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Speculation Heats Up For A Panera Buyout Of COSI
I find Panera's strategy compelling as outlined by Mr. Shaichs: Buy out franchises, restaurant chains like Panera, and repurchase stock. There are good reasons to do all of these things - especially when you are sitting on $200M+ in cash, and a highly valued stock.
The objective I want to focus on is his second - and, it relates partially to Cosi. Buying a competitor that fits the 'similar to Panera' tag can be great on two levels - if they are located properly, Panera gains instant market share/growth, and they have the added benefit of taking out a current/future competitor. The Paradise deal was this. And, Panera has quite a few regional competitors across the US. - some with very strong brands. Cosi is somewhat in alignment with this strategy - although I am not sure the brand is worth saving, but the locations might slot in well gaining Panera more stores while taking out a competitor in their niche.
As for the general strategy, I see another angle that quite possibly could add another significant layer of value by finding a 'new' (not 'untapped',, but actually 'new') market for Panera that does not exist for them. For instance, in my area (West Coast) there is a regional bakery/cafe concept named Specialtys that perfectly demonstrates this (and, I happen to eat their product 4-5x per week). They have a technology aspect that I have not seen anywhere else - from what I can gather, they do most of their business on-line. And, I think this explains why their locations seem to be very unconventional (at least from your normal retail concepts). However, they do tremendous volumes - the up and down the coast (our offices are in both SCal, NCal and Seattle) their places are packed, and their little delivery vehicles are everywhere.
The point is that Panera should not only buy out regional concepts to drive growth and quell competition, they should purchase similar concepts that have found new markets. Then either apply the lessons to Panera for added value/growth, or add the concept as a growth vehicle.
I am anxious to see what Shaich's/Panera does - they have a lot of resources available to remain the dominant player. It will be interesting to see if they can do so. For my stock's sake, I hope they do.
Mar 15, 2012. 02:27 AM
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