Panera Bread Founder Ron Shaich on Fast Casual Dining

Barry speaks with Ron Shaich, co-founder of Au Bon Pain and founder and former chairman and CEO of Panera Bread. A key part of building that brand, today Shaich is a lead investor in Cava, Tatte, Life Alive and Level99, continuing a long and extensive career in the restaurant and fast casual business. He’s credited with defining the fast causal segment. Shaich makes his investments through Act III Holdings, a more than $1 billion evergreen investment vehicle. Shaich has twice been recognized as an Ernst & Young Entrepreneur of the Year, selected as the 2018 Restaurant Leader of the Year and was presented the prestigious Nation’s Restaurant News Pioneer Award as one of the most significant contributors in the history of the restaurant business. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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• 2:04Barry Ritholtz?

  This is Masters in Business with Barry Ritholtz on Bloomberg Radio. This week on the podcast, what can I say? Ron Shake is a legend in the fast casual dining space. He began with a single restaurant, a single cookie store, and eventually parlayed that into a series of acquisitions, mergers, expansions, ultimately leading to the Panera Bread concept, which now has 2,000 locations and does about $6.5 billion. He sold the company in 2017 or so for about $7.5 billion.

• 2:47Barry Ritholtz?

  He now runs Act3, which is a fascinating sort of venture fund. One of their big firms is Kava, fast Mediterranean cuisine. What can I tell you? The guy is a brilliant operator, one of the best performing publicly traded CEOs in history, at least in the food and consumer services sector. He knows everybody from the head of Starbucks to Sam Adams to Shake Shack. All those people travel in the same circles. He has carved out his own unique identity in space. And I just thought this conversation was fascinating, and I think you will also.

• 3:31Barry Ritholtz?

  So with no further ado, my discussion with the former chairman and CEO of Omopin and Panera Bread, Ron Shake. Ron Shake, welcome to Bloomberg.

• 3:43Speaker 03

  Thank you, Barry. Good to speak to you.

• 3:44Barry Ritholtz?

  So those numbers are astonishing. And I also recall reading Panera was the best performing restaurant stock in the last decade. You were CEO, second best consumer stock on the S and P. Are those data points right?

• 4:00Speaker 03

  Yes, but to be clear, I sold Panera in 2017 and have not had anything to do with it since then. But I am today. A lead investor and the chairman at Kava helped take that thing public.

• 4:14Barry Ritholtz?

  We're gonna talk about Kava, we're gonna talk about Know What Matters, the book you wrote, Lessons From A Lifetime Of Transformation, but let me roll this all the way back

• 4:24Speaker 03

  Sure.

• 4:24Barry Ritholtz?

  to your education, bachelor's from Clark in 1976, MBA from Harvard in 78.

• 4:31Speaker 03

  Don't hold that against me.

• 4:32Barry Ritholtz?

  What was the career plan? By the way, you are not the first Harvard MBA I've had in the studio.

• 4:39Speaker 03

  Okay, I guess I would say to you this, I never really had a career plan. I had a drive to make a difference.

• 4:46Barry Ritholtz?

  Uh huh.

• 4:47Speaker 03

  And the challenge for me was whether that was gonna take form as politics, which was a love of mine, or business. And I found over the years that when I was doing business, I brought a strategic or political context to it. When I was doing politics or political campaign management, it was a business. Put another way, a business is an election that never ends. A political campaign is a business that has one judgment day, the election day.

• 5:18Barry Ritholtz?

  That's fascinating. So there was a quote from you, maybe this was from the book, you go to business school, you didn't know what an investment banker was?

• 5:27Speaker 03

  I didn't, no. You know, I actually never set out to do business. I had been the treasurer of the student council at Clark, and I was tossed out with a couple of friends from a local convenience store. They'd suggested we were shoplifting, we weren't, but it was just a heavy security presence. And I came back to campus and I said, you know what? Why are we giving these guys our money? Why don't we create our own student-run store? And I was able to tax-

• 5:54Barry Ritholtz?

  Campus co-op?

• 5:54Speaker 03

  Yeah. I taxed the student body, they agreed to it. And there was nobody else there to essentially build the store. I built it, there was nobody to run it, I ran it. And as a kid who really thought he was gonna go to law school, like you Barry, and had never, you know, I couldn't dance, I couldn't sing, I discovered-

• 6:15Barry Ritholtz?

  How's your outside shot?

• 6:16Speaker 03

  My outside shot's better than how I dance, you know? But I have to tell you, yeah, I have to tell you that I had more fun. It was the most creative endeavor I had ever been involved in.

• 6:27Barry Ritholtz?

  Really?

• 6:27Speaker 03

  It's live performance art.

• 6:28Barry Ritholtz?

  Yeah.

• 6:29Speaker 03

  And I love food, I love retail, I love running the place, I love the people. And it became sort of a way I lived my life.

• 6:37Barry Ritholtz?

  That's really fascinating. So that tees up what becomes at least the first part of your career. Tell us about the work you did at a cookie company.

• 6:48Speaker 03

  Oh, I started a cookie company. So I got out of business school. I took what I call the third year of the MBA. I went to learn, I went to work for a company called Cole National and helped run a part of their company called The Original Cookie Company.

• 7:04Barry Ritholtz?

  I remember that.

• 7:05Speaker 03

  Do you?

• 7:05Barry Ritholtz?

  Oh, sure.

• 7:06Speaker 03

  It was in the malls, yeah.

• 7:07Barry Ritholtz?

  Right, that's right.

• 7:08Speaker 03

  Yeah, I was a district manager, I was running stores. I came back, Dan Quayle, I remember, I was in Indiana and there was a Dan Quayle for the US Senate billboard up. And I came back and wanted to do political campaigns. And I couldn't get a job. And I decided I was going to try to open my own cookie store. And at that point, all the cookie stores were in malls. I said, let's open it where there were lots of people. In Boston, there's a place called Park Street Station. It's the entrance way to the downtown in the financial district. I thought, why don't I open a cookie store there? And in fact, I ultimately found the job in political campaign consulting.

• 7:51Speaker 03

  But while I was down in DC, I was offered a location near Park Street Station. I thought I'd come back one day a week. I ended up creating this cookie store. That was a two-day-a-week, three-day-a-week endeavor. I never went back to DC to run campaigns. And that cookie store later was merged with Obon Pen. And that company, which we created in 1981.

• 8:19Speaker 03

  Was the company I sold for 7.8 billion, literally, in 2017.

• 8:26Barry Ritholtz?

  So, so let's, let's go back to that acquisition. You, again, and I don't remember if I read this in the book or somewhere else. Nobody buys cookies before noon.

• 8:36Speaker 03

  This is a challenge, yes.

• 8:37Barry Ritholtz?

  Right, but croissants and baked breads and other goods like that, that's perfect breakfast fare. Was that the obvious, let's combine these two, we'll cover the whole day, as long as we're paying rent for 24 hours?

