In this segment from the Motley Fool Money podcast, Chris Hill, Jason Moser, Matt Argersinger and Simon Ericsson explain what Panera is doing right, and the difference in performance between its company-owned stores and its franchisees.
A full transcript follows the video.
This podcast was recorded on July 29, 2016.
Chris Hill: Panera Bread (NASDAQ:PNRA.DL) shares hitting a new high this week, after a blowout quarter, and Simon, the company-owned stores are really driving this.
Simon Ericsson: Well, anecdotally, let's start with this, because we've got a Panera right across the street from Fool HQ here.
Simon: How many times have you gone there, and there was a line of people waiting to get to the cash register?
Chris: No one's waiting at the cash register!
Simon: Never ever; everyone's always at their seats, they've gotten their food, it's very highly automated, it's very efficient, and that's exactly the story of Panera 2.0. The company is investing in the company-owned stores to get that traffic as efficient as they can through the stores, and you've seen a 4.2 percent same-store sales growth in the company-owned stores ... The majority have now converted, versus 0.6 percent for the franchises, which have largely not converted yet. I've got to applaud management for the investment they've made into their business; I think it's paying off for the company right now.
Matt Argersinger: Personally, I love the rapid pickup option. We have one right across the street, as we've said, and it's ... You can literally sit at your desk, order food, ten minutes later, walk over there, pick up your food, don't have to talk to anyone ... I hate talking to people ... Paying people ... It's all online. It's very impressive what Panera has done, because this is something they set out to do a few years ago, when the CEO called the stores a mosh pituitary, I believe, and they've taken some very aggressive actions, and it's paying off!
Chris: Yeah, Ron Shaich, all credit to him and his team for calling out the mosh pit, executing this plan. I'm wondering, Simon, how much the company has given in terms of a plan to buy back some of these stores? It's not unusual to see a difference between the results you get from a company-owned store versus a franchise store; this is a pretty stark difference, as you indicated, and I'm wondering if, ultimately, the plan is, "Let's get 100% of these to be company-owned"?
Simon: You know, that would be the plan that makes sense. Interestingly, they are actually converting a lot of their company-owned locations to franchisees this quarter, which was one of the operating losses that they had, which is kind of going backwards from the strategy that you just laid out, Chris. I think, though, this is more of a demonstration of, "Hey, we're onto something with this; if you are a good franchisee, and you want to get on board with investing on yourself into the franchise store that you have, we've demonstrated that it works, and let's get you on board. You put the money up front, and you'll also get the fruits of that as well.