The Exchanges

Q Is that what you were trying to do with the concept essence document is like hash that out?

A Totally. Concept essence was what we started every business and every business we're in today. And we should talk about the multiple businesses we're in today. Every business that we're in starts with a concept essence document. What is a concept essence document? It's essentially a script for regional theater. Think of it this way. If you're in a multi-unit business, I'm running thousands of, of, of regional theater shows that are performing 18 hours a day. And so what is that script? What is the aesthetic of the environment? What is the food and the food attitude? Um, what is the humanity? What are the people like? How do you experience it from a consumer's perspective when you walk in? And we try to really go deep and use words that mean something in writing that script. Or that vision for how we're going to compete. And that becomes an organizing tool. I mean, just imagine at Panera, we had a 125,000 people. How do you get them all aligned with what we're trying to create if you can't put it into words?

AI assessment note: “Totally. Concept essence was what we started every business and every business we're in”

Q Is New York a good barometer then? Like if it works in New York?

A No, it's the funniest thing. People come from Europe all the time. They all go to New York. It's the worst market because it's not the rest of the country. It's not representative. I'll tell you a quick story. And we'll go back to the act three thing. Uh, one of the first discussions I remember having with Brett Schulman, our CEO down at Cava, I said to him, Brett, right? You, you know, you and the sweet green guys, you all went out, you know, you started in DC, and then you went out to LA as your second market. I said, here's the deal. I said, what really matters is not how you do in LA, in Malibu, in West Hollywood. What matters is how you do in Fredericksburg, Virginia. Mm-hmm. You, you make it in Fredericksburg, Virginia. You do two to three million a unit. I'll show you a thousand locations in America. That's the key. And, and I will tell you that if you're building a business of mass scale, it isn't New York City that matters. Um, it isn't LA that matters. It's everything in between. And can you offer people something of quality and substance? Uh, it's, it's a different environment to compete in. Um, New York City costs are three to four times higher. It's, it's, if you're an, you know, if, if you're really good, you can make it, but it's very difficult.

AI assessment note: “No, it's the funniest thing... It's the worst market because it's not the rest”

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A You know, it's interesting, so I, I, I left Panera. I had always had interest in a number of other little businesses, and I was doing, after I left, I was doing a lot of speaking on the pervasive short-termism in the U.S. capital markets, and how, not just our, our body politic, but our capital markets, and how that was Essentially making us less competitive. It was, it was not helping our GDP growth. If we're not thinking long-term, we're not going to have innovation. If all we want is, is to pop the stock, it's short-term cost-cutting that drives it. One of my, my associates, a guy named Keith Pascoe, oh, I, had worked with me at Panera, said, why don't you take your own money and put your money where your mouth is? And I ultimately took Roughly two hundred million dollars of my own money, no LPs, no external folks, just my own money and a bit of money from some of my partners, um, some of the people that chose to join us and took some of the people I had worked with and decided to go do it. And essentially I created a investment vehicle, because it's not a firm, it's called Act III. You can figure out where that comes from, Obonpan, Panera, and now Act III Holdings. And within eight weeks of, of, of leaving Panera, had gotten involved in our first really real deal, which was Cava. I had been an investor in Cava, uh, when it was two restaurants, just a little something. And a…

AI assessment note: “gotten involved in our first really real deal, which was Cava.”

Q Do you think about control differently now with all your experiences?

A I'd answer it differently. You asked me if I think about control. Look, one of the lessons I've learned is to believe in yourself. When I was growing up and coming of age professionally, if you're smart, you're always going to say, that guy's leaning on me about this or that. What am I not getting? What should I do? And one of the lessons I learned as I look back is to trust myself, that I actually know what I'm doing, And I have to believe in it, and I have to have the faith to get through the long march. I have to have the faith to go through the pain of transformation. One of the really interesting retrospective lessons for me is to actually trust myself, and that has led to a, to a decision that generally when we, we, we like to be in a control situation in a company. By that I mean that we're willing to bet our own money, we're willing to bet on ourselves, myself, and the Act Three partners, but we don't want to be at the effect of somebody else who has a different idea, and, and straight up, when you have investment partners, the best way I can, I can express it to you, it's a little like having a baby with someone. You take their money, you know, they have, they, they have legitimate rights. And if you're the kind of person I am, you want to listen, and you want to be responsive. And so I like generally being in a control position, because it allows us to take a long-ter…

AI assessment note: “that has led to a, to a decision that generally when we, we, we like to be in a control situation”

Q Well, let's talk about building a company. One of the phrases that you use over and over again is means and byproduct. How does that factor into building the company?

