Long-Term Greedy, Not Short-Term Stupid: The Playbook Behind Panera's 7.8 Billion Sale

I've done this now over half a century.

I was part of building bakery cafes in

America between old bone pen, Panera.

These were the dominant brands. How do

you develop the long-term thinking that

you've brought to all these different

concepts? I have an expression. I'm

long-term greedy, not short-term stupid.

Now, it seems so obvious, but how did

you hit on this insight at the time? I

think that the most powerful skill that

I have as a business person and what I

would challenge entrepreneurs to acquire

is the skill of talk to me about the

difficulties of running a business. The

family cost, the social cost when you're

doing anything that's takes powerful

commitment. That commitment owns you.

You don't own it. There's a very real

personal price. I've been married twice.

It's not something I'm proud of.

Everything I believe in about business

starts with three words.

What are you obsessed with lately? My

health, actually. What does that mean

for you to be obsessed with that? Well,

I'm 71 and I look at my kids. I look at

my relationships and there's so much to

live for and so much to see and I really

want to do everything I can to give

myself every opportunity to live and see

how the world unfolds.

>> And how has that changed your behaviors?

I got more serious about it because I

would say in my earlier years, 30s, 40s,

and 50s,

I was probably more focused on work and

relationships, family, and as I gained

perspective on it, if I'm ever going to

do it, now's the time. So, I'm trying to

literally work out every day in some

serious way and really eat well, take

the right medication, supplements,

anything I can to help myself. Uh, but

to me, that's about an attitude towards

life. And that attitude essentially

starts with a view um that it's our

responsibility to figure out what it is

that we're going to respect in the

future. I tell it by way of a story. My

I watched my mom and dad pass away now

30 odd years ago. One of them died very

much at peace, the other not so much at

peace. And they really were

secondguessing some of the decisions

they've made in their lives. And I began

to realize there's a judgment day. I

can't tell you, Shane, it's up there.

That's a personal spiritual decision.

But I can tell you if you if you have a

chronic illness and you have the

opportunity, you have a judgment day, a

self judgment as you go through the uh

the end of life. And watching them die

30 years ago, I concluded for me, I

wanted that opportunity to have that

judgment day, not in the ninth inning

with two outs, but in the seventh

inning, the fifth inning, the third

inning when I could really do something

about it. And ever since I began on an

annual basis sitting down and saying

what is it in five years and 10 years uh

I'm going to respect in the context of

my relationships with my work my

relationships with my family and friends

my relationships with my body and my own

relationships with my my own

spirituality.

And so that process of defining what

I'll respect is where I began. And I

would then on a basically um codify

those initiatives, those things I was

trying to accomplish. I'd codify them

into projects and then literally sit

down with myself once a quarter and say,

"How am I doing? Am I actually full of

baloney or or not? Am I actually getting

done what I signed up to do?" And so

increasingly over time, bring it back, I

have found myself realizing that I have

to do a better job of caring for my

body. And that the power of exercise,

the power of physical engagement really

matters. And I think I feel better about

that relationship today than probably at

any other point in my life. Take me

through one of those quarterly reviews.

What does that look like to you? Do you

like pull up your calendar and look at

how you're spending your time? to you.

Yes, we look at time, but it's not so

much about time. Time is a is a means.

It's not the the end. Uh I'm really

looking at what did I get done? Did I

get done the things that I said I needed

to do to create that condition that I'm

trying to attain in three, five, and 10

years. So, I give you a very specific

example, and we're staying in the health

domain. I think it was probably 15 years

ago. I went to my doctor and I realized

I was on the edge of becoming

pre-diabetic.

Uh I was also doing work at Panera and I

had a medical adviser helping me deal

with how our food manifested itself and

we wanted to really serve people. We had

done a clean food initiative and he put

me on a continuous glucose monitor and

he wanted me to see how I was effective

at Panera food and and that whole

experience between my doctor and this

work I was doing at Panera made me

realize I needed to manage my own

relationship with carbohydrates, my own

relationship with my diet. And that led

me to say, hey, if you're ever going to

do this, I was at that time, you know,

mid50s. I said, if I'm ever going to do

that, I got to get to work on doing it.

And I then put that into projects. One

of which was uh in my case to to move to

a more vegan diet. Another piece of that

was to hire a trainer. and I hired a

Ukrainian uh former Olympic trainer,

track and field coach who uh would come

to my house at 5:30 in the morning and

did so for for 12 years. And so what I'm

really saying is I'm trying to no nobody

knows where we're going to end up, but

I'm trying to create a state and then

the question is what are the projects

the things I can do to do that? And then

to sit down and say every quarter, how

am I doing against that? So now we're 15

years later. I still wear that

continuous glucose monitor. My blood

sugar is you know low normal. Um but

it's a way in which I I I keep the data

and I've I I've become educated. It's a

it's an ongoing project. Um same thing

now with exercise. I have a different

trainer. Um, I've evolved, but I'm

really trying hard now to push up my V2

max as opposed to

simply my my my strength and I'm playing

with a bunch of different things. But

but again, all of these are project

against an end of trying to to recognize

it's my responsibility to care for

myself and nobody knows how this is all

going to play out and whether I will

remain healthy or not or any of us will.

But I can do what I can do. And on a

regular basis, I'm sitting there and I'm

I'm literally writing it down. I'm

really saying, "This is where I'm trying

to get to." And then I am literally

writing it down. It's controversial when

I talk to people about exercising every

day. People are like, "You're crazy. You

need rest." And I'm like, "It's easier

to exercise every day than it is five

days a week for me anyway."

>> Yeah. I'm committed to it every day. And

in fact, what I did, again, part of that

project is I I set an appointment for 8

am every day. And I either do it with a

trainer or myself, but I'm there 8:00

a.m. and I get it done before the day

begins basically.

>> Yeah.

>> And and you know, I' I've started to be

a little more um kind to myself. I'm not

doing at 5:30 a.m. anymore, but I still

I want to get it done before the day

starts because if it's really important,

it's one of the key things I'm trying to

drive and it's one of the projects I'm

focused on, then I have to make sure I

make time. With the wisdom that you have

now, looking back and and building Oon

Pan, Panera, which I want to get into in

detail, do you wish you would have

placed more of an emphasis on your

health back then? Yes, but I have to put

that in context as well. Look at I'm 71.

I couldn't feel more blessed. I've had

uh an amazing life. I've had great

health. I'm still in the prime of my

life. Uh I have extraordinary family. I

I I've had um the chance to do really

interesting work and impact hundreds of

thousands, if not millions of of people.

I've been able to engage my mind. I've

had this opportunity

to live a blessed life. I look backwards

and there are certainly lessons I've

learned and things I might do

differently, but taken as a whole, I

couldn't be more at peace and more

pleased. Does it change how you think

about sort of food and the experience

that you're creating for people in the

restaurant? Like I think of something

like True Food Kitchen, which is a very

healthconscious sort of restaurant. How

how does it change how you think about

serving millions of Americans every day?

I've always come from a place of wanting

to make a difference in people's lives.

My way of approaching the world was

essentially initially in a political

context and I discovered through some

experiences in university and we can

talk about these but but I discovered

that business is probably one of the

most creative things you can ever do and

for a a kid who couldn't dance and

couldn't sing I was I was blown away by

the power of business both the

creativity of it and it is a lever to

change. I think I've been involved in

more change as a business person, more

positive change for the world than I

ever could have been if I had done

politics or gone into government or been

a lawyer. I mean, you take Panera.

Panera was one of the two first brands

to introduce antibiotic free chicken in

America. It led to changing the

marketplaces, the Challenger brand, and

doing so, we actually opened up the

market, lowered the prices, and in came,

you know, everybody from McDonald's to

Chick-fil-A. We were the among the first

people to remove trans fats um from our

menu. Um in in the early 2010, 2012, the

US government wanted to post caloric

information. Um the industry was

fighting it intensely publicly said look

at you know what what's the problem with

this industry if people are afraid of of

posting caloric information what's in

their food maybe the answer isn't trying

to hide it maybe the answer is to

actually change what you got in your

food if you think people aren't going to

be too pleased with that. we were in the

lead uh and and had the opportunity to

be one of the first large organizations

to remove all artificial colors,

flavors sweeteners preservatives

really to to push for what is now called

clean food. Uh removing the ultra

processing and I I I know that we've

made a difference. Um I also think we

made a difference in in in in the food

culture. When I grew up, the only

choices were fast food and fine dining.

In the early 90s, as I think you and

maybe some of your listeners know, we

really

developed the ideology that became what

is called today fast casual. Wasn't very

complicated. We we we began to to look

around and could see this been 92 93

that one out of three consumers, one out

of four consumers held their noses when

they went into fast food.

>> And you said, "What is it that they're

looking for?" And I know we spent a year

or two on the road listening to people.

And what you heard was that so many of

these consumers, what they really sought

was real food, environments that engaged

them, served by people that that cared,

and they actually wanted an experience

that elevated their sense of self, not

depleted it, which is what they

experienced in fast food. And we began

to say if we could create that kind of

environment

um that we we could create something

that that actually elevated people and

that this was a powerful opportunity.

