What Has Panera's CEO Learned From the Global Pandemic?

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1:12Hello, and welcome to HBR Now. I'm Octavia Gorodima. I'm a career coach and the founder of 2010 Agency. And I'm here with my co-hosts, Ardy Ignatius, the editor-in-chief of Harvard Business Review, and Joshua Markt, who owns product and innovation at HBR. Hi, guys. Hello. Our special guest today is Naren Chowdhury, CEO of Panera Bread. Panera's story began in 1980 as a 400-square-foot cookie store in Boston. Now the company operates over 2 ,000 bakery cafes in the United States and Canada. We'll be talking to Naren Chowdhury about how Panera has pivoted during the pandemic, the ramifications for the restaurant industry, and how to lead during the hardest of times.

1:54If you have a question for Naren, please do post it in the comments and we'll be asking those later. But first, let's hear from our sponsor, our friends at Accenture.

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2:21Now, before we bring Naren in, I'd like to talk to Ardy and Josh about the tumultuous events of the past few days. So much of such consequence has happened in such a short space of time. There's an impeachment vote pending. Federal authorities have said they're preparing for a wave of armed protests across the country in the days leading up to the inauguration. In all honesty, the past week has felt like a year, and yet the year is only just beginning. Adi, how are you finding solace right now with so much turmoil for our democracy? So your comment about the past week seeming like a year, I was thinking about our show last week at this time, or actually on Wednesday.

3:03So we had Adam Grant, it was a great discussion. And, you know, in the hour or two after that perfectly pleasant discussion, the world changed. and I'm not sure I've recovered since then. The big question, I guess, that concerns HBR and its readers is, what does business do? And I actually am looking forward to talking to Niran today about, CEOs don't particularly like to dive into politics, don't like to see their workforce as politicized. On the other hand, there are red lines that get crossed and suddenly you need to engage in some way. You need to say, look, a line has been crossed. It matters to me and my company.

3:47You need to take action of some sort. I'm really interested in what CEOs all over the world are doing and particularly in talking to Niren about that at Panera. Yeah, I feel the same way, Adi. It feels like we took a collective wallop in a weird, strange way, and I'm still kind of stunned. I do try and go back to being positive around the fact that so many people are involved in the political process now. And I think that is a good thing. But I'm curious the same way you are about some of the questions you've raised. Yeah, it's it's so hard. And I think for me, it's often tempting to shut out tough news cycles.

4:26But I simply can't do that. I can't do it this time. I can't look the other way. And the magnitude of what these events symbolize is what leaves me bereft. And I think it's also just the recognition that there are literally no safe spaces. You know, COVID, not COVID, it's violence. And I think, however I choose to deal with this news, it doesn't change the fact that it's happened and that it's consequential. And there were so many hard conversations that lie ahead, not just. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more.

5:12Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean.

5:51And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. in the House and the Senate, I think, between all of us. Yeah, and they came together. I mean, you're seeing several congressmen and women who are testing positive for coronavirus. That has to be true for the mob as well. So, I mean, in addition to everything else, this is probably going to be a super spreader event. So, you know, the coming together of these storylines is extraordinary, is horrifying and extraordinary. Yeah. So let's get our conversation started.

6:32I'd like to formally introduce our guest. Naren Chowdhury is the CEO of Panera Bread. He's worked at the forefront of the food retail and hospitality industry for the past three decades. Naren joined Panera two years ago from Krispy Kreme Donuts, where he served as chief operating officer and the president of the international division. Prior to that, Nuren spent 23 years at Yum Brands in a number of roles, including President of Yum India and President of KFC Global. Nuren, welcome to the show. Thank you. It's great to be here. So, Nuren, COVID-19 has wreaked havoc across so many industries, hospitality and food retail in particular.

