'You’ve got to stand up,’ says Great Harvest boss, after shot at Panera
Illustration by Jonathan Hankin
Can a franchise with under 200 stores, Great Harvest Bread Co., derail the sale of the mighty Panera Bread, at 2,000 stores and counting, to JAB Holding Co., the German conglomerate that offered $7.5 billion or $315 a share in April?
Eric Keshin, president of Great Harvest based in Dillon, Montana, thinks it’s both his duty to franchisees and his right under antitrust law to try.
He hired the law firm Saul Ewing in Baltimore to send a letter to the Federal Trade Commission on April 24, objecting to the merger and expressing concern over the “potential anticompetitive effects” it would have on the bakery-cafe business.
His central complaint is over trademark infringement. Great Harvest sued Panera in federal court in March 2016, saying the tagline Panera rolled out in June 2015 was too much like Great Harvest’s, which Keshin says his bakery-café chain filed with the U.S. Patent & Trademark office in October 2014.
The slogans in dispute: “Panera Bread, food as it should be.” And for Great Harvest: “Bread. The way it ought to be.”
“The rule of thumb for the advertising industry and for the world is ‘confusingly similar,’” Keshin says, and to him, any consumer would indeed confuse those two lines.
Plus, Panera spends heavily on advertising, thus solidifying in consumers’ minds a trademark that Keshin claims Panera is infringing upon.
“They’re spending in excess of $100 million a year on advertising. We are spending way, way, way, way less than that,” he says, emphasizing each and every ‘way.’
Selling for a premium
The infringement litigation is pending, with initial mediation hearings scheduled for early May. If the court determines that Panera was in the wrong, “then they’ve just been purchased by somebody else at a premium. Would you think perhaps that part of that premium might be associated with the brand value?” Keshin opines, showing his chops as a former ad man with the storied McCann Erickson agency and its big-name clients.
“So, if you’re guilty, and you’re selling what you’re guilty of for a premium, I don’t know what you call that. Unfair, how about that—in my cleanest of words.”
Panera’s Steve West, vice president of investor relations, forwarded my email requesting comment to Jonathan Yohannan, VP of PR and social media, who within six minutes replied with Panera’s canned response: He thanked me for “reaching out” and said “we don’t comment on legal matters, but I hope we can stay in touch.”
Panera’s quarterly and annual filings to the Securities & Exchange Commission don’t mention the trademark infringement litigation, meaning the company doesn’t think the outcome will be material to its financial future. If the merger is approved, which the company expects in the fourth quarter barring impediments, JAB Holding would have an impressive portfolio: Peet’s Coffee & Tea, Kuerig, Caribou Coffee, Krispy Kreme, Einstein Bagels, and more.
Keshin thinks it’s too much. “The harm to consumers in this market cannot be understated if JAB uses this acquisition to squeeze or eliminate access to coffee supplies,” the letter to the FTC says. Keshin notes a further potential harm to Great Harvest, because a significant number of Great Harvest’s franchisees partner with Peet’s Coffee & Tea through its selective ‘We Proudly Brew’ program. “We are concerned that after the proposed merger, the benefit of being a Peet’s coffee partner will be eliminated.”
In the FTC’s hands
Great Harvest filed its complaint under the HSR act, or the Hart-Scott-Rodino Antitrust Improvement Act of 1976, which requires merging partners to make detailed filings with the FTC or the U.S. Department of Justice (depending on the industry), then wait for those agencies to determine the transaction will not adversely affect U.S. commerce.
Paul Olszowka is an M&A attorney with Barnes & Thornburg in Chicago who is not involved in this transaction. He explained the FTC has 30 days from when the parties file their HSR to examine the deal, then say whether they’ll let it go forward as is, or with changes, or whether they’ll file suit to block the deal.
He said it is routine for competitors and industry experts to be interviewed or to file comments during the process, but the majority tend to do so in private. In a minority of cases, he said, people make their objections public, as Great Harvest has done, even getting a U.S. senator or two involved in some cases he recalls, to drum up opposition to a deal.
‘That’s our right’
Keshin, a smooth-talking executive who has a great way with words, paused for quite a while when I asked for his reaction when he originally saw the new Panera Bread tagline rolled out the year after Great Harvest’s.
He had read my story about Jimmy John Liautaud in the April issue, and knew that when sources swear during an on-the-record interview, they swear in the article I write, as well. So he cleaned up what he wanted to say: “My, oh my that sounds very familiar!” he said was his reaction, then added with a laugh, “I think my reaction might have been something that he would say,” referring to Jimmy John. “I won’t say it.”
Keshin is defiant when asked if people might dismiss his actions as grandstanding to get a settlement. As a former ad man, “standard operating procedure” is to conduct searches of proposed taglines, to make sure they do not infringe on others, and Panera did not do so, he said.
“We have to raise our hand and say, ‘Would you look at this please?’ That’s our right,” he says, and it’s also his duty to franchisees. “Our franchisees pay us a royalty in part for the intellectual property that we’ve created. You’ve got to protect that. And then to have that line overrun by hundreds of millions of dollars—I’ve got to protect them.”
And if he’s the David to Panera’s Goliath, so be it, especially since everyone knows how the biblical story turned out. “You’ve got to stand up. You can’t be intimidated by somebody that’s much bigger than you.”
Beth Ewen is editor-in-chief of Franchise Times, and writes the Continental Franchise Review® column in each issue. Send interesting legal and public policy cases to firstname.lastname@example.org.