Now I was trying to figure it out for my

own company but that ideology that view

of the world which in the early 90s

nobody thought would ever work that

became the ideology that fueled what's

called fast casual today which is a $350

billion business. Um, Panera became the

poster child for it. Uh, Howard Schultz,

Starbucks played a similar kind of um,

paradigm. Steve Ell's and Chipotle. And

I think together you saw the the

evolution of food culture. I'm I'm so

pleased. One of the things that we did

was just say food was about so much more

than what you put in your stomach and

how cheap it was. Food industry is the

second oldest profession and it's about

hospitality at its core. You know, the

idea that we could create environments

that people actually wanted to sit in

and invite them to to come in and enjoy

it and to find it as a place where you

where you really did want to have an

interview, gather the soccer moms, have

a Bible study group, write the great

American novel. I mean, all of these

were experiences that played out in

environments that we created. And to me,

that was a a beautiful contribution to

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It's remarkable. I mean, looking back

now, it seems so obvious, but how did

you hit on this insight at the time? I

think that the most powerful skill that

I have as a business person and what I

would challenge entrepreneurs to acquire

is the skill of empathy. Empathy is

about the ability to climb into somebody

else's brain to feel what they're

feeling and to see what they're feeling

and not sell them but understand and

appreciate them. And I think that

historically we've had those kinds of

skills. I mean, you know, when you talk

about my career, you talk about often

the financial results. You have Cava,

which has been the most successful food

service IPO of the last 5 years,

arguably. Now, a company worth $7

billion, was worth as much as 15

billion, but it's up three, fourfold

from its IPO year and a half ago. Um,

you talk about Panera. Panera was the

best performing restaurant stock over

two decades. Its last two decades um

produced 25% irr

uh in fact somebody told me we we

actually beat Warren Buffett and

Berkshire Hathaway. You you know people

talk about the financial performance but

that's not the part that gets me

excited. That's not the part that I

actually feel. That's a byproduct or

manifestation of what really was

exciting which is learning and

transforming. And so over the course of

our history and I can I can take you

through this but there were three or

four maybe five key learnings that broke

maybe every five years that led to

massive transformation. And it was

actually getting that and figuring it

out and seeing it and tasting it that I

loved. Um, that to me was where the real

work was to to understand that with

empathy what the opportunity was and

then to have the the the discipline to

go in not just understand it but

actually build that into an organization

and put that in place and we can go all

the way back to the initiation of my

career. I started it with a single

cookie store in downtown Boston. That

cookie store led to um an opportunity to

become involved in another company

called Oon Pen. Essentially, there were

50,000 people a day walking by that

store.

>> The cookie store.

>> The cookie store. Nobody bought cookies

before 12 noon. So, we made a decision

um to put in French baked goods. We

became a ly of this company called Oon

Pan. I didn't know at that time but Oon

Pen was really a French bread

manufacturer. Um they had opened 13

stores and closed 10 of them had about

three million in debt and were

functionally bankrupt. And uh I became

their ly in this one square block area

in downtown Boston. And I I can tell you

as an operator I know which of my

vendors are any good and which aren't.

They were so out of control. Sometimes

they build me, sometimes they didn't.

Sometimes they delivered, sometimes they

didn't. I'm sure to this day I still owe

money. But the point of the story is

simply to say they had a lot of issues.

I saw the opportunity to apply what I'd

learned in the cookie business to the

French bakery business and it led to a

merger. Uh we took 60% of the company

and they kept 40% and then split it up.

That company Oonen Coinc, which we

formed was my cookie store and there are

three French bakeries was the company we

ended up literally selling for $7.8 8

billion in 2017. But the point of the

story is the first thing that we

actually really figured out was the

possibility, the opportunity of what Oon

Pent represented. And I would be working

on the counter and customers would walk

in and say, "I want that baguette." And

I'd say, "Sure." And they'd say, "Slice

it." I start to slice it. You know how

you slice bread? You slice it like this.

And they say, "No, slice it from top to

bottom." I'd do so. and I'd hand them

the the baguette chain and they'd pull

out a little bag from a supermarket and

they they put some boron and roast beef

on or smoked turkey and again you didn't

have to be a marketing wiz to say wait a

second what they really care about the

job they want is a sandwich they want

something it's not the bread they want

itself it's how that forms a platform

for something else and we began to say

maybe the opportunity The job we wanted

they that the customer wanted to hire us

for was actually to make him the

sandwich, make him the salad, use the

croissant bread as a platform.

And straight up um again doesn't seem

like a a revelation now, but we began to

rebuild this concept around that idea.

And very quickly this broken bankrupt

company, Old Bone Pen, started taking

off. And when we were selling sandwiches

and and and croissant, it was an

elevated food experience. People loved

it. And this broken down little company

in the course of six, eight years took

off. Uh it became a uh category in malls

across North America. We had everybody

from Pepsi and Sarah Lee um attempt to

take us on or buy us out or take it take

us out. By 1991, the manifestation of

that was we went public based on this

this model of a French bakery cafe as

opposed to just a French bakery. That

was one learning that that that

observation that empathetic observation

of the power of of the product not as an

end in and of itself but as a platform

that led to a powerfully successful

concept. The same thing happened again

by 93. Oon pen was beginning to run out

of organic growth and the one thing if

you're in a public company and I've been

involved in any number of public

companies most of its valuation is

generated by its possibility of growth

and you have to actually deliver that

and it was very clear to me in the early

90s that Obam was limited in its growth.

It was great in Boston, New York, DC,

Chicago, but it didn't work in the malls

in LA. It didn't work in the malls in in

Missouri. And we ended up backward

integrating and we ended up building a

big international business. We said if

we're the best in the United States at

high density urban feeding, there's more

opportunities abroad than just the

United States. We also began building a

manufacturing business. We had uh had

always had manufacturing skills and

built what was the at that time the

largest frozen dough plant ever built in

the the Midwest. And then I I ended up

buying um a little 19story chain in St.

Louis called the St. Louis Bread

Company. And I saw that again at that

time as a a gateway to the suburban

marketplace. Old Bumpen would be urban.

Uh the St. Louis Bread Company could be

suburban. And and and it was

interesting. And it was at that point,

this would have been 93, 94, 95, I I ran

it through an earnout, I I began

traveling the country with guy named

Scott Davis, another guy named Dwight

Juen. These were uh people that worked

with me, colleagues who I thought, you

know, I learned from. And we began

seeing these consumers who wanted

something more. And it was very clear

that there was this very distinct

consumer niche out there that wanted

something better. And we began to to try

to make sense of it. And again, you ask

me how we did it. It was traveling into

the west coast, the east coast, went up

to Vancouver in Canada, Mikey and Terra

breads, amazing bread he was doing up

there. And we're trying to find out who

are the best people um that were meeting

customer needs and why were people

smiling when they came out of there. And

it was from that that we essentially

began to get it. And I can I can I can

remember um sitting in a in a bar with

these two guys, Scott Davis and Dwight

Juice. And and Dwight was my researcher.

And Dwight said, "You know, you really

want to understand today's consumer?

Look at their beer bottle. That label on

it is a mirror for who people perceive

themselves to be. And our opportunity is

for our food to do the same thing, to

give people a sense of who they were and

what they are. And you know, I began to

to make sense of it. And again, for me,

the the the the powerful theme here of

shame is trying to search for what is

the the signal versus the noise. um you

know what really matters because there's

all this stuff coming at you but what

are the deeper trends and what had

become clear to me as I was traveling

the country and watching people and

their angst around fast food their need

for speed but their need for quality

their need for an experience that

elevated them as I was doing that I

began to understand a deeper theme post

World War II all food was local but you

fast forward that In 1990, almost every

major consumer category had been

commodified. It had been turned into an

oligopoly. You can take beer. It had all

once been local beer. It was Annheiser

Bush and Miller. You can take coffee. It

was also again once local coffee

roasters that had morphed into um

fulures and and and Maxwell House. You

can take um soft drinks. once had been

local soft drink manufacturers that had

become Coke and Pepsi and every action

draws reaction and that's the deeper

trend and we began to see in different

consumer categories people waking up and

saying you know I don't want to be part

of a mass market I want to feel special

in a world in which I don't and you

started to see the development of craft

breweries and beer good friend of mine

in Boston Jim uh Cook um did Samuel

Adams

uh you know it was an answer to what um

had happened to the marketplace. We saw

the same thing with coffee with the

growth of specialty coffee. I mean back

then if you came to my house for dinner

on Friday night I'd serve you folders.