• 8:50Speaker 03

  Well, yeah, I'm, I'm running this cookie store for about six months, having the time of my life. But as, as you said, nobody was buying cookies before 12 noon. And I had about 50,000 people a day walking by me. So I said, what can I put in here that could represent a product that would appeal to people in the morning? And I decided to become a licensee of a French bakery. And there was a number that were actually in that business. I hooked up with a group called Obon Pen. And they had, at that point, three bakeries. They had, at one point, opened, I think 13 of them, closed 10 of them. I didn't fully understand they were on the edge of bankruptcy, but I did a deal with them.

• 9:33Speaker 03

  I became their licensee for this one square block.

• 9:37Barry Ritholtz?

  So, a little background about that. The predecessor of one of the companies, and I don't remember if this was Obon Pen or something else, was Pavilion, a French manufacturer of ovens?

• 9:48Speaker 03

  Pavier, Pavier. We gotta work on your French, Barry.

• 9:50Barry Ritholtz?

  Well, je parle plus, but not very well. If I'm going to Paris, I'll bone up, but uh...

• 9:56Speaker 03

  Parlez-vous français? Un petit peu.

• 9:58Barry Ritholtz?

  Un petit peu. So, they were setting up bakeries in order to sell their ovens. It sounds like you said, hey, forget the ovens, let's sell the baked goods.

• 10:09Speaker 03

  Well, actually, Pavier founded Obon Pen. A group bought the company. It was led by the man who became my partner of over two decades, a gentleman named Lou Cane. Lou Cane and his partners bought the Obon Pen from Pavier. And, and to be clear, they, they, they essentially thought they could...

• 10:35Speaker 03

  Grow this across North America and there were sort of delusions of grandeur.

• 10:40Barry Ritholtz?

  They were right, they just had the wrong operator.

• 10:43Speaker 03

  They had the wrong operator, they had probably the wrong concept. And that's what led them to borrowing a great deal of money against their own personal real estate and as I said, opening 13 units of which by the time I came along, they had closed 10 of them.

• 10:59Barry Ritholtz?

  So you licensed the spot, how does that lead to eventually purchasing Obon Pot?

• 11:05Speaker 03

  Well, I'm their licensee for about six months and I began to become friends with their CEO, a gentleman named Lou Cane, who had essentially was running the company. And it was very clear to me the trouble they were in. And I began to say, this was a powerful opportunity to apply what I knew about running food businesses and actually create the kind of company I wanted to work for. I wanted to build and I went to Lou with an idea. And the idea was we would merge our two companies. My one cookie store, his three French bakeries and their three million dollars in debt. I had the cash cow, they had the three stores. And I really thought I could operate my way out of the business.

• 11:48Speaker 03

  And what ended up happening is I received 60% of the company. Lou and his partners kept 40% of the new company. And then we went marching off. That company, Obon Pen Co, Inc., was the company I ended up running for nearly 37 years.

• 12:06Barry Ritholtz?

  So 37 years and along the way, you IPO in 1991?

• 12:13Speaker 03

  27 years as a public company CEO, Barry, longer than Cal Ripken played baseball.

• 12:18Barry Ritholtz?

  That's unbelievable.

• 12:19Speaker 03

  And I'm still standing. Weak knees, but I'm still standing.

• 12:22Barry Ritholtz?

  You know Warren Buffett and Jamie Dimon, probably your two competitors.

• 12:26Speaker 03

  I had a better performance than Warren Buffett in my last 20 years as a public company CEO.

• 12:31Barry Ritholtz?

  Well, he's backloaded, so he began strong and then did okay afterwards. But what's really fascinating is, how do you go from, you know, three or four locations to an IPO in 1991?

• 12:48Speaker 03

  Three and four, three to four, three or four locations that were bleeding. We're losing money. You know, I'm always trying to learn. And probably the most powerful thing in my life is not the success. It's the learning and then the action one takes from the learning. And I had a revelation in the early eighties. I would be working in one of these French bakeries and people would walk in and say, "You know what? I want that baguette." And I'd start to slice it for them. They'd say, "No, don't slice it like bread. Slice it from top to bottom."

• 13:22Barry Ritholtz?

  Right.

• 13:22Speaker 03

  And I'd hand them the baguette and they'd look at me, Barry, and they'd pull out a bag from Stop & Shop.

• 13:28Barry Ritholtz?

  Make a sandwich.

• 13:29Speaker 03

  Yeah, they'd put meat on it. Porridge, you know, cheese, smoked turkey. And again, you didn't have to have a Harvard MBA to say, "You know, the opportunity is not in the bread or croissant. The opportunity is in what the bread and croissant can allow the consumer to do." So we said, "Instead of selling the bread and croissant, let's sell the product they want," which was the sandwich. That allowed us to create the first of what became many, many units, which was a French Bakery Cafe up in Copley Square in Boston.

• 13:59Barry Ritholtz?

  So that included breakfast, croissants, and I'm assuming other breakfast sandwiches, full lunch, soup, salad sandwiches?

• 14:07Speaker 03

  Oh, yes, the whole thing.

• 14:08Barry Ritholtz?

  And suddenly, it's not just a $2 item. Suddenly, you're selling actual product.

• 14:14Speaker 03

  And again, I'm always looking for what job am I doing for people? What's the need I'm meeting? And we were really the first concept at Obum Pen in the late eighties that was serving white collar folk food that they wanted with quick service. And so Lou, my partner, was an extraordinary human being. We worked together till he passed away. Lou had tremendous real estate connections all over the East Coast and in the Midwest. And we were in every major building. Here, we were in New York at Rockefeller Center, World Financial Center, World Trade Center, but at Rock Center. You know, the folks would come down and this was the only place they could get really

• 14:58Speaker 03

  food that they respected and respected them.

• 15:01Barry Ritholtz?

  Quality food at a reasonable price reasonably quickly.

• 15:04Speaker 03

  Price wasn't even the... Um, the reason for existence, our reason for existence was this was food people really wanted and they were willing to pay for it. They were willing to pay more than they could get when the alternatives were fast food or a lengthy lunch at, at, at a sit down restaurant.

• 15:20Barry Ritholtz?

  There was nothing in between and I'm thinking back to that eighties and nineties era. Your choice was McDonald's or Burger King, maybe Pizza Hut, maybe like Taco Bell.

• 15:32Speaker 03

  Or the pool grill at the Four Seasons, you know, I mean, right? I mean, it was, you, you know, back then it was fast food or fine dining.

• 15:40Barry Ritholtz?

  Nothing in between.

• 15:41Speaker 03

  Nothing in between. And if you had thirty minutes.

• 15:43Barry Ritholtz?

  This was really, this was a white space, wide open, nobody else was there?

