Panera’s CEO explains why profits and purpose don’t have to be at odds

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Transcript

Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations. Welcome to Leadership Next, the podcast about the changing rules of business leadership.

My co-host Ellen McGirt is off today, but I’m very excited about the guest we have with us, Niren Chaudhary. He’s CEO of Panera brands which includes Panera, Einstein Bagels, Caribou Coffee. Niren, thank you so much for taking the time to be with us.

Niren Chaudhary: My pleasure to be here.

Murray:  So the reason I’m so excited about having you here is that it has been my observation that Panera is a very purpose-driven brand. Can you talk a little bit about your purpose and how it expresses itself in your business?

Chaudhary: Sure, you know, I really think that leadership is a privilege. And leadership is all about impact. And I think impact that goes beyond creating enterprise value. And I think with that mindset, you know our purpose at Panera is, we want to make the world healthier and happier. Healthier because of the quality of our ingredients, our impact agenda, and then happier because they show joy in the capability of food. So that’s our mission, and, you know, it’s—I think both elements are deeply ingrained and integrated in the way in which you want to show up as a brand new company. We’ve always done that, by the way, and we want to do that as we go forward.

Murray: You have four key principles that you hold the company to. Can you talk about those four?

Chaudhary: Yeah, so I think when we talk about a healthier world, you know, is essentially is about to always strive for leadership in food ingredients. In fact, our filter is that at Panera, we will only serve food we will serve our own children first. If it’s good enough for my kids, I think it’s good for our customers.

The second is that we want to be a catalyst to unlock the dreams of our associates in the company and actually create generational progress. So that’s the second one.

The third one is around community—serving our community. We have this mindset of we have limited control on the world outside of Panera, but within Panera we completely own it. So why can’t we make Panera a shining example of the world that we wish to see? So that’s, you know, serving our community.

And finally, this intent of protecting our planet. You may have heard of this saying that says that we don’t inherit the planet from our parents, we borrow it from our children. And therefore, I think it’s a moral imperative that we have to leave the world, the community, in much better shape than we found it.

Murray: Beautiful. I think the first one—only serve food that we would serve to our families—is kind of self explanatory, but let’s spend a little time on each of the next three. First of all, being a catalyst for talented youth from underprivileged backgrounds. How do you do that? Are you providing scholarships benefits to people who work at Panera?

Chaudhary: Yeah sure. I think even the first one, it’s quite obvious that we’re a food company, but I just want to highlight that we are leaders in terms of food that is clean; nothing, you know, artificial; responsibly raised; sustainable; and it’s also climate friendly. So it’s a very deep commitment. And we strive for leadership on that dimension. So I just wanted to share that.

I think on the second one that you asked about, unlocking the dream of our associates, here’s the thing: We employ about 150,000 people across 11 countries, close to 4,000 stores. And I think I really believe that success is a function of ability and opportunity. And we have so many talented youth that are there from underprivileged backgrounds who are very talented, but who never get that opportunity never get that break in life. And therefore we have this mindset of: Why can’t we? Why can’t we create that opportunity or give these kids a break? I think you’ll agree with me that the biggest multiplier or catalyst for generational progress is education. We want to sponsor education to begin with. And then I think down the road, we want to also look at other avenues of creating generational progress. It might mean creating a path for well-deserving employees, a path to ownership, perhaps, in the future.

Murray: What does that mean in actuality? If I work at Panera, what will you do for me?

Chaudhary: So, I think a couple of things, you know, we’ve launched a Panera foundation this is for underprivileged youth outside of and we started with about 17 NGOs and we give scholarships and grants to these NGOs that do tremendous work with a youth from early on in education. So this is outside of connecting.

And then within Panera we have set up a project that we call the Dream Project, and we kicked that off this year. And it was probably one of the most inspiring things that I was a part of. So here’s how it went. We actually opened up a request for application and sponsorship to all our associates to the frontline. And we got more than 1,600 applicants. And then we hand picked about 37 and we gave them scholarships for them to pursue education [inaudible]. And each one of the executive team members and a franchise owners actually showed up for each one of those conversations and congratulated these kids for having won the scholarship and the response that we got from them was just you know, so moving and so inspiring. Because, as you may be aware, almost 30 to 40% of youth in the U.S. when they give up higher education, they do it because they can’t afford it.

You know, and then beyond that, we have you know the accelerated learning programs for talented youth that can be on a fastest track to move from associate to assistant manager to cafe general managers to [inaudible] manager, and potentially into ownership. So those are the things we do.

Murray: Is it working? Are you seeing people rise rapidly from entry level jobs to more advanced…

Chaudhary: Yes. So almost more than 87% of our cafe general managers are internally. Close to about 90% or above cafe leaders or area directors etc. are [inaudible]. We have also recently, you know, during the headwinds of talent that everyone has faced, to win the war on talent, we’ve come up with a very compelling strategy, which is as follows: We believe that the most important leader in our business is the Cafe General Manager. And we believe in [inaudible]. So if we can hire, attract, retain and grow the best talent, we will win.