Today if I don't use a you know an

expensive espresso machine I'm or an

espresso I'm somehow insulting you. That

was the deeper trend. People wanted to

feel special. You saw the same thing

with beverages. Coke and Pepsi morphed

into Snapple into Al Waldo and now you

walk into a convenience store, you're

going to see a couple hundred different

beverage brands. The point of it is we

saw the same thing, the same opportunity

happening in food. At one time, all food

had been local and had been commoditized

into fast food. And the powerful

opportunity was for specialty food, for

food that was done the way it had been

done, for food that people respected

with ingredients. And we began to see

the power of that and saw the same thing

happening with bakery. One time bakery

had all been local in the consolidation,

the commodification that had become

three lows for 99. And by the early '9s,

some consumers were waking up and

saying, "I want it done the way my

grandparents did it. no chemicals, no

preservatives, stone deck ovens. And we

began to say, there's a powerful

opportunity in, shall we say, specialty

food, and there's no more powerful

platform to compete with that than a

specialty bakery. And putting those two

together became our manifestation of

what we could do as now called fast

casual concept. And so again, same

thing. I saw it, I could see it, I could

taste it. And it was the opportunity to

go put that in place. We should come

back to what the objective of all this

is in a second. But that led to that

second transformation. And the second

transformation ultimately was to apply

those principles of a specialty food to

one of our concepts. And I began to

apply it to this one concept we held

called St. Louis Break Company. And we

literally completely rebuilt it. We took

that unit that was doing about a million

dollars a year. It was basically a a a

sandwich place in which the bread was

the differentiator. And we added a

breakfast business ruden and sourdough

bagels. And the business popped from a

million to a million250. And then we

came in and created a whole different

environment for the store. A place that

you wanted to sit. a wonderful wonderful

designer named Terry Heckler who

actually did our logo and did the

original Starbucks logo out of out of

Seattle who's since passed away but but

he was instrumental in that and we

created a kind of environment that

welcomed you and invited you. I used to

call it visual candy. Wherever you sat,

you you saw something and we we we we

softened the environment. We made it

comfortable. We made it a place you

wanted to be and we put that into place

into our stores. Very quickly our

volumes popped from a million250 up to a

million750. And we began to understand

that we were actually playing in another

business, a gathering place business

offering an opportunity for a place

people could go to to touch base, to see

each other, to connect. Soccer moms,

Bible groups, pharma reps, folks doing

interviews, people doing their taxes.

And we created these environments. And

again, this is the manifestation of this

understanding that people wanted to feel

special in a world in which they didn't.

And Panera became the poster child for

that. And we built that out. And that

led to a third learning and

transformation. By 989,

I was feeling some real frustration. I

was running a big public company. We had

four divisions at that time. Oon Pen

Ompen Manufacturing, Oon Pen

International, and this fourth division,

St. Louis Bread Company, that we had

renamed Panera. That's a whole another

story why we did it. But it was renamed

Panera Bread. And I'm on a beach down in

the Caribbean with a friend. And I'm

lamenting this friend. You know,

everybody's fighting. Everybody's angry

at me. The guys at Oon Pen are angry at

me. Why am I trying to take their

capital and shift it to this growth

thing Panera? The guys in international

didn't want to call home and the guys in

manufacturer were trying to figure out

why they were in a retail company. Any

rate, we had professional managers and

everyone and and I was I said this

strange you know the real the real shame

here this thing Panera even though it's

the third biggest of our company it's

not the largest. It's not the name on

the door. The name of the door was OM

that was the public company. I said,

'This thing has the potential to be a

nationally dominant company. For every

thousand people say it, one ever makes

it. And it was pretty clear that we we

had that opportunity. And I said, you

know what? We're going to screw it up.

We're not going to give it the capital.

We're not going to give it the human

resources to get it where it needs to

go. And my friend looked at me and said,

"Ron, what would you do if the name of

the company was Panera? Panera owned

everything else. How would that change

the way you thought?" And I looked at my

friend, I said, 'Wow, I'd never thought

of it that way. If I had any guts, if I

had if it was really Panera, I would

monetize every other asset, take the

financial capital, and I'd also take the

human capital, the best people, and I'd

go down there and I'd make this happen

because the greatest gem in this company

was that division. And the greatest risk

to to its possibility, its potential,

was that we didn't give it what it

needed to actually grow and become what

it could be. You know, I thought about

I'm this kind of guy if I say I'm going

to do it, I often go do it. I want to

live with myself. And I went off and and

and came back two months later and went

to my board with a proposal to sell

every other business and bet the whole

thing on this Panera Bread division. you

know, I didn't control the company at

that point and that was a definitely a

very tough situation, but ultimately um

they gave me the room to do it. I did

it. It led to the worst year and a half

of my life. I sold every other division.

Um these aren't just businesses. These

were, you know, the old bone pen was my

first child. My kids know that, you

know, I mean, it was a part of me. These

were people I had sweated with and bled

with and I loved. The good news is most

of them ultimately came back to work for

us when their non-competes were over.

But we sold the you know Oonen in Oon

Pen International. We sold the

manufacturing business and by 99 I ended

up with Panera Bread and a whole bunch

of cash and and a business that had

extraordinary potential. And then I went

to work to help make that happen. And we

took it from what a couple of hundred

stores up to 2,000 restaurants. We're

very close to it by the end of that

decade. And that led again to the the

the next transformation cuz they they

come in waves. And by 2008

2009, I personally was feeling that I

wanted transformation. I wanted to

understand if I could take these

powerful lessons I learned about

long-term thinking and actually apply

them in a a broader civic society. I had

been involved with the Obama campaign

and there had been some discussion of of

joining the administration and I was

unable to give him my commitment to

Panera and I decided I wanted to go do

this in some way and I also had a a

desire to test out an idea I had been

working on which was something called

Panera Cares cafes of shared

responsibility where there would be no

set prices. It was a test of humanity.

people come in and it's another whole

story. But I wanted to test out these

these cafes of shared responsibility.

And so in 2008 2009 I stepped down as

CEO. I tried to take that opportunity as

jumping off a high dive board to

actually learn what it felt to go in the

water and I spent about a year a year

and a half um creating Panera Cares

doing a bunch of political things. I was

one of the eight or nine people that

co-founded a group called No Labels here

in the United States, which is meant to

reduce the hyperartisanship in DC, the

polarization, and focus us on long-term

thinking. Again, you it's about seeing

opportunity. I had the chance to to

return um from the West Coast. I was

still the executive chairman of Panera

and the largest shareholder and I did a

lot of the M&A work and some of the

consumer work and I came back from a

trip after a weekend and I essentially

decided I wanted to write a a manifesto

for how I would I would compete with

Panera if I weren't part of Panera. I

would say how I would screw with Panera,

but but how would you take it on? How

would you best it? And I essentially at

that time called for for complete

digital access which didn't exist in the

restaurant industry. We can talk more

about that. I called for something

called loyalty which again didn't exist.

It's become prevalent in the industry.

Uh it had actually been developed in the

UK with a company called Tesco and came

through Kroger in the United States

where your best customers were treated

different differently. I called for

clean food, a different approach to

eating and how you might eat. And I

essentially called for omni channel and

I I I handed in this vision um for a

radical transformation of Panera to Bill

Morton who' become the CEO. And Bill was

my very dear friend, 20-year colleague,

and looked at me and said, "Wow." He

said, "I don't have anybody to work on

this. Would you go work on it?" And I

said, "Yeah, I'll have some fun with

it." And $25 million later in another

year, the the the executive chairman is

working 80 hours a week on this vision

for how to have integrated technology

changed the guest experience. Changed

the the whole deal. I was loving it. I

had none of the ceremonial duties of

being a CEO. I didn't have to tell

people what I just did. I don't have to

tell them what I was going to do. I just

was dealing with the product. And um

Bill came to me and said he personally

had a problem. He couldn't travel.

something had happened in his family and

he said maybe we should make you CEO

again and I should step down and we

debated it because it wasn't what I

wanted necessarily but it seemed to be

necessary at a certain point and maybe

nine months or a year later we we

executed that we just swapped positions

he became executive vice chairman and I

became a CEO again and I put this in

place and again it it all sounds lovely

but it led to the worst three years I

can ever imagine. I had activist

investors attack me. I spent $150

million on technology. I used to refer

to technology as a social security of an

era. It was only a matter of time till

it was 100% of our revenue. I that was

we were really investing in it and you

didn't know where it would end and we tr

ended up having to transform everything.

We transformed not just technology but

we transformed how we how we dealt with

the guest what our our our concept

essence was. Um we transformed much of

the senior management team this company

had had grown and its needs and its

requirements. Ultimately this became one

of the mo largest transformations in the

industry and it took on a life of its

own. And again, straight up, I could see

the opportunity for a better Panera that

was not competing the way it had

competed for the prior 20 years, but was

competing against what the possibility

was of what the consumer wanted. And

then came the hard work of actually

putting that into existence. And by

2017, it was working. Our arid was up

35%. Our comtore sales were were pushing

double digits. And we had a European

money manager uh JB who came along and

fell in love with Panera and they wanted

to buy it. And though I was never

selling it, it wasn't my intention. Uh

you know, when somebody falls in love,

who is it for me to deny them what they

wanted if they were willing to pay for

it? And they they paid for it. And what

at that time was the largest or second

largest US restaurant deal ever done,

$7.8 billion. at among the highest

multiples. And you know, again, it

seemed like an opportunity to harvest

everything that we had worked on for a

lot of people that had believed in us.

And we we took that opportunity.

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And then what are the major clicks to

get us to Cavana? Now, you know, it's

interesting. So, I I I left Panera. I

had always had interest in a number of

other little businesses and I was doing

after I left I was doing a lot of

speaking on the pervasive short-termism

in the US capital markets and how not

just our pol our body politic but our

capital markets and how that was

essentially making us less competitive.