7:16Restaurants, the nation's second largest private sector employer, have been in economic freefall due to mandated closures and capacity limits. How is Panera faring during the pandemic compared to your competition? So, yeah, I think the year has been very challenging, to say the least, particularly for the restaurant business. The restaurant business, as you mentioned, accounts for 4 % of the GDP of the country, employs about 10 % of the workforce. And the important thing is almost 99 % of the restaurants tend to be family-owned. And they actually, unfortunately, have been impacted the most. Panera, fortunately, I think has come out and is coming out much stronger through the pandemic.

8:03And I think we embrace the pandemic by asking ourselves, how can we use this as a catalyst to become stronger? You know, a stronger business, a stronger business model, a stronger brand, a stronger culture, a stronger team. And as we now ended the year in 2020, here are some interesting metrics. So we pivoted from pre-pandemic, off-premise business was about 40%. Today, it is about 85%. Pre-pandemic, our digital e-commerce was about 35%. 55%. And now it's about 55%. So we are more off premise, have greater access through e commerce, and therefore have become a lot more resilient through this entire year.

8:53And beginning of the pandemic, our business was deeply impacted, we were down almost, you know, 50%. But we've closed the year by being down just about, you know, negative 10, etc. So I think we have become much stronger through the pandemic with that mindset of how do we use this as a catalyst to become stronger. I like the idea of a catalyst. And what will the company's post-vaccine business model look like? How are you projecting your future? So I think when the dust settles, and I believe that it will, I think Panera's value proposition of food that customers feel good about eating with greater off-premise convenience, more digital access, I think, is going to be even more relevant as we go forward.

9:44We're also building as we speak about what we think the next generation Panera would look like, which I think will be an asset light, smaller box with greater off-premise convenience as we go forward and build the brand. So I think... When you need to build up your team to handle the growing chaos at work, Use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast.

10:23That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com.

11:00I think our value proposition will be even more relevant. in the days to come. And then we are also investing heavily in a couple of areas to ensure that that competitive advantage is sustainable. So like our talent, we're using this as an opportunity to strengthen our talent. We're building even a stronger e-commerce digital network as we speak and also strengthening our supply chain. So that is our strategy as we go forward. It's going to be more asset light, more off-premise orientated and more e-commerce driven. On October 1st, the House of Representatives approved the Restaurants Act, $120 billion restaurant relief bill.

11:39The next step is a vote in the Senate. Chuck Schumer said that the next stimulus bill should include the Restaurants Act. In your opinion, should the government have done more to support restaurants? You know, it's such a tough, challenging situation. It's unprecedented. I think given the uncertainty of it, I feel that the government moved pretty quickly. and with the CARES Act and the PPP provisions, I know that, for example, our franchisees benefited a lot from that injection of capital, and it was deeply appreciated. Could they have done more? Yeah, I think obviously it's such a huge challenge, and like I said, impacting the family-owned restaurants disproportionately, perhaps more in that area.

12:24But I do think grateful, I feel grateful for the amount of support that the restaurant industry got from the government during this crisis. So if you've just tuned in, this is HBR Now. Our guest is Naren Chowdhury, CEO of Panera Bread. If you have a question for Naren, please post it in the comments. And if you can stay to the very end, we have something that you won't want to miss. So, Naren, two weeks ago, President Trump extended pandemic-related bans on issuing green cards and work visas through March 31st. Joe Biden has pledged to undo many of Trump's policies, But in the interim, green card applicants from India face the worst backlog due to the 7 % per country cap on allocations each year.

13:05As a C-suite leader who relocated to the United States, what's your perspective on the immigration challenges highly skilled workers are currently facing? Sure. You know, I really believe for our country, immigration is important. In fact, it's a catalyst for economic growth. It's a catalyst for creating jobs. So here are some important insights. I think immigrants account for about 15 % of the working population. But interestingly, almost 25 % of all new businesses are started by immigrants. 30 % of Nobel laureates in the field of science are immigrants. So immigrants are important. They contribute a lot to the economy.