And recently, we’ve actually invested heavily in creating a very powerful value proposition for any kid who wants to grow their career as a cafe gen manager, there is no better place than us for the following reasons. One, we provide a path to financial freedom and ability to earn around $[inaudible] or more [inaudible]. Secondly, we say that we got to be like a school of life for you. We will not only give you technical education, we teach you how to be a better leader but a human. You will not be with us forever, but you will be glad that our paths crossed. And lastly, we’re giving a wider aperture of career opportunities to our cafe general managers beyond operations. So these are a bunch of different things that we’re doing towards helping unlock the dreams of our associates.

Murray:  And then on the commitment to diversity. How does that play into the equation?

Chaudhary: So important. So we have to manage that by 2023, at least 50% of our leaders—and this is important representation and leadership, not at the frontline—50% of our leaders will be female but when you’re 23 and 30% of our leaders will be ethnically diverse by 2026.

Murray: And Niren one aspect of diversity to the companies like yours has to think about it’s also the question of where you put your stores. How do you think about that? Obviously you need to have customers but we’ve got many parts of the country in the world that are food deserts, you may be priced out of those regions, but how do you think about that?

Chaudhary: We have a national brand we believe that everybody is a customer. We want to be accessible to everyone. So as you may be where we are actually currently present across 48 states. We primarily a suburban brand so far, but we are very rapidly moving into urban centers. We’re looking at non-traditional like airports and colleges and universities. I think on food insecurity that you talked about.

Here’s a fascinating piece of information. You know 30 million Americans suffer from food insecurity, which means they don’t know where they’ll get the next meal from. One out of every five kids does not know where the next meal will come from. On the one hand on the other hand, 30% to 40% of what is produced in terms of food is wasted in the country. And that is just not right. You know being a food company, we have to do something about it. So we have this end of day donation program, where we donate all our unsold bakeries and sweet goods at the end of the day to more than 3,500 NGOs charities worth about $100 million a year. We’ve been doing that for the last many years and we continue to do that and it’s a program that I think makes a ton of sense.

[Music]

Murray:  I’m here with Joe Ucuzoglu, the CEO of Deloitte US and the sponsor of this podcast for all three of its seasons. Thank you for that.

Joe Ucuzoglu: Pleasure to be here, Alan.

Murray: We’ve had this rising talk about a notion of stakeholder capitalism that businesses have a responsibility not just to their shareholders, but to their employees to the communities they operate in to the natural environment. Is all of that talk real and will it last particularly when times get tough?

Ucuzoglu: I see a pretty durable shift, Alan, with a lot of momentum here. CEOs are prioritizing sustainability. They’re prioritizing purpose. They’re prioritizing trust. You certainly see some noise. On one end, there’s some skepticism as to whether this is virtue signaling. On the other end, there’s some lingering debate about whether this broader focus on stakeholders detracts from shareholder returns. If you cut through all the noise, what we’re seeing is actually a huge convergence of interests. This is core to sustaining a vibrant capitalist system. If you take a long-term view, the only way that you’re going to deliver sustainable shareholder returns is to take really good care of all of those constituents.

Murray: And is it working?

Ucuzoglu: Well business was at the heart of leading society through the pandemic. Business is at the heart of addressing the climate challenge. We’re seeing massive momentum with very tangible commitments and tangible actions towards decarbonizing the economy. So yes, I think the evidence is ample.

Murray: Joe, thank you.

Ucuzoglu: Alan, it’s a real pleasure.

[Music]

Murray: I know Panera was one of the early stores in adding calorie counts to menus and now you’re talking about carbon footprint on menu items. Are customers responding to that? Do customers care about the carbon footprint of menu items? Why are you doing that?

Chaudhary: I really believe everybody cares. I think climate change [and] global warming is the single biggest threat that is facing all of us connected. And I do believe that, you know, people deeply care about this, this topic. And we are all familiar with the Paris Agreement and the commitments that we’ve made as nations and so on. I personally passionately believe that we cannot expect just a government and other people to do something about this. I think the corporate world and leaders, we as human beings have to step up and do our bit because the problem is just gigantic. And I think it’s it just doesn’t have one dimension to it. And then additionally, you know, food production contributes 25% of greenhouse gas emissions. So we are part of it, and therefore as a food company, we have to take a leadership and do something about it.

