Panera Bread is one of the fastest growing quick-service restaurant concepts in the United States. To learn about their perspective on the relationship between restaurants and retail real estate, we asked their Vice President, Real Estate, Doug Schnell, a few questions.

Q:   How is Panera responding to the economic downturn?

DS:  Anchored by a debt free balance sheet and a concept that continues to see strong comps relative to the rest of the industry, we are looking at the current environment as a tremendous opportunity to continue our growth and improve our unit-level economics through lower occupancy. In addition, we believe that we will see more opportunities materialize in our targeted trade areas as many restaurant and conventional retailers are not able to survive as a result of the downturn. In short, we believe that the best time to grow is during a recession.

Q:   What changes have you seen in real estate?

DS:  While there are fewer sites available because of the lack of new development, the competition for restaurant space is now less fervent. As one example, some of the most significant competition that we used to see for restaurant quality sites was from banks, which has now greatly subsided. In addition, the pool of restaurant competitors that are actively growing has declined. With our balance sheet and ability to generate traffic for a center, many landlords are now viewing Panera as an anchor in its ability to attract other tenants to a shopping center.

Q:   What are some of your criteria for site selection?

DS:  For Panera, every location decision is about evaluating the trade-offs between residential and daytime population density, the retail environment, and site characteristics. Panera Bread is a very flexible concept that allows us to pursue a wide range of development strategies ranging from a neighborhood grocery anchored strip center to a super-regional power center or mall location. Where a retail focus is lighter, we typically need stronger residential and daytime demographics. In terms of the site characteristics we seek, like most restaurants in the quick casual sector, we look for highly visible and accessible end-cap and freestanding locations. Where the option is available, we are also actively pursuing drive-thru compatible locations.

Q:   What co-tenancies are you most interested/concerned about?

DS:  Not surprisingly, we view strong retail anchors as one of the key drivers of our performance in terms of extending the reach of our trade areas and driving additional traffic. As a concept that tends to skew more female, we are somewhat more focused on anchors and co-tenants that attract female shoppers. Because of our desire to locate near retail, and in light of the current environment, we are much more aware of our co-tenancy. We rigorously track distressed retailers, primarily in an opportunistic fashion in the interest of acquiring new locations, but also as a way of understanding our risk as we evaluate the co-tenancy of a shopping center.

Q:   What trends will most impact your location decisions in the future?

DS:  Probably the single most significant change for Panera's expansion is the shift from growth through new centers to growth through existing real estate. Quality locations are now much more difficult to identify and secure than two or three years ago. In this new environment, we have become and will continue to be much more proactive in our site selection process. This includes creating a comprehensive plan for each of our markets that targets the optimal intersection for each of our top trade areas. It also includes doing a full inventory of the top sites in each of our targeted trade areas. Through this process, our real estate managers and brokers are able to proactively seek existing locations rather than wait for availabilities. P