An interesting lead article in USAToday (July 24-26), headed “Panera bakes a recipe for success”, discusses how Panera Bread CEO Ron Shaich successfully fought the downturn.

Panera is Latin for “time for bread”. Its 1264 restaurant/stores (80 more about to open) generate $2.6 b. in annual revenue, and offer medium-priced fresh food, with mainly a luncheon crowd.

The restaurant industry is, like all industries based on discretionary or luxury spending, in huge trouble in the U.S. Generating some $566 b. annually, the past quarter saw the worst decline in the industry’s history.

Shaich says he is a contrarian. When everyone else is slashing their prices, Shaich has raised his twice — both for bagels, and for soup. But he has also innovated new dishes, and insists, “this is the time to impove the food experience”…precisely when customers least expect it. He charges $7.59 for a new kind of salad — pricey, but apparently popular.

Face it — our customers expect, in these hard times, worse service, cheaper quality, and all the other bad things that go along with aggressive cost-cutting.

Can you surprise them? Can you give them better quality? Can you give them new and better products? Can you focus on the consumer experience, not just the consumer product?

Ron Shaich can. And he has proved it works. Panera’s stock is up 50 percent since last year.