Panera Bread founder Ron Shaich criticizes IPOs in new book

Panera Bread founder Ron Shaich ran a publicly traded company for more than two decades, but that doesn’t mean he’s a fan of IPOs or Wall Street.

More than six years after selling the chain for $7.5 billion, Shaich reflects on his nearly four decades at the helm of the company, which he transformed into a fast-casual restaurant giant. Shaich’s new book, “Know What Matters,” will be available in stores on Tuesday.

The book begins with his first entrepreneurial ventures as a student and ends with Panera’s blockbuster sale to JAB Holding. Shaich combines the retelling of his career with business advice aimed at entrepreneurs and CEOs navigating the ups and downs of running a publicly traded company.

He warns readers against chasing profits, trends and the prestige of a publicly traded stock. Ironically, Panera Bread is considering an IPO, but Shaich, no longer involved with the chain, directs his advice to the founders.

The restaurant, now known as Panera Bread, began in 1981 as a merger between Cookie Jar, founded by Shaich, and the struggling French bakery Au Bon Pain. In total, Shaich spent 32 years at the helm of the company, excluding the two years in which he theoretically retired but continued to serve as chairman of the board.

Today, Shaich is the managing director of Act III Holdings. He founded the venture firm, which focuses primarily on restaurant and entertainment startups, with some of his proceeds from the sale of Panera. Act III invests in cava in 2018, years before the IPO this year. Shaich owns a 10.3% stake in the Mediterranean chain, according to public filings.

One of the most unexpected pieces of advice in Shaich’s book is his caution about going public. Shaich took Au Bon Pain public through an initial public offering in 1991. Also, when Au Bon Pain purchased the St. Louis Bread Company, renamed it Panera Bread, and then folded Au Bon Pain to focus on Panera’s growth, Shaich’s company was taken public.

Still, Shaich says IPOs don’t make sense for most companies.

“The reality is that 90% of CEOs who take a company public regret it for a long time,” Shaich told CNBC. “Why? Because you massively expand the number of voters you really need to do something for.”

In the book, Shaich recounts the various adversaries he encountered throughout his career, including Wall Street analysts and activist investors who wanted to take on Panera. He shares his reluctance to cede control to outsiders.

“In hindsight, I have become more skeptical about raising capital, both from venture funds and in the public market,” Shaich writes in the book.

Shaich’s lack of appreciation for the typical venture capital model is also evident in his own company. According to Shaich, there are no outside investors, so-called limited partners, in Act III, which allows the company to focus on the long term. The company also provides ongoing capital to its investments, allowing founders to focus on the business rather than fundraising, he said.

In fact, Act III’s Cava deal is probably the company’s most traditional venture investment. But Shaich, who serves as the company’s chief executive, is confident the fast-casual chain is on the right track. In his opinion, Cava CEO Brett Schulman could be among the 10% of CEOs who don’t regret going public.

“Cava is a company that will be successful as a listed company. Honestly, because it’s a strong niche: the Mediterranean,” Shaich said. “This is a company that is ready to go public because it has a clear plan for the next 1,000 stores.”

Shaich hasn’t been as forthcoming about other restaurant IPOs. He said at an Axios event in early October that the salad chain Sweet green Shouldn’t have gone public until it was profitable, the drain reported. (Sweetgreen has not yet reported a profitable quarter, but executives said they expect the company could break even for the full year.)

Shaich is less transparent about Panera’s potential IPO. Last year, Panera canceled a deal with restaurateur Danny Meyer’s special purpose acquisition company that would take it public for the first time since JAB bought the chain. Earlier this year, the company said it was preparing for an IPO as it unveiled a CEO succession plan.

Shaich declined to comment on Panera’s expected IPO, citing a nondisclosure agreement he signed as part of his exit agreement from the company.

“But I have to say this: I love Panera…I’m all for it in every sense of the word,” Shaich said.

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