• 15:46Speaker 03

  Yeah, I would say that was really true. And, and I think this became very hot, this whole French bakery cafe category in malls all over the country. We had everybody come after us. Pepsi came after us. This was going to be the third leg of Pepsi food service. Sara Lee came after us, a company called Vita France, which has now gone by the wayside. All of these companies were, were, were larger, had more capital. But the truth was, we ended up running rings around them. We cared more. Our folks were more dedicated. We worked harder. And by 1991, we had built this out to probably a hundred units. We had the highest average unit volumes in, in, in, in the category. It was very clear we were going to be the

• 16:30Speaker 03

  winner. And we went public with Morgan Stanley in an IPO in, in, in June of 1991.

• 16:38Barry Ritholtz?

  So after the IPO, you eventually acquire St. Louis Bread Company, later to be renamed Panera Bread. Tell us how that transformed the entire relationship.

• 16:50Speaker 03

  The key is the learning. So the first thing I began to realize after the IPO was that the market pays for growth. And yet, Obon Pen's growth at that point was somewhat limited. Obon Pen was at its best in these urban locations. It didn't work in the malls in LA.

• 17:06Barry Ritholtz?

  Right.

• 17:07Speaker 03

  And, and, and so we expanded into a number of different other businesses. We built an international business. If the Obon Pen was the best in the United States. It's at high density urban feeding. There were more locations outside America. We built a manufacturing business. We were manufacturing all of our product and we were selling it also in supermarkets.

• 17:29Barry Ritholtz?

  Product meaning food or ovens and kitchen?

• 17:32Speaker 03

  Bake goods, not kitchen equipment, baked goods.

• 17:34Barry Ritholtz?

  Mm-hmm.

• 17:35Speaker 03

  And then third, we bought in 1993 a business called St. Louis Bread Company from a wonderful human being named Ken Rosenthal in St. Louis. It was 19 stores at that point. And I thought this would be the gateway to the suburban marketplace. At the same time, I was trying to figure out what was going on for the consumer. And I was running around the West Coast for about a year, a year and a half with a guy who's now one of my partners, Dwight Juuson, a guy named Scott Davis, who was our concept officer. And we were trying to figure out what was the themes that were impacting consumers. And we began to develop

• 18:20Speaker 03

  a belief that the really important signal that needed to be read, the deeper trend, was that consumers were rejecting the mass market and they wanted to feel special in a world which had increasingly become consolidated in oligopolies. Think coffee and Miller and I think coffee and Folgers and Maxwell House, beer and Isabush and Miller, think soft drinks, Coke and Pepsi. Every one of those in the early 90s had a reaction. You can talk about Starbucks, you can talk about what you see occur with specialty beer. A good friend of mine in Boston, Jim Cook, developed Sam Adams.

• 19:04Barry Ritholtz?

  Sam Adams, yeah, sure, of course.

• 19:05Speaker 03

  Again, a reaction of the mass market. We saw the same thing as Coke and Pepsi lent itself to Waldo and Snapple and 400 beverages in.

• 19:16Speaker 03

  7-Eleven, and we began to say, this was a deeper trend. Consumers rejecting that mass market and wanted specialty goods built, made the way their grandparents made it, without chemicals, without preservatives. And we said the same thing was going to happen in the food industry. And in fact, the same thing was happening in the bakery industry. Baked breads had once been done in, in stone deck ovens. That had become three lows for 99 cents at supermarkets. And, and, and consumers wanted that kind of quality that they had and had and were willing to pay for it. And we began to say, there was a powerful opportunity in specialty food, specialty restaurants, much like there was this powerful opportunity in specialty coffee, specialty

• 20:00Speaker 03

  beer, specialty beverages. And that was the genesis for what became this ideology, this paradigm that's today called fast casual. What it said, what it spoke to was real food, actually, people that, that, that engaged you, served in environments that excited you, and ultimately left your sense of self-esteem, what you felt about yourself. It elevated it, as opposed to depleting it as fast food did. The currencies of fast food were a lot of food for not a lot of money. The currencies of fast casual is, let's do something better for a bit more money. And the result, that category, that, that, that understanding is today a $300 billion

• 20:45Speaker 03

  category.

• 20:46Barry Ritholtz?

  So, so let's talk-

• 20:47Speaker 03

  We did it, just to finish it up. We did it. Howard Schultz came along about that time. Steve Els a little bit later. But it was a paradigm that informed a whole new category when people said, you couldn't do this.

• 20:59Barry Ritholtz?

  Steve Els is with what?

• 21:01Speaker 03

  Chipotle.

• 21:02Barry Ritholtz?

  Chipotle, alright. So let's, you mentioned Howard Schultz and Starbucks. I think of Starbucks as a coffee shop that serves food. I think of-

• 21:11Speaker 03

  Is that food? No, I don't want to get salty. Sorry.

• 21:14Barry Ritholtz?

  Um, well, it's not exactly fresh. I know some of that stuff has to be frozen.

• 21:20Speaker 03

  No, all of it is.

• 21:21Barry Ritholtz?

  All of it is.

• 21:22Speaker 03

  Yeah, I mean, they, these businesses are, are defined by their systems.

• 21:27Barry Ritholtz?

  Uh huh.

• 21:28Speaker 03

  So when we look at Starbucks, and they tried many times to improve the quality of food, Howard got it. And in fact, we actually, I worked with him probably two or three times trying to help him think about that question. We were, we were friends.

• 21:43Barry Ritholtz?

  Why would you help your, one of your largest competitors catch up to you on the food space? I have to ask that.

• 21:50Speaker 03

  Well, we were kind of frenemies. It went back for 35 years when he had, you know, four or five stores in Seattle and he had, you know, we were looking to bring specialty coffee into Oban Penn and ultimately we chose to go take up ownership position in a company called Coffee Connection in Boston, which was the Starbucks of the East Coast. And, and he wanted to buy Star Coffee Connection and we went through a process. We had to write a first refusal. We drove up the price, but, but we had a friendly rivalry. And the truth of the matter is, I profoundly respected Howard.

• 22:27Barry Ritholtz?

  Clearly he's built an amazing business.

• 22:30Speaker 03

  I respected not just the size of the business, but he shared with us the same values about really doing something that delighted customers, that made a difference. He broke through on, on design and environment and, and, and what it meant. And, and so, you know, we always had this relationship of both competition and mutual respect.

• 22:53Barry Ritholtz?

  Huh, that's really fascinating. I'm going to share a Starbucks story that I bet you haven't heard. I'm curious as to your thoughts. And I believe Howard Schultz was gone when this happened because I can't imagine.

• 23:05Speaker 03

  Howard, you know, pulled out of Starbucks, I think, three or four times.

• 23:09Barry Ritholtz?

  Right. So during the pandemic, I get two emails on the same day. The first one is from Delta. Hey, we know that you've worked hard to achieve your platinum medallion status and the pandemic is a disaster. Don't worry, we're going to roll your status over next year when hopefully things will be back to normal and you'll be flying again. I'm like, gee, you know, Delta really has their act together. How, how thoughtful. The same day I get an email from Starbucks. Hey, you've accumulated 317.

