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. 

Paradise’s sandwiches are $6.75. Top sellers in that category include the Ham and Brie Panini topped with sliced green apples and the Turkey Chipotle Wrap. Salads run from $3.95 to $6.85. Soups and specialty pastas are also available. The breakfast menu includes omelets, egg sandwiches and wraps, quiche, fruit parfaits, and baked goods. Almost the entire menu is available for catering.

“We really believe our style of service is what makes us so profitable,” Birzon says. “We bring them through a cafeteria line where they interact with our employees wearing their white chef’s coats and chef’s caps. We have a sandwich station, a soup station, a salad station, and a baked goods station. There’s a tremendous opportunity to upsell.”

Paradise Bakery & Café 

  • CEO: Dan Patterson 
  • HQ: Scottsdale, Arizona 
  • Year started: 1976 
  • Annual sales: $100 million (projected for 2007) 
  • Total units: 57 
  • Franchised: 28 
  • www.paradisebakery.com
 
Why it bears watching: Paradise Bakery & Café always has seen itself as a leader—a brand with a competitive spirit. It comes naturally given that founder and CEO Dan Patterson was a member of the 1968 and 1972 U.S. men’s Olympic volleyball teams. He has said athletics was a good training ground for business. 
 
Being a good teammate is critical now for the company that hopes to continue to grow in its own right despite being little brother to the segment leader. Paradise already has grown by 11 stores mainly in the Southwest since Panera’s majority acquisition and plans to add another 14 by year’s end. “We’ll open another eight to 12 stores next year,” Birzon says, “but will spend much of that time deciding what we want to do with the concept—if we want to grow rapidly through franchising or be more of a boutique concept.” 
 
Birzon says Panera has indicated it will let Paradise’s company leaders continue to make strategic decisions about growth. That allowance for autonomy is part of what made the partnership with Panera attractive, Birzon says. That goes along with the fact that Panera, like Paradise, still sees value in operating its own stores. About 50 percent of the Paradise stores are company-owned, while Panera operates about 40 percent of its stores.
Breakfast, Fast Casual, Finance, Growth, Story, Panera Bread, Paradise Bakery & Café