Einstein Bros 2002 Annual Report Download - page 4

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consumers in each daypart.
Utilize Effective and Efficient Marketing. We are developing new and enhanced advertising campaigns for each of our brands. In particular, a
new marketing strategy designed to further enhance Einstein Bros.' lunch business was launched in mid-2002 and will be expanded in 2003. In
three Einstein Bros. markets, we utilized television advertising featuring the concepts of superior food quality and quick casual positioning. Sales at
Einstein Bros. locations in markets in which we utilized television advertising were approximately 5% to 10% higher than sales generated at
locations in other markets. Based on these results, we intend to utilize television advertising in 2003 in several additional Einstein Bros. markets
where there is sufficient unit concentration to justify the expense of television advertising.
Pursue Disciplined Portfolio Growth. We have a significant opportunity to add new company-operated Einstein Bros. locations both in
existing markets to realize additional operating and marketing efficiencies, leverage existing brand awareness and enhance customer convenience,
and in new markets, including the approximately 20 states in which the Einstein Bros. concept does not currently have a presence. We added five
new Einstein Bros. company-operated locations during 2002 and intend to open an additional 10 locations in 2003. We have a strong platform for
growth through franchising and licensing as a result of our strong unit economics and solid positioning within the quick casual restaurant segment.
We expect to launch our Einstein Bros. franchising effort in the second half of 2003. We grew our licensed locations to 26 at the end of 2002 and
intend to open approximately 25 licensed locations in 2003. By growing our portfolio with experienced, well capitalized operators, we expect to
continue to build our leadership position in the quick casual segment of the restaurant industry.
Develop Alternative Retail Channels. We believe we have substantial opportunities to develop multiple sales channels outside of our
traditional locations. These alternative retail sales channels can generate incremental sales, enhance our brands' visibility and improve customer
convenience. In particular, in-store bakeries are increasingly seeking to outsource production of bread and bagels. We have established a vendor
partnership with Costco and recently entered into a similar arrangement with SuperTarget, pursuant to which we sell Einstein Bros. products
through approximately 300 Costco and 100 SuperTarget stores, respectively. We expect to attract additional alternative retail customers based on
Einstein Bros.' substantial brand equity and superior food quality and freshness.
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Restaurant Operations
We operate, franchise or license 747 locations as of December 31, 2002 under our Einstein Bros., Noah's, Manhattan, Chesapeake, New World
Coffee and Willoughby's Coffee & Tea brands. We expect to grow our restaurant operations primarily through our Einstein Bros. brand.
Einstein Bros. As of December 31, 2002, there were 369 company-operated and 24 licensed Einstein Bros. locations in 42 Designated
Marketing Areas ("DMAs") nationwide. The average Einstein Bros. location is approximately 2,200 square feet in size with approximately 40
seats and is located in a neighborhood or regional shopping center. We use sophisticated fixtures and materials in the brand's design to create a
store environment that is consumer friendly, inviting and reflective of the brand's personality and strong neighborhood identity, and which visually
reinforces the distinctive difference between the brand's quick casual positioning and that of quick service restaurants. Einstein Bros.' menu
specializes in high-quality foods for breakfast and lunch, including fresh baked goods, made-to-order sandwiches on breads such as challah, hearty
soups, innovative salads, desserts, five fresh-brewed premium coffees daily and other café beverages. The Einstein Bros. brand generated
approximately 78% of our 2002 revenues.
Noah's New York Bagels. As of December 31, 2002, there were 83 company-operated and two licensed Noah's locations in six DMAs on the
West Coast. The average Noah's location is approximately 1,800 square feet in size with approximately 12 seats, and is located in urban
neighborhoods or regional shopping centers. We use elaborate tile work and wood accents in the brand's design to create an environment
whimsically reminiscent of a Lower East Side New York deli, which reinforces the brand's urban focus with an emphasis on the authenticity of a
New York deli experience. Noah's menu specializes in high-quality foods for breakfast and lunch, including fresh baked goods, made-to-order
deli style sandwiches, including such favorites as pastrami, corned beef and roast beef piled high on fresh breads baked on location daily, hearty
soups, innovative salads, desserts, five fresh-brewed premium coffees daily and other café beverages. The Noah's brand generated approximately
16% of our 2002 revenues.
Manhattan Bagel/Chesapeake Bagel Bakery. As of December 31, 2002, there were 201 franchised Manhattan locations in 37 DMAs
nationwide and 49 Chesapeake locations, most of which are in five DMAs on the East Coast. The average Manhattan and Chesapeake location is
approximately 1,400 to 2,400 square feet with 24 to 50 seats and is primarily located in urban neighborhoods or regional shopping centers.
Manhattan and Chesapeake stores are designed to combine the authentic atmosphere of a bagel bakery with the comfortable setting of a
neighborhood meeting place. The locations offer over 20 varieties of fresh baked bagels, as well as bagel sticks and bialys and up to 15 flavors of
cream cheese, an extensive variety of breakfast and lunch sandwiches, salads, soups, coffees and café beverages, soft drinks and desserts. The
Manhattan and Chesapeake brands generated approximately 4% of our 2002 revenues. Manhattan and Chesapeake revenues are comprised of
manufacturing revenues (primarily sales of dough and coffee to franchisees), royalty payments and fees.