13:48But here's the key insight. If we do nothing and if we restrict immigration, then by 2035, I believe there'll be a shortfall of maybe about 20 million workers required as the American workforce gets older. So I think it's a necessity. I think we need to have immigrants coming into the country and contribute towards building a stronger economy in the future. So, immigration has just become so politically charged in the United States, and yet you underscored just the value that immigration can bring. What do you think are some of the biggest misconceptions when it comes to business immigration and the economy?

14:30I think the single biggest misconception is that immigration is leading to an increase in unemployment, you know, and current, especially around the pandemic, I think we have to realize that it's the pandemic that is creating the levels of unemployment. It is not immigration. And I think some of those myths have to be dispelled. I think a case has to be made about the importance of immigration, but also the necessity, as I said, if we don't have immigration, we will not have enough workers in America to continue to drive the economy. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs.

15:06It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners. Sitting around the table. everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra.

15:44Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. So Noren, I'm going to ask you one more question before I bring my co-hosts in. So many of us, too many of us are dealing with grief while trying to keep going at work. And I'm aware that you have experienced profound loss. How can leaders support employees who are returning to work after losing a loved one? I think that's a very important question.

16:27I really believe that leaders have to be even more compassionate in these times, have a greater sense of empathy, a greater sense of a family than ever before. I think that's what we need. It's made even more difficult because we're all sitting remote across the screen. We can't be around each other and be there to comfort each other. So at these times, I think an expression of genuine care, warmth, compassion is so important. And I think it has to be also expressed by what we do and not only by what we say. So I'll give you some examples of what we've tried to do at Panera. So, you know, when we first got hit by the pandemic, we had to furlough close to 35 ,000 people.

17:15and that was a very, very difficult decision for me. But I was determined to do that with the utmost humanity and compassion possible. And therefore, we did a deal with CVS and Walmart who were looking to hire people and we asked them to hire our furloughed employees and then give them back to us once the pandemic was over. We also partnered with Deepak Chopra and Oprah Winfrey to provide free meditation and self-care opportunity for our associates to really sort of look in words, you know, nourish themselves and heal themselves and become emotionally stronger during this very unprecedented time.

18:04I want to bring back Adi and Josh to ask some questions as well. Thanks. I'll jump in. Niren, so the big question really since, one of the big questions since March has been the balance between protecting the general health and keeping the economy going. Our business, publishing, we've been able to transition to work from home without missing a step. We're lucky in that way. Your business is not the same. I guess I'm interested in, do you think we've gotten the balance right, or do you think we as a society has overreacted in terms of closures that have been more damaging to the economy than they need have been?

18:52Yeah. I think, you know, this is, I'll tell you why this whole situation is so difficult. I think there are three dimensions to this entire issue. You have a health crisis, which is raging as we speak, with some glimmer of hope with the vaccines. But then you also have a financial crisis. You have, you know, 20 million people unemployed right now with uncertainty for the future. And you also have a humanitarian crisis. where you have 35, 40 million Americans who are struggling with hunger. So it's a health crisis that's triggering a financial crisis and a humanitarian crisis. And all three of them are happening at the same time.

19:37So I think whatever we do, I think we have to actually address all of those three dimensions proactively and to the best of our ability. And I really feel that this is so complicated and so complex that industry and industry leaders have to step up and also control. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast.

20:23That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners. Sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com.

21:00Attribute and make a difference in this regard across all three dimensions. So that is what I believe in. I think all three have to be addressed, and I think industry has to play a part. So we're also dealing with an intense political moment. after what happened in Washington last week, the corporate backlash has been really quite intense. You know, more and more companies are saying they'll suspend donations to politicians who supported the process of questioning the election results. I'm curious, you know, CEOs generally don't like to be thrust into political situations because they're divisive internally, but you can't avoid it.

