Panera Is Out Of The Danger Zone--But Other Chains Aren't
Although fast-food chains are so far weathering the storm better than many high-end eateries, several of those found and/or based in the OC are now reported to be in trouble.
Industry reports this week brought news that El Pollo Loco, Del Taco and Real Mex Restaurants, which owns El Torito Grill (amongst others), are on the endangered list. Now Jamba Juice and Cosi join them. There have been signs of shakiness in the recent past, at least for two of these: El Torito shuttered its Mission Viejo location (although sources are adamant that this was due to a lease dispute), while Sharon Fogg, Del Taco's senior vice president of marketing, left the company on Friday.
Reasons given for the worrying outlook include overexpansion, huge debts and negative cash flow. No major surprises there. The real question is, how likely are they to go belly-up? According to the survey by credit ratings agency Moody's, El Pollo Loco, Del Taco and Real Mex are on the 'Bottom Rung', meaning they're among the companies most likely to default on their debts, while Jamba and Cosi, according to a Yahoo! Finance article, are said to be among the chains 'facing extinction'.
All four chains have done their best to remain competitive, by introducing new and/or cheaper menu items. El Pollo Loco even went as far as offering discounts to customers with coupons from its competitors. But it may not be enough to save them.
On the contrary, Missouri-based Panera Bread is, according to the same Yahoo! article, "well-situated to weather recession-induced shrinking same-store sales, with a debt-free balance sheet, adequate free cash flow and a track record of profitability."
I'm slightly baffled, because most of the offerings I tried at Panera this weekend were disappointing.
I wanted to sample the new breakfast menu dishes, including the hot sandwiches and granola parfait, but they'd already sold out.
The high point was an excellent, spicy chicken chipotle sandwich, with crisp bacon and freshly toasted bread. The lattes (made from beans roasted in small batches, as Panera is keen to point out) weren't bad--stronger than the hot milkshakes you get elsewhere, yet smooth...
And while there was a limited choice of pastries (given that it was only mid-afternoon), the pumpkin muffies and blueberry muffins were perfectly acceptable.
On the other hand, a chicken tortilla soup was horrible--bland, artificial tasting--and the chain's lackluster, hospital-café-style décor is offputting.
Perhaps the availability to surf while slurping is a reason for Panera's popularity: the chain operates the largest free wifi network in the whole country. And it recently landed the number one spot in a rundown of the nation's healthiest fast-food chains.
So it's clearly doing something right... And it may just weather the storm.