Pod Insights How I Built This with Guy Raz Panera Bread/Au Bon Pain: Ron Shaich (2018) About this episode In the early 1980s, Ron Shaich bought a small, struggling Boston bakery chain called Au Bon Pain, and built it out to 250 locations nationwide. Ron then saw an opportunity to build something even bigger: Panera Bread. It was the start of "fast casual" – a new kind of eating experience, between fast food and restaurant dining. Today, Panera Bread has over 2,000 stores, and $5 billion in annual sales. PLUS, for our postscript "How You Built That," we check back with Lisa Dalton, who turned a relationship mishap into a game-changing braille label that solves a daily problem for blind consumers.
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0:00 Guy Raz? Hey, really quick before we start the show, you will really want to hear this because if you are a fan of '90s music, you may want to fly from wherever you are in the country to attend this upcoming live show. How I Built This is coming to Seattle, to Ben Arroyo Hall, on Thursday, March 26, and we are going to tell the story of Sub Pop. I'll be talking with Jonathan Poneman and Bruce Pavitt, the founders of Sub Pop, the iconic label behind artists like Nirvana, Soundgarden, Fleet Foxes, Death Cab and so many more. For information or to get your tickets, go to nprpresents.org. And I hope to see you in Seattle. It's going to be so exciting. OK, on to today's episode.
0:43 Guy Raz? You know, you can learn a lot about your business by hanging out at the cash register and just, you know, listening to your customers, which is actually what Ron Shake did many, many years ago at this small bakery he was running in Boston. Basically, his customers would ask for one thing over and over and over. In fact, they asked for this thing so often that Ron decided to totally expand what he was offering at the store. And that decision, well, it eventually led him to build one of the most popular fast casual brands in the US. We first ran this incredible story about two years ago. If you haven't heard it, you will love it. If you have, it is totally worth hearing again. Here you go.
1:26 Speaker 01 We were making spinach croissant. We'd buy the spinach frozen. We didn't have a way to get rid of the water. And somebody came up with the idea, well, let's buy a dozen clothes dryers and we'll put the spinach in the clothes dryer. That will dissipate the water. It was a great idea until one day we blew the top off the dryer and ended up with spinach in all 3,000 square feet of the production space.
1:55 Guy Raz? From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
2:09 Guy Raz? I'm Guy Raz, and on today's show, how Ron Shake built a successful bakery called Obon Pan and then took a big bet to build an even bigger restaurant chain, Panera.
2:27 Guy Raz? Ron Shake isn't a household name like, say, Howard Schultz, but you could argue that what Howard Schultz did for coffee, Ron Shake did for cheddar broccoli soup or the Asiago cheese bagel. Because like Howard, Ron wasn't just focused on a product. He was interested in creating a space, a place where people could hang out for a long time, maybe even have a PTA meeting or social gathering and really linger over that bagel or cup of soup. This is the famous third place concept that both Howard Schultz and Ron Shake wanted to tap into. And that's how Panera became one of the fastest growing restaurant chains in the world.
3:10 Guy Raz? In fact, if you'd invested $7,000 in Panera stock in 1999, you'd be sitting on more than half a million dollars by 2017. Now, the thing is, if you met Ron Shake, say, in high school, this is not the path you'd have predicted for him. Ron wasn't even interested in business. His passion was politics. His parents were raging liberals, and Ron grew up going to rallies and volunteering on campaigns all over New Jersey. He eventually went to Clark University, where naturally, he majored in politics. And he was quickly elected to student government. And that could have been Ron's life, except for one day, when something happened to Ron and a group of friends.
3:54 Guy Raz? Something kind of small, but something that, when you look back on it, probably changed his entire life.
4:02 Speaker 01 Yeah, so we were in a local convenience store called Store 24, across the street from the main entrance to the Clark campus. And they accused us of shoplifting and tossed us out, asked us to leave.
4:14 Guy Raz? Were you guys just being rowdy or wild or anything?
4:17 Speaker 01 No, we were shopping, but I came back to campus, and I was in my dorm room with a couple of friends. And I said, you know, why are we shopping there? How the heck can they treat us like this? We're what supports that store. We said, what do we need them for? We can do this ourselves. We can have our own convenience store. And I said, you know, this isn't going to be that hard. Let's go do it. And we approached the university. They weren't so keen on this, but I moved the question to the student body. They voted in support of it. And I basically agreed to spend that summer between my sophomore and junior year, opening this convenience store guy.
4:53 Guy Raz? Wow, so what'd you guys sell?
