What’s so amazing in the case of Starbucks Corporation (NASDAQ:SBUX) and Panera Bread Co (NASDAQ:PNRA), is how hard it is to reduce capital expenditures in their particular lines of business. Capital expenditures are new investments in things like buildings and equipment, as well as upgrades. For restaurants and retail stores to grow they have to build new locations and upgrade equipment.
So the real question is, how did this happen?
Conclusion: it’s the business plan!
Yes, you guessed it, we’re ending this tale right where we started it–and with a question. Let’s start with the question first: what do coffee, online auctions, and bread have in common?
Well, answering that question is as simple as:
1) eBay Inc (NASDAQ:EBAY)’s business model is unique in that it is a massive retailer with no inventory. All eBay Inc (NASDAQ:EBAY) does is connect sellers with buyers, it doesn’t manufacture products or resell them. This keeps eBay’s costs low. It saves eBay millions of dollars that companies like Wal-Mart Stores, Inc. (NYSE:WMT) and Gap have to spend in areas like storefronts, warehouses, and operations.
2) Panera Bread Co (NASDAQ:PNRA) is a remarkable company in that it is able to charge much more for its food than fast food companies like McDonald’s Corporation (NYSE:MCD), but it has similar costs. Panera sells sandwiches for double or triple what McDonald’s does, but it skips out on paying for high priced staff, heavy duty cooking equipment, and more. The company doesn’t even have dish washers or waiters, but I guarantee a lunch at Panera will cost you nearly as much as Chili’s.
3) You can’t have a conversation about costs without mentioning Starbucks Corporation (NASDAQ:SBUX). This company invests very little in the way of equipment and food costs, yet its beverages sell for double what Dunkin’ Donuts charges.
These businesses, all for different reasons, have managed to keep customers happy and costs low. In the case of Panera and Starbucks, their brands are so focused on quality that customers are happily paying more for their products than for competitors.
Everyone’s paying more for a sandwich at Panera Bread Co (NASDAQ:PNRA) or a coffee at Starbucks–except for Panera and Starbucks Corporation (NASDAQ:SBUX)! And dollar for dollar, earnings at eBay Inc (NASDAQ:EBAY) are more valuable than other retailers, because their low cost structure reduces risks associated with inventory and real estate costs.
These businesses are keeping their costs low, which is making their stocks go up. If you really want to think like an “owner of a business,” you can’t do better than this!
The article Invest Like an Owner With These 3 Stocks originally appeared on Fool.com and is written by Adem Tahiri.
Adem Tahiri owns shares of Starbucks. The Motley Fool recommends eBay, Panera Bread, and Starbucks. The Motley Fool owns shares of eBay, Panera Bread, and Starbucks. Adem is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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