It was it was not helping our GDP

growth. If we're not thinking long term

we're not going to have innovation. If

all we want is is to pop the stock, it's

short-term cost cutting that drives it.

One of my my associates, a guy named Kee

Pasco. Oh, I had worked with me at

Panera said, "Why don't you take your

own money and put your money where your

mouth is?" And I ultimately took roughly

$200 million of my own money. No LPs, no

external folks, just my own money and a

bit of money from some of my partners.

um some of the people that chose to join

us and took some of the people I had

worked with and decided to go do it and

essentially I created a investment

vehicle because it's not a firm it's

called act three you can figure out

where that comes from oon pan panera and

now act 3 holdings and within eight

weeks of of of leaving Panera had gotten

involved in our first really real deal

which was Cava I had been an investor in

Cava uh uh when it was two restaurants,

just a little something. And after I

left Panera, they asked me if I joined

their board. Another company called

Zoies had asked me if I joined their

board. Uh they were a public company and

you know, and it was very clear to me

again, I could see and taste that

opportunity. Mediterranean had power. It

was the number one diet in America. It

was bold flavors. It was different but

accessible. And you could tell this was

a a powerful channel with lots of winds

at its back the channel. And I began to

say who has the potential to dominate?

Is it Zoe's or Kava? And again, these

folks at Zoies were were five times the

size of Cava, but Cava was doing higher

volumes and was a better concept. I

started to think to myself, you know

what? What I should do is buy the Zoies.

I think it was a three or400 million

dollar public company at that point from

a billion dollars, you know, instead of

figuring out for them buy it and then

merge it in with Cava. And the one

problem is I had to tell that to Cava

who wanted me to join their board. And I

I broke the news to Brett Schulman, who

is the this wonderful CEO down at Cava.

And Brett said, "Wow, okay, that's an

interesting idea." And he said, "Before

you join the board, maybe you want to

tell them about this." And I I went and

basically pitched their board on this

idea. And in their wisdom, I must be be

straight, they understood it and they

understood the power of building a a

dominant brand in the Mediterranean

category. And um it helped that I agreed

to essentially finance um a large part

of the acquisition and to to help lead

it. But what it amounted to was instead

of me buying Zoe's, we decided to have

Cava buy Zoe's and then we would help

them make that transformation. And here

was the bet that by buying a company

five times larger, we could apply our

discipline, our skills, our culinary

skills um to end up with the dominant

player in this category. And the the

thesis um step back, but the thesis

behind act three is we bet on categories

that have tailwinds and then we endeavor

to build the dominant player in that

category. Um my industry is an industry

of winner take all. Think McDonald's and

Burger King. Think Panera and Corner

Bakery, Chipotle, Quidoba. All of the

the value creation tends to um happen

for those that are building something of

large scale. and and and if you have

that that dominant position and you're a

better competitive alternative, you win.

And so we saw that opportunity in Cava.

And that's what led us to to make that

acquisition. And at that point, Cava

went almost overnight. So it took us 6

months to do the deal, but from 50

restaurants to 300. And it led to a

very, very tough 2019 because the

company wasn't prepared or ready for it.

And one of the things about ACT 3

Holdings, we're we're able I have um

seven or eight partners. Not one of them

is a financial guy. There's only one

financial guy in the mix who was

actually the activist who attacked me. I

couldn't tell anybody at the time that I

actually thought he was smart and liked

him. But at any rate, I did. And um he

joined us as our CFO. And you know I

have one partner that was the has been

with me for 20 odd years who does all

our deepest research and strategic

thinking. He was the guy who was really

helped me develop fast casual and that

ideology. I used to say from from his

brain to my lips I speak it but he was

the guy who really pushed me hard on on

thinking he's with us. I have another

partner who's opened 5,000 retail

locations. I have another partner who

came up through Darden was president of

Dairy Queen, the president of um Buger's

Bagels, uh was my COO is a guy who

really understands discipline scaling

and how you build these companies. We

took out a number of people from

Panera's technology function. The number

three guy who built all that technology

joined us and he brought a team with

him. We have the capability of really

doing technology. I have an another

partner who's a a serial entrepreneur,

great at food, great at design, great

with ideas. We get into a smaller

business. I mean, he's superb in helping

bring it all together. So, the model for

us in act three was one to to bet on on

a category and then have the ability to

go in and help them build the dominant

player in that category. And so at Cava,

we were able that that first year to

really provide a lot of technology

skills that were needed, help out in in

many ways as there wasn't a an effective

CFO till we brought that in and to

actually help in in multiple different

ways to help that business grow. And it

was a very tough year. I can remember

Brett, our CEO, we used to go to

breakfast every other week, walking back

from breakfast in downtown DC, and he

looked at me wisfully and said, "Ron, I

just wish we still had just our 50

stories, not these 300 that we bought."

And I looked at him and I go, "Brett,

you know, we don't have that choice

anymore. What we need to build is

loadbearing people and organization

around you that can take on this

opportunity. But if we can pull this

off, Katie bar the door, we're going to

build an amazing company in a powerful

category. And ultimately, Cava has been

probably the the single best IPO in the

last half decade in the restaurant

industry. How many restaurants are you

up to now?

>> About 400. But but more importantly, I

mean, it's perceived as a a brand who's

filling out a category Mediterranean and

dominating in that. And you know given

its market cap, market valuation which

has gyrated between 7 billion and 15

billion up and down um you know the

market perceives this as something very

real with the potential to fulfill its

destiny is the next Chipotle and that's

what they're paying for that potential.

Let's go back to the Obama Pow IPO just

for a second because I remember you

talking about how it changed everything

for you and you didn't anticipate having

all these new constituents or people

breathing down your neck and the the

short termism that sort of comes with

some partners I guess some capital

partners. I'd say differently. I did a

book called Know It Matters and I did a

chapter on the IPL. I'll warn you,

Shane. I've counseledled dozens of

people on going public who are going

public. And I typically start by telling

people 90% of the entrepreneurs that go

public live to regret it because it's a

very different enterprise. Now, for me,

it was phenomenal. I've done it multiple

times and you know, it's created great

blessings in my life in many ways, but

there are also difficulties that go with

it. And I can remember the day we went

public, my partner at that time, Lu

King, was was on cloud nine and um I had

him stop the the car we were in uh the

limousine and I got out and I walked

through Central Park down here in New

York and I started thinking to myself

just the sense of responsibility I felt

to all of these folks that were

investing tens hundreds of millions of

dollars in this company. And the reality

is when you're running an enterprise,

you have a responsibility. The people

that believe in you and you want to

deliver. I want to deliver for the

people who are buying the stock, not the

ones that are shorting the stock.

>> Yeah.

>> There were any number of those

investors. They all came from very

different places. Some were with us and

building something for the long term.

Others were were trading the stock for

the short term. And you had all of these

pressures. And it all played out in a

very public way. you had very limited

ability to protect whatever was going on

in your company and develop it and you

needed to be ready for prime time. And

so I I'll I'll tell you a story. When

when we decided to take Katha public, I

think people would consider it a very

successful IPO. Today, three and a half

times from the IPO price, but considered

very successful. What did we do? We

helped Brett and the team get ready for

an IPO for a year and a half before we

went public. We did quarterly earnings

calls in the company simulated with our

investors. You know, they had to do

press releases. They had to take

questions. We we we worked with great

diligence in getting their narrative

down

>> so that when they went out

>> they knew what they were selling and

they were selling to the street the

possibility of participating in the

growth of what would be the the dominant

player in Mediterranean. I think we

really prepared this company uh when we

actually went to market. We didn't let

the investment bankers control the

distribution. We did. We brought in

cornerstone investors like Tro who I had

a long-standing relationship with and

make had helped make billions of dollars

for them. We brought in um Capri the

capital group which again I had been

part of helping make billions of dollars

for them. We brought them in as early

investors. We limited the distribution.

None of us were selling stock on the

IPO. This wasn't an opportunity for any

of the existing investors or the or the

largest ones like me to get money out.

It was an opportunity to support and

fuel the company. And essentially, we

only allowed the investment banker 9% of

the shares in distribution, which

essentially went to their clients and

the hedge funds. We protected 91% of it

of that distribution so that it ended up

in the right hands. And I think that we

serve that company very well. Um, in

taking a long-term view of the IPO, the

end was to me, an IPO is a little like a

wedding celebration. It's the beginning

of the marriage. It's not the end. And,

you know, having been married, I I would

say to you, you want to really

contemplate that on your on your wedding

day. What What is it you're going to

have to do to have a successful wedding?

and um that celebration will will will

fall by the wayside. Um if you don't

>> do you think about control differently

now with all your experiences?

>> I'd answer it differently. You asked me

if I think about control. Look it one of

the lessons I've learned is to believe

in yourself. When I was growing up and

coming of age professionally, if you're

smart, you're always going to say that

guy's leaning on me about this or that.

What am I not getting? What should I do?

And one of the lessons I learned as I

look back is to trust myself that I

actually know what I'm doing

>> and I have to believe in it and I have

to have the faith to get through the

long march. I have to have the faith to

go through the pain of transformation.

