Panera's recipe for the recession: Let the dough rise

Conventional wisdom holds that, when it comes to fast food in a recession, less is decidedly more. In this perspective, desperate consumers, prioritizing price above pleasure, rush into feed stations, fill up on the calories that they need to get through the day, and rush out again. Ingredients and flavor are secondary considerations and expectations about ambiance are limited to the hope that the bathroom will be sanitary and the floor will be clean.

In this context, Panera's success in the recession is a surprise. It's hard to explain how the chain -- which charges more, takes longer, and doesn't even have a cute mascot -- can possibly be thriving in a brutal economic climate. Yet, thrive it does: the company plans to open 80 new locations in 2009, and its same-store sales rose 3.4 percent in 2008. They have continued to rise this year, and the company's stock, which rose 50 percent last year, is only slightly off in 2009.
CEO Ron Shaich, who describes his company as "contrarians to the core" in a recent USA Today article, delights in the company's refusal to fit in with commonly-accepted trends: "In a world where everyone is cutting back, we want to give more, not less." Right now, that expansive vision is translating into expanded menu offerings, including a new chicken salad with sliced grapes and almonds, a low-cal power breakfast sandwich, and a salmon sandwich. For Panera's less adventurous customers, the company will also be offering macaroni and cheese, oatmeal, and smoothies.

This refusal to be easily pigeonholed presents a problem for many food analysts. To a great extent, Panera is unique, a chain for which there is no analog. It is not, as some analysts say, a Chipotle that serves non-Mexican food, or a Cosi that serves pastries. It is not a Starbucks with a bulked-up menu or a Pret a Manger with fresher sandwiches. The closest comparison would probably be a traditional French bistro or a southern cafe. Like these iconic establishments, Panera tries to position itself as an extension of the home, a gathering-place where visitors can linger over a meal without feeling a pressure to drop in, strap on the feed bag, and run out.

Of course, unlike bistros and cafes, Panera is a chain, which means that its seemingly authentic atmosphere must be endlessly replicable. In other words, it must strenuously maintain a model that thrives on the appearance of effortlessness.

Panera's ability to do so -- combined with the chain's upscale food and low-end prices -- may explain its recessionary success. For customers who have grown accustomed to using real flatware to eat off real plates, paper cartons and shrink-wrapped sandwiches feel like a come-down. For that matter, the gap between slow-paced, up-scale eateries and rush-through, cattle-call places like Applebee's can be dizzying.

By offering real food, served on real plates at a relaxed pace, Panera is perfectly positioned for people who appreciate luxury, even if they can no longer afford it. In this context, the chain's decision to raise prices may have actually worked for it. While the increases of a few cents per item were negligible, they conveyed the message that the company refused to compromise quality in the search for lower prices. A potentially dangerous move, the higher prices seem to have actually served the brand: as Panera's subsequent success shows, when one is in the business of selling affordable luxury, high standards can be a great selling point.,feedConfig,entry&id=641002&pid=641001&uts=1248383966
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