The Exchanges

Q So at a certain point, I mean, so you're learning about the cookie business, I guess, and then at a certain point, you get this idea like, hey, wait, I can do this myself. I can have my own cookie store?

A Yes, and I can literally remember traveling across Indiana on my way to Fort Wayne to open a new cookie store, and it hit me, and I said, why are we opening this in a mall? There's a huge opportunity to open these in, in an urban setting. Why don't we open one? And I can remember going to my boss. I remember him taking me to meet, um, the CEO of the company. I said, I want to open an urban cookie store. And he looks at me and he says, we don't do that here. We open mall-based retail units. And I thought to myself, well, if you're not going to do it, I'd like to go do it. Why shouldn't we? And I'm the kind of guy who, if I say I'm going to do it, I want to go do it. And it led me to actually resigning my job, and I moved back to Boston. And I started looking for real estate. And the reality was, nobody would lease me space.

AI assessment note: “Yes, and I can literally remember traveling across Indiana on my way to Fort Wayne”

Q I mean, it's insane. It's in the middle of the worst financial crisis. How did that happen? I mean, how did the, the, the financial crisis and the collapse of the economy not affect you guys?

A Our whole view was to make smart bets, and one of those smart bets comes from a contrarian perspective. Pre the recession, pre the Great Recession, the whole world was, was in a go-go kind of context. Everybody was levering up their balance sheets, putting on debt, borrowing money to buy back stock, grow, grow, grow. At that time, we held back. Real estate costs were high. We didn't lever up. When the recession hit, as Warren Buffett put it, that's the time you make a fortune. Our concept was still strong. People were still visiting us. We decided to invest our resources in growing even more quickly during the recession. Real estate costs were down 20%. Construction costs were down 20%. Simultaneously, most of our competitors were ripping costs out of their P&L, trying to chase their costs down as their sales were descending. It was a vicious cycle. We said this is the time to build competitive advantage, and ultimately we tripled the stock through the recession.

AI assessment note: “We decided to invest our resources in growing even more quickly during the recession.”

Q So at a certain point, I mean, so you're learning about the cookie business, I guess, and then at a certain point, you get this idea like, hey, wait, I can do this myself. I can have my own cookie store?

A Yes, and I can literally remember traveling across Indiana on my way to Fort Wayne to open a new cookie store, and it hit me, and I said, why are we opening this in a mall? There's a huge opportunity to open these in, in an urban setting. Why don't we open one? And I can remember going to my boss. I remember him taking me to meet, um, the CEO of the company. I said, I want to open an urban cookie store. And he looks at me and he says, we don't do that here. We open mall based retail units. And I thought to myself, well, if you're not going to do it, I'd like to go do it. Why shouldn't we? And I'm the kind of guy who, if I say I'm going to do it, I want to go do it. And it led me to actually resigning my job, and I moved back to Boston. And I started looking for real estate. And the reality was, nobody would lease me space.

AI assessment note: “Yes, and I can literally remember traveling across Indiana”

Q All right. So something, something happens early in this period, shortly after you go public, which is Obon Pan acquires this, uh, small chain of St. Louis based sandwich shops called the St. Louis Bread Company. What, what's the story there? Why did you buy this, like, small chain in St. Louis? Was it, was the idea to, to turn them into Obon Pans?

A No. You know, I, I talk to everybody in our industry, and there's nobody I don't learn from, and I was asked by an investment bank to meet several gentlemen who owned a company called St. Louis Brand Company, and it hit me. These were 19 stores in St. Louis doing volumes almost as much as we did within Au Bon Pain, but doing so in suburban St. Louis, and it struck me. This was an opportunity To acquire St. Louis Bread Company, and maybe we could build it into 304 105 hundred stores in the suburban marketplace, while Au Bon Pain was our urban strategy. So in November of 1993, we bought the St. Louis Bread Company, those 19 stores, for twenty-three million dollars.

AI assessment note: “No. You know, I, I talk to everybody in our industry”

Q All right, so something, something happens early in this period, shortly after you go public, which is Obon Pan acquires this, ah, small chain of St. Louis-based sandwich shops called the St. Louis Bread Company. What, what's the story there? Why did you buy this, like, small chain in St. Louis? Was it, was the idea to, to turn them into Obon Pans?

A No, you know, I, I talk to everybody in our industry, and there's nobody I don't learn from, and I was asked by an investment bank to meet I met several gentlemen who owned a company called St. Louis Bread Company, and it hit me. These were 19 stores in St. Louis doing volumes almost as much as we did within Au Bon Pain, but doing so in suburban St. Louis, and it struck me. This was an opportunity to acquire St. Louis Bread Company, and maybe we could build it into 304 105 hundred stores in the suburban marketplace while Au Bon Pain was our urban strategy. So, in November of 1993, we bought the St. Louis Bread Company, those 19 stores, for twenty-three million dollars.

AI assessment note: “build it into 304 105 hundred stores in the suburban marketplace while Au Bon Pain”

Q In other words, you sold, what, their croissants?

A Well, I actually converted my store to where it had two logos. It had the Au Bon Pain logo, and it had the cookie jar logo, and you could get French baked goods that we baked on premise, or you could get the cookies in the afternoon, and the thing started doing very well. Um, but, um, as an operator, and I'm an operator, an operator is a guy who runs these businesses, You know which of your vendors are any good and which aren't, and these folks at Au Bon Pen, it was very clear to me they were out of control. I loved their product. Their product was great, but as a business, they were disorganized. They, they, sometimes they delivered, sometimes they didn't. Sometimes they billed me, sometimes they didn't. To this day, I'm sure I still own money. They just didn't have the basic processes and disciplines, and that's typical in many small businesses. And I saw a powerful opportunity And I thought to myself, wow, I really could straighten this business out. I really could operate this. So what ended up happening, Guy, I became friends with the gentleman who was running the, the three Obonpens, the guy who later became my partner, Lucane.

