1: Ron Shaich‘s first impression of the company he would sell twenty-four years later for $7.5 billion was not good.
It was 1993. Ron was the CEO of Au Bon Pain. He had gotten up before dawn to visit the St. Louis Bread Company, a bakery that sold sandwiches, baked goods, and pastries, which one day would become Panera Bread.
After making several wrong turns, Ron arrived at a dingy shopping mall.
“I was starting to wonder if I should have just stayed in bed,” he recalls in his book Know What Matters.
“Tucked into the corner of a suburban strip mall, with minimal signage,” Ron writes, “the small bakery café couldn’t have been further from Au Bon Pain’s high-visibility locations in places like Rockefeller Center and the World Trade Center.”
What piqued his curiosity? A line of customers waiting patiently for the doors to open.
“The St. Louis Bread Company had been founded in 1987,” Ron writes, “by an entrepreneur named Ken Rosenthal, who, inspired by San Francisco’s North Beach café scene and artisan bread culture, vowed to bring it to his hometown.”
Ken had reached out to Ron to seek his advice on how to grow his company, which at the time had twenty locations in St. Louis.
“My initial reaction was that he was crazy,” Ron recalls. “His company lacked the infrastructure, systems, and discipline necessary to grow and manage a sprawling network of semiautonomous franchisees.”
But as Ron crunched the numbers, he learned the little Midwestern bread company was “generating sales on par with the average Au Bon Pain store while paying a fraction of what Au Bon Pain paid for real estate,” he writes.
Which led to his visit to St. Louis that early morning.
2: “The doors opened and I followed the crowd inside, all my senses on high alert,” he remembers. “I inhaled the seductive, comforting aroma of fresh-baked bread.”
“Behind the counter,” Ron writes, “the source of the aroma—a variety of warm, crusty loaves and pastries—was proudly displayed in baskets up the wall. . .
“I listened to the tone and cadence of customers’ conversations as they waited in line and sat around the café tables,” he recalls. “It felt more like they were at a family gathering than running an errand. I noted how the manager greeted many people by their first names.
“I was also struck by what I didn’t hear—not a hint of grumbling or impatience, even as folks waited ten or fifteen minutes for their loaf of sourdough.
“If Au Bon Pain had imposed a ten-minute wait on New Yorkers, we’d have been strung up by our apron strings,” he notes.
Ron got in line and purchased his own loaf of sourdough bread, a bear claw pastry, and an espresso drink.
“The sourdough was indeed exceptional: crusty, tangy, with substance and texture,” he shares. “The pastry was light, buttery, delicious. And the coffee was authentic cappuccino—something that was hard to come by even in New York back then.”
Ron looked behind the counter and saw an expensive Italian espresso machine.
“Based on what I saw, heard, smelled, and tasted that day, I sensed an opportunity,” he explains.
“It wasn’t the product of boardroom brainstorming or exhaustive market research, but rather the product of empathy: Making the effort to feel what other people were feeling—their needs and desires and why they were satisfied or disappointed.”
3: Ron believes that empathy is the key ingredient in innovation. It is “the root of all learning because it’s the key to human relationships,” he writes.
“It’s what allows us to connect to each other and bridge the divide between our subjective worlds,” Ron observes. “It pulls us out of our own mental models, our well-worn habits, to see the world through others’ perspectives.”
As Ron waited in line that day, his five senses on high alert, he was intentionally practicing empathy as he ordered, sat down, and tasted the bread and pastry.
“And that practice led me to an intriguing question: Could this thriving little company be Au Bon Pain’s gateway to the elusive suburban and Midwestern markets?” Ron writes.
The St. Louis Bread Company CEO also perceived an opportunity. “He knew he and his partners did not have the experience to grow his business,” he notes.
“So rather than letting his ego get in the way,” Ron writes, “he was smart enough to entertain the idea of putting his creation in the hands of an operator who knew how to nurture it, evolve it, and build their capabilities to expand it into multiple markets.”
Shortly thereafter, Au Bon Pain acquired St. Louis Bread Company for $24 million.
“In my favorite twist to the story,” Ron writes, “Ken took that money and used it to become our franchisee, and ultimately grew a franchise business that was four times larger than the one he sold to us.”
The best part? “I’m pleased to say we still love and respect each other,” he notes, “something you can’t say about the parties in many other corporate acquisitions.”
More tomorrow.
_____________________________
Reflection: How often do I pause to see the world through my customers’ eyes and truly experience what they experience?
Action: Practice empathy this week by observing our organization from the perspective of those we serve and noting one meaningful insight that could inspire innovation.
What did you think of this post?
