Growth Chains: Woe is Who?

Paris Baguette

The tide’s about to turn on U.S. brand recognition for this French-inspired — and South Korean dominant — bakery/cafe concept.

Santa-Anita1Paris Baguette distinguishes itself in the bakery/cafe segment with a strong focus on specialty bakery. The 50-unit chain has transitioned from a corporate-only growth model to franchising and targets 300 U.S. units by 2020. Photos courtesy of Paris BaguetteWith more than 3,600 units worldwide since its founding in 1988, Paris Baguette is a powerhouse brand in the bakery/cafe segment — just not in the U.S. That is, at least not yet.

A division of Seoul, South Korea-based SPC Global, a $5 billion conglomerate whose portfolio includes Dunkin' Donuts, Baskin Robbins and Shake Shack franchises in Korea as well as proprietary restaurant concepts, the company has developed 50 stores here since opening its first U.S. unit in Los Angeles in 2005. Its biggest presence is in Asia, especially South Korea, where Paris Baguette carries brand recognition similar to Starbucks, but it also operates stores in China, Singapore, Vietnam and, as of 2014, France.

According to Chief Development Officer Larry Sidoti, who joined Paris Baguette's domestic team in mid-2015, the chain's relatively slow growth here has been strategically focused on proving the viability of the Paris Baguette concept in some of the toughest U.S. markets — San Francisco, New York and LA — prior to making aggressive moves toward national expansion.

With unit volumes averaging $2.1 million — $2.5 million in East Coast metropolitan markets — concept viability is no longer in doubt, and the company is making the necessary moves to accelerate its growth. Specifically, the U.S. division shifted from a corporate growth model to franchising in late 2015. Of its current 50 units, 5 are franchised, but Sidoti says the pipeline is filling up fast. He projects the chain will add 40 new units this year and that Paris Baguette will have more than 300 domestic units by 2020.

Classic French boulangeries and pastisseries serve as the inspiration for the concept, which operates in stores that average 2,000 square feet. The concept features a variety of fresh-baked pastries, specialty cakes and breads as well as a limited menu of sandwiches and salads, soups, coffee, tea and espresso drinks, and specialty beverages. Each store's footprint includes extensive self-service bakery display cases and, depending on location, 30 to 50 seats for on-site dining.

Customers grab a tray and tongs and serve themselves from rows of products on display. When purchasing coffee or cafe menu items, customers place orders with the cashier, pay and wait for staff to prepare, package for takeout or deliver the food to their table.

Food purchased for off-premise consumption accounts for roughly 60 percent of a typical store's sales, according to Sidoti, who adds that baked goods generate the majority of revenue. These amounts vary by market, he adds, noting that dine-in sales are higher in urban locations with heavy foot traffic.

Bakery-First Mantra

Paris-Baguette-CakeInspired by French boulangeries and pastisseries, Paris Baguette offers a wide assortment of fresh-baked pastries, specialty cakes and breads as well as a limited menu of sandwiches and salads, soups, coffee, tea and espresso drinks, and specialty beverages."The interesting thing about this segment, especially in the fast-casual space, is that we don't feel that we have a lot of direct competition. There are cafes, independent bakeries and a few chains, but there aren't many companies out there doing what we're doing," Sidoti says. "Other brands include baked goods as part of their overall experience, but most are really more fast-casual restaurants or coffeehouses than bakeries per se. For us, bakery is the focal point. Our other products are great, but pastries, cakes and breads are our signatures and we go to a level of detail and precision with bakery that most other bakery/cafe concepts don't."

In line with its bakery-first positioning, the design of Paris Baguette's stores showcase the "theater" of baking. "We try to create an ambience where the actual baking is part of the show," Sidoti says. "You can see it from the customer area through glass walls that enable you to see into the kitchen." Kitchen and back-of-the-house prep space typically takes up 60 percent of total location.

In the kitchen, mission-critical pieces of equipment include specialized dough conditioners and deck ovens. "Those are the engines of our operation because everything is baked on premise," Sidoti says. "The conditioners basically prep the dough at different temperature increments over time prior to baking, compensating for environments with fluctuating temperatures and humidity levels. It's a very unique process and is part of what sets us apart."

The level of specialization and precision required to deliver the quality and consistency that Paris Baguette is known for is also what makes its dive into franchising challenging. "This concept is a bit more intense and complicated than your typical fast casual," Sidoti says. "From an operations perspective, there's some precision involved and a skill level that franchisees have to acquire to ensure that they can create the right products consistently."

While individual operators and area developers with solid foodservice experience are the preferred franchisee prospects, less experienced applicants who demonstrate a passion for the concept and a vision for the business are considered as well. The company offers an intensive 14-week training program for new franchisees and operates regional support centers in the Northeast and San Francisco Bay areas in addition to its LA-area headquarters.

"We're definitely ready to grow fast," Sidoti says. "We took our time and grew corporately to prove the model and show stability and longevity, but we haven't grown as fast as we'd like. Now, we're transitioning to a franchise model, and we're very excited about what lies ahead. Considering that 99 percent of the United States doesn't know who we are, we have a big market to fish from. It's a huge opportunity for the brand."

Snapshot

  • U.S. Headquarters: Commerce, Calif.
  • Ownership: SPC Global, Seoul, Korea
  • Segment: Bakery/cafe
  • Services: Takeout, dine-in, catering, delivery
  • No. of Units: 50 domestic, 3,600-plus worldwide
  • Average Unit Size: 2,000 sq. ft.
  • Average Back of House: 60% of total
  • No. of Seats: 30 to 50
  • Average Check: $10.50 - $11
  • Average Unit Volume: $2.1 million nationally, $2.5 million East Coast
  • Growth Projection: Current East and West Coast markets, Dallas, Seattle