Let’s Talk Franchising!

A Tale of Two Bakeries: Why Panera Rose While Cosi Fell

Author: Jim Coen
March 28, 2010
Category: Franchising in general

Carol Tice at BNET Insight does a detailed comparison of each franchise and offers some insight into some reasons Panera had success and why Cosi seemingly struggled:

Two bakery-cafe chains have been in the news recently — Richmond, Mo.-based Panera Bread (PNRA) announced growing sales despite the downturn, while Cosi (COSI) of Deerfield, Ill., said its sinking sales have led to a delisting warning notice from the Nasdaq. Both chains began around the same time, and Cosi certainly got as much positive initial press and consumer raves. Some of the key differences that made Panera the winner:

Management strength and consistency. Panera was the second chain idea from seasoned Au Bon Pain visionary Ron Shaich, who’s been actively involved until just the past few months. By contrast, Cosi founders Jay and Shep Wainwright were fresh out of college when they brought back Cosi’s concept from a bistro they saw in Paris. Cosi’s ownership has been a revolving door — it merged in 1999 with Xando, another small chain that later busted. Efforts to sell it again last spring failed. Shep left after the 2002 IPO, and Jay was forced out in a 2005 management shuffle, so founders have been out of the loop for years.

A concept that franchise owners wanted. Panera was able to attract investors willing to open more than 500 franchised units. Though Cosi made many announcements over the years of big expansion plans and hundreds of planned units, growth was slow. A restaurant can have the best food in the world, but if its business model doesn’t make sense for franchisees, they won’t buy restaurants.

An emphasis on more experienced, wealthier franchise owners. Panera sets a higher bar for its franchise owners, requiring previous multi-unit restaurant experience. Though it only sold multi-unit franchises, Cosi just asked for previous restaurant experience. Panera also recruited franchisees with at least $7.5 million in net worth and $3 million in liquid assets, while Cosi requires only $900,000 in net worth and $400,000 liquid. Translation: If stores need investment to improve results, Panera’s franchisees have more resources to make it happen.

Comments

Author: Carol Tice | Date: July 12, 2010 | Time: 1:44 pm

Hi there –

Thanks for the shout-out! Methinks you’re sort of skating over the line on copyright infringement with that much reprint…but glad to be thought of. Feel free to publish a couple sentences of any of my posts and then link to my blogs back on BNET, though.

Thanks again –

Carol

Author: David | Date: August 3, 2010 | Time: 1:08 pm

It’s interesting to hear the difference between both Panera and Cosi on the back end of the franchise model. However, as a consumer I would tell you that the product and experience at Panera has been better for me at Cosi. My only concern is that Panera keeps their quality as they continue to grow.