So you’re right. 10 years ago, we were the first ones to make transparent the calorific value of the food that we serve and it’s become an industry standard. And now 10 years later, last year, we work with the World Resources Institute and measure the carbon footprint of all of the countries that we serve. And what we found really was very encouraging that 55% of our entrees are climate friendly, and we have labeled them as cool food. And this cool food therefore is an indication for a consumer when they come into contact with a brand that if this is important to them, they can make an informed choice and therefore make just to the habit in which they consume food, make a positive impact on the climate. Let me share with you a very interesting stat: if every American wants to replace only 10 quarter pounder burgers and fries with a chipotle chicken avocado meal from Panera and chips, that’s equivalent to taking 16 million cars off the road in a year.

Murray: So Niren, I have to ask you the question that people ask me all the time: you’ve made all these social commitments—commitment to climate, commitment to diversity, commitment to educating youth from underprivileged backgrounds. How do all those things affect your bottom line? Do they hurt it? Do they help it or is it just neutral and you do it because it’s the right thing to do?

Chaudhary: Well I think you know, the only way these things will work, if there’s a business model that can enable this to self perpetuate you know, otherwise these initiatives cannot work. I think that is to me, that is what makes it fascinating and meaningful, that you’re able to create enterprise value and have an impact agenda and do it in a way that both actually happen. Let me illustrate that. So [inaudible] 90% of associates and employees want to work for companies that are impactful. More than 70% of consumers are looking to buy from brands that are impactful. And investors are also looking to invest in brands that are purpose driven. Because I think profit and purpose is not a trade off anymore. I think I would argue that purpose actually reinforces profit and makes it more sustainable over the mid to long term. As long as you can find a way that they both mutually reinforce each other and that’s that’s always our intent, and we want to look for ways in which this mutually reinforces our profit.

Murray: Niren this commitment to purpose is very impressive. I’ve read that you were driven in part by your late daughter, and I wonder if you can talk about that.

Chaudhary: Sure, Alan, thank you for asking me about Aisha. So Aisha, my daughter, I lost her in 2015 when she was 18 because of pulmonary fibrosis. And you know, she is easily my biggest inspiration, because her own whole mindset towards handling difficulties and challenges—and she achieved more in 18 years than I can do in my lifetime. She’s a Ted talk motivational speaker. She’s the author of a best-selling book called My Little Epiphanies and there’s a movie on Netflix called The Sky is Pink inspired by her life.

But here’s the thing: Every time I am confronted with challenges I can reflect on how I shall live life and these are the following things that have you know, I bring to life in her memory. One is have the courage to focus on what you can control and not on what’s happening to you. The second is you know, lead with compassion even as you make difficult decisions, you can always do that with heart and compassion and respect for people. And the third is about being resilient, that you get knocked down but getting what you do, get up and fight the good fight. And finally, this notion of you know windmills, which is when there’s a storm raging outside, you know, stand tall as a windmill and harness the fury of the storm and convert that into something that is good, and not jump into the nearest bunker and wait for the storm to pass. So here are some of the ways in which Aishah shall continue to inspire.

Murray: I love the windmill point. I mean, we have a lot of storms these days. So we need a lot of windmills. You know our listeners can’t see this but you are surrounded by music paraphernalia. You’re a musician?

Chaudhary: Yes, I am. I’m a wanna-be musician.

Murray: And some of what you do supports the Panera brands?

Chaudhary: Well, music I think is an expression of just happiness and being authentic and, and having fun at work, you know, which is a core aspect of how we work at Panera. We work hard and we have tons of fun. So I have to say that when I was young, my wife used to inspire my songs. And now it is the chicken sandwich and the flatbread pizza or coffee that really inspires my songwriting ability. So I’ve become very prolific and been writing songs in…

Murray: Well Niren I I don’t want to put you on the spot. I do want to put you on the spot. Sing us one of your Panera songs if if you’re willing.

Chaudhary: Oh, absolutely. With pleasure.

Murray: Do we need to do a little setup here?

Chaudhary: Yeah, just give me a sec. So Alan, do you like any of our food?

Murray: I do. I love the sandwiches. I don’t eat many sandwiches. But if I’m going to eat a sandwich, I’d like to eat one of yours.

Chaudhary: [Guitar strumming. Music begins] And okay, since you like sandwiches, I’ll give you a sandwich song.

[Singing] Chef’s chicken sandwich…come in Panera…Chef’s chicken sandwich…In the brioche bun moist and soft. Spicy take chicken sandwich… Fried pickles at the bottom hit the spot…

Murray: Beautiful! You made me hungry Niren. Hey, you are in over 100 episodes you are first singing CEO. You’ve raised the bar for every CEO who comes on here in the future. Thank you so much for taking the time sharing your passion, your purpose and your music

Chaudhary: Thank you, Alan. Was a pleasure.

Leadership Next is edited by Nicole Vergalla, written by me, Alan Murray, along with my amazing colleagues, Ellen McGirt and Megan Arnold. Our theme is by Jason Snell. Executive producers are Mason Cohn and Megan Arnold. Leadership Next is a production of Fortune Media. Leadership Next episodes are produced by Fortune‘s editorial team.

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