Einstein Bros 2003 Annual Report Download - page 10

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management tools to provide corporate and retail operations management quick access to retail data and to reduce store managers' administrative
time. The system supplies sales, bank deposit and variance data to our accounting department on a daily basis. We use this data to generate daily
sales information and weekly-consolidated reports regarding sales and other key measures, as well as preliminary weekly detailed profit and loss
statements for each location with final reports following the end of each fiscal period.
Trademarks and Service Marks
Our rights in our trademarks and service marks ("Marks") are a significant part of our business. We are the owners of the federal registration
of the "Einstein Bros.," "Noah's New York Bagels," "Manhattan Bagel," "Chesