Human Resources | November 2017 | By Danny Klein

Panera CEO Ron Shaich: This is Why I'm Stepping Down

The outspoken, political-minded leader of Panera doesn't plan to disappear.
Panera CEO Ron Shaich is stepping down.
Panera CEO Ron Shaich said the fast casual will continue to lead the industry. flickr: CIA Strategic Initiatives
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All has been relatively quiet on the Panera Bread front since November 8, when the company dropped two bombshells in a single afternoon. The first piece of news being that Panera entered into a definitive agreement to acquire Au Bon Pain, bringing together two iconic café chains that share plenty of history. Next, Panera’s founder, chairman, and CEO, Ron Shaich, made his decision to step down, effective January 1, public. Shaich isn’t exactly vanishing, though. The outspoken leader of the more than 2,000-unit chain is sticking around as Panera chairman and will remain a significant investor in the company.

Last week, Shaich reached out through email to his network, addressing the recent changes and explaining why and how they unfolded as they did.

Shaich said he plans to divide his time between helping Panera with its strategic initiatives, managing his own personal investments, and “combining all that with my desire to make a difference in the broader world, with a with a focus on battling the short-termism that is so pervasive in our capital markets and national political debate,” he wrote.

Some of this is related to Panera’s trajectory with JAB Holding Company. The Luxembourg-based company, which owns Krispy Kreme, Caribou Coffee, Keurig Green Mountain, Peet’s Coffee & Tea, among others, acquired Panera for $7.5 billion, back in the spring.

Shaich said the deal gave Panera “peace of mind” and will allow it to focus on long-term decision making. What that means has been pretty speculative to this point. Many pundits think JAB has the pockets and influence to take Panera global. Will it happen?

Nobody is sure, but the first real tangible change arrived with the purchase of Au Bon Pain, the company Shaich founded with his late partner, Louis Kane, in 1981. Au Bon Pain went public in 1991 and the company acquired Saint Louis Bread Company in 1993. St. Louis Bread was renamed Panera. Au Bon Pain was sold six years later, and the rest is history.

“While the ABP transaction closes the circle professionally for me the rationale for the acquisition is not about my need for closure but rather that this acquisition is a powerful strategic move for our company,” Shaich said.

Au Bon Pain, a Boston-based bakery-café chain, has 304 units worldwide. Panera said in the announcement that the brand will be part of its initiative to intensify growth in new real estate channels, including hospitals, universities, transportation centers, and urban locations.

Shaich said it was painful to sell Au Bon Pain originally, but the company needed to divert its resources to Panera, a budding fast casual that would eventually deliver a total shareholder return up 86-fold from July 18, 1997 to July 18, 2017.

“… bringing it back into our fold also represents completion for me. Most importantly, this acquisition offers exciting opportunities for our company and our franchisees to intensify growth in new real estate channels, specifically hospitals, universities and transportation centers that are central to our strategy to vacuum as many high-ROI dollars out of a market as possible,” Shaich said. “And it is an example of how we will use the Panera platform and our ability to make acquisitions to our advantage.”

As was revealed before, Blaine Hurst is stepping into the CEO role. Hurst has led many of the company’s significant innovations. He joined Panera in January 2011 as senior vice president of technology and transformation where he was asked to build the company’s digital capabilities and grow Panera’s 2.0 and e-commerce platforms. He was elected executive vice president of technology and transformation in May 2013 and executive vice president and chief transformation and growth officer in October 2014. Hurst was promoted to Panera’s president in December 2016.

“After years of working with Blaine, I am confident that under Blaine’s leadership, Panera will continue to shape the industry and make a real difference in the lives of our guests and all of you, our team members and franchisees,” Shaich said. “Indeed, I am so confident in Blaine, our leadership team and our future that I intend to remain the largest individual investor in Panera outside of JAB and its affiliates.”

Shaich said he plans to assist Hurst and Panera’s leadership team with customer-facing initiatives, external communications, and acquisitions as desired. Again, however, he spoke of his personal plans outside of Panera as a culprit for shifting roles.

“I see that short-term thinking as a malevolent force that inhibits innovation, civility, and national competitive advantage,” he said. “… I also want to ensure that I have the time to manage my personal investments and, most importantly, to actually do the work that I think needs to be done to impact the direction of our capital markets and country.”

Shaich added that the transition has been in the works for some time. He has gradually attended fewer meetings and spent less time in the officer. Meanwhile, Hurst has ramped up involvement.

“He is currently overseeing all of the planning for 2018, as well as making sure our initiatives maintain their momentum,” Shaich said.

Shaich returned to Panera in 2011 when the company’s growth started to stall. He said Panera needed to “reset our trajectory and reposition our company as a better competitive alternative with expanded runways for growth.”

The company has surely made good on that promise. It reported same-store sales growth of 5.8 percent in the third quarter and has been a leader in several key fields. Notably, the company’s digital innovations have it set to hit $1.2 billion in digital sales this year. The MyPanera loyalty program has 28 million members. Rapid PickUp, delivery, Panera at Home, and catering are all healthy parts of the fast casual’s business. In April, the company said it plans to commit 10,000 new employees to delivery. Panera is making moves with voice-activated ordering.

From a menu standpoint, Panera announced in March that it was becoming the first major chain to list the calories and added sugars of its fountain beverages at all locations. It also unveiled a kids menu with more than 250 possible meal combinations sans toys or sugary drinks.

“The entire industry is now running our playbook trying to catch up,” Shaich said of Panera, which has more than 100,000 employees and annual systemwide sales north of $5 billion.

Shaich said the move ultimately was bittersweet.

“Right now, we are winning more spectacularly than we ever imagined and yet I know in my heart that you and Panera are capable of even more,” Shaich told employees. “We’ve made the right ‘smart bets.’ We have a powerful strategic plan and we have the right people in the right places. We are set up for success. I truly believe we will continue to keep the promise of Panera and create an even brighter future for all of us.”