• 23:44Barry Ritholtz?

  Starbucks points because you're here all the time. But unfortunately, due to the pandemic, these will expire next month. And the third leg of the stool was a link, a story in the Wall Street Journal. That everybody who preloads their credit card onto the Starbucks apps. We're essentially giving Starbucks a $3 billion interest free loan.

• 24:08Speaker 03

  Sure.

• 24:08Barry Ritholtz?

  And I was so morally indignant over the, you're gonna take our crappy.

• 24:15Speaker 03

  Loyalty points.

• 24:16Barry Ritholtz?

  Loyalty points away, like they cost you nothing. And you know what? You're bad players. Get refund my, my 50 bucks that's on the app. I'm deleting the app. Thanks Starbucks for the past few years. I'm not boycotting you, but you're like something I'll put up with. And Starbucks to me today is like McDonald's.

• 24:41Speaker 03

  It is McDonald's.

• 24:42Barry Ritholtz?

  I worked in McDonald's for two days in high school, have never gone back since. It's a horrific source of, you know, junk food. And I don't know what they've done in the ensuing hundred years. But I don't step foot into McDonald's and I rarely step foot in Starbucks. Oban Panera, on the other hand, and I'm not blowing smoke.

• 25:07Speaker 03

  Have you been to our new concept, Tate?

• 25:09Barry Ritholtz?

  I have not.

• 25:10Speaker 03

  It's, it's 45 restaurants in Boston and DC. It's we're opening this week in Ridge, Ridgewood, New Jersey. We'll be opening in Garden City and.

• 25:20Barry Ritholtz?

  Garden City's not far from where I live. I will definitely check it out.

• 25:23Speaker 03

  Manhattan, it's, it's, it's, it's third wave coffee. It's, it's Levon infused baked goods, Levon, Israel, Turkey.

• 25:34Barry Ritholtz?

  Really?

• 25:34Speaker 03

  And North Africa, Lebanon. It's fascinating. And then we have chefs in every unit. We're doing real food, again, from the Levon, but, but fascinating real food and doing really significant volumes. Back to your, your story.

• 25:47Barry Ritholtz?

  Yeah.

• 25:48Speaker 03

  You know, here's the point. Starbucks has been through many waves.

• 25:53Speaker 03

  Brian Nichols, friend, very good guy, he's doing the right stuff. He's doing what Howard did when that business was formed, which is focusing on a competitive advantage as doing a better job for the guest. If you don't make a difference for the guest, you have no right to be in business. And the reality is, in my industry, my industry is the second oldest profession in the world, the food industry. You know, if you don't have a competitive advantage, a reason the customers are walking past your competitors to choose you, all you're going to do is going to get your market share. And when you get your market share, this is dirt farming. And that's ultimately what happened to Starbucks.

• 26:34Speaker 03

  And what Brian is trying to do is reassert its points of difference, its specialness, in a way that delights guests and gets them to come back. And when you tell your story of Starbucks, it speaks to how Starbucks was actually diminished by management. It's bad profit when you're abusing customers, and it's good profit when you're making a difference in the lives of your guests.

• 27:00Speaker 00

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• 27:32Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience. Experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices. But according to recruiters, advisors,

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• 28:54Barry Ritholtz?

  You have such a fascinating background, and you've dealt with so many really interesting people in competitive space. We talked earlier about you being frenemies with Howard Schultz and Starbucks. Take me through how you go from IPO-ing at Oban Pan to acquiring Panera. What was that experience like?

• 29:21Speaker 03

  Well, we didn't acquire Panera. We acquired a business-

• 29:24Barry Ritholtz?

  St. Louis Bread Co.

• 29:25Speaker 03

  We acquired a company called St. Louis Bread Company. We recognized the ideology and power of what would later be called fast casual, real food for real people. We ended up using St. Louis Bread Company as a test laboratory to apply those principles. We changed everything. We took a unit doing a million dollars a year. We added breakfast. That took us to a million two fifty. We changed the environment in big ways. That took us to a million seven fifty. Added a gathering place segment. And by- Uh, nineteen ninety-five, I realized, um, the name St. Louis Bread Company was the wrong name to take national, and we changed the name to Panera Bread.

• 30:09Speaker 03

  And the, the big, um, and very important step was really in nineteen ninety-eight. Um, I, at that point, was running a public company with four divisions, Obon Pen, Obon Pen International, Obon Pen Manufacturing, and this thing called Panera Bread. Panera was the third largest of them. I, I, I have to tell you, I would look at Panera and say, this brand has the potential to be nationally dominant. And it wasn't at that point, but it had it. It had consistent volumes. And I was, I was struck by the degree to which the folks that were running it didn't really understand what growth was gonna take and what was gonna hit 'em. And I was deeply worried. And I was down in the Caribbean with a friend, and this, and I, I was lamenting, I was kinda bummed about it.

• 30:54Speaker 03

  And she looked at me and she said, Ron, what would you do if Panera owned Obon Pen, the company, the name of the company was Panera, and it owned all those other divisions? And I, I looked at her and I said, you know what? If I had any guts, I'd monetize every asset we have. Panera is the gem. It could be a nationally dominant company. I would take all the capital from those other businesses. I'd go down there myself and make it, make it work, and I'd bring the best human capital we have. And I'm this kinda person, if I think about something long enough and I say, I'm gonna go do it, I go do it. It took me three months, I made the decision to go do it, I brought the idea to my board, they thought I was crazy.

• 31:36Speaker 03

  They all had hired on to this company called Obon Pen and not Panera. But eventually, they gave me the room to do it. It was a bet-your-job kind of proposition. And over the next year and a half, we sold every other business but Panera. Uh, and I ended up, um, with Panera, a bunch of cash, maybe a hundred and eighty stores, and I moved a new wife down to St. Louis, Missouri, and, uh, off we went in running Panera.

• 32:02Barry Ritholtz?

  And, and tenxed it up to two thousand stores, which, how long did that take?

• 32:07Speaker 03

  Well, I, I will tell you, from that point forward, the, the stock, uh, was up a hundredfold.

• 32:12Barry Ritholtz?

  Wow.

• 32:13Speaker 03

  In the early, uh, that happened in, I guess, ninety-nine, early two thousands, you know, um... You know, I, people would later would say to me, Ron, why didn't you tell me? And I'd look at him and go.

• 32:26Barry Ritholtz?

  How did I know?

• 32:27Speaker 03

  I, I, I'd look at him and say, yo, I was telling you. Nobody wanted to listen. And the truth of the matter is, for at least a year, you could have bought my stock at three bucks a share.

• 32:38Barry Ritholtz?

  Right.

• 32:39Speaker 03

  Which is what I was trading at at that point. You could have bought my stock at three bucks a share by the wheelbarrow load.

• 32:44Barry Ritholtz?

  And what did you have in cash at the time?

