Bad Business - A look at Panera Bread
By James Phillip on Jan 10, 2008 in Bad Business
This will begin a new series for us at the Capital HACKER which will include the topics Good Business and Bad Business.
In this online textual episode we will take a look at Panera bread and possible reasons why their stock is falling faster then southern California home prices. I will preface this with the fact that Panera was one of my favorites for a long time to grab a bagel and over the summer of 2007 while we built our new home we treated our family and workers to many meals and snacks from this establishment. It was during 2007 when I started to see things change. I will note this lesson I have learned over time from being a consultant.
If you start to short your services or products to make up for loss profits it will become a leading factor in your demise.
I witnessed this with restaurants such as The Cooker (remember this place? It was good!) along with another one we loved, Rio Bravo. Another thing you think the whole restaurant industry would have learned by now, going cheap or reducing portions is simply a way to go out of business.
My all time favorite breakfast is a toasted whole wheat bagel with peanut butter. I would often get this at Panera along with a highly energizing coffee. Over the summer of 2007 I had one worker hand me my side of peanut butter, it was in one of those take home dipping sauce containers but only 1/4 of the size, and I would guess you could stack 4-5 quarters in it? That day I was thinking, it must have been someone new that day or they ran out of container. Wrong! This was the new side of peanut butter, and on top of that at a ridiculous cost. If you try really hard, you may be able to put a water thin coat of peanut butter on your bagel now.
Also known for their great breads like recipes with asiago, they have cut many of their cheese breads since it is “healthier” which if you follow their pattern of putting two slices of paper thin lunch meat on a sandwich for $6+ which many don’t even include cheese, is clearly a cost cutting measure.
You say you lowered the amount of cheese in the bread to make the sandwich healthier yet you plaster chipotle mayo all over it?
If I want a bagel now I run to a local place like Einstein Bagels, which will provide an reasonable amount of cream cheese or peanut butter given the price you pay, and if I want a sandwich I can hit Pot Belly and have a sandwich for under 50% less with more meat on it while being just as wonderful in taste.
These are just some observations, but those things alone will give you a little insight on their stock performance recently. Investors and consumers are far smarter then corporate American gives them credit for.
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