A Well, I think it starts with life. So, so much of what I've learned about building companies starts with life, Shane. I think in much of our society, much of our lives, we've confused byproducts with ends and means. I have a friend who's a type one diabetic. His goal in life is to stay alive as long as you and me. But that is not something he can control. It's a byproduct. What is it a byproduct of? Of, of a simple end. Keeping his blood sugar between 81 80. When he does that, the byproduct is life. What's his means? Diet, exercise, and insulin control. It's literally the same thing in business. Do I want value creation? You better bet on it. But the way I get value creation is by creating a better competitive alternative, a place that people want to come visit you in, that they're willing to walk past your competitors to come to you. What's the means? It's everything I do every day in a business. It's how I spend my time. It's focusing on the aesthetics, the operations, the structures, the processes, um, the way in which we engage with our team members, the way in which we engage with our customers. That's the doing of the doing that drives the, the, the end, a better alternative that actually creates the, the, the wherewithal to have the byproduct. Only I can tell you is those companies, those CEOs, those leaders that focus on the, on the, on the byproduct, the outcome, never…

AI assessment note: “It's literally the same thing in business. Do I want value creation?”

Q Take me through one of those quarterly reviews. What does that look like to you? Do you, like, pull up your calendar and look at how you're spending your time? Do you?

A Yes, we look at time, but it's not so much about time. Time is a, is a means. It's not the, the end. Uh, I'm really looking at what did I get done? Did I get done the things that I said I needed to do to create that condition that I'm trying to attain in three, five, and 10 years? So, I'll give you a very specific example, and we're staying in the health domain. I think it was probably 15 years ago, I went to my doctor, and I realized I was on the edge of becoming pre-diabetic. Uh, I was also doing work at Panera, and I had a medical advisor helping me deal with how our food manifested itself, and we wanted to really serve people. We had done a clean food initiative, and He put me on a continuous glucose monitor, and he wanted me to see how I was affected by Panera food, and, and that whole experience between my doctor and this work I was doing at Panera made me realize I needed to manage my own relationship with carbohydrates, my own relationship with my diet, and that led me to say, hey, if you're ever going to do this, I was at that time, you know, mid-fifties. I said, if I'm ever going to do that, I got to get to work on doing it. And I then put that into projects, one of which was, uh, in my case to, to move to a more vegan diet. Another piece of that was to hire a trainer. And I hired a Ukrainian, uh, former Olympic trainer, track and field coach, who would come to my hou…

AI assessment note: “I'm really looking at what did I get done?”

Q Does it change how you think about sort of food and the experience that you're creating for people in the restaurant? Like, I think of something like True Food Kitchen, which is a very health conscious sort of restaurant. How does it change how you think about serving millions of Americans every day?

A I've always come from a place of wanting to make a difference in people's lives. My way of approaching the world was Essentially, initially in a political context, and I discovered through some experiences in university, and we can talk about these, but, but I discovered that business is probably one of the most creative things you can ever do, and for a kid who couldn't dance and couldn't sing, I was, I was blown away by the power of business, both the creativity of it, and it is a lever to change. I think I've been involved in more change as a business person, More positive change for the world than I ever could have been if I had done politics or gone into government or a bit of a lawyer. I mean, you take Panera. Panera was one of the two first brands to introduce antibiotic-free chicken in America. It led to changing the marketplaces, the challenger brand, and doing so. We actually opened up the market, lowered the prices, and in came, you know, everybody from McDonald's to Chick-fil-A. We were the Among the first people to remove trans fats, um, from our menu, um, in, in the early, one, eight, 10, 20, 12, the U.S. government wanted to post caloric information. Um, the industry was fighting it intensely. Publicly said, look at, you know, what, what, what's the problem with this industry? If people are afraid of, of posting caloric information, what's in their food? Maybe th…

AI assessment note: “Panera was one of the two first brands to introduce antibiotic-free chicken in America.”

Q Privately held. Incredibly successful. How do you think through that? What's your reaction to that?

A Oh, my reaction to it is, I, I know the, the, the polls. I've been there. The world, look it, the world pays, the marketplace pays for something that's getting bigger, larger, better. So how do you do that? You, you add things, you improve things, you make it better. Uh, we all want that. I mean, we're susceptible, susceptible to that. By human nature. And the unfortunate truth is oftentimes, many times, it doesn't make it better. It actually just makes it worse, more complicated. And so my view is we don't want to do, we don't want to be everything for everybody. We want to be something special for somebody. And that's the essence of what we mean when we see, we say being a better competitive alternative. To actually standing for something and being something better.

