Business & Tech

Panera Bread to acquire Boston-based Au Bon Pain

AP Photo/Charles Krupa, File

Panera Bread announced on Wednesday that it would acquire Boston-based Au Bon Pain, a move that will reunite two bakery-cafes that share the same starter yeast. 

Ron Shaich, who built Au Bon Pain into a national brand and used it to launch Panera, will step down as chief executive of Panera and serve as chairman of the combined company. He will be succeeded by Blaine Hurst, currently Panera’s president. Both executives work out of Needham. 

Terms of the deal were not disclosed. Au Bon Pain currently operates more than 300 stores. 

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“A lot of people have talked about this in the context of closing the circle, but that isn’t what it’s about,” Shaich said. The company has been underinvested in, he said, and there are several avenues for growth, as Panera’s health-conscious menu resonates with many venues seeking to serve better fare.

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“This is a great strategic acquisition that offers the opportunity for us to grow in several new real estate channels, including hospitals, universities, transportation centers, and urban locations,” he said.

Whether that might mean the merger of the two companies under the Panera name, he said, was still too soon to know. 

The ingredients of both companies can be traced to a cafe called the Cookie Jar that Shaich opened on Winter Street in downtown Boston in 1980, shortly after finishing his MBA at Harvard Business School. A year later, he merged the concept with a small three-bakery chain called Au Bon Pain and began selling healthy, low-cost meals marketed as a quality alternative to fast food. 

Over the next decade, Shaich and his late partner, Louis Kane, built Au Bon Pain by focusing on urban hubs, taking the company public in 1991. In 1993, it paid $23 million to acquire St. Louis Bread Company, an upstart suburban bakery, with 20 locations in the Midwest. 

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Shaich eventually took the St. Louis Bread company concept national under the name Panera and built it and Au Bon Pain in tandem. By 1999, the company owned or franchised 265 Au Bon Pain shops and 125 Panera locations. But Shaich saw more growth opportunities in Panera and sold off the Au Bon Pain portion of the business to a private equity firm.  It was a tough decision — he compared it to “selling his first son” — but a lucrative move. 

The independent Panera Bread Co. eventually grew into the biggest fast-casual food chain in the country — more than 2,050 locations and $5 billion in annual sales — and in the process created a training ground for a league of local restaurant executives that are somewhat jokingly referred to as the “Bread Mafia.” The company’s team members have gone on to leadership roles at Dunkin’ Donuts, Friendly’s Ice Cream, Wahlburgers, Cosi, and Pizzeria Uno. It currently employs about 800 people in St. Louis, while 150 are based in Needham.

Hurst joined the company in 2010 and was tasked with overseeing Panera 2.0, a $42 million investment by the company to overhaul digital strategy, supply chain, and customer service.

With his oversight, the company introduced digital kiosks and mobile ordering, and rid its menu of artificial ingredients as part of its “100% clean” initiative. In an interview, he said to expect Au Bon Pain to begin introducing more digital offerings to better serve customers in the coming months. 

In July, Panera was acquired for $7.8 billion by JAB Holdings, the European company that owns Peet's Coffee & Tea, Keurig Green Mountain, and Krispy Kreme Doughnuts. JAB also owns a majority stake in retail and roasting companies Intelligentsia Coffee & Tea and Stumptown Coffee Roasters. Industry analysts have also speculated that JAB might buy Canton-based Dunkin’ Donuts in a move to further consolidate its coffee empire. 

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Bonnie Riggs, a food service analyst with NPD Group, said the wave of acquisitions comes at a time when the growth of the fast-casual industry in the United States has stalled for the first time in five years. She said that restaurant chains have been looking to locations like hospitals and universities as opportunities for growth — spaces in which Au Bon Pain has long operated successfully. Choosing to acquire successful companies provides economies of scale as rents and operating costs are on the rise. The decision among brand executives, she said, is simple: “If we’re not acquiring, we’re closing a lot of stores.”

Shaich said the acquisition of his former business and the shift in his role stirred up many emotions. 

“The greatest joy over these 36 years has been the opportunity to learn alongside people like Blaine,” he said. “There’s a personal gratification in it, but I want to be clear, we did it because it’s a great opportunity. We’re winning.”

Janelle Nanos can be reached at janelle.nanos@globe.com. Follow her on Twitter @janellenanos.