Why Ron Shaich Gambled Everything for Panera Bread

What's up everyone? Welcome back to Founders Journal, the number one podcast for early-stage entrepreneurs. I'm back with another tactics-focused episode where we answer your burning questions. And today we are answering a simple but profound question that so many entrepreneurs ask: how do I make decisions that I won't regret? And to answer that question, I have invited a world-class entrepreneur onto the podcast. Ron Shaich is the founder and former CEO of Panera Bread, one of the earliest leaders of fast casual restaurants. Ron's been in the restaurant business for over 30 years, and he's currently the board chair at Cava and is one of the biggest drivers of turning Cava into the powerhouse of fast casual today. In this episode, he talks about his natural interest in leading businesses and how the death of his parents, especially his father, who he had a really close relationship with, dictated how he would approach life and ultimately business. Ron preaches how it's never too early to set a goal and making sure every decision you make thereafter is in service of accomplishing that goal. So without further ado, here is Ron Shaich.

Hi, I'm Ron Shaich, and it's my joy to be here with you today. I have been involved in any number of businesses, among the Businesses you may know are Au Bon Pain, Panera Bread, which I ran for 37 years, 27 years a public company CEO. I've been involved in Cava, Tate, Life Alive, Level 99, BJ's Restaurants, a number of other companies. If I really think about it, I came from a fairly political family. I grew up in the anti-war movement, and to me, coming of age was about How do you make a difference in the world? How do you actually leave this place better because of your existence than not? I could never have imagined myself in business. It was antithetical. It took me years to accept that. And I ended up in business in an ironic fashion. I was thrown out of a local convenience store in college, a place called Clark University in Worcester, Massachusetts. And I was treasurer of the student body. I walked back to campus. I said, My God, these guys are just not treating us right. We should open our own nonprofit convenience store. And I had the wherewithal as treasurer of the student body to propose a tax. The students agreed to pay for this thing. We raised under $100,000, but we had money. And the question was, who's going to build it and who was going to run it? And I ended up saying, all right, I'll go spend a summer building it. I became the first general manager. For a kid from New Jersey who couldn't dance and couldn't sing, I discovered this was the most creative thing I had ever done in my life. I loved it. I love watching consumers. I love watching people come in and watch their eyes. I loved the way it worked. I loved working with the team. I love being committed. And I began to say, my God, you know, doing this was the next best thing to being an artist. It's live performance art. And I discovered the beauty of business. And I was very blessed to have had that opportunity. You know, one of the things I talk about in the book is the death of my parents, and the realization that there is a judgment day on this earth. And if you have a chronic illness, there's a judgment day. As you reflect back on your life, there's a judgment day. And as I watched my parents both go through that, I can tell you that the time to really be reflecting on your life The time is in the 6th inning, the 3rd inning, and to really try to pull back that postmortem and make it a premortem while you still have a shot to make it what you want. I say that because I saw one of my parents more at peace than the other. You want to be in that place where you're at peace, so you better decide what you're going to respect. For me, that began with a process of really sitting back each year and saying, what do I want to respect? What do I want to respect? And asking, what is it I want in my life 3 years, 5, and 7 years from now in the context of my relationship with my body and my health, my relationship with my family and my children, and my relationship with my work? And what is it I want from that? What about my relationship with my own God? Where do I want that to be? And I'd literally put it on a piece of paper and I'd say, this is what I would respect in, in 5 years if I got there. And then I'd sit there and I'd write it out. How do I get there? What are the things that matter, the 2 or 3 or 4 or 5 things I've got to get done in the next 12 months to get there? And then I'd sit down every quarter and hold myself accountable. And ironically, I did the same thing in a business, but it wasn't a business lesson. It was actually a personal lesson applied to business. And I think in many ways, that's why I think of my book and I've titled it Know What Matters. And like so many things, it starts with life, and it also applies to business relative to my dad. Here's a guy who's been gone for 25 years, almost 25 years. I said I've been trying to prove myself to him for 40 years before he passed away, and for the last 25 after he passed away. The truth is, I had a mother with tremendous love. I think in a lot of ways, I'm emotionally built like her. On the other hand, My dad was somebody I admired and respected immensely. I always wanted to live up to them, and I wanted to live up, maybe more importantly, to my own sense of who and what I felt I needed to do to respect myself. One of the things that we all do as kids is stand on the shoulders of our parents. And I can remember when we had Au Bon Pain, my dad said to me, Rod, he said, you know, you and Louie, my partner, you should go to Florida Send the kid—that was our district manager, Lou Bazil—send the kid up to Boston. He can run the stores. You guys are gonna live real well. And I looked at my dad and go, "No way, Dad. I want to build a business. I want to build something I'm powerfully proud of. I want to build something that that's meaningful." And he looks at Ron, take the money. You're nuts. Take the money. And he said, looked at me and said, "Ron, the next thirty stores—they're gonna all go to pay for overhead." He says, you're not going to do any better. I looked at him and said, Dad, that's not what it's about. For me, it's about building something of substance and scale. The reality is, I didn't do what he said. I did what I said. He was right. The next 30 stores went to the overhead. We didn't make any more money. It wasn't until we broke through at 50 restaurants that we actually could move forward. Ultimately, I didn't sell that company. That company ultimately became Panera Bread, and I sold it 37 years later. It took me a long time to get to a place where I would follow my dad's advice. I actually tell you that story because I wasn't my dad, it was never about taking the money. To me, the value creation is a byproduct. Business is the same thing. We all talk about value creation. What did I make? What happened? But you know what? I can't make that happen. It's a byproduct. What I can create is a better competitive alternative. What do I mean in English by that? I can create something that people are willing to walk across the street and walk past 10 or 15 or 20 competitors, because my