AI assessment note: “we don't want to be everything for everybody. We want to be something special”

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A I think that the most powerful skill that I have as a business person and what I would challenge entrepreneurs to acquire is the skill of empathy. Empathy is about the ability to climb into somebody else's brain, to feel what they're feeling, and to see what they're feeling, and not sell them, but understand and appreciate them, and I think that historically we've had those kinds of skills. I mean, you know, when you talk about my career, you talk about often the financial results. You have Kava, which has been the most successful food service IPO of the last five years, arguably. Now a company worth seven billion dollars was worth as much as fifteen billion, but it's up three, fourfold from its IPO a year and a half ago. Um, you talk about Panera. Panera was the best performing restaurant stock over two decades. Its last two decades, um, produced 25% IRR, uh, In fact, somebody told me we actually beat Warren Buffett and Berkshire Hathaway. You know, people talk about the financial performance, but that's not the part that gets me excited. That's not the part that I actually feel. That's a byproduct or manifestation of what really was exciting, which is learning and transforming. And so over the course of our history, and I can, I can take you through this, but there were three or four, maybe five, Key learnings that broke maybe every five years that led to massive transformati…

AI assessment note: “the most powerful skill that I have as a business person... is the skill of empathy.”

Q How do you develop the long-term thinking that you've brought to all these different concepts from Au Bon Pain to Panera to Cava?

A It just makes sense to me. I mean, it just seems logical, right? Like if I want to start, I'm figuring out where I'm trying to be in five years and 10 years, and what's it going to take me to get there? And that's what we mean by future back thinking. Um, and what seems stupid to me is to do what's short-term expedient and long-term stupid. I have an expression. I'm, I'm, I'm long-term greedy, not short-term stupid. And I, I really want to build something of value, but the way you do that, Whether you're talking about a business or a relationship or your own life is to focus on those things that have meaning and self-respect and those things that when you get down and get to the other side of it will have touched other people and most importantly touch yourself.

AI assessment note: “It just makes sense to me. I mean, it just seems logical, right?”

Q What are the key metrics you look at without mentioning any, any sort of particular competitor? If it's a public company, What would be the two or three variables and the financial statements you look at? And if it's a private company, how do you?

A First, the financial statements are, are a byproduct. They're not the end. So I'm often not looking at the financial statements, um, as a leading indicator. I'm looking at the financial statements as the trailing indicator. What we always start with at act three is does that category Does it have tailwinds? Does it have power? Is this a category that's getting stronger? Look at Mediterranean. It's the number one diet in America. Every time you go to the doctor or you read an article, they're giving you a commercial for our diet. Um, it's bold flavors, it's ambitious flavors, and yet it feels safe. Um, you know, it's food that you can eat, lamb and, and chicken. Um, it's, it's, it's, it's craveable wellness. It's healthy. Um, and yet it's, it's, it's also tasty. That's a category that's got power. Um, We have another business in plant forward. Uh, we call it positive eating. Three percent of Americans is vegetarian, but 40% are eating, um, um, more plant forward. They want, they want that in their diets. Somebody's going to win in that category. We intend to be those people. You can think about bakery cafes. I was part of building bakery cafes in America between Au Bon Pain, Panera. These were the dominant brands. Well, I can tell you the future is in Upscale bakery cafes where you have real chefs, um, where you have, um, food that's worth going out of your way for.

AI assessment note: “the financial statements are, are a byproduct. They're not the end.”

Q How important do you think that focus was in your success?

A I'm pretty focused, and you know, I work hard. I always have. I love it. I enjoy it. I love when we figure things out. I, I like to think that I protected the people around me, and that I'm, but I, I like to think I'm willing to pay the price, and by that I mean I'm willing to do what it takes to do the hard work. Most people aren't willing to pay that price, and they don't understand you're not going to get the byproduct if you don't, if you don't build something that's a better alternative, and that's hard work, and I, I would share with you this, too. Uh, I'll share with you two things. One, I often say to Two entrepreneurs. I said it yesterday. I was at a Tony Robbins event, and I said to the folks, I said, listen, if you don't enjoy the people in your business, the people in your life, if you're, you know, you're, if you don't enjoy the doing of the doing, you're never going to get there. If you're doing this to make money, you're never going to make money. If you're doing this, um, for the, for the glory of it all, You're never going to get it. If you don't love the doing of it, you're going to fail. And for me, it was never about the end. It was about the doing. I love the figuring it out. I love the people that I work with. To this day, I'm not doing Act Three because it's going to change my life or my kids' lives in any way. I'm doing it because I actually love the pro…

AI assessment note: “I'm pretty focused, and you know, I work hard. I always have.”