In another exclusive Q&A, F&H talks shop with Panera Bread’s Craig Milne, the person responsible for bringing one of America’s most lauded restaurant concepts to Canada
F&H: Did you have a background in hospitality before acquiring the rights to Panera?
CM: I washed dishes when I was 16 in St. Catharines, Ont. And after university I worked with Peter Fowler (now CEO of SIR Corp.) before heading to The Keg for 10 years to run locations throughout southern Ontario. I then spent 16 years with SIR Corp. working on all its brands.
CM: I started talking to Panera about two years ago with regard to opportunities. After many flights back and forth between the U.S., we came up with a template for a deal. I then spent about a year travelling to different U.S. markets, studying Panera’s bakery operations, every line position, even cash and barista. I fell in love with the brand. But they also invested a lot of time and money in me to make sure I was successful. It was nothing like I had experienced in this industry before. Panera exceeded my expectations on every level, as far as training, persistence of standards and procedures, the product and relationship with suppliers. They get it.
F&H: That stringent screening process, while intense, has to make you feel secure that every location within the brand is being run the right way.
CM: In the Canadian market, there were a dozen or so people Panera met with where they ultimately said, “It’s just not the right fit with you.” Who they partner with — and they really do partner with franchisees — is very particular. I feel fortunate.
F&H: OK, so tell me a bit about the deal you signed with them.
CM: I have an area development agreement for the GTA that’s a work in progress. But before we do anything more in Canada, we need to get the three cafés we have opened up and running and make sure our supply chain is set. We need to understand the Canadian marketplace — its needs, wants and likes — so we can look at the brand as a whole in Canada.
F&H: Can you tell me how much a franchise costs?
CM: They look for a liquidity of about $3 million and a net worth of about $7.5 million.
F&H: Are all the stores the exact same footprint?
CM: Panera really works well in a 4,200- to 5,000-square-foot space.
F&H: It’s very roomy in here. You don’t see that too often — many developers are trying to shrink the footprint at new stores.
CM: There’s an awful lot of time spent to ensure that every inch of space is utilized properly. But one of the things many people don’t know about Panera is that our dough is fresh, and we have deck ovens and rack ovens in the back. Panera isn’t about pulling frozen dough out of the freezer, putting it in a convection oven and baking it off. It is bread made fresh, the way it’s supposed to be made.
When Panera was started by [company CEO] Ron Shaike in the 1980s and into the 1990s, everything was becoming quicker, faster and more efficient. But they really struck a strong chord and put a stake in the ground by deciding to do it right. And the way to do that is to use real ingredients, real stone-deck ovens and real bakers that take the time and care to do it right.
F&H: What’s the hardest part about bringing an American concept to Canada for the first time?
CM: I’m going to say two things. Number 1 is sourcing and supplying the ingredients that we need to make our bread. Panera has 1,400 locations, and they work very closely with their vendor partners. They’re also working with farmers in the fields to make sure that the romaine lettuce we use is to our standards. They have very specific standards. Supply chain has been a challenge for us.
Number 2 is educating the Canadian consumer about all the layers at Panera. We opened with a big splash, but it’s about them knowing what Panera is all about and how they can use us. We need to explain our brand to Canadians.
F&H: What makes Panera stand out from other sandwich-type stores in Toronto?
CM: It’s all about the bread, which is baked fresh, every day. And at the end of the day, leftovers are donated to charity. But our sauces are also made fresh. We don’t use secret sauce, we use chipotle mayo sauce. Our produce is delivered five days a week to our cafés, and we use organic produce in a lot of our items. We use hothouse tomatoes, fresh meats and antibiotic-free chicken.
F&H: Do you find the health and wellness trend is driving more traffic into your stores?
CM: Panera has been ahead of the curve for about 10 to 12 years. The nice thing that has happened in the past 12 to 18 months — which has been very tough on the industry — is that people are recognizing us even more now. We have always been committed to quality fresh product, and we don’t take shortcuts. I think more and more people, when they look at true value equations, and not just the price they pay, they know we’re using quality ingredients. They can taste the difference.
F&H: How have sales been since you opened your cafés?
CM: We are very happy with our sales. We continue to grow and word of mouth continues to grow, too. We opened the Richmond Hill location in October of last year and customers lined-up out the door. [The Square One store opened in Mississauga, Ont., in November 2008; the Thornhill location opened in January 2009.] It was a little bit overwhelming those first two weeks, but to Panera’s credit, there was a crew of people up here from the U.S. helping me out at every turn.
F&H: When I was pulling up, I think I spotted drive-thru capability built into the structure. Is this in the cards in the near future?
CM: Panera has drive-thru locations opening in the U.S. right now. Our intent was to open three cafés, run them for about six to eight months, and then start our drive-thru operations.
F&H: The recession has been tough on the restaurant business in cities across North America. But Panera opened more stores, its same-store sales increased by 3.4 per cent, and the prices on some menu items were even increased. What makes it such a winning brand?
CM: It’s the focus Panera puts on the products, the people and great service, all in a really comfortable environment. It is also about the value equation Panera offers. In this industry, where people do trade down, we’ve found they trade up as well. Price is important to many people out there, but it’s also the value of what they’re getting. People also want to eat healthier and live longer. Panera is real food with real ingredients. The environment is also warm and inviting, and we have free Wi-Fi, so you will see a lot of people using their laptops here. Many customers use Panera as their office away from home.
F&H: Your stores are in suburban markets in the GTA right now. Are they also suited to an urban market?
CM: Very much so. We have heavy concentration in Chicago and Boston. Panera does well in both urban and suburban markets. With site selection and looking for the right market and demographic, a great deal of time and research goes into it. We only want the absolute best sites.
F&H: Are you eyeing any new locations right now? Do you have the rights for all of Canada, or are you interested in them?
CM: Yes, we are looking at two or three other locations for next year. Panera will grow, but we’ll do it right. Let’s just say it’s a work in progress. l