4:55 Speaker 01 We sold everything from drinks to munchies, to cookies and candy. And, you know, our assistant manager would come to my apartment at 5:00 in the morning. And we actually would go to this deep discount supermarket and buy, I don't know, 10 or 15 baskets full of merchandise that we'd stocked the store with. And we hired 20 or 30 different students to work there. I will be very frank in saying to you, I was more interested in that store than I was in my own academic life.
5:33 Guy Raz? And, and your guy, who's still focused on public policy and government, but I guess this was kind of cool. You liked, you kind of liked doing business. You liked running a business.
5:45 Speaker 01 Yeah, and, and, you know, I didn't see myself as that kind of guy. And it took me a while to make sense of that. But in so many ways, running a business is no different than a campaign. In fact, a campaign is a business that, that essentially has one day in which it ends. A business is a campaign that goes on and never ends.
6:11 Guy Raz? So at this point in his life, Ron wasn't quite sure what he wanted to do, business or politics. But people around him saw how much he loved running that convenience store. And a lot of people said, hey, why don't you get an MBA? So Ron did. He enrolled at Harvard Business School in 1976. And when he finished, unlike a lot of his classmates who went into banking or finance, Ron decided to go into retail. And he took a job in the Midwest at a place called The Original Cookie Company.
6:43 Speaker 01 Twenty stores in shopping malls. We grew it to about 125. I took the job as the third year of the MBA. What I mean by that is, I took a job as a district manager. Basically, I ran 10 or 15 of these cookie stores, half the United States. And I spent my time running around the country. And I ended up opening dozens of these cookie stores around the country.
7:08 Guy Raz? So at a certain point, I mean, so you're learning about the cookie business, I guess. And then at a certain point, you get this idea like, hey, wait, I can do this myself. I can have my own cookie store?
7:18 Speaker 01 Yes. And I can literally remember traveling across Indiana on my way to Fort Wayne to open a new cookie store. And it hit me. And I said, why are we opening this in a mall? There's a huge opportunity to open these in an urban setting. Why don't we open one? And I can remember going to my boss. I remember him taking me to meet the CEO of the company. I said, I want to open an urban cookie store. And he looks at me and he says, we don't do that here. We open mall-based retail units. And I thought to myself, well, you're not going to do it. I'd like to go do it. Why shouldn't we? And I'm the kind of guy, if I say I'm going to do it, I want to go do it.
7:59 Speaker 01 And it led me to actually resigning my job, and I moved back to Boston. And I started looking for real estate. And the reality was, nobody would lease me space.
8:13 Guy Raz? For a cookie store?
8:14 Speaker 01 I couldn't find any. For a cookie store.
8:16 Guy Raz? Because they thought it wouldn't make enough money to pay the rent?
8:18 Speaker 01 Because I had no credibility.
8:20 Guy Raz? Yeah, right.
8:21 Speaker 01 I had no real money. I had, you know, no balance sheet to sign a lease. And so I went to my dad, and I said, I want my inheritance, whatever it's going to be. I want the opportunity to use it. And I had about $25,000. My dad essentially lent me, gave me $75,000. And that $100,000 became the grub stake, the equity, that allowed us to build that first 400-square-foot cookie store.
8:51 Guy Raz? Wow.
8:52 Speaker 01 In downtown Boston.
8:53 Guy Raz? What did you name the store?
8:54 Speaker 01 We named it The Cookie Jar. And I can remember, we took the Toll House recipe right off the bag. I bought a small mixer. And I would pass out cookies in front of the stores we were building it. And I'd start to adjust the recipe based on what I learned talking to customers.
9:09 Guy Raz? And you were the baker? You were making the cookies yourself?
9:13 Speaker 01 Yeah, we opened, there were three employees. I mean, it was me and two folks. I will never forget that day. It just seemed like people never stopped walking, coming in and purchasing. We had 50,000 people a day going by. And I'll never forget it. I got to the end of the day.
9:29 Guy Raz? 50,000 people a day walking past that store, just foot traffic?
9:32 Speaker 01 Yeah. But I got to the end of that, that first afternoon. We opened at 1 o'clock, Guy. And by 6, we closed. And my back was hurting, my legs were hurting. And I counted the money and I realized, we had only brought in $400. I mean, you forget when we talk about business, what it is to sell 400 batches of cookies at a buck each and the amount of energy and work that goes into it.
9:55 Guy Raz? I mean, that, that sounds pretty good, though. I mean, especially for the first day.
9:59 Speaker 01 Well, you know, Guy, the reality of the cookie business, and basically any business, is you got to pay the rent. The staff is essentially going to be there. So the question is, what's your volume? And I was there maybe four or five months. You know, we were surviving, weren't making a lot of money. It was a fun gig, but I wanted more.
