Flynn Continues ‘Perfect Diversification’ Play With Acquisition of 34 Panera Locations


Greg Flynn and the Flynn Restaurant Group have picked up another 34 Panera Bakery-Café locations. The San Francisco-based operator now controls 130 restaurants, along with 477 Applebee’s and 274 Taco Bells.

That means the leader of the Monitor 200 is a little further ahead and rapidly approaching $2 billion in sales. Flynn said he doesn’t have specific goals for growth, but the 1,000-store mark will be something to celebrate.

“That’s a nice round number, and I think that will be fun,” said Flynn. “There’s not even an explicit goal to grow for the growth, it’s only growing if it’s accretive and strategic, the financing is attractive and we have the ability to operate. Having said that, growth is fun and we’ve always embraced it as a core objective.”

Flynn acquired the restaurants from one of Panera’s first franchisees, Randy Simon, co-founder and CEO of Original Bread. He opened the 19th Panera back in 1994. He’s also a co-founder of Freddy’s Frozen Custard & Steakburgers.

"Growing with Panera over the last 24 years has been an experience for which I will always be grateful. As I look back, I'm truly awed to have been involved in the growth of this dynamic concept," said Simon, in a press release. "Our team is confident that Flynn Restaurant Group will carry on our standards of excellence in service and our preeminence in community involvement. Their leadership role in the restaurant industry will allow them to fully implement all the new initiatives which Panera has slated for national roll-out."

Simon will now focus his efforts on growing Freddy’s.

For Flynn, Panera is an ideal middle child between his Applebee’s and Taco Bell holdings.

“It’s fast casual but frankly it’s a more complicated, bigger broader offering than most fast-casual offerings,” said Flynn. “Panera is the perfect diversification for us. Obviously with Applebee’s we have the classic sit-down dinner with liquor, then Taco Bell is classic QSR with 70% drive-thru which is all about convenience and value.”

Panera also hasn’t seen the volatility felt across fast casual lately, which has been one of the weakest segments in the last two months, according to TDn2K research.

“I think fast casual was really hot for a while, it got badly overbuilt and the novelty wore off,” said Flynn.

Unlike the typical middle child, however, it’s getting a lot of attention.

“We went from zero to 130 in two years, so it’s a very high priority for us. I think Panera is a wonderful system right now, it benefits first and foremost from great franchise leadership,” said Flynn. “But also the fact that they own 40% of their cafes, so they put their money where their mouth is.”

Testing initiatives like Panera 2.0, cleaner food, catering and delivery internally before rolling out to the system is the optimal way to run a franchise, according to Flynn.

The 34 restaurants are some of the oldest in the system, and while Flynn said there’s plenty of work to be done, there are no losing cafes in the whole portfolio.

“We wish to do all the upgrades the whole system is going through, that’s 2.0 conversions wherever it makes sense—which we think will be most of the cafés—it’s café-based delivery, which requires some changes and lots of training and lots of hiring and it’s just remodels there reimaging upgrades,” said Flynn, who will also be moving away from tired trade areas. “In many cases its relocations, because these are some of the original cafes and they are in-line or end cap in a shopping center but no drive-thru. But trade areas have changed an the concept has changed.”

Those big upgrades are a common theme in the flurry of recent acquisitions, especially as longtime operators like Simon foresee a mountain of capital requirements and a lot of work to stay in the Panera system. Flynn said it’s just the modern lifecycle of franchised restaurant operations.

“That’s good because you have someone like us come in because we have capital and it’s a way for us to add a little value using an advantage we have anyway to take that portfolio to the next level,” said Flynn.

Sellers like Simon also prefer sophisticated operators like Flynn because they know their life’s work will keep growing, giving cherished employees ongoing opportunity.

“That was very important to Randy,” said Flynn. “He and his partners have built a wonderful business over 34 years and they care about their 1,500 employees deeply, it’s like a family and that’s been true of many of our acquisitions. While I don't think that ever saves us any money—we still pay as much as anyone else—I think it is influential on the margin when deciding who to pick, they really want a good outcome for their people.”

Flynn expects to build another four Paneras in the next year and accelerate as the new-location pipeline comes up to the speed. His Taco Bell construction efforts produce about 10 restaurants per year.

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