AI assessment note: “I actually converted my store to where it had two logos”

Q So you, you are, uh, taking a big risk in 99 when you sell a bone pan. By 2003, Panera is doing a billion dollars in sales. Are you doing a victory lap? Are you, like, high-fiving people and saying, see, I told you.

A Guy, I never do a victory lap. The reality is, right, the time to worry about tomorrow is today, and my job is to discover what's going to happen tomorrow. I have what's called a retailer's nightmare. I have a fear that, that somehow, someway, nobody's going to show up tomorrow, and then what? You know, I get up on a stage, right, and I, I speak in front of 5000 Panera people, and I, I sit there, and I think to myself as I'm speaking, My God, these people are counting on us to make the right decisions. Their mortgages, their kids' education, their livelihoods, their lives, their careers are counting on us to make the right decisions. So I'm continually asking myself, where are we going to be in three and five years? What do we need to do to get there? How do we make sure we don't make a mistake? How do we care for this? How do we steward it in the right way?

AI assessment note: “Guy, I never do a victory lap. The reality is, right”

Q In other words, you sold, what, their croissants?

A Well, I actually converted my store to where it had two logos. It had the Au Bon Pain logo, and it had the cookie jar logo. And you could get French baked goods that we baked on premise, or you could get the cookies in the afternoon. And the thing started doing very well. Um, but, um, as an operator, and I'm an operator, an operator is a guy who runs these businesses. You know which of your vendors are any good and which aren't, and these folks at Au Bon Pain, it was very clear to me they were out of control. I loved their product. Their product was great, but as a business, they were disorganized. They, they, sometimes they delivered, sometimes they didn't. Sometimes they billed me, sometimes they didn't. To this day, I'm sure I still owe money. They just didn't have the basic processes and disciplines, and that's typical in many small businesses. And I saw a powerful opportunity, and I thought to myself, wow, I really could straighten this business out. I really could operate this. So what ended up happening, Guy, I became friends with the gentleman who was running the, the three Obonpens, the guy who later became my partner, Lou Kane.

AI assessment note: “you could get French baked goods that we baked on premise”

Q So you, you are, uh, taking a big risk in 99 when you sell a bone pan. By 2003, Panera is doing a billion dollars in sales. Are you doing a victory lap? Are you like high-fiving people and saying, see, I told you.

A Guy, I never do a victory lap. The reality is, right, the time to worry about tomorrow is today, and my job is to discover what's going to happen tomorrow. I have what's called a retailer's nightmare. I have a fear that, that somehow, someway, nobody's going to show up tomorrow, and then what? You know, I get up on a stage, right, and I, I speak in front of 5000 Panera people, and I, I sit there, and I think to myself as I'm speaking, My God, these people are counting on us to make the right decisions. Their mortgages, their kids' education, their livelihoods, their lives, their careers are counting on us to make the right decisions. So I'm continually asking myself, where are we going to be in three and five years? What do we need to do to get there? How do we make sure we don't make a mistake? How do we care for this? How do we steward it in the right way?

AI assessment note: “Guy, I never do a victory lap. The reality is, right”

Q Uh, because it, it seems like you guys had this amazing, like, very successful partnership, and, and I know, um, Lou passed away in 2000, but how did you guys do that? Like, how did you, because most people, most partnerships break down. People fight. They get jealous, angry. They get resentful. Like, Did you, did you have an agreement? How were you able to work so well together?

A Well, first off, I'll describe Lou. Lou was our version of Blake Carrington from Dynasty. He was direct from, from Central Casting. And he, he looked the part. People loved Lou. And Lou probably was at his best in relationships, in building relationships. And, and, and I was the guy who, Who really thought deeply about the business, who ran the business and made it happen. And Lou and I's partnership worked because we understood each other. Um, I owned, you know, six times more stock than him, but most of the, the community at that point undoubtedly thought the company was Lou's. When I was 20 years his junior, I was the guy who, you know, worked with Lou. He was, um, Harvard College, a major fundraiser for Harvard, He was on the commandant staff in the Marine Corps, And Lou was able to, through his relationships, develop the real estate, and he had the real estate, and I could turn it into something, and so we were perfect for each other, and both of us, till the day he died, took care of each other.

AI assessment note: “Lou and I's partnership worked because we understood each other.”

Q Were you guys just being rowdy or anything, or wild or anything?

A No, we were shopping, but I came back to campus, and I was in my dorm room with a couple of friends, and I said, you know, why are we shopping there? How the heck can they treat us like this? We're what supports that store. We said, what do we need them for? We can do, we can do this ourselves. We can have our own convenience store. And I said, you know, this isn't going to be that hard. Let's go do it. And we approached the university. They weren't so keen on this, but, um, I moved the question to the student body. Um, they voted in support of it, and I basically agreed to spend that summer between my sophomore and junior year opening this convenience store guy.

AI assessment note: “No, we were shopping, but I came back to campus”

Q Were you guys just being rowdy or wild or anything?

A No, we were shopping, but I came back to campus, and I was in my dorm room with a couple of friends, and I said, you know, why are we shopping there? How the heck can they treat us like this? We're what supports that store. We said, what do we need them for? We can do, we can do this ourselves. We can have our own convenience store. And I said, you know, this isn't going to be that hard. Let's go do it. And we approached the university. They weren't so keen on this, but, um, I moved the question to the student body. Um, they voted in support of it, and I basically agreed to spend that summer between my sophomore and junior year opening this convenience store guy.

AI assessment note: “No, we were shopping”