10:22 Guy Raz? What was your vision for Cookie Jar? Did you imagine it being like that cookie company you worked for in Ohio? That it would be a big chain of cookie stores? Was that what you were thinking long-term?
10:33 Speaker 01 You know, it's so funny. I have never started with a tight goal in mind. What I have always done, and to this day still do, I see an opportunity, I wade out into the water. And I try to figure out where that opportunity is going to take me. It's a little like body surfing when you go on vacation, you go to the ocean. You know, you get out far enough away from shore. You start to watch the waves come in and then you choose a wave and you think that's going to be a powerful wave. And then you get on that wave and you see where it takes you and you start to navigate and negotiate your way to shore. And so for me, the cookie store was not an end, but a means to take me to the next place.
11:17 Speaker 01 I just love the process of figuring it out. I love the doing of the work. I was working a hundred hours a week and, and it never felt like work. It was joy.
11:31 Guy Raz? But you, you also said just a minute ago that you, that it wasn't enough, that you wanted more. So what, like, what was your plan to take the cookie jar, you know, to the next level?
11:41 Speaker 01 Well, it was really interesting. I mean, I saw these 50,000 people a day going by, but nobody bought cookies before 12 noon. And I thought to myself, wow, what can we do with this? And I thought, you know, why don't we put in French baked goods? They seem to be growing in popularity. People were buying croissants and the like. And I went to a local, to a company called Obon Pen.
12:06 Guy Raz? It was a small, just a local Boston chain, like two or three locations?
12:09 Speaker 01 Yeah, at that point, well, they had three locations and I became their licensee for the one square block around my little cookie store.
12:17 Guy Raz? In other words, you sold what, their croissants?
12:20 Speaker 01 Well, I actually converted my store to where it had two logos. It had the Obon Pen logo and it had the cookie jar logo. And you could get French baked goods that we baked on premise, or you could get the cookies in the afternoon. And the thing started doing very well. But as an operator, and I'm an operator, an operator is a guy who runs these businesses. You know which of your vendors are any good and which aren't. And these folks at Obon Pen, it was very clear to me they were out of control. I loved their product. Their product was great. But as a business, they were disorganized. They, they, sometimes they delivered, sometimes they didn't. Sometimes they billed me, sometimes they didn't. To this day, I'm sure I still owe money.
13:04 Speaker 01 They just didn't have the basic processes and disciplines. And that's typical in many small businesses. And I saw a powerful opportunity. And I thought to myself, wow, I really could straighten this business out. I really could operate this. So what ended up happening, Guy, I became friends with the gentleman who was running the, the three Obon Pens, a guy who later became my partner, Lou Cane.
13:29 Guy Raz? Lou Cane.
13:30 Speaker 01 And it was clear to, to him and to me that Obon Pen was not going to be able to continue growing or staying in business there. And so I came to them and said, look, I think I can fix this. You give me 60% of the company, you and your investors keep 40%. I'll put my cookie store, which was making money, in with your three Obon Pens and we'll create a new company. And it was in that process that we created what it became.
13:59 Guy Raz? So, so once you did the deal with, with Lou and Obon Pen, what did you do? Like, how did you even start?
14:07 Speaker 01 Well, I knew, I knew how to fix their business. I was committed to doing whatever it took to, to get this thing off the ground. So after we took over Obon Pen, it was a mess. You know, we didn't have a way, we were making spinach croissants. We'd buy the spinach frozen. We didn't have a way to, to get rid of the water. And somebody came up with the idea, well, let's buy a dozen dryers.
14:30 Guy Raz? Like hair dryers or?
14:32 Speaker 01 No, clothes dryers. And we'll, we'll put the spinach in the clothes dryer and that will dissipate the water from, from, you know, frozen spinach. Well, that was a great idea.
14:42 Guy Raz? You put frozen spinach into clothes dryers?
14:45 Speaker 01 Well, we let it defrost first, Guy. But we put defrosted spinach in, in clothes dryers, letting it run off the water was a great idea. Until one day, we blew the top off the, the dryer and ended up with spinach in, in all 3,000 square feet of the production space.
15:02 Guy Raz? I used to love those spinach croissants at Obon Pen.
15:06 Speaker 01 You didn't know how they were made, did you?
15:08 Guy Raz? Wow.
15:10 Speaker 01 But I can literally remember, Guy, we didn't even have the ability to maintain our equipment. And I would use my auto mechanic to help fix the equipment. I didn't know who else to call. And we had a dough divider that was essentially being held together with bailing wire and paper clips. My auto mechanic was trying to keep it going. And we were using a hanger as the handle on this dough divider. I was in a bakery at about 3:00 in the morning, and all of a sudden, you see sparks come off this dough divider. And this guy, the individual who was working on the dough divider, jumps like a deer that had been shot, and he
15:55 Speaker 01 falls on the ground like a raggedy handoff.