One of the really interesting

retrospective lessons for me is to

actually trust myself.

And that has led to um to a a decision

that generally when we we we like to be

in a control situation in a company. By

that I mean that we're willing to bet

our own money. We're willing to bet on

ourselves. Myself and the act three

partners, but we don't want to be at the

effect of somebody else who has a

different idea. And and straight up when

you have investment partners, the best

way I can I can express it to you, it's

a little like having a baby with

someone. You take their money. You know,

they have they they have legitimate

rights.

>> And if you're the kind of person I am,

you want to listen and you want to be

responsive. And so I like generally

being in a control position because it

allows us to take a long-term approach

to do the things that that don't drive

profitability in the short term. but

actually build a far better company. You

know, there's there's one principle here

that we haven't talked about. And then I

want to talk about act three with you.

Everything I believe in about business

starts with three words, better

competitive alternative. The the world

doesn't need another business. It

certainly doesn't need another

restaurant. The whole objective of

everything we do is to build something

that for some target customer, this is

the best alternative they can find. And

what I mean by that, it sounds like

fancy MBA talk. It isn't. All it means

is that your target consumer is going to

walk past all of your competitors, all

the people doing something similar to

you, and choose to come to you because

you do it better than anybody else. If

you're able to do that, you can win. And

so I I I tell it by way of a story. I

was in um Vegas speaking I don't know a

couple of years ago and I walk through

the casino at 11:30 and I see folks

dumping chips into these slot machines

and I think to myself, Ron, the only way

I'd ever be in a casino at 11 p.m. is if

I own the casino and had the house vac.

It's the same exact thing

>> for me when I think about business. If I

don't have a better competitive

alternative, if I don't have the house

vig, this is an ugly business and I

don't want to be in it. What I've come

to know and what I'm trying to to make

sure your listeners hear loud and clear

is that what matters more than anything

else is genuinely having a concept, a

vehicle, a business that in whatever

your mini market is, the physical one

mile or the nation if it's real estate,

whatever it might be, that you're the

best alternative. When you have that,

then you have the possibility of growing

and building something. A scale.

>> Is that what you were trying to do with

the concept essence document is like

hash that out?

>> Totally. Concept essence was what we

started every business and every

business we're in today. And we should

talk about the the multiple businesses

we're in today. Every business that

we're in starts with a concept of

essence document. What is a concept of

essence document? It's essentially a

script for regional theater. Think of it

this way. If you're in a multi-unit

business, I'm running thousands of of of

regional theater shows that are

performing 18 hours a day. And so, what

is that script? What is the aesthetic of

the environment? What is the food and

the food attitude? Um, what is the

humanity? What are the people like? How

do you experience it from a consumer's

perspective when you walk in? and we try

to really go deep and use words that

mean something in writing that script or

that vision for how we're going to

compete and that becomes an organizing

tool. I mean just imagine at Panera we

had 125,000 people. How do you get them

all aligned with what we're trying to

create if you can't put it into words?

But you obsessed over this. So you spent

nine months working on this document

before you started and you were obsessed

about all the details and walk me

through that a little bit because

>> a lot of other people there's there's

sort of wisdom which is like go fast and

fail fast and this is sort of the

opposite of that. you took your time,

you were methodical, you were in the

weeds, you were watching people, but you

know, go fast and and fail makes sense

in technology where it's very much um

there there's no fixed cost and you can

repair completely. Um I'm in a business

I call it fashion with fixed assets. It

you know, you build a restaurant, you're

going to spend a million, a million and

a half, $2 million, maybe more. You

don't want to mess it up because fixing

it is really difficult. So you want to

get very clear what you're doing. What

do you do first, second, third, and make

sure you get it in the right order. So I

am much more concerned about getting it

right in a really serious way and

understanding it and then taking the

right steps from that than I am about

getting out there and getting market

share first because the cost of failure

is so high because the cost of failure

is extraordinary and often times once

you you bounce you can't come back and

remember we're talking about fixed

assets we're talking about you know

building restaurants. If I don't

understand what I'm doing, I'm going to

build it wrong. I'm going to fail.

>> How often do restaurants turn around

once they start losing sales?

>> Rarely.

It's really hard because organizations

by their nature don't like to change. In

fact, I I'll share with you something

I've I've I've written about. I call it

the life cycle of a business. It starts

with discovery and ends with delivery.

And think of it this way. When a

business starts out, it's so hard to get

off the ground and win. So hard.

Probabilities are very low. Um, you have

no capital, no scale, um, no competitive

advantage. You have the highest cost

you're ever going to have. And, and it

requires something that really is

powerful to break through with the

consumer to deal with all those forces

working against you. But some people do

and people discover a better way to

approach the customer that touch the

customer, a better experience and they

get off the ground and they start to

scale and it works and it's doing well

and it's getting bigger. Along comes

Outside Capital and Outside Capital

says, you know, we can help you grow

even further. And pretty soon you have a

board meeting of people saying, you

know, this business is doing great, but

but but you know what? It could do even

better if we bring in some of these,

I'll call them delivery people.

>> Delivery people are, you know, financial

planning and purchasing and a range of

different disciplines. And the truth of

the matter is, you bring in the delivery

people, it makes the place better. The

margins get better. The business gets

more disciplined. It gets tightened. But

here's what begins to happen. And not

over six months, but over years and and

half a decade, the delivery people and

the discovery people find they're

talking different languages. The

language of discovery is the language of

poetry. It's the language of imagine if

if only we could do this. The language

of of of discovery, of delivery, is the

language of prove it to me. Show me the

numbers. Let me see the spreadsheet. I

don't believe you. And quite frankly,

these these forces challenge each other.

But the language of uh but but delivery

because it does add value starts to push

out discovery because discovery doesn't

have oxygen if if if you got delivery

pushing down on it. And over time what

happens in so many food companies is

that that discovery is pushed out by

delivery. delivery gets stronger and

stronger and stronger and it becomes the

dominant force in the company.

>> And then these companies wake up after

15 or 20 years. They're billion-dollar

companies and they're really powerful

about delivering what was wanted and

needed by the consumer 5 years ago, 10

years ago and 20 and really terrible

about discovering what's going to be

needed and wanted for tomorrow. And so

one of the things that I've always

focused on is actually protecting

discovery and in fact as a CEO viewing

my role as discoverer and chief

innovator and chief because that will by

the very nature of centrifugal force um

and size and scale you will end up

decapitating discovery in these

companies. One of the things that I see

and anecdotally of course I'm not in

this space at all is there's a almost a

trend when you have a concept that's

sort of working and then you add on to

it and you keep adding and adding and I

always think well the backend operations

get a lot more complicated the

purchasing gets complicated the

inventory management gets more

complicated and then you look at

something like In-N-Out which has

basically a very simple menu privately

held

>> privately held incredibly successful.

How do you think through that? What's

your reaction to that?

>> Oh, my reaction to it is I I know the

the the polls. I've been there. The

world, look, it the world pays, the

marketplace pays for something that's

getting bigger, larger, better.

>> So, how do you do that? You you add

things, you improve things, you make it

better.

>> Uh we all want that. I mean, we're

susceptible susceptible to that by human

nature. And the unfortunate truth is

often times, many times, it doesn't make

it better. It actually just makes it

worse, more complicated. And so my view

is we don't want to do, we don't want to

be everything for everybody. We want to

be something special for somebody. And

that's the essence of what we mean when

we see we say being a better competitive

alternative to actually standing for

something and being something better.

How important is marketing now in terms

of getting traffic? And there's this

concept of viral marketing for

restaurants and people trying to break

through. I can see the eye roll.

>> Yeah, marketing is the wrong phrase in

my book. I think the right phrase is

amplification.

By amplification, I mean if I've got

something that actually touches people,

then I've got to let them know it's

available. But the idea that I'm going

to somehow come up with something cute

or better tactic or better technique

that may work in the in the very short

term, but it doesn't sustain a business.

And when you're building fixed assets as

we are,

you want something that sustains and

lasts for for years and and decades, you

want something that that built a

competitive moat uh and is a better

competitive alternative. So to me,

marketing is is

never the end. To be cuter or better is

never the end. The end is to actually

sustain is to build a better business

that's sustaining and powerful in its

own right and then figure out how to

make sure its target customers actually

know about it and it's on their short

list. Do you look at other restaurants

and uh think that oh I would do this

differently and they have a good concept

but they haven't quite nailed it and

maybe you can give me an example and

walk through one like True Food Kitchen

or something.

>> Well, first I I have a rule. I will not

talk about competitors because that

always gets me in trouble. But u I would

say this to you doing this as long as

I've done it. you know, I've done this

now uh over half a century and and I've

been in this industry

um and the collective

leadership of Vacry Holdings, my my

group, we probably got two or 300 years

of history. We there isn't a day that

goes by that we don't have on our

private chat some um interesting

commentary on on what folks are doing.

You can see these patterns over and over

and over again. What are the key metrics

you look at without mentioning any any

sort of particular competitor? If it's a

public company, what would be the two or

three variables and the financial

statements you look at? And if it's a

private company, how do you

>> to first the financial statements are

are a byproduct. They're not the end.

