The Ledger
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Shaich claims 90% of entrepreneurs who go public live to regret it.
“90% of the entrepreneurs that go public live to regret it, because it's a very different enterprise.”
Cava limited investment bankers to 9% of its IPO share distribution.
“Essentially we only allowed the investment banker, nine percent of the shares in distribution, which essentially went to their clients and the hedge funds. We protected 91% of it, of that distribution so that it ended up in the right hands.”
The fail fast philosophy is dangerous in high-fixed-cost restaurant businesses.
“Go fast and fail.
Makes sense in technology, where it's very much there, there's no fixed cost, and you can repair completely.
I'm in a business, I call it fashion with fixed assets.
It, you know, you build a restaurant, you're going to spend a million and a …”
Entrepreneurs are fundamentally risk avoiders rather than risk takers.
“Entrepreneurs see a better opportunity and they're not risk takers. They're actually risk avoiders. They see that opportunity, an opportunity to serve somebody, to make a difference, to do a job better for somebody, and in the context of that, they're risk avo…”
Mass-scale restaurant success relies on Middle America, not New York or LA.
“And I will tell you that if you're building a business of mass scale, it isn't New York City that matters. It isn't LA that matters. It's everything in between. And can you offer people something of quality and substance?”
The restaurant industry is a winner-take-all market for scaled players.
“My industry is an industry of winner-take-all. Think McDonald's and Burger King. Think Panera and Corner Bakery, Chipotle and Qdoba. All of the value creation tends to happen for those that are building something of large scale.”
Act III secures ROFRs on follow-on rounds and has never declined one.
“And so when we invest in a company, we're going to put an investment in it. And then we're going to agree take a right of first refusal. And all follow on rounds of capital at a pre-agree to multiple. So we're all in alignment. It's an easy thing. And the trut…”
Multiple early Sweetgreen investors sold their shares quickly after the IPO.
“I think that in the Sweetgreen IPO, We see a case where a number of the investors sold fairly quickly.”
Cava is arguably the most successful food service IPO in five years.
“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.”
Panera generated a 25% IRR over two decades, outperforming Berkshire Hathaway.
“Panera was the best performing restaurant stock over two decades. Its last two decades produced 25% IRR In fact, somebody told me we actually beat Warren Buffett and Berkshire Hathaway.”
Shaich convinced Au Bon Pain to sell everything and bet on Panera.
“I went off and came back two months later and went to my board with a proposal to sell every other business and bet the whole thing on this Panera Bread division.”
Ron Shaich was one of the original co-founders of No Labels.
“I was one of the eight or nine people that co-founded a group called No Labels here in the United States, which is meant to reduce the hyper-partisanship in D.C., the polarization, and focus us on long-term thinking.”
JAB acquired Panera Bread for $7.8 billion in a historic deal.
“And they paid for it, and what, at that time, was the largest or second largest U.S. Restaurant deal ever done. 7.8 billion dollars, and among the highest multiples.”
Cava ran simulated quarterly earnings calls for 18 months before its IPO.
“For a year and a half before we went public, we did quarterly earnings calls. In the company, simulated, with our investors, you know, they had to do press releases, they had to take questions.”
Delivery functions inevitably crowd out innovation and discovery as companies scale.
“Delivery, because it does add value starts to push out delivery discovery because discovery doesn't have oxygen. If you got delivery pushing down on it and over time, what happens in so many food companies, Is that, that discovery is pushed out by delivery. De…”
The future of bakery cafes is upscale concepts featuring real chefs.
“Well, I can tell you the future is in Upscale bakery cafes where you have real chefs where you have food that's worth going out of your way for.”
Cava market capitalization is four to five times higher than Sweetgreen.
“Today I would gather that Kava is going to mark a cap five times what Sweet Greens is worth, something in that order, four or five times.”
Act III invests in common stock alongside founders rather than preferred shares.
“Number one, we believe in founder-friendly capital. So when we go in, we hope it's the last investment capital that gets taken before an IPO. Generally we will come in as common stock. Not preferred. Same place as the management team. And we will typically tak…”
Tatte generates $250 million in annual revenue across just 50 locations.
“We're also in a company called Tate, which is in, Boston and D.C. And now the New York market. It's 50 restaurants doing about five million dollars a year and two hundred fifty million.”
Act III Holdings grew from $200 million to $2 billion, returning 55%.
“And, you know, it started as a two hundred million dollar investment is now a nearly, you know, it's a two billion dollar portfolio. And it's delivered 55% returns”
Ron Shaich uses an annual framework to set multi-year life priorities.
“And ever since, I began on an annual basis sitting down and saying, what is it in five years, in 10 years, I'm going to respect in the context of my relationships with my work,
My relationships with my family and friends, my relationships with my body, and my …”
The fast casual restaurant sector is a $350 billion industry today.
“That became the ideology that fuels what's called fast casual today, which is a three hundred and fifty billion dollar business.”
Panera spent $150 million on technology during its digital transformation.
“I spent a hundred and fifty million dollars on technology.”