15:57 Guy Raz? Wow.
15:58 Speaker 01 And I and everybody else in the production area came running over to this guy. And I can just remember thinking to myself, please, dear God, let this guy survive.
16:08 Guy Raz? Yeah.
16:08 Speaker 01 I certainly flashed in my mind, bakery shut down, Baker killed.
16:13 Guy Raz? Yeah.
16:13 Speaker 01 I could imagine all. And we're all over there. And this ex-Vietnam veteran tattoos all over his body, working in the bakery, comes over and starts to do mouth-to-mouth resuscitation, and pounding on his chest. And then, all of a sudden, this guy who's on the floor opens one eye, and he says, will you please take your tongue out of my mouth? And that's what I knew. We were going to be OK.
16:39 Guy Raz? When we come back, Heran took Obon Pan from a small business in Boston to a publicly traded national chain. And then, how he put all of that success on the line to grow another company, Panera Bread. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.
17:16 Guy Raz? Hey, welcome back to How I Built This from NPR. So something you're going to notice about Ron Shaich and the story of how he eventually builds Panera Bread is just how many times along the way, he sees new opportunities or has to improvise and adapt. Again, and again, and again, Ron comes to a point where he has to make a big pivot and transform his business. And in 1985, three years after Ron acquires a small French bakery in Boston called Obon Pan, a business that's really struggling, he manages to turn things around with his partner, Lou Cane. But it's still a small business. In fact, Ron himself works at the sales counter during the day. But
18:01 Guy Raz? doing that actually helps him figure out, almost by accident, his next opportunity.
18:07 Speaker 01 In 1984 and 1985, I would be in a restaurant working, and I'd have a customer walk up to me, guy, and say, could I have that baguette? And I say, sure. And they say, slice it. I'd hand them the loaf, and they'd pull out a bag from the local supermarket, from the local Stop & Shop, and they'd put roasted turkey and maybe cheese on it. And you know, you didn't have to be a Harvard MBA to say, wow, the real thing here is that the baguette is not the end. It's the platform to sell sandwiches. And my whole view of business, if you really focus on listening, you will see amazing things. You'll learn amazing
18:49 Speaker 01 things. And these customers, in their behavior, were showing us the opportunity. And so in 1985, we created the first French bakery café in the Copley Place Mall in Boston.
19:04 Guy Raz? So you decided that you were going to make this a new experience, a new Obon Pan experience, where people could come and eat lunch and buy bread?
19:12 Speaker 01 Yeah, we were going to go from being simply a bakery to a bakery café.
19:16 Guy Raz? Right.
19:16 Speaker 01 And almost instantly, this broken down company became very hot. People wanted this. I can remember the second day that we opened in Copley Place, we had 50 people in line before we opened the doors.
19:32 Guy Raz? And what were you serving there?
19:34 Speaker 01 We were serving sandwiches and some soups made on our bread and croissant. But they were differentiated kinds of sandwiches. They were roast beef and bourson on a real French baguette. It would be roasted turkey and brie cheese. And I think what Oban Penn was providing, and I don't think we had the language for it back then. But what the Bakery Cafe was, was an alternative between down and dirty fast food
20:04 Guy Raz? Yeah.
20:04 Speaker 01 and fine dining.
20:05 Guy Raz? Yeah.
20:06 Speaker 01 And for people who were working in white collar jobs increasingly in urban settings, this was the first example of what we later came to call fast casual. This was an attempt to do something that was better, but in a quick service mode.
20:22 Guy Raz? So, so once you sort of stumbled on this idea of creating cafes and bakeries, it was off to the races. You just, I mean, at that point, it was clear that you were going to begin a pretty rapid expansion.
20:34 Speaker 01 Well, Guy, you know, as soon as we came up with this idea of a bakery cafe, we saw all kinds of interest in it. We became hot. You know, every major office building wanted a French bakery cafe. And we found, we developed big competitors. Pepsi came after us. They decided this was going to be the third leg of Pepsi food service. And they'd created something called La Petite Boulangerie. Sara Lee came after us. They bought a chain called Michelle's Baguette. And they were going to open 400 stores.
21:04 Guy Raz? Wow.
21:05 Speaker 01 There was a company in your part of the world, down in DC, called Vida France.
21:09 Guy Raz? Oh, yeah.
21:10 Speaker 01 And they were off and running. And we were, quite frankly, the smallest of them. And the interesting part to me, Guy,
21:17 Guy Raz? Yeah.
21:17 Speaker 01 is every one of these large competitors had people with resumes that would run rings around our guys. All of them had far more money and announced they were going to open more stores.
