Panera Bread Keeps Rising

History is studded by Icarus-like restaurant chains who fly high into the heavens only to abruptly plunge to earth. But Panera Bread's wings have still not melted, a franchising company [NASDAQ: PNRA] that has outperformed every major restaurant stock for the last 10 years. The Wall Street Journal [$$] observes:

Panera added about 70 stores in 2009 and plans another 100 or so this year. But with around 1,500 stores in the U.S. and Canada, Panera's saturation point may still be a ways off. It operates in a niche between fast-food and casual dining, which can likely accommodate more capacity. In contrast, the casual dining segment occupied by the likes of Chili's and Olive Garden has more than 10% excess capacity, reckons John Glass of Morgan Stanley. Fast-food restaurants such as McDonald's and Burger King are currently under pressure, with many facing a decline in same store sales. But now that demand has started to stabilize, the number of restaurants looks reasonably balanced, he says.

Panera's top line has also held up because it avoided discounts during the recession. Chili's and McDonalds have both relied on specially-priced deals that squeezed margins and may be tough to remove from menus.