So, I'm often not looking at the

financial statements um as a leading

indicator. I'm looking at the financial

statements as the trailing indicator.

What we always start with at act three

is does that category

does it have tailwinds? Does it have

power? Is this a category that's getting

strong? Look at Mediterranean. It's the

number one diet in America. Every time

you go to the doctor or you read an

article, they're giving you a commercial

for our diet. Um it's bold flavors. It's

ambitious flavors. And yet it feels

safe. Um, you know, it's food that you

can eat, lamb and and chicken. Um, it's

it's it's it's cravable wellness. It's

healthy. Um, and yet it's it's it's also

tasty. That's a category that's got

power. Um, where we have another

business than plant forward. Uh, we call

it positive eating. 3% of American is

vegetarian, but 40% are eating um um

more plantforward. They want they want

that in their diets. Somebody's going to

win in that category. We intend to be

those people. You can think about bakery

cafes. I was part of building bakery

cafes in America between Old Bone Pen,

Panera. These were the dominant brands.

Well, I can tell you the future is in

upscale bakery cafes where you have real

chefs. Um where you have um food that's

worth going out of your way for because

it's part of the experience. Part of the

experience. And how important is that

experience? It's everything. You don't

just come for food. You come for the

totality of that experience, the people

that serve you, the environments that

you're in, how you feel when you're

there. Um, but but at any rate, so I I

just want to continue with this. We're

in immersive entertainment, powerful

category. Um, we're in in healthy eating

in Europe, another powerful category.

So, first at act three, we bet on the

category

>> and and I'm trying to take a a forward

look and say what's going to be the

categories that are going to be dominant

in five or 10 years. I don't want to be

fighting against headwinds. I want to be

sailing with tailwinds. That's number

one. Number two, I only want to invest

and I only want to play in that that

nexus of building the dominant player in

that category because the rewards fall

to those that are the dominant players

in these categories. Our goal is to

build it. And the truth is we have a

playbook. We know how to do it. U

between me and my partners, we have

built dozens of companies, any number of

successful ones, and we know what works.

And you know the the mantra here at Act

three is simply this. You know it's

tougher to build a nationally dominant

company than it is to climb Mount

Everest. Nobody goes up Mount Everest

without a guide because the the risk of

falling off the side is huge. Death,

right? Our challenge is why go up and

try to build a nationally dominant

company without somebody who's been

there before, has done that route three,

four, five times. And we basically

practice what we call sharpen

management. When we're in the boardroom,

we don't have financial people. We're

not ever worrying about the liquidity

event. We're in the business of building

companies, not selling them. And we're

not looking at the balance sheet. We're

not looking at the numbers so much as

really trying to help that management

team know what's going to hit them and

how to protect them. I I would say for

example we at ACT 3 believe that

financing which is pre which is at the

core of so many companies should not be

seen as a life cycle event. You know so

many companies are raising money in an

annual or or more frequent basis as if

you know it should be done every

birthday. Our view is running a company

is hard enough work without having to

continually be out there selling. And so

when we invest in a company, we're going

to put an investment in it. Um, and then

we're going to agree uh take a right of

first refusal on all follow on rounds of

capital at a pre-agreed to multiple. So

we're all in alignment. Um, it's an easy

thing. And the truth is we have yet to

ever turn down um a follow- on round of

capital other up to an IPO. And for our

for our companies, they've never ever

worried about capital. they call, pick

up the phone and and and we get there

because we're of them and we're with

them. And we recognize that capital

raising is not something they should be

doing, but rather they should be

worrying about building a better

competitive alternative. Similar kind of

thing with the many skills that my my

partners bring to it, whether whether it

be strategy, whether it be real estate,

whether it be technology, our guys are

available to the companies we invest in.

Again, we don't push it but on a cost

plus basis. And we want to protect our

management team to focus on building a

better company and not have to worry

about scaling up so many of these

different functions.

>> Well, let's talk about building a

company. One of the phrases that you use

over and over again is means and

byproduct. How does that factor into

building the company?

>> Well, I think it starts with life. So,

so much of what I've learned about

building companies starts with life,

Shane. I think in much of our society,

much of our lives, we've confused

byproducts with ends and means. Uh I

have a friend who's a type 1 diabetic.

His goal in life is to stay alive as

long as you and me. But that is not

something he can control. It's a

byproduct. What is it a byproduct of? Of

of a simple end. Keeping his blood sugar

between 80 and 180. When he does that,

the byproduct is life. What's his means?

diet, exercise, and insulin control.

It's literally the same thing in

business. Do I want value creation? You

better bet on it. But the way I get

value creation is by creating a better

competitive alternative, a place that

people want to come visit you in that

they're willing to walk past your

competitors to come to you. What's the

means? It's everything I do every day in

a business. It's how I spend my time.

It's focusing on the the aesthetics, the

operations, the structures, the

processes, um the way in which we engage

with our team members, the way in which

we engage with our customers. That's the

doing of the doing that drives the the

the end a better alternative that

actually creates the the the wherewithal

to have the byproduct. Only thing I can

tell you is those companies, those CEOs,

those leaders that focus on the on on

the byproduct, the outcome never get

there. It's rare because they they

actually miss the mark on what creates

it. You know, it's like saying, "I want

to be happy." You can't create

happiness. You can create the conditions

in your life that leads to a feeling of

happiness. And if I were talking to my

kids, I'd be telling them, "Do the

things that lead to your own

self-respect. Do the things that you

will respect." And if you in fact do

that as your end, your byproduct will be

that happiness.

>> Go deeper or spend a couple clicks maybe

on sort of how businesses go backwards

when they try to get the outcome instead

of the inputs, if you will. It's the

means versus the byproduct. So when you

focus on driving

the bottom line, you miss understand

that the most important thing is to

drive um the customer experience and the

the reason they want to come in. Um I I

give you an example. I was involved with

a company that will remain nameless.

They had a little ecoli scare. Their

immediate reaction was to cut labor. I

looked at him. I said, "You're you're

you're nuts. If you do that, you're

going to destroy what you've been

working on for for years, which is

telling your people that what matters

most is running great stores. In fact,

when you run any enterprise, what you do

is much more important than what you

say. And so, when you focus on very

short-term metrics, even though it seems

like a desirable thing, it actually

costs you far more in the long term. How

do you develop the long-term thinking

that you've brought to all these

different concepts from Obama to Panera

to Cabba? Just makes sense to me. I

mean, it just seems logical, right? Like

if I I want to start and figure out

where I'm trying to be in five years and

10 years and what's it going to take me

to get there? And that's what we mean by

futureback thinking. Um, and what seems

stupid to me is to do what's short-term

expedient and long-term stupid. I have

an expression. I'm I'm I'm long-term

greedy, not short-term stupid. And I I

really want to build something of value.

But the way you do that, whether you're

talking about a business or a

relationship or your own life, is to

focus on those things that have meaning

and self-respect and those things that

when you get down and get to the other

side of it will have touched other

people and most importantly touch

yourself. Spend a few clicks on that. Is

there an example that comes to mind in

the short termism versus long-termism?

And I love the idea of being long-term

greedy. I publicly spoken to this. You

can look at the difference between the

way Cavo went public and Sweet Green

went public. These were two companies

that emerged out of the the DC market

about the same time. One was out there

with a ton of press and a ton of builtup

expectations. Um that was Sweet Green.

Cava was slower, more disciplined. Um

you know I think Sweet Green uh went in

one direction with its real estate. Cava

stayed uh much more disciplined as it

went forward. Uh ultimately they both

went public. Um I think that in the

Sweet Green IPO we see a case where

a number of the investors sold fairly

quickly. uh was a different headset. Uh

let's get this thing off the ground. Um

you saw um a lot of of very instant um

gratification for some of the folks

involved in the IPO. I think you see in

Cava a very different approach. We took

a um a slower approach to that IPO, a

much more disciplined approach to it.

And I think we were much more

disciplined in the the consistency of

the brand and the brand integrity. Um

consequence as we call it. Um I think

that you see the byproduct of it. Um

today I I I would gather that Cava has

got a market cap five times what sweet

greens is worth something in that order.

four or five times depends on on you

know but it's stayed in that range and I

think that that value creation is a

byproduct of the very real decisions we

made in Cava about staying disciplined

staying focused on concept essence

building something that really delivered

for our team members first for our our

guests second and by doing that that our

investors would would end up doing well

and always taking the long-term approach

one thing that I don't think gets enough

attention and this is something I think

you're open to talking about is um the

difficulties of running a business, the

costs of running a business, the family

cost, the social costs, the talk to me

about that with Oban Pan in particular

and Panera and when you're doing

anything that's takes powerful

commitment that commitment owns you. You

don't own it. I I I've never owned a

business. The business is on me. It's

with me in the shower. It's with me on

vacation. Um, it's it's it's it's there

with me. And in fact, some of my best

work is done when I'm I'm I'm I'm on

vacation. I'm not actually thinking

about it in a conscious sense. And I

have the ability to extract and and

understand. But but listen, doing

anything in the world, whether it's

working out every morning, whether it's

being in a relationship, requires

commitment. And it requires a commitment

to the long term and it requires

responsibility. I would simply say I've

been committed to these businesses. I've

been committed to the people that have

believed in me. I've been committed to

my team members, to my investors, and I

want to give them something worthy. I

want to I want to build something of

quality. And there's a very real

personal price. I've been married twice.