• 32:46Speaker 03

  A couple hundred million.

• 32:48Barry Ritholtz?

  So, a buck or so in cash?

• 32:50Speaker 03

  Yeah.

• 32:51Barry Ritholtz?

  So, you're risking two dollars?

• 32:52Speaker 03

  Yeah, you could have bought it, you know, split adjusted, but you could have bought it. That stock ultimately, three bucks a share then, traded for three fifteen when we sold the company seventeen years ago.

• 33:03Barry Ritholtz?

  And that was seven billion plus?

• 33:04Speaker 03

  Yeah, seven point eight.

• 33:05Barry Ritholtz?

  Wow, that's almost eight billion. And I'm not sure if this is true, according to perplexity, Panera is either Latin or Spanish for breadbasket, is that right?

• 33:14Speaker 03

  Yeah, it was actually an empty vessel where we could put a personality into.

• 33:19Barry Ritholtz?

  Okay.

• 33:20Speaker 03

  So, we weren't looking for a name, you know, there's no Joey Panera, it's not my cousin.

• 33:25Barry Ritholtz?

  Right.

• 33:26Speaker 03

  There, it was really a, a, a vehicle to produce an identity that was rooted in some of you who were around Panera, no, mother bread.

• 33:34Barry Ritholtz?

  So, ninety-nine, everything gets sold off, you accumulate all this capital. At what point did you start to get the sense, hey, this is gonna work? Did it take a year or two?

• 33:46Speaker 03

  I know, I actually knew back then.

• 33:48Barry Ritholtz?

  From day one? You're like, this can't fail.

• 33:50Speaker 03

  No, you know, for me, it's, it's, it's not that it can't fail, but, but I see something, I can feel it. And, you know, my definition as an entrepreneur is I'm, I'm a risk avoider. I'm not a risk seeker. But to me, the greatest risk is blowing a powerful idea, is blowing a, a market niche that I can see and taste. And it's for me, it's beholden on me to fulfill that. And I can literally remember understanding what we had with Panera back then, and, and knowing what it could become, and knowing we had this obligation to help it fulfill its, its destiny. I could feel it.

• 34:28Barry Ritholtz?

  Huh, that's really fascinating. So 2017, you sell out to a private company?

• 34:35Speaker 03

  Whoa, whoa, whoa, whoa, wait, wait Barry, we've got a few years, we've got about 20 years and then

• 34:40Barry Ritholtz?

  So how do we get from 99 to 2017?

• 34:43Speaker 03

  20 years, 1,500 restaurants, and 100X in the stock price.

• 34:49Barry Ritholtz?

  So what was that, tell us about those two decades. What was it like growing from, you know, 50 stores to 1,500 plus?

• 34:59Speaker 03

  It was a lot of work and a lot of fun and wonderful people who shared it, who believed in it deeply, who cared about it. It was a focus on the guest. It was a focus on something we call concept essence. This brand's role in the world. And quite frankly, we really, over those roughly 20 years, stayed highly disciplined. We were never about liquidity. We were never about trying to sell the company. We were about running a great company for our guests, producing high comp store sales through good days, through the great recession,

• 35:39Speaker 03

  going through all those ups and downs. And we stayed true to that. We ended up having very strong comp store sales, very high ROIs, and we ended up, you know, building a massive organization.

• 35:52Barry Ritholtz?

  What was the biggest challenge during that ramp up? Because we have all seen companies either over expand or expand into the wrong food categories or the wrong geographies. Like, how challenging is that process, knowing that, hey, either this is great or it's a disaster, there's almost nothing in the middle?

• 36:14Speaker 03

  Yeah, you know, it's really funny. To me, running a company, a small or a very large company, is all about discipline. And not getting ahead of your skis. I never wanted to be a company that had to go through layoffs. I never wanted to be a company that had to close stores. So I kept trying to say, how do we run this thing with discipline? ...on what matters, that is satisfying the guests in a way none of our competitors could. How do we create differentiation? Competitive advantage is everything. How do we create an experience other people can't do, with food other people can't provide, with a culture and an experience when you walk in the store that other people weren't offering?

• 36:59Speaker 03

  And it was that focus on that that never broke in those 20 years. And I think anybody who worked for me knew that.

• 37:06Barry Ritholtz?

  Huh, that's really fascinating. So now, 1,500 stores, 17 years later.

• 37:12Speaker 03

  Maybe we were 1,700 stores, but keep going.

• 37:15Barry Ritholtz?

  Okay.

• 37:16Speaker 03

  You're missing a few hundred stores.

• 37:17Barry Ritholtz?

  Almost 2,000 stores today. What led you to decide, "All right, these guys really want to throw a dumb amount of money at me? I'll take it."

• 37:26Speaker 03

  Well, we have to make one stop along the way.

• 37:29Barry Ritholtz?

  Okay.

• 37:30Speaker 03

  So, as I told you, I have this other love, politics, and trying to fix the world. And I fundamentally believe, as in business, the ability to think long-term is what was the key to Panera and the way we approached it. I also think that in our civic society, being able to think long-term and come together as a country is powerful. I would often think the Chinese have 20-year plans and, you know, we can't agree on a budget for 20 months, and today we can't agree on tariffs for 20 hours. But the truth of the matter is, back in '08 and '09, I felt this desire to take what I'd learned in running large organizations and apply it in civic society.

• 38:13Speaker 03

  And I had some discussions with the Obama administration. I couldn't step down to do that because of my commitment to Panera. And I made the decision, I wanted to step down, jump off the high diving board, and see what it felt like applying myself elsewhere. I made that decision. I stepped down as CEO, stayed as executive chairman. I created something called Panera Cares, which were these cafes of shared responsibility, no set prices. It was quite an interesting experiment in humanity. We opened five of them. I also went off and helped. Co-form an organization called No Labels, which was about reducing, again, the hyper-

• 38:52Barry Ritholtz?

  Oh, I recall No Labels.

• 38:54Speaker 03

  Yeah.

• 38:54Barry Ritholtz?

  I didn't realize that.

• 38:55Speaker 03

  I was one of the folks that were really the founders of that. And, and I'm, I'm out as executive chair for about a year or two. And I was still doing acquisitions, I was still the largest shareholder, and doing some consumer work. And I came back one weekend around 2010, 11. And I sat down at a computer and I wrote a vision for how I would compete with Panera. And that vision essentially called for digital access. None of that existed in 2011. It called for loyalty. Very little of it was in this country. Tesco had formed it in the UK, it come to Kroger. We called for loyalty, we called for omnichannel.

• 39:31Barry Ritholtz?

  Loyalty meaning like reward system?

• 39:33Speaker 03

  Reward system, yes. How do you find a way to, to build a deeper personal connection with guests? Uh, it called for clean food, uh, free of all artificial, uh, chemicals, preservatives.

• 39:45Barry Ritholtz?

  So minimal processing?

• 39:47Speaker 03

  Yes.