place for whatever their specific need is, is that much better. Figuring that out—that's the end. Building something that's truly better—a better mousetrap, more worthy of that customer—is truly the path. And everything we spend our time on is the means. Is figuring out how to do that and actually getting it done. But if you do it, you can create value, but not by focusing on value, focusing on building something better. What I'm looking for is what makes people work, what makes people tick. I'm trying to climb into the moccasins, into the brains of the people that are coming in. And I recognize that these concepts that we operate, There are different strokes for different folks. And the question is, what is it they want? And how do we create something that's so darn good, they walk past dozens of competitors to choose us for that solution? And we have to have the authority, we have to have the power, we have to have the difference. And when we do, we have a powerful business. You know, some would say the restaurant business is a little like dirt farming. It's a low-margin business, you get your market share, it's really tough. 9 out of 10 restaurants fail. Yet we've had phenomenal good fortune with restaurants. Why? Because each of the concepts we're involved in, going all the way back to Au Bon Pain through Panera, Cava, Tatte, Life Alive, they meet and address the needs of a specific customer better than anybody else. I have a simple expression and I say it to entrepreneurs all the time. I say, if what you're really about is wanting to go to the university club for lunch, Don't get into this. Don't get into this unless you love drinking beer with your bakers, which is what I had. You know, if that wasn't more fun, if you don't love the doing, it isn't going to happen for you. I never had more fun than when I went to work. I loved it. I loved figuring it out. I loved the people I worked with. I loved when we figured it out and everybody else didn't. I can remember when we saw fast casual in the early '90s. It was powerful. One out of 3 consumers were rejecting fast food, and nobody was serving them. All that existed was fine dining and fast food. We began to understand that there was a deeper trend playing out in society. I call it decommodification. Post-World War II, there was huge consolidation in every category. You can look at soft drinks, Coke and Pepsi, you can look at beer, Anheuser-Busch and Miller. All of that led to competition being Advertising dollars, shelf space, distribution. Well, people began to live in this world, consumers, and say, I want to feel special in a world in which nobody seems to feel special. And you began to see people develop what we would call specialty products. We saw a good friend of mine here in Boston, Jim Koch, did it with something called Sam Adams beer, craft beer. You saw it with specialty coffee. You saw it with Aldo and Snapple. We began to recognize the same exact phenomenon, that deeper trend was going to play out in the consumer marketplace, going to happen in restaurants. It hadn't happened yet. And there was a powerful opportunity in what's called specialty food. I called it then. Today they call it fast casual. But what it meant was changing the currency. The currencies of fast food were a lot of food for not a lot of money. The currencies we were serving were real food, Environments that engaged them, people that cared, all done in such a way that your self-esteem, your sense of self was elevated. That was 2 years on the road to get there. And what I argue in the book, and we did a chapter on it, is what an entrepreneur is, is not a risk seeker. Entrepreneurs are risk averse relative to taking any risk with the opportunity they see they can meet. Really being an entrepreneur is seeing opportunities. Seeing opportunities to make a difference in the lives of other people. When you do that, you build something of success. When I could feel and taste the power of a bakery cafe, when I could see the power of what's today called fast casual, and I wanted to turn Panera into a poster child for that, when I could see and feel the power of what would happen if I sold all my other businesses and bet it all on Panera, when I could see and feel the power to transition Panera yet again around digital and loyalty and clean food and omnichannel. When I could see and feel that, I felt such joy and excitement. The question was doing it. You had to get it done. And what we often as human beings do is get lost in all the stuff coming at us, the reaction. And so what I try to do is separate myself from my reaction, my feeling. I didn't want to sell Obampe, but I knew that what really mattered here was to care for Panera. Too often, I say this to my kids, too often we spend too much time obsessing as if we have perfect knowledge. We have this perception we have control. We don't. Life is a lot more like surfing, um, you know, than anything else. You choose your wave. Sometimes they're good, sometimes they're bad. You get on that wave and you go as hard as you can and you take it as far as you can, and then you adjust. And so there's no such thing as being able to Plan everything out. On the other hand, if you don't have some plan in some direction, you're going nowhere. So it's really about trying to find that balance, which is really rooted in directions. And again, trying to stay focused on what you're going to respect and what you want, as opposed to knowing exactly the right course. What am I trying to do for my customer? What do I need to do for my investors? How do I need to care for my team members and my suppliers? Chain. How am I doing that? Once you do that, you back up and you start to break that into years and quarters. And every quarter, what do I have to get done? Where am I at? What am I doing? Am I doing the right things to get to what I set out to do? Is what I set out to do still what I want to try to get accomplished? And it's a dynamic process of continuing to adjust. And the point I want to leave with your listeners is this isn't so much about just running a business, about your life. Because a business is just another form of living your life. What is it you're going to respect? What is it you have to do in the next 3 months to get where you want to get to in terms of your own self-respect? Do that and you'll have that. Don't do that and you're going to be a reaction machine that's whirling around and accomplishing things that aren't going to actually serve you in the end. Know What Matters, it's available October 24th. You can preorder it. You can order it after October 24th. Any of the major booksellers will have it. Know What Matters by Ron Shaich. It's meant to help give you some perspective on how you accomplish the things that we've talked to today. Build a life you can respect, build an organization you can respect, and actually do it in a way in which you feel good.

That was Ron Shaich, former CEO and founder of Panera Bread. Such valuable and important perspective as we build our businesses while always coming back to what really matters. If you like this episode and want more entrepreneurs on the pod, send me an email at alex@morningbrew.com and share the names of your dream guests. Thanks for listening, and I'll catch you next episode.