21:27 Guy Raz? Yeah.
21:27 Speaker 01 But every one of them hit the wall. What they didn't have is our people were much more connected. Our guys weren't worrying about their next career move. Our guys were committed in this deep and profound way to making this concept work. So we ended up out operating all these larger companies. And by 1991, we were validated when we went public. Morgan Stanley took us public. And we really had won the battle to be the dominant bakery cafe operator in America.
22:01 Guy Raz? All right, so something, something happens early in this period, shortly after you go public, which is Obon Pan acquires this small chain of St. Louis-based sandwich shops called the St. Louis Bread Company. What's the story there? Why did you buy this, like, small chain in St. Louis? Was it, was the idea to, to turn them into Obon Pans?
22:21 Speaker 01 No, you know, I, I talk to everybody in our industry and there's nobody I don't learn from. And I was asked by an investment bank to meet several gentlemen who owned a company called St. Louis Bread Company. And it hit me, these were 19 stores in St. Louis, doing volumes almost as much as we did within Obon Pan, but doing so in suburban St. Louis. And it struck me, this was an opportunity to acquire St. Louis Bread Company. And maybe we could build it into 300, 400, 500 stores in the suburban marketplace, while Obon Pan was our urban strategy. So in November of 1993, we bought the St. Louis Bread Company, those 19 stores, for
23:06 Speaker 01 $23 million.
23:07 Guy Raz? You are looking at this thing and you're thinking, hey, wait, we can use this as a way to get into the suburban market. What was the St. Louis Bread Company doing that was different than Obon Pan? Why would it have appealed to, to suburban consumers more than Obon Pan?
23:21 Speaker 01 Well, it's interesting, Guy. The St. Louis Bread Company was in location sites that were significantly larger. And that enabled it to have, shall we say, a gathering place or chill business. St. Louis Bread Company was generating volumes nearly as high as Obon Pan, but doing so in real estate that cost half as much.
23:42 Guy Raz? Is the, is the chill business, like, literally, like, to chill out? Is that what you mean when you say that?
23:47 Speaker 01 Yeah, we, we call it the gathering place or chill business. Others call it third place. But basically, it's, you know, when you, when you don't want to go back to the office, when you want a place to, to read a magazine, to do your bills, to go on Wi-Fi, where do you go?
24:01 Guy Raz? Yeah, it's like the Starbucks. This is the Starbucks model, right?
24:04 Speaker 01 Yes, though the difference between us and Starbucks, in Starbucks, they're tight spaces. So you generally go in with your headphones on and try to separate from everybody else. Panera, because we have the space, it's the kind of place you really do want to sit and do an interview. It's the kind of place that for a Bible study group or a team meeting, you can fit six, eight, 10 people at a time.
24:26 Guy Raz? All right. So you acquire St. Louis Bread Company. It's going to be the sort of the suburban alternative to Obon Pan. And you were not going to give it the name Obon Pan. It was going to be St. Louis Bread Company? Or did you initially, did you immediately realize you were going to rename this thing?
24:43 Speaker 01 Well, we renamed the concept Panera Bread in all markets other than St. Louis. But we renamed it Panera Bread because as we went to new markets, people often thought St. Louis was more associated with Clydesdale horses and beer than it was with bread.
25:01 Guy Raz? Oh, wow. Yeah, right.
25:02 Speaker 01 And so we wanted an empty vessel, a personality we could form. And our view was we had bought this, there's something good happening. Let's take a couple of years and study it.
25:13 Guy Raz? So what'd you do at that point?
25:14 Speaker 01 So we went off and I literally spent two years on the road with yellow legal pads, talking to people. And it was very clear to me, I'm always searching for what's the deeper trend. Post-World War II, fast food was special. You fast forward to 1990 with 60,000 drive-throughs in America. Fast food had become self-service gasoline stations for the human body. And the reality of it was that there were many consumers that were holding their noses when they wanted the fast food. They wanted more than a lot of food cheap. And it was very clear to us, this same phenomenon was happening in bread. And you started to see the growth of specialty bread in the East Coast and the West Coast.
25:55 Speaker 01 And we began to understand that this phenomena offered a powerful opportunity. Somebody was going to dominate specialty food. And with the power of combining it with a specialty bakery, we saw the potential to do it.
26:09 Guy Raz? So out of curiosity, in that, by '98, you're watching St. Louis Bread Company Panera really start to grow. Do you remember how many stores you had at that point? Did you expand beyond those original 19?
26:21 Speaker 01 Yeah, by 1998, we roughly had 150 stores. And I was having one of those moments that all CEOs have of self-reflection. And frankly, I was kind of bummed. I was looking at Panera Bread as one of four divisions in this multi-divisional restaurant concept.