• 39:47Barry Ritholtz?

  And no, and very little additives, if any?

• 39:50Speaker 03

  If any, exactly. And then on, on the channel approach. And I brought this, this memo into my very dear friend, gentleman I love, Bill Morton, who was our CEO, he'd been my CFO for two decades. And, and I shared it with Bill and he took a look at it and said, would you go work on it? And I said, you know, I, I would. And a, a year later, the executive chairman is working 80, me, I'm working 80 hours a week, having the time of my life, building up, up a prototype for technology and digital access and clean food. And, and, and Bill comes to me and says, he can't travel. Would I come back as CEO? We, we fought over for about a year, I didn't really want to come back and, and, and, and

• 40:35Speaker 03

  do what I had done as CEO. But he couldn't travel and it was required. So I came back as CEO, I put all that plan in place. It was horrific.

• 40:45Barry Ritholtz?

  At Panera?

• 40:46Speaker 03

  At Panera, oh yeah.

• 40:47Barry Ritholtz?

  And it didn't work?

• 40:48Speaker 03

  No, no, wait. I spent 150 million, it was, the, the transformation was huge.

• 40:52Barry Ritholtz?

  Okay, so it did work?

• 40:53Speaker 03

  Oh, well, let me get there. I, I mean, I had activists along the way. One of my partners in Act 3 today was the activist who attacked me.

• 41:00Barry Ritholtz?

  Uh huh.

• 41:01Speaker 03

  I, I had a lot of fun with him, I could never tell anybody I actually respected him.

• 41:04Barry Ritholtz?

  Name?

• 41:05Speaker 03

  Noah Elbogen.

• 41:06Barry Ritholtz?

  Okay.

• 41:07Speaker 03

  But I, I couldn't tell anybody that, but I actually grew to like him. And today he works with me. But, but at any rate. So those years, 2014, 15, 16, anytime you go through transformation, anytime you change something, and this was probably the largest transformation in a large public restaurant company, it was difficult. I remember when we were driving technology, we're the first real restaurant technology in an integrated way. Again, I used to call technology the social security of Panera. It was only a matter of time till it was 100% of our revenue.

• 41:42Barry Ritholtz?

  Right.

• 41:43Speaker 03

  And we were committed to this and we did it. By 2016, our comps were pushing double digits again.

• 41:50Barry Ritholtz?

  Wow.

• 41:51Speaker 03

  EBITDA was up 35%. The company was rocking. Starbucks made an approach to us to buy us. That didn't, we'd go forward. And in 2017, the leadership of JB, which was a European money manager, came calling and they had fallen in love. And frankly, my view of a business is I spend all of my time building it, but when somebody's in love, that always provides the opportunity to harvest.

• 42:23Barry Ritholtz?

  So Starbucks comes knocking. Were they offering a stock deal? Was it remotely close to the nearly 8 billion that JB came up with?

• 42:32Speaker 03

  If you read my book, you'll read the whole story. But the Starbucks deal was around 240 a share. The JB deal was done at 315 a share.

• 42:45Barry Ritholtz?

  Much more aggressive numbers.

• 42:46Speaker 03

  Six months after the Starbucks discussions.

• 42:49Barry Ritholtz?

  Right.

• 42:50Speaker 03

  And frankly, the Starbucks discussions didn't reach conclusion. It was at that point that Howard was making his own decisions about stepping down and replacing himself with Kevin Johnson. And my sense is they did not want to take on an acquisition like Panera at that moment. So our stock price got ahead of itself. They couldn't do the deal. So the Starbucks deal didn't go forward.

• 43:15Barry Ritholtz?

  Right. But at the very least, it set a floor for future discussions with whomever.

• 43:20Speaker 03

  Well, it wasn't public. So we had, to be honest with you,

• 43:23Barry Ritholtz?

  I mean internally.

• 43:24Speaker 03

  We had had these discussions at 240 a share at Starbucks. It didn't go forward. And when we began with JB, and again, you can read the book. You know, I think it started in the high 200s. By the time we were done, they were paying 315 for it.

• 43:42Barry Ritholtz?

  Wow. And the book is Know What Matters: Lessons From A Lifetime Of Transformations.

• 43:49Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs. And hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 44:33Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 45:12Barry Ritholtz?

  All right, so let's talk about Act Three, which I don't mean that in the Shakespearean sense, but you launched Act Three Holdings to invest in new brands. Tell us about the motivations for that.

• 45:24Speaker 03

  Well, after I had saw Panera, I didn't know where I was headed. There was discussion with JB about joining them as a partner.

• 45:33Barry Ritholtz?

  And this is the big European investment shop that took over Panera?

• 45:39Speaker 03

  Yeah, but it wasn't for me. And I was doing a bunch of speaking about the pervasive short-termism in our capital markets and how I thought it had been, it had a untoward impact frankly on innovation and GDP growth. And one of my now partners, who'd been my chief concept officer at Panera, was a gentleman named Keith Pascal. And he said, why don't you take some of your money? You've made all this money. Why don't you take some of it and invest it in a long-term, with a long-term focus? And I thought about it, and I'd been out of Panera about two months at this point. And I actually had an idea. And the idea

• 46:24Speaker 03

  I had, it was a company, I basically had, had deep belief that the Mediterranean category had the potential to be the next major culinary category.

• 46:36Barry Ritholtz?

  Oh, that's really interesting.

• 46:38Speaker 03

  Oh, it's obvious. I mean, it was the number one diet in America, Mediterranean. Every time I went to the doctor, they were doing a commercial for Mediterranean. It's bold flavors, but it's flavors that feel safe. It's also craveable wellness. It's healthy, it's good for you, and it tastes good. And it was very clear, this category had power. And I had made an investment in a very small company in the DVM, DMV, which was down in DC, called Kava, when it was two restaurants. I knew them. And I had another restaurant company, as I had left Panera, approached me, called Zoe's, asked me if I would join their board. They'd give me warrants of, you know, 10% of the company

• 47:22Speaker 03

  or something, to see if I could help them. Compete and and I I looked at him and I thought to myself, wow. And at the same time, Kava, the guys at Kava asked me if I'd join their board. I thought to myself, you know, th- this is an industry, the food industry, in which in every major category, winner takes all.

• 47:44Barry Ritholtz?

  Yep.

• 47:45Speaker 03

  You know, you can talk McDonald's and Burger King, Panera and Corner Bakery. You can talk Chipotle and Qdoba. And I said, somebody's going to win in Mediterranean. And there is a powerful potential to to take Zoe's, to buy this company Zoe's, which was about 250 restaurants, take the culinary skills of Kava, merge them together and end up with the, you know, clearly 10x dominant player in the Mediterranean category. And I I thought I might do this. Well, Kava asked me to join their board. I I I I went to their CEO Brett Schulman with this idea. And and I said, and he said, before you, you know, you better talk to my board about it. I went to a meeting with the board.