Um it's not something I'm proud of. I

feel like uh it it it it's a failure. Is

that a failure because I was committed

to my business? I don't know. But I but

I sometimes I think about that. The

biggest fallacy of life is that you can

have everything and that all there are

are choices and that you you want to

make your choices with a clear head and

and your open eyes as to what you value,

what you respect and then you want to

build your life around that. Just as I

try to build a business around what it

is we try to what kinds of essence and

what we expect, I try to build my life

around what is it I'm going to respect.

And that's why I really try to think

through on a regular basis what is it I

need to do um for my own self-respect in

the context of my relationship with my

my body my relationship with my family

and and and

my my my spouse um my friends um my

relationship with my work and what does

it mean to do that well and ultimately a

relationship with my own spirituality

and my own um personal integrity. You

take all of that and you try to put that

together and you try to build a life

understanding

>> there is no balance. You can't have it

all. You've got to you make choices and

their trade-offs and you try to do that

as well as you can. I just encourage

your listeners to be clear what it is

that they want and what it is that

they're going to respect. What you don't

want to do is wake up one day and say,

"I wish I had and miss it." How

important do you think that focus was in

your success?

>> I'm pretty focused. And you know, I work

hard. I always have. I love it. I enjoy

it. I love when we figure things out. I

I like to think that I protected the

people around me

>> and that I'm but I I like to think I'm

willing to pay the price. And by that I

mean I'm willing to do what it takes to

do the hard work. Most people aren't

willing to pay that price and they don't

understand you're not going to get the

byproduct if you don't if you don't

build something that's a better

alternative and that's hard work. And I

I would share with you this too. Uh I'll

share with you two things. One I often

say to to entrepreneurs, I said it

yesterday. I was at a Tony Robbins event

and I said to the folks, I said,

"Listen, if you don't enjoy the people

in your business, the people in your

life, if you're, you know, you're if you

don't enjoy the doing of the doing,

you're never going to get there. If

you're doing this to make money, you're

never going to make money. If you're

doing this um for the for the glory of

it all, you're never going to get it.

The if you don't love the doing of it,

you're going to fail. And for me, it was

never about the end. It was about the

doing. I love the figuring it out. I

love the people that I work with. To

this day, I I'm not doing Act Three

because it's going to change my life or

my kids' lives in any way. I'm doing it

because I actually love

the process of having challenges and

figuring it out. So I I would say to you

and I say to people all the time, don't

do it for the for the outcomes. Do it

because you you actually love it. Um we

should talk about another concept about

entrepreneurship. I think it's often

misunderstood. Here's what entrepreneurs

do. This is what my business life's been

about. Entrepreneurs see a better

opportunity

>> and and they're not risktakers, they're

actually risk avoiders. They see that

opportunity, an opportunity to serve

somebody, to make a difference, to do a

job better for somebody. And in the

context of that, they're risk avoidant.

They don't want to take risks that get

in the way of their getting there. And

for me, when I can see a better way to

do something, when I can see a way to

make a difference in somebody's life,

um, be it a guest or even a a team

member, I want to do that with all the

energy I can. And I want to protect it.

And that to me is what an entrepreneur

is. It's somebody who sees opportunity

and then seizes that opportunity. I'll

share with you something else that I

think is important. You have to be both

strategic and detailed. So I I I can

operate at a a what are we trying to

accomplish in five years level? But

again, I can then get down into a

discussion on is that floor material um

working in a way that it's it's bouncing

sound around and the sound is the wrong

thing for the experience we imagine.

It's the totality of both sides of it in

these complex businesses that's

essential. Some people want to just be

strategic, others can't get out of the

detail. It's the ability for both. You

get a strategy from the detail and

frankly no strategy is worth anything if

it can't be executed. I find that

fascinating in particular the detail.

There's such an aversion uh from a lot

of people to get in the weeds of things

to understand things deeply and so

they're often reading information that's

filtered or synthesized

>> or wrong and it could be completely

wrong and they'd have no idea. Somebody

told me this and I don't know if it's

true or not and it's somewhat

provocative but you they said you can't

rely on uh somebody who doesn't know to

filter information for somebody who does

know and they used more provocative

terms than that but

>> I think there's some truth to that. I

think there Yeah. So, the ability to go

between these levels from high, you

know, 30,000 ft to the 1 in level and

anything in between is the sign of of

somebody who's really involved in in the

details getting firsthand information.

But I think that's what creates the

pattern recognition that you can see

when you spot these transformations that

we've talked about from Oban Pan to

Panera to, you know, Panera Act 2. And I

I think like if you're not in the weeds

on that stuff and you're not in the

details, you'll never be able to spot

that. Totally true. I think that you

can't have an effective strategy if it's

not informed by an understanding of what

actually is going to touch your customer

and how it's going to get executed. On

the other hand, the most powerful

strategy in the world means nothing if

it can't be executed. And so the ability

to understand how you're doing on both

levels simultaneously has been an

essential characteristic that served me

particularly well in my career.

>> Some people would call it obsessive. How

would you respond to that?

>> It's thoughtful as opposed to simply

obsessive. Being obsessive isn't enough

uh unless you're right. You know, being

right isn't enough unless you can get it

done. And I guess what I'm trying to

argue for is is not micromanaging, not

getting into the detail because that's

the only place you know how to operate,

but being able to use the detail to

extract and learn. Like I I'll tell you

a story, Shane. I I go to visit

restaurants we own all the time. I'm not

going to check out the people who work

there. They all think I am, but I'm not

going to catch somebody doing something

wrong. I'm actually going to check out

myself and our senior management and how

are we doing in projecting a vision of

how we compete and then delivering that

down through an organization and a group

of people to actually get it done.

>> That's a great way to look at it. I I

want to come to ACT 3 for a second here

and let's spend a few clicks on what

you're doing, what you're trying to do,

and why you're doing it. What we're

trying to do is build the next

generation of great companies. And we're

doing that based on an understanding

that building better competitive

alternatives is everything. And we want

to enable and help companies become the

best competitive alternative in

categories that have extraordinary

power. We have a couple of principles.

Number one, we believe in founder

friendly capital. So when we go in, we

hope it's the last uh investment capital

that gets taken before an IPO. Uh

generally we will um come in as common

stock not preferred same place as the as

the management team and we will uh

typically take a right of first refusal

on all follow on rounds of capital have

never turned it down and essentially

have enabled our founding teams to to

feel confident that they have unlimited

capital behind them. Secondly, we

practice what we call sharp um

management, not venture capital. When

we're in the boardroom, we're not

looking at the next liquidity event.

When we're in the boardroom, we're

actually in there helping solve real

problems. Typically, and most often,

we're saying you need to put more

overhead here, not there. What comes

first, second, and third. And each of my

partners are are serious um seauite

operations folks that have experience uh

in our 25 people. We have only one

that's really financially driven um or

thinks financially.

>> That was the activist investment.

>> That was the activist.

>> What's his name?

>> Noah El Bogen. Yeah. I had 300 people

chanting uh you know f you Noah. And uh

later I I I I ended up um respecting the

guy, but I couldn't tell anybody. I

liked him. I made an investment in a

hedge fund he had and ultimately asked

him to join me in this endeavor. But but

he says he's now a reformed activist. We

don't practice activism. We we help

people. And then obviously third, we

only at ACT 3 invest where we have

competitive advantage.

>> Um what does that mean? We invest where

we know something and we know how to

build dominant players in in in very

specific categories. Um we're now act

three as you know is the largest

independent investor in in in cavi serve

as the chairman there. Um we're also in

a company called Tate which is in Boston

and DC and now the New York market. It's

50 restaurants doing about $5 million a

unit. 250 million. It's a powerful cafe.

It's got a bakery there. It's got

artisan thirdwave coffee and it also has

authority with real chefs. It's a a

fascinating concept because it brings

the attitude and voice of the Levant the

Middle East. The founder woman named

Zidor Israeli powerful powerful chef and

and our our baked goods are really third

wave. They're differentiated. They're

worth actually eating.

>> Why New York? Isn't that like I I don't

know. I don't know the restaurant space,

but isn't that the most competitive

market in the

>> the single most competitive market?

We're not yet in. We'll be in New York

next year. We're in Ridgewood, New

Jersey. We're in We're going to

Scarsdale, Garden City, Summit, um

Milbour because we started in Boston. We

they built out substantially in Boston.

We went to DC. Did great in DC. New York

is in the middle of it. You're

absolutely right. New York City is about

as competitive a market as as ever. But

this is a concept that's good enough to

really compete. Is New York a good

barometer then? Like if it works in New

York?

>> It it's the funniest thing. People come

from Europe all the time. They all go to

New York. It's the worst market

>> because it's not the rest of the

country. It's not representative. I I'll

tell you a quick story and we'll go back

to the act three thing. Uh one of the

first discussions I remember having with

Brett Schulman, our CEO down at Cava. I

I said to him, Brett, right, you you

know, you and the Sweet Green guys, you

all went out, you know, you started in

DC and then you went out to LA as your

second market. I said, here's the deal.