26:41 Guy Raz? You had Obon Pan.
26:42 Speaker 01 I had Obon Pan, Obon Pan International. I had Panera, and I had Obon Pan Manufacturing. And I was with a friend. And I said, you know, for every 100 people who talk about having a nationally dominant concept, one ever makes it. To do so is so difficult. But I said, this one has that potential. And my friend looked at me and said, Ron, what would you do if Panera owned Obon Pan, not Obon Pan owns Panera? And I said, you know, I'd take all the resources we had, put it against Panera, becoming a nationally dominant brand. And I'd take myself and the very best people we had, and I'd go down there and make it happen.
27:21 Guy Raz? You were proposing to sell Obon Pan?
27:25 Speaker 01 I was proposing to sell everything other than Panera.
27:29 Guy Raz? Except for Panera?
27:30 Speaker 01 Take all the money and all the human resources and myself and go down and make this happen.
27:35 Guy Raz? So basically, you're saying these, out of the four sub-businesses, let's get rid of these three, take the cash, and pour it into Panera, because that's the place, that's the thing that has the potential?
27:46 Speaker 01 Yes.
27:47 Guy Raz? So you go to your board, and you say, let's do this. And your board is looking at you like you're nuts, because they actually got into this business because of Obon Pan?
27:56 Speaker 01 Literally, that's what happened, Guy. It was a huge boardroom struggle, because I had two votes, our venture capitalist had three, and all of them had invested in Obon Pan.
28:07 Guy Raz? Yeah.
28:08 Speaker 01 Let's just say there were very heated discussions. And if I hadn't pulled this off, I probably wouldn't have stayed as CEO of Panera.
28:15 Guy Raz? I mean, you had, I guess, when you sold Obon Pan, it was like 250 stores, something like that?
28:19 Speaker 01 About 250 stores.
28:21 Guy Raz? And Panera only had 180. So you were, you really were downsizing. But you thought, we need to downsize in order to explode in growth.
28:30 Speaker 01 But I wasn't downsizing. I was focusing. I could see the potential of Panera. In retrospect, it looks brilliant, because the stock has been up a hundredfold since then. But going through it was horrible. I mean, those businesses, Obon Pan, was like my first child. I birthed it. I grew it. I lived it. I loved it. But sometimes, you just have to march forward. You have to know what matters, and Panera's what mattered, and you have to get it done. And so we lived through the sale of all three other businesses over a year and a half. And we changed the name of the public company from Obon Pan to Panera, and off we ran.
29:11 Speaker 01 And back then, you could have bought our stock for three and a half, $4 a share.
29:16 Guy Raz? Why didn't you tell me? Why didn't you call me then, Ron?
29:19 Speaker 01 You know, Guy, I was telling everybody. Nobody wanted to listen then.
29:23 Guy Raz? Three bucks a share?
29:24 Speaker 01 And it ended up selling for $315 a share.
29:27 Guy Raz? Oh, my God.
29:28 Speaker 01 The truth is, nothing's proven until it's done.
29:31 Guy Raz? So you are taking a big risk in 99 when you sell Obon Pan. By 2003, Panera's doing $1 billion in sales. Are you doing a victory lap? Are you like high-fiving people and saying, "See, I told you"?
29:48 Speaker 01 Guy, I never do a victory lap. The reality is, the time to worry about tomorrow is today. And my job is to discover what's going to happen tomorrow. I have what's called a retailer's nightmare. I have a fear that somehow, some way, nobody's going to show up tomorrow, and then what? You know, I get up on a stage, right? And I speak in front of 5,000 Panera people. And I sit there and I think to myself as I'm speaking, "My God, these people are counting on us to make the right decisions." Their mortgages, their kids' education, their livelihoods, their lives, their careers are counting on us to make the right decisions. So I'm continually asking myself, where are we going to be in three and five years? What do we need to do to get there?
30:32 Speaker 01 How do we make sure we don't make a mistake? How do we care for this? How do we steward it in the right way?
30:38 Guy Raz? What's interesting to me is that this growth was just explosive in the early 2000s. And I guess by 2009, Panera was opening like a new store every five days.
30:48 Speaker 01 Basically, every three days.
30:49 Guy Raz? I mean, it's insane. It's in the middle of the worst financial crisis. How did that happen? I mean, how did the financial crisis and the collapse of the economy not affect you guys?