• 48:29Speaker 03

  I pitched them on the idea of of buying a company five times larger and then merging with them. Ultimately, they asked, they wanted to do the acquisition. I agreed to finance the deal or at least half of the capital they needed, about 150 million I put into it. And I became, you know, one of their very largest shareholders and I became chairman of the company.

• 48:51Barry Ritholtz?

  And and how large is Kava today?

• 48:53Speaker 03

  Well, it went public about 18 months ago. It stock is was up as high as seven X since the IPO. It's now up five X. It's a it was it's a $10 billion market cap company. It traded as high as 16 billion. It's perceived by the market frankly as.

• 49:18Speaker 03

  Has the potential to be the next Chipotle, the next Panera. It's a powerful brand with an amazing management team led by Brett Shulman. And I'm pleased to say we've been able to help them along the way. Know what they needed to do to become the kind of great company it is today.

• 49:35Barry Ritholtz?

  Let me push back a little bit on winner take all, even though I'm a big believer in that as a reality. But McDonald's seems to have gotten kinda old and stale. And along comes Shake Shack and a dozen other five guys and down there. And it suddenly seems like in the burger space, as an example, there's increasing competition and it's no longer Mickey D's as the only winner. Is that just what happens eventually or what's your perspective on that?

• 50:11Speaker 03

  Well, first, let me, let me share with you something. Danny Meyer, who's the

• 50:15Barry Ritholtz?

  Brilliant.

• 50:15Speaker 03

  Yeah, chairman, very dear friend, chairman of Shake Shack. He's a dear friend, but my son actually works at Shake Shack in, in, in operations. And so I, I have great affinity for those guys. But, but here's the truth. McDonald's is worth what 75 billion, 100 billion? I mean, it's, it's got a huge market cap. There isn't another hamburger business that's got a market cap anywhere near that. And that's what we're talking about.

• 50:44Barry Ritholtz?

  But they got a 65 year head start, 75 year head start over

• 50:49Speaker 03

  Yeah, that's what I mean. Winner takes all. When you have a position of dominance in a category, you win. Now you can be niched and niches come along and they redefine themselves. And they can in themselves become a category. But ultimately, this is an industry in which scale matters. It matters as you spread the overhead and it's a winner take all industry.

• 51:10Barry Ritholtz?

  I'm, I'm looking at a lot of the big winners of the past. And I know they're all different industries, whether it's General Electric or Sears or or, or retailers.

• 51:22Speaker 03

  Barry, you're, you're a great investor and a smart man, but you're confusing two things.

• 51:27Barry Ritholtz?

  Yeah.

• 51:27Speaker 03

  One dominance of a category. And then what happens to businesses as they lose their competitive advantage?

• 51:35Barry Ritholtz?

  Exactly.

• 51:36Speaker 03

  So let me share with you a principle that was very clear to me. When businesses form, it requires a powerful, powerful

• 51:45Speaker 03

  Effort by somebody to discover a better alternative. Because you have no scale. You've got to get customers to walk across the street. You have no purchasing, no ability, access to capital. When a business starts to get some success, because it's actually worked, capital comes in. And as capital comes in, people began to say, you know, we know you've discovered something better, but we need to figure out how to be more efficient, how to run it better. And what ultimately happens is you bring in what we would call discovery, delivery people. Delivery people are about improving the margins, about purchasing, about financial planning. And often in companies, and particularly in my industry, as they approach a billion

• 52:27Speaker 03

  dollars, the discovery people and the delivery people, they ultimately do well together at the beginning, the margins get better, but ultimately there's conflict and friction. The language of discovery is the language of, could you imagine? Let's try this. What would happen if? It's poetry. The language of delivery is financial planning. Prove it to me. I want to see the numbers. I don't believe it.

• 52:52Barry Ritholtz?

  Logistics.

• 52:53Speaker 03

  Numbers. It's got to be proven. And what ends up happening is the delivery capabilities of most companies drive out the discovery capabilities. And companies that were once very effective, they became more and more reliant on efficiency. And what happens typically in many companies is they get very good, very efficient at doing what the marketplace wanted from them five years ago, 10 years ago, 20 years ago, and not very effective at figuring out what the consumer of tomorrow wants.

• 53:27Barry Ritholtz?

  There's a wonderful Paul Graham quote that goes, "All experts are experts in the way the world used to be."

• 53:34Speaker 03

  Exactly. And so my point to you is, is, once we define the categories, dominance matters. Somebody will own, the reason the market is paying upwards of, has been paying upwards of $15 billion valuation on Kava, this thing is 400 restaurants. And we've had valuations of 30 to 40 million dollars a restaurant. What is the market paying for? They're paying for the future. They're paying for an expectation that this business will take form as one of the great companies in this country. The question, that's dominance of a category.

• 54:14Speaker 03

  Now, the challenge to the team at Akava is staying on that edge, staying on that wave, is continuing to discover, which is why the role of CEO in so many companies, in my view, is to be the innovator in chief and lead that discovery. Because if the CEO isn't doing it, it isn't going to happen.

• 54:33Barry Ritholtz?

  Huh, that's really interesting. So I want to talk about some of the companies that Act3 has invested in, but let's get a little broader view. Tell us about Act3. What are you doing? What's the philosophy here?

• 54:45Speaker 03

  So after we helped form the modern Akava and invested in that, I had also had a company I had bought for Panera called Tate, which, a large stake in it with its founder Zeridore. When I left Panera, I took with me Panera's interest in Tate, and we decided to take our own money. I took roughly a quarter of a billion dollars of my own money, and a number of people who decided to join me, they co-invested. And we decided to put that money to work, investing in growth companies with a couple

• 55:29Speaker 03

  of very simple principles. The number one principle was founder-friendly capital. We think that in growth concepts, the last thing they need to do is do fundraising as if it's an annual lifecycle event, literally. The last thing that needs to happen is money raising needs an annual event, so we come along and we make an investment, hopefully at a reasonable valuation, but we then take a right of first refusal with a pre-agreed to valuation multiple on all follow-on rounds. And we've never turned that down.

• 56:05Barry Ritholtz?

  Wow.

• 56:06Speaker 03

  So all of our investments know that they essentially never have to raise money again.

• 56:10Barry Ritholtz?

  Don't have to worry about it.

• 56:11Speaker 03

  So all the money's there, it's already pre-negotiated. It also allows us to consolidate up our position. That's principle one. It's common stock. And no dilutive, no pref terms. Number two, we practice what we call Sherpa management. So almost every private equity firm that makes investments, their people are financial. They're in the boardroom often asking what the next liquidity event is. Of our 25 people, only one of them is financially driven. As I said, Noah Elbogen, our former activist. Everybody else, our senior C suite executives. I've got a guy who's opened 5,000 retail stores. Wow. I've got another guy who's my partner Dwight Juicen,

• 56:51Speaker 03

  who was with us for 20 years and really invented fast casual. My joke with him is from his brain to my lips. I make the speech, he's the one who does the thinking. We have another partner Chuck Chapman, who's extraordinary. He was with Darden, was with Berkshire Hathaway and Dairy Queen, was with Bruegers, was president, was on my board, was the CEO of Panera. He's great at scaling and building these businesses. I've got a major technology group that has the capability of knowing what's going to work in three years. At any rate, when we're sitting in a boardroom, we're there as a Sherpa. And I have a simple expression.

