Small Cap Success Story: Panera Bread

Jacob Harper  |

The history of Panera Bread Co. (PNRA) is a complicated one, marked by a shifting identity that obfuscates what, exactly marks the beginning of the company as we know it. Technically, the company now called Panera is the descendant of bakery chain Au Bon Pain, which went public in 1991 at $9 a share before lingering in the $3-$6 range for most of the 90s.

You could also say the spirit of Panera is the spirit of St. Louis Bread Company, a Missouri chain which Au Bon Pain acquired in 1993. As a smash hit subsidiary St. Louis Bread gave the nascent company direction, and would provide the blueprint for modern-day Panera’s look, menu, and entire dining concept.

Then again, you could say the real identity of Panera is Panera itself, a name that Au Bon Pain gave the St. Louis Bread Company stores outside of Missouri, a name they eventually adopted for the entire company as well before spinning off Au Bon Pain into a separate entity.

While the exact origins of how Panera became Panera are a bit convoluted, one thing that’s easy to understand is that whatever the origins, today the company called Panera is a smash, with 1,652 locations across the US and Canada, and is one of the biggest restaurant success stories of the last 10 years.

Meet Me in St. Louis Bread

Probably Panera’s biggest reason for success is the introduction of the “fast-casual” concept of dining. In short, the dining concept splits the difference between fast food and sit-down restaurants, and is especially popular as a lunch destination for workers and students who a) don’t have a lot of time b) don’t want to eat unhealthily and c) don’t want to spend too much.  

This is what the company that was Au Bon Pain took from pioneers St. Louis Bread. Au Bon Pain’s CEO, and the man founded Panera Ron Shiach admitted as much when crediting St. Louis Bread with truly creating the business model that would catapult the company to massive success.  Shiach said, "We bought (St. Louis Bread) for $23 million, and then didn't change it. For two years we studied it.”

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One of the more attractive features of St. Louis Bread was the idea that customers could sit down, hang out in a “gathering-place business.” The idea, which would form the entire basis for the fast-casual concept, proved to be immediately popular, and Shiach began focusing the entire company around St. Louis Bread’s model, spinning off the more traditional bakery Au Bon Pain in 1999.

Consolidation, Expansion, A Nice, Light Soup

Armed with the St. Louis Bread-inspired model, Shiach grew the company from 20 locations in 1993 to 180 in 1999. In the 00s, though, the company really started to shine. They expanded their menu, positioning themselves as an early-dinner eating option, in addition to their core as a breakfast and lunch destination. One of the core innovations of Panera's was to emphasize their food's relative healthiness.

From Dec 31, 1999 to Dec 31, 2009, Panera would go from $3.88 a share all the way to $66.97 a share, representing a return of 1,628.26 percent. This explosive growth would make Panera the 30th best performing stock percentage-wise in the entire decade.

The 10s: Fast-Casual Dominates the Landscape

Concomitant with the rise of Panera has been their fast casual cousin Chipotle Mexican Grill (CHP) . While Chipotle was never as small cap like Panera as Chipotle is a spinoff of McDonald’s Corporation (MCD) , there’s no question that Chipotle has been a smash, with a fifteen-fold increase in stock price since its 2006 IPO. Bopth Chipotle and Panera have changed the dining landscape, and represent a fundamental shift in how people go out to eat.

Whether you count Panera’s true beginnings as the 125 location chain Au Bon Pain or the 20 location St. Louis Bread that would form the core of the company, either way Panera has to be considered a major small cap success.

The company is up 6.6 percent on the year to hit $170.23 a share, down from an all-time high of $194.77 in May 2013.  However, the stock is up 226.45 percent since Sept. 2008, and over 2,600 percent since it first went public in 1991.

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