31:01 Speaker 01 Our whole view was to make smart bets. And one of those smart bets comes from a contrarian perspective. Pre the recession, pre the Great Recession, the whole world was in a go-go kind of context. Everybody was levering up their balance sheets, putting on debt, borrowing money to buy back stock, grow, grow, grow. At that time, we held back. Real estate costs were high. We didn't lever up. When the recession hit, as Warren Buffett put it, "That's the time you make a fortune." Our concept was still strong. People were still visiting us. We decided to invest our resources in growing even more quickly during
31:41 Speaker 01 the recession. Real estate costs were down 20%. Construction costs were down 20%. Simultaneously, most of our competitors were ripping costs out of their P&L, trying to chase their costs down as their sales were descending. It was a vicious cycle. We said, "This is the time to build competitive advantage." And ultimately, we tripled the stock through the recession.
32:02 Guy Raz? Ron, I don't want to end without asking you about Lou Cane, your longtime business partner.
32:13 Speaker 01 Yeah.
32:14 Guy Raz? Because it seems like you guys had this amazing, very successful partnership. And I know Lou passed away in 2000, but how did you guys do that? Because most partnerships break down. People fight. They get jealous, angry, they get resentful. Did you have an agreement? How were you able to work so well together?
32:36 Speaker 01 Well, first off, I'll describe Lou. Lou was our version of Blake Carrington from Dynasty. He was direct from Central Casting.
32:44 Guy Raz? Wow.
32:45 Speaker 01 And he looked the part. People loved Lou. And Lou probably was at his best in relationships, in building relationships. And I was the guy who really thought deeply about the business, who ran the business and made it happen. And Lou and I's partnership worked. Because we understood each other. I owned, you know, six times more stock than him. But most of the the community at that point undoubtedly thought the company was Lou's. I was 20 years his junior. I was the guy who, you know, worked with Lou. He was Harvard College, a major fundraiser for Harvard. He was on the commandant's staff in the Marine Corps.
33:29 Speaker 01 And Lou was able to, through his relationships, develop the real estate. And he had the real estate and I could turn it into something. And so we were perfect for each other. And both of us, till the day he died, took care of each other.
33:46 Guy Raz? That's pretty amazing. So last year, Panera sold, was acquired, sold to a German company, JAB Holding. So it's now a private company again.
33:57 Speaker 01 Yes.
33:58 Guy Raz? Why did you sell?
34:00 Speaker 01 Real simple. Because what had allowed us to have this powerful success was his ability to make long-term transformative smart bets. The reality is, in the public marketplaces, I was deeply worried we would not be able to continue to do that.
34:14 Guy Raz? When you were on Wall Street, answering to Wall Street, you could not do that?
34:17 Speaker 01 No, you know what the truth is? I probably could, because I voted 17% of the stock and I had this reputation, this credibility. The problem was, what happened if I wasn't there?
34:27 Guy Raz? Yeah.
34:28 Speaker 01 And I'm 64, I'm not going to be here forever. How does Panera continue to do the things that had created value? There's a pervasive sense of short-termism that has invaded our markets. The reality is, when you have such short-term pressure on our CEOs, they react. And what that ends up meaning is cost-cutting. And they avoid the kind of transformative events that drove the success of Panera. Anything of value, when you have 100,000 employees, as we do, and you have as many stores as we do, takes time, takes years. And so the reality is, as a CEO, as a leader, I've got to figure out where the world is going, I've got to know how the world is unfolding, and I've got to make sure my company is positioned as the world arrives there.
35:11 Speaker 01 You can't do that so easily in a public company.
35:14 Guy Raz? You, toward the end of 2017, you you announced that you were stepping down as the CEO. Are you finally, now that you are kind of slowing down and stepped out from the day-to-day stuff, able to enjoy? I mean, you also became a rich guy. You didn't grow up that way. Are you able to enjoy some of that?
35:34 Speaker 01 You know, money is freedom. And so, I wouldn't be foolish and tell you, I don't enjoy it. You know, I've often been on these panels where I'm the token entrepreneur at business schools and the like. And people say, "Oh, isn't it so wonderful? Look at what you created." And they usually talk about the money. And I tell them, "Look, you don't understand. You know, if you don't like the people you work with, if you don't like the doing of the doing, the creative process of it, you're never going to get there. It's not about going to lunch at the club. It's not about the financings. And you better be clear about the entrepreneurial life. The business owns you. You don't own it. And this business was with me, it still is, every minute of my life, when I'm in the
36:18 Speaker 01 shower, when I'm sleeping. That's the way you develop it, and that's the way you grow it, and that's the way you run it. And if you're not willing to pay that price, you don't want to do what this is all about."
36:31 Guy Raz? Ron Sheik, he was CEO for 36 years before officially handing over the reins of Panera Bread in early 2018. Late in 2017, after Panera went private again, and 20 years after selling Obon Pan to focus on building out Panera, the company actually bought back Obon Pan. The two brands are once again part of the same family. Do you, how often do you eat lunch at Panera?
