Panera Seeking Bigger Slice of Market with Several New Cafes

July 16, 2012

Dan Eaton, 22 June 2012, © 2012 American City Business Journals, Inc. All rights reserved.

Columbus is one of Panera Bread Co.’s oldest markets, but observers might not guess that based on the frenetic pace of its new franchisee for the region.

Warren-based Covelli Enterprises Inc. has wasted little time launching plans for more Panera cafes after acquiring the 20-restaurant Central Ohio franchise from Columbus-based Breads of the World LLC late last year. It has opened four cafes this year, including the largest Panera in the nation near Ohio State University, and has at least seven more on tap before the calendar flips to 2013.

“We’re being aggressive in Columbus right now,” said owner Sam Covelli.

Planned openings this year include sites in the Brewery District, the revamped Shops at Worthington Place and at a new retail plaza at West Third Avenue and Olentangy River Road near Lennox Town Center.

“Columbus has been a high-volume market for us,” Covelli said. “I really feel there is a heck of a lot of opportunity to still grow.”

High volumes

Covelli is Panera’s largest franchisee with nearly 200 restaurants in Ohio, Kentucky, West Virginia, Pennsylvania and Florida. It is expanding into Toronto, Canada, this year and recently acquired five cafes in Lima, Wooster, Marion and Mansfield. The company, which also franchises five O’Charley’s restaurants, has been in the Panera business since 1998.

St. Louis-based Panera has grown to 1,562 cafes, including 816 that are franchised, since its debut in 1987 as the Saint Louis Bread Co. It reported same-store sales for franchised restaurants last year rose 3.4 percent, and were up 5.2 percent in the first quarter of 2012. Sales across the chain totaled $1.82 billion last year, up 18 percent from $1.54 billion in 2010.

Covelli won’t disclose his operation’s sales but said cafes in the Columbus market have seen consistent double-digit increases.

“High volumes make it a lot easier to grow,” he said.

Bakery-cafes have been one of the fastest-growing segments of the restaurant world in recent years, with sales growth outpacing the overall industry, according to a 2011 study by Chicago-based Technomic Inc. Darren Tristano, executive vice president, said in the report that one in three consumers surveyed still hasn’t visited a Panera-style cafe, which spells a lot of upside for operators.

“The most common reasons have to do with location and unfamiliarity,” Tristano said. “As more units open and as marketing efforts continue to boost awareness, there is little reason to think the segment will not continue to perform well.”

Rising up

Covelli is working on making Panera ubiquitous in Central Ohio. The next openings include two in the Delaware area – one in the city and one at the Route 36 exit off Interstate 71 – another in Heath, and a Gahanna restaurant on North Hamilton Road. More highway exit sites could be coming. Covelli runs six Paneras along the Ohio Turnpike.

“We don’t want to depend solely on interstates, but we’d like to start doing more in Central Ohio,” he said.

Covelli made a splash in the Ohio State campus area with a Lane Avenue restaurant at nearly 8,000 square feet in size. He expects a planned cafe in the Brewery District to be high profile as well. The cafe would fill the former Hoster’s brew pub at 550 S. High St., putting Panera close to the heavily traveled Franklin County government complex to the north and German Village to the south. It also has 80 parking spots.

“We just think that’s going to be a tremendous site,” Covelli said.

Other possibilities include a third campus restaurant and a second in the Polaris area, perhaps along Gemini Parkway to complement its cafe at Polaris Towne Center.

The key is to identify and jump on opportunities, Covelli said, even if they are close to existing Paneras.

“There are sites out there that we don’t know about yet,” he said. “We’re getting sites now that we didn’t know about several months ago.”

The cafe coming to West Third and Olentangy is a little more than a mile from its Grandview Avenue unit, but it can cash in on redevelopment of Gowdy Field, he said. The Lane Avenue and South Campus Gateway Paneras are a mile apart but pull from different areas of the OSU campus.

“We’re just right down the road from the other one,” he said. “They hardly affect each other.”

Covelli may be looking for a move soon on the office front as well. The company took Breads of the World’s offices in the Olentangy Plaza on Bethel Road, next to one of its restaurants.

The growing fleet is going to lead to more office needs. Covelli said the company could try to expand at Bethel or look for new offices.