Panera Bread founder Ron Shaich new book criticizes IPOs

Panera Bread founder Ron Shaich led a public company for more than two decades, but that doesn’t mean he’s a fan of initial public offerings or Wall Street.

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

The book starts with his first entrepreneurial endeavors as a college student and ends with Panera’s blockbuster sale to JAB Holding. Shaich mixes retelling his career with business advice aimed at entrepreneurs and CEOs navigating the highs and lows of leading a publicly traded company.

He cautions readers against chasing profits, trends and the prestige of being publicly traded. Ironically, Panera Bread is mulling an IPO, but Shaich, who is no longer involved with the chain, directs his advice toward founders.

The restaurant now known as Panera Bread started as a merger in 1981 between Cookie Jar, founded by Shaich, and the struggling French bakery Au Bon Pain. In total, Shaich spent 32 years at the top of the company, excluding the two years when he had technically retired but remained active as executive chair.

These days, Shaich is chief executive of Act III Holdings. He founded the venture firm, which mostly focuses on restaurant and entertainment startups, with some of his proceeds from selling Panera. Act III invested in Cava in 2018, getting in years before its initial public offering 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 IPO in 1991. Even as Au Bon Pain bought St. Louis Bread Company, renamed it Panera Bread and then shed Au Bon Pain to focus on Panera’s growth, Shaich’s company was publicly traded.

Still, Shaich said he thinks initial public offerings don’t make sense for most companies.

“The reality is for 90% of the CEOs that take a company public, they live to regret it,” Shaich told CNBC. “Why? Because you’re broadening, in a massive way, the number of constituents whom you have to really deliver for.”

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

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

Shaich’s lack of appreciation for the typical venture capital model also comes through in his own firm. Act III doesn’t have any outside investors, known as limited partners, which allows the firm to focus on the long term, according to Shaich. The firm also provides continuous capital to its investments so founders can focus on the business rather than fundraising, he said.

In fact, Act III’s Cava deal is probably the firm’s most traditional venture investment. But Shaich, who serves as the company’s chair, is confident that the fast-casual chain is on the right path. In his opinion, Cava CEO Brett Schulman might be part of the 10% of chief executives who don’t regret going public.

“Cava is a company that will succeed as a public company. Quite frankly, because it’s a powerful niche: Mediterranean,” Shaich said. “This is a company that’s ready to be public, because it has a clear plan for the next 1,000 stores.”

Shaich hasn’t been so complimentary to other recent restaurant IPOs. He said at an Axios event earlier in October that salad chain Sweetgreen shouldn’t have gone public until it was profitable, the outlet reported. (Sweetgreen hasn’t reported a profitable quarter yet, but executives said they think the company could break even for the full year.)

Shaich is less transparent about Panera’s possible IPO. Last year, Panera called off a deal with restaurateur Danny Meyer’s special purpose acquisition company to be publicly traded for the first time since JAB bought the chain. Earlier this year, the company announced it’s 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 deal from the company.

“But I’ll say this, I love Panera … I root for it in every sense of the word,” Shaich said.