This UK-based company started its British invasion in the year 2000. Thirteen years later, Pret A Manger’s count of U.S.-based shops has only reached 50. It wasn’t until 2009, in fact, that it expanded beyond Manhattan. Barely “pret” for prime time.
But we’re “pret,” ready to call this a turning point, in what will become a classic case study of a private company that survived and grew by retaining a founder’s steady hand on the steering wheel. It’s time for that other hand to push down on the throttle.
Two chaps, as they are called in London, started Pret A Manger in the mid-1980s. It took them a few years to work out the kinks in delivering on the promise of “ready to eat” food (and drink) in what they call “a cross between a good restaurant, an Italian coffee bar and a bullet train.”
By 2001, Pret had pretty much redefined “business lunch” in London, eclipsing a store count of 100. Time, then, for the made-for Harvard Business School case study strategic detour: a sale of a portion of the company to – *drumroll* – McDonald’s [sic]. Sick.
The two founders departed (but maintained majority ownership). Business success also departed.
Within two years, senior management was tossed like so much avocado salad. One of the founders returned, bringing along a colleague from another business venture. Pret A Manger hasn’t looked back since.
Finally realizing it wasn’t wanted, or needed, McDonald’s sold off its portion of the business in a 2008 deal that gave majority ownership to a London-based private equity firm, Bridgepoint Capital (a minority interest bought at the same time by Goldman Sachs (boo !) was purchased by Bridgepoint in 2012 (yay !) ).
All of this background is important, especially for U.S. readers who don’t know what a Pret A Manger is. We think roughly three years from now, most Americans will know Pret.
Here are the main pillars of Pret’s business:
> On-site kitchens to prepare fresh food daily
> Leftovers given to the homeless, or binned nightly
> Natural ingredients (preservative-free, cage-free eggs, blah blah blah)
> Clean, bright store design
> Fast counter service (goal = 60 seconds max per customer)
> Focus on employee service (more on that in a later post)
> Direct access for customers to top management
Finally, then, here is the Starbucks connection alluded to in our headline: go back to the above list, and give a check mark to any item that applies to Starbucks.
We ended up giving Starbucks zero ticks.
Our eyes were drawn to this comparison of sorts when a Pret A Manger opened weeks ago on a block opposite not one but two Starbucks along our daily commute. “These guys (Pret) will be crushed,” we thought to ourselves.
Yet every time we pass this Pret, it is full of customers, moving quickly in and out. We’ve since become customers, our hands caressing a HOT cup of coffee, and managing to GET A TABLE to sit and hold a QUIET meeting with colleagues.
To be sure, nearby Starbucks #1 and #2 are still jammed with Times Square tourists (a similar phenomenon to that of U.S. visitors to France, who eat at a Parisian McDonald’s three times a day). But we will venture that Pret has taken away a number of hometown customers.
Trailing by some 12,000 locations, Pret A Manger won’t be a Starbucks killer in the U.S. But if it can find the money to open up dozens more stores, each one within sight of a Starbucks, it can easily skim off customers fatigued by the latter’s expansion into, well, everything – food, tea, smoothies, juice, wine, etc.
And as we have reported before, the “coffeehouse experience” that Starbucks built its brand on no longer exists. Americans tolerate the new furnishings (term used lightly), as there is no direct competitor of any scale (Caribou, where are you ???).
Starbucks is now less than the sum of its parts, yet plans to add 15% more U.S. stores over the next several years. Welcome to the “fortress” strategy.
Can Pret A Manger make life a bit miserable for Starbucks going forward? Interestingly, Bridgepoint Capital announced just last week it would forego an IPO for Pret A Manger and raise money for store expansion privately.
Too bad Warren Buffet just blew a $23 billion wad on ketchup. He could have invested some of it on one of the best growth stories of the late 2010s.