• 57:36Speaker 03

  Building a nationally dominant business is tougher than climbing Mount Everest. Very few people ever do it. Nobody goes up Mount Everest without a Sherpa. Why don't you understand that you will be well served if you have a Sherpa as you build a nationally dominant company? When we're in that boardroom, we're talking to management about how to make sure they don't fall off the side of the mountain, how they don't, and make sure they don't trip up and fall. And frankly, we've been very successful in helping build these dominant companies in these core categories. And then last, Barry. The last principle, as I told you when we began talking, we believe deeply in competitive advantage. We only invest where we have competitive advantage. What Act Three is really

• 58:20Speaker 03

  good at is we have hundreds of years of pattern recognition in this industry. We know what categories are going to have a wind at their back, and we know how to help these companies build the dominant position in that category. And frankly, we now are involved with seven companies. We've yet to have anything other than a huge success.

• 58:42Barry Ritholtz?

  Huh, that's really fascinating. Let's talk quickly about two of the companies that you've invested in, besides Kava. One is Life Alive, and the other is Level 99. Tell us about those.

• 58:55Speaker 03

  Sure. So, Life Alive is positive eating. Look, at 40% of America is trying to eat better. The question is, where do you go to do that? How do you do it? This is mostly vegetables. It's really good. We've owned it for seven or eight years. We've nurtured it, cared for it, watched it grow. Very high volume today. Somebody's going to own the plant-forward category. We hope that this is the concept that's the dominant player in that.

• 59:23Barry Ritholtz?

  And Level 99?

• 59:24Speaker 03

  Level 99 is another interesting one. This is immersive social entertainment. It's 40,000 square feet of challenges. It was created, it's 40,000 square feet of challenges with a farm-to-table restaurant and a brewery in the middle of it. It was created by a gentleman named Matt DePlessis. We met Matt before he opened one of them. He's out of Harvard, out of MIT, Harvard Business School, and spent 20 years working with Disney and their folks. Very experienced in entertainment. He had the vision for this business. We put up the capital. We're partners in it with him. And it is stunning to go to one of these.

• 1:00:07Speaker 03

  We're in Natick, Massachusetts. We're in Providence, Rhode Island. We're opening in Disney World. We're opening in Tyson's Corner.

• 1:00:14Barry Ritholtz?

  Wow.

• 1:00:14Speaker 03

  And this summer, you'll see us in locations across America. This is

• 1:00:20Speaker 03

  Is a kind of business, we'll have 3,000 people on a Saturday night. It's an unbelievable experience and with extraordinary margins. It may be one of the best businesses I've ever been involved in.

• 1:00:31Barry Ritholtz?

  Wow, that's amazing. All right, I only have you for a few moments, so let's jump to our speed round. Five quick questions, 30 seconds each, starting with, what's keeping you entertained these days? What are you streaming or watching or listening to?

• 1:00:45Speaker 03

  Well, what's keeping me entertained is my kids.

• 1:00:48Barry Ritholtz?

  Yeah.

• 1:00:48Speaker 03

  I have a 26-year-old and a 21-year-old, but what I'm watching, the thing I just finished was watching White Lotus with my son.

• 1:00:55Barry Ritholtz?

  Mm-hmm.

• 1:00:55Speaker 03

  I loved it. I mean, we have a house on an island called Jumby Bay off of Antigua, and it reminds us of where we live and just what really goes on between people is always the most fascinating to me. I love people.

• 1:01:09Barry Ritholtz?

  Tell us about your mentors who helped shape your career.

• 1:01:12Speaker 03

  I don't know if anybody helped shape me, but I would say Luke Kane, who was 25 years my senior and my partner of many years, taught me what it meant to be a stand-up guy. I love this man. He was a huge influence. I also would say my dad, who was CPA, but again, knew how to deal with people, talk to people, care about people, and I respected him as a business person.

• 1:01:38Barry Ritholtz?

  What about books? What are some of your favorites? What are you reading right now?

• 1:01:42Speaker 03

  Oh, goodness. Last night I was reading a book on Australia. I'm going to Australia with my daughter in two weeks, so I skim read that, but I tend, you know, I just reread Daniel Kahneman Passed Away. I think I'm pronouncing his name right, but he wrote Fast and Flo-

• 1:02:05Barry Ritholtz?

  Thinking Fast and Slow, Danny Kahneman.

• 1:02:07Speaker 03

  I had read it years ago. I just reread it. Again, I love it. It's behavioral economics, behavioral finance. It's about how people work. And to me, my life, probably if there's one thing that's the central organizing principle, is trying to figure out what makes people tick.

• 1:02:23Barry Ritholtz?

  Huh, really interesting. Our final two questions. What sort of advice would you give to a recent college grad interested in a career in food service or franchising?

• 1:02:35Speaker 03

  I'd say, I'd say get out and, and, and understand what it is to be an operator, understand what it is to run a business. The action isn't in the office, it's not in the support center, the action's in the field, it's in the stores. And most importantly, my advice to you is figure out, not the right career path, but figure out what you, what you care about, what you can do well, and then go do it.

• 1:02:58Barry Ritholtz?

  And our final question, what do you know about the world of building a restaurant, for lack of a better word, empire today, that might have been useful back in the late 80s?

• 1:03:12Speaker 03

  Trust yourself.

• 1:03:13Barry Ritholtz?

  Really?

• 1:03:14Speaker 03

  You know, I think some, you know, guys like me, I don't know, I always, you know, you second guess, you wondered, you listened to every advisor. And one of the things you, you, you gain with a little more age is a perspective that I actually knew what I was doing, staying focused on that customer, staying focused on, on, on the, on the end of delivering a better guest experience and understanding the byproduct would be financial success. It wasn't the end.

• 1:03:41Barry Ritholtz?

  Thanks, Ron, for being so generous with your time. We have been speaking with Ron Shaich. He is the former CEO and chairman of Panera Bread, and Oborpa, and all those other companies. If you enjoy this conversation, check out any of the 550 we've done over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, or wherever you find your favorite podcasts. Be sure to check out my new bestselling book, How Not to Invest: The Ideas, Numbers, and Behaviors That Destroy Wealth and How to Avoid Them. How not to invest, wherever you find your favorite books.

• 1:04:26Barry Ritholtz?

  I would be remiss if I did not thank the crack team that helps put these conversations together each week. John Wasserman is my audio engineer, Sean Russo is my researcher, Anna Luke is my producer, Sage Baumann is the head of podcasts here at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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