Thinking of Buying a Fast-Casual Franchise? Read this report first.

Ones to Watch | By Sabrina Davis

Paradise Bakery & Café
A sandwich on the menu of fast-casual restaurant Paradise Bakery and Cafe.

You might expect a 46-unit chain to lose some identity after merging with a company 22 times its size, especially when the company is Panera Bread, the fast-growing bakery café powerhouse.

Au contraire says Paradise Bakery & Café President David Birzon. “We still see ourselves as the bakery-café leader in terms of quality. Before becoming involved with Panera, we would describe ourselves as an upscale version of Panera. We’ve always thought our baby was a little bit better looking.”

The two chains that were once competitors, when Panera was eyeing Paradise’s home market in Arizona, became teammates in February 2007 when Panera purchased a 51 percent interest in the Scottsdale-based Paradise Bakery & Café. Paradise’s role in the partnership is to help Panera become a small-market regional player.

“Panera runs off a commissary system to supply fresh dough to its facilities, so it has to have a large market to make investment in a commissary worthwhile.” Birzon explains. “We don’t put in a commissary until we have 12 stores or so in an area.”

Paradise prepares all its dough in its stores from scratch. Once a market grows to 12 stores, Paradise uses a commissary to take over bread production only. “There’s a great synergy between our companies in that we give them the opportunity to compete in smaller markets, too.”

The companies also are experimenting with the old adage that there’s no better competitor than oneself. “In Indianapolis we’re growing the concepts side by side,” Birzon says. “We’re really using that as a test market to see how the concepts work and compete together. We’re finding that the concepts are different enough that the guests are getting two different experiences and visiting us both in the same week.”

Paradise’s history is part of what makes it special. It started as Cookie Muncher’s Paradise in 1976, offering three types of cookies, muffins, and fresh-squeezed lemonade. By 1979 the menu had expanded to include soups, salads, sandwiches, and other bakery items. The company is still well known for its sweet treats, and few customers pass through the cafeteria-style line without picking up dessert.

The history and customer following might be one reason Panera plans to keep Paradise running as a separate entity even after the likely purchase of the remaining 49 percent of the company in December 2008. For the other reason, just look at the bottom line, Birzon says. “Our street locations, which are the core of our business, do an average of $60,000 per week in each store with an average check upwards of $11. That’s just phenomenal in this market.” Panera’s average weekly per-store sales are roughly $40,000 with an average check of $8 to $9.

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