I said, what really matters is not how

you do in LA, in Malibu, in West

Hollywood. What matters is how you do in

Fredericksburg Virginia.

>> You you make it in Fredericksburg,

Virginia, you do two to three million a

unit. I'll show you a thousand locations

in America. That's the key. And and I

will tell you that if you're building a

business of mass scale, it isn't New

York City that matters. Um it isn't LA

that matters. It's everything in

between. And can you offer people

something of quality and substance? Uh

it's it's a different environment to

compete in. Um New York City costs are

three to four times higher. It's if

you're an you know if you're really

good, you can make it, but it's very

difficult.

>> Why did Oon Pen not work? You mentioned

that earlier when you went west. It

didn't work out there.

>> Didn't work in the malls.

>> It didn't work in suburbia.

>> So, it worked like downtown LA.

>> If there was a downtown LA, I mean, back

then there is today

>> it would it worked in a major office

building in downtown LA

>> because it was about high density urban

quick.

>> Yes.

>> Where people pay a premium for quality

and quickness.

>> Yeah.

>> It worked in Eden Center in you know in

Toronto kind of thing.

>> Right. Okay. So come back to the act

three.

>> So act three. So you you know we we

start with with tate. You know it's got

authority in bakery. It's got authority

in thirdwave coffee. It's got chefs in

every store. It's got real food. We're

doing breakfast. We're doing lunch.

We're doing gathering place. It's rooted

in this powerful aesthetic. Uh it's it's

it's it's they're beautiful. They're a

mix of antiques. That's twice. You've

mentioned the experience of having a

chef in the the actual unit as a

differentiator. So talk to me a little

bit more about that as a concept or how

it creates the experience.

>> And then we got to get back to act

three. But yes, every one of these

businesses are defined by their their

structure. Structure matters. For

example, I can't tell you how many

conversations over the years I had with

Howard Schultz about Starbucks and their

desire to do better food, dur food. But

they could never. Why couldn't they?

Because they have a frozen food system.

They manufacture in one place. They

freeze it. They ship it into the the

store and they defrost it. They spend a

hundred million dollars on an

acquisition, Bingerie, great little

bakery. Could they bring it to

Starbucks? No. Because the system

defines what they're capable of doing.

Similarly, at Panera, we were an

assembly business. We started as a

sandwich place. We put together

sandwiches. We didn't have real culinary

skills in the stores. Our ability was

was simply to assemble. So we were

limited. We took on Tate and I

originally bought Tate for Panera. I saw

it as a a better version of Panera in in

certain neighborhoods. I then converted

one of our stores in Harvard Square

actually. We popped the the sales volume

by more than twofold. Yeah, exactly. And

um you know materially changed the

Ebida. It left me in a place where I

said, "Wow, this is powerful." And when

I sold Panera, I negotiated the right to

take Panera's interest in Tate. At that

time, it was a dozen stores or whatever

to take that interest with me as part of

my um my package. And I ultimately did

take Taté with me. That's how it became

part of act three. Similarly, another

business, Life Alive. Um again, Plan

Forward, positive eating. Um I I love

this business. We've been in it eight

years. I can tell you that Plan Forward

is a is a tailwind that is powerful.

Somebody is going to win in it. We've

now produced stores in Boston and DC

producing very high volumes uh

surprisingly high volumes for positive

eating for this kind of food. Uh and and

a and a really powerful team and concept

and we have a a ton of of of excitement

in that. We have another company called

Level 99. Uh this is a guy who I was

introduced to um had an idea. He'd come

out of um MIT and and had been involved

in the um entertainment business for

many many years um uh engineer and he

had a vision for taking a space 40,000

square ft all kinds of different things.

We said to him, let's drop a

farm-to-table restaurant in the middle

of it, a brewery. We opened the first

one in in in NIT, Massachusetts at the

NITC mall. I have never been involved in

a business as powerful as this. Blew me

away. We've since opened in Providence,

Rhode Island. We're opening in Tyson's

Corner in DC in 4 weeks. We're opening

in Disney World down in um in Orlando in

the coming year. Uh it's going to be at

a location uh close to you anytime soon,

but uh sometime soon. But this is

another one of these powerful

businesses. Uh last year we made an

investment in a business in Barcelona,

Spain called Honest Greens. Again, very

high volumes. Um it's basically chefs in

every restaurant, real vegetables,

greens, um salmon, chicken put together

in a way that lots of of the young

Spaniards have found exciting. Uh that

business is now 30 odd restaurants in

Spain and Portugal on its way to the UK

and and and France next year. Again, we

think that there's a powerful

opportunity to bring some of these

disciplines to Europe, but to do it

right. Uh we also have another business

that we're involved in with act three

came out began in co but we have lots of

connections with institutional um

capital and the capital has asked us to

get involved in companies and typically

we can't with public companies we can't

uh take a carry we get paid so we we do

a deal with the company with the support

of their investors to take a percentage

of the company warrants so we have an

interest with a company called BJ's out

on the west coast where we provide some

strategic guidance. We have another

involvement with a company called Park

Technology

uh which is trying to really be the

source for um for unified commerce in

restaurants. You know, these are all

strong public companies where we've been

able to help them. And in the case of

BJ's, the stock is more than doubled

since we got involved. In the case of

PAR, it's held very strongly. And so,

again, what we really are in the

business of doing is doing what we love

to do, help figuring out where the

future is going to be, making sure we

arrive at that future before the rest of

the world gets there, figuring out what

those categories are, and then helping

wonderful management teams build the

dominant player in those categories.

And, you know, it started as a $200

million investment is now a nearly you

know I would it's a $2 billion portfolio

and um it's delivered 55% returns and

and mostly we're just having fun. I mean

we are not yeah we work hard but but it

isn't like running a company that the

the guys that are running the companies

are doing the heavy lifting and we're

there trying to make people think. I

love it. You know Shane we talked about

something before I just want to mention

I sit on any number of boards. I lead

the boards of most of these companies. I

was on the board at Whole Foods is when

we sold it to Amazon. To me, one of the

things that people misunderstand about

boards, the job of board is not to run a

company. Our job in act three is not to

run it. It's actually to ask good

questions that make the people that are

running it think. And that's where the

power comes. It's in the quality of the

question and the quality of how it helps

impact other people's brains that

actually matters. The discipline is not

in micromanagement. The details is not

in micromanagement. The detail is in

actually helping drive powerful and

profound understanding that allows you

to do a better job. I think that is an

incredibly profound misunderstanding

about boards and the value that people

bring especially when you're on the

board with a founder who's the CEO

instead of professional

>> we can take cava I think you know if

Brett Schulman who is the CEO were here

he would say our relationship has

evolved and grown over the six seven

years we've known each other I think

there were times along the way you know

that were really hard I think he's come

to know we are really on his side

>> were really with him. And I think he

would say the most powerful thing we

brought to him.

>> Um, and our relationship changed for the

better when basically my role has been

to challenge his thinking and let him

deal with the implications of it as

opposed to be directive.

>> Yeah.

>> And you know, he's grown immensely. He

started as my student and you know, I

learn from him all the time watching him

do it. But we share the same value

system. We share a a common thought

process about what's going to work. And

so the way you get there is through

taking the time to think about things in

a deep way. And again goes to my book

know what matters. Knowing what matters.

I think that the board in Cava which I

chair would say we understand uh our

role which is certainly to ensure

financial integrity to ensure um uh risk

assessment and and and and and to fill

that but most importantly we don't help

that company flying in on some basis and

telling them what to do. We help them by

bringing to to bear our experiences and

helping make them think in such a way

that they have a better sense of what's

going to hit them in the future and

they're prepared to handle that today.

>> This has been an incredible

conversation. We always end with the

same question which is what is success

for you?

>> Self-respect.

Ironically to me success is looking at

myself and knowing I have built the best

life that I know how to build. Whether

it be my role as a father, my

relationship with my kids, my role as a

a spouse and and in in relationships,

whether it be the kind of boss I've been

in the difference I've made in the lives

of people. Um very important to me the

lives I I've I've touched all over this

country and many parts of this world.

Guests who've come up to me and said,

"Thank you, you know, for what you did.

I I love being in your places, you know,

and and and and knowing I was the best

version of myself I could be. You know,

I'll say something to your toes. People

always say to me, "What's your legacy?"

Or somebody said to me yesterday at this

Tony Robbins event, you know, "What do

you want your legacy to be?" And I I

think about it and I realize there is no

legacy.

>> You know, you know, things go on, they

change. I don't think 50 years from now

people will be talking about me. I I I

think what my legacy is, frankly, what

matters most is my kids and the things I

show them that live on in their lives

and and in their hearts and in their

their souls and in their kids. And those

are the kinds of things that matter. And

as I look back at this my 71 years on

this earth, uh I just feel so blessed to

have had the chance to do work that I've

loved, to love, um to touch people, and

I hope in some small way I've done this

in a way that is worthy of all those

blessings.

>> I love that answer. Thank you so much

for the time today.

>> Good. This was fun.