37:01 Speaker 01 I'm in a Panera, oh, I don't know, four or five times a week now.
37:06 Guy Raz? Four or five times a week?
37:07 Speaker 01 Yeah, and my kids are in another four or five times. So, we still love Panera.
37:19 Guy Raz? And please do stick around because in just a moment, we're going to hear from you about the things you're building. Hey, thanks for sticking around because it's time now for how you built that. And today, we're updating a story we ran about a year ago, and it begins in Queen Creek, Arizona. Lisa Dalton was dating a software engineer named Brian, and Brian is blind. And one day, Lisa was at his house, looking through his pantry and making a shopping list.
37:45 Speaker 02 He had 18 cans of refried beans and didn't know it.
37:49 Guy Raz? So Lisa decided to reorganize. A nice gesture, but also a big mistake.
37:55 Speaker 02 He had used a memorization-based system to organize what he had in his pantry. And in my manhandling the goods, I had completely messed them up.
38:04 Guy Raz? Brian was forgiving. He said, "It's OK. You didn't know." But Lisa, she felt awful.
38:11 Speaker 02 I felt like melting into the floor.
38:12 Guy Raz? But she also thought, "There has to be a better system for Brian's pantry." So she started to research. And she found a few solutions, like putting braille on an index card and then wrapping it around a can with a rubber band. But that seemed wrong for a guy like Brian.
38:28 Speaker 02 I just thought, "This is not the level of household. He's a stylish dude. I wouldn't want him to have to do that."
38:34 Guy Raz? OK, something to know about Lisa. She actually sells customized and commemorative bricks using stamps she makes with a 3D printer. And as she tried to figure out how to solve a problem like Brian's pantry, she thought, "What about using my printer to make reusable labels?" And so she did. She came up with something that's kind of like those Liv Strong wristbands, but with braille on the outside, something you might slip around a container.
39:00 Speaker 02 It's a rigid plastic. It has a little bit of give in it where you can just slide it on, and then they pop right off.
39:06 Guy Raz? Now, Lisa had kept all of this a secret. So when she gave Brian the labels...
39:11 Speaker 02 He kind of cracked up and his face changed. And he's like, that's weird, but that's really cool.
39:15 Guy Raz? And the next thing he said was, hey, you should really sell these. So Lisa started working on more Braille labels for all sorts of cans and jars. And after a few months, she packed up her prototypes and she went to a convention hosted by the National Federation of the Blind. She didn't really have any expectations. She just wanted a little feedback. But instead, people kept coming to her booth. And then they'd come back with friends and say, hey, check these out. And one woman asked Lisa if she would sell her a few of the prototypes.
39:46 Speaker 02 She had packed her husband's lunch and grabbed the wrong container. She packed him a beer. I mean, I know how mortifying that is. And to know that you potentially made a job-ending mistake over something so simple, that's got to be terrifying.
40:03 Guy Raz? And that day, talking to the people at the convention, it was a revelation.
40:07 Speaker 02 I got to the car that day and I totally cried. It was ridiculously moving, the stories, how they've been trying to solve that problem and how they wish that this had come out 20 years ago.
40:19 Guy Raz? So she went home and built a website. It went live in October of 2018. And now Lisa sells her Braille labels for $3 each. And the name of the product? Can Do Labels.
40:31 Speaker 02 I just thought this would bring a lot of independence to people who are also wanting to be able to do their own things. I thought, these are yes-can-do things.
40:40 Guy Raz? This past year, National Braille Press, a publisher and platform that supports people with visual impairments, started to sell can do labels. To keep up with the growing demand, Lisa's now recruited a friend to help with the printing. If you want to find out more about can do labels or your previous episodes, head to our podcast page, howibuiltthis.npr.org. And of course, if you want to tell us your story, go to build.npr.org. And thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. And while you're there, please do give us a review. You can also write to us at [email protected] . And if you want to send a tweet, it's at howibuiltthis. Our show was produced this week by Casey Herman, with music composed by Ramtin Arablouei.
41:23 Guy Raz? Thanks also to Sequoia Carrillo, Candace Lim, Julia Carney, Neve Grant, and Jeff Rogers. Our intern is Rainie Toll. I'm Guy Raz, and you've been listening to How I Built This.
41:42 Guy Raz? This is NPR.
41:49 Speaker 03 Not everybody wants to run around the White House or Congress all day. That's where the NPR Politics Podcast comes in. At 5 PM, NPR's best political reporters get together and break down the biggest political stories. No noise, just friends making sense of Washington. Listen to the NPR Politics Podcast every weekday.
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