21:38So I'm interested in how at Panera you're dealing with this latest backlash that I'm sure, you know, has, has got your employees rolled up. Of course, your, your customers, how do you, how do you navigate that? I think, um, Ari, you're right. I think, you know, normally businesses say, let me get on with what I do, but I think there are moments in time where you have to take a stand and provide clarity, uh, to the organization, to your employees, your customers as to what your core values are what do you believe in and these are the moments where i think if you don't do that i think that that that would be a missed opportunity so i i want to share with you how i personally felt you know i was like really really disturbed and deeply shocked by what transpired i think the uh the unnecessary loss of life i think the attack on the nation, the attack on democracy, the attack against the free will of the people in a free and fair election, which was undermined, I think was deeply disturbing to watch.

22:48However, at the same time, I took a lot of hope and encouragement by the fact that the House of Representatives and the Senate got back together the very same day and finished the job and ratified the new government. And that to me was democracy, you know, also working at its best, taking accountability, coming back with urgency and doing the job. But I'll tell you what disturbs me the most. What disturbs me the most is the fact that there was so much anger, hatred, violence, resentment that was visible, all of that built on a foundation of misinformation and falsehoods, etc. That to me was perhaps the single most concerning thing in the entire episode.

23:44And as I was reflecting on it, I just feel that we as leaders across the country need to even deepen our resolve to stand for the utmost and the highest levels of transparency and candor in our organizations and we as leaders have to walk the walk on that you know to be truthful to be transparent to be honest and um i really have this mindset of i have limited impact in the world around me but i have full control over the panera that we build and therefore why can't we make Panera a reflection of the world that we wish to see? Why can't I make Panera inclusive, embracing, compassionate, respectful?

24:34And I think that really is my focus, to really make sure that we are living by those values in Panera. Yeah, I think that makes sense. I think it's hard to get the change you want out of government, out of global institutions, and it has to happen inside companies. I do want to ask one more question, then I'll hand over to Josh. The president of the U.S. is in the process of being impeached for the second time, and there are those who say it was his actions that caused everything you were just talking about, what happened in Washington. You met with Trump, as did many business leaders. I'm wondering the fact that you met with him, that you had a conversation with him, an audience with him, are people using that against you now?

25:24Is that actually a liability that you have to handle somehow? No, I don't think at all. I think, you know, I was there to represent the industry and make sure that the right incentives were being given to the industry at a time of huge amount of need. You know, I was looking for opportunities to actually serve the community when we went and interacted. So, for example, we have this mindset of how can leaders step up and do the right thing, including for the community. And at Panera, we've done a lot to serve those who are impacted the most by the pandemic. So doctors and nurses, we fed 50 ,000 meals a week to doctors and nurses in New York.

26:07We did a program with the USDA and the government to feed school children who are not able to access lunch with this closure of schools. And that's where we established a program with the USDA. And then, of course, families that don't have food to eat. We partnered with Feeding America and created a program to feed half a million American families. So I think the intent, whether with this administration or any other administration, is always to look for opportunities to do the right thing. to contribute and to make a difference and to get the required incentives that are required for the restaurant industry at large.

26:52I want to switch gears for a second at least, but I also want to remind people out there to keep asking their questions. Maybe we'll get back to some of the themes we've just been talking about. But I wanted to shift to innovation and competition because your space is so competitive. I'm curious, you know, in some ways, even now, we sort of think it's counterintuitive that people could be starting new concepts. We see them. We see them expanding. I certainly see them around Boston, even now. I'm curious which concepts you see coming along that give you some concern or intrigue and how you keep innovating when, you know, revenue is down.

27:33How do you do that? That seems like one of the trickiest things that business leaders need to do. Yeah. So I think our mindset is, you know, we always want to be aware of the context and the competitive environment, but not spend too much energy on that. Spend all of our energy looking inside at Panera and understanding how can we leverage Panera to best serve the needs of our customers better than anybody else, being focused on that. And I think that has been our focus. We take inspiration and learnings from the category, and then we try and sort of apply that in a Panera way. So I'll give you some examples.