consumer trust as the guiding tenet.

“We have a menu that’s built around choice, some indulgent items and some healthy, and it simply didn’t make sense to take this out of the customers’ hands.”

“The underlying issue was that our consumers wanted to know. If we have a trusting relationship with them, then we needed to share this info,” he says. “We have a menu that’s built around choice, some indulgent items and some healthy, and it simply didn’t make sense to take this out of the customers’ hands at the point of purchase.”

Panera’s Future Path

Moreton says Panera’s success boils down to a few distinct factors. There’s the menu and quality of the food, as well as the environment and the people. As the economy staggered and others slashed costs and prices, Panera only looked more thoroughly into excelling in these areas.

“You put these deposits in a customer’s emotional bank account,” Moreton says, “and it wins in recessionary times as well as boom times.”

Part of Panera’s allure years ago stood in its decision to woo the business and student crowd with complimentary WiFi, a move some thought foolish and costly, as well as encouraging book clubs and business associates to meet in its restaurants. The “chill business,” as Moreton calls it, has become a driving force for Panera and bolsters the company’s reputation as a customer-centric spot. As customers get more dependent on personal technology, the brand will adapt to that shift like a nimble private company rather than a corporate freight train, advancing its customer connections.

“We can move with our customers and change with them,” Moreton says. “As needs and preferences change, we’ll move with it while maintaining our core.”

With a check average greater than most in the segment, Panera meets consumers’ sprouting demands for higher-quality food, service, and experience. Without the taxes of time and service burdening casual-dining establishments, the brand answers consumers’ desires for convenience. Those traits bode well for Panera’s future, though Moreton knows nothing is guaranteed.

Panera will continue its reach to “own” categories, Moreton says. With high-quality salads, for instance, the company felt china and silverware were a must. The brand also established a new distribution process that allows Panera to control lettuce from the field to the fork, improvements that offered a better, fresher product.

“We’re looking at the totality of the experience,” Moreton says of Panera’s big-picture mindset.

The brand will also look to heighten its off-premise opportunities. Panera’s catering business, unveiled in 2004 to only modest acclaim, jumped 20 percent in 2010 and spearheaded Panera’s ascent. The company’s all-out assault on the catering segment featured a broad reorganization highlighted by more sophisticated databases, improved packaging, and the interplay between regional catering sales managers—who serve as direct touchpoints with clients—and in-house catering coordinators. Whenever possible, Panera associates deliver food and arrange the space, a way for the restaurant to bring its experience to the outside world.

“There’s a Panera experience we do well within our four walls, but we’re finding the way to replicate this with catering,” Moreton says.

Panera will devote similar attention to its drive-thru business, seeking ways to answer consumers’ thirst for convenience. Unlike other brands, however, Panera plans to continue separating its drive-thru operations from the restaurant’s guests, a strategic move to address convenience without disrupting the cozy dine-in experience.

Leaning forward in his chair, Moreton says Panera’s entering an exciting time of growth, including plans to open as many as 100 new bakery-cafés each year. The company has upcoming changes to its menu and is “broadening out” categories, marketing, and messaging initiatives. The to-go business, catering, and various other off-premise channels will continue receiving attention.

“We learn, we reiterate,” Moreton says. “That’s what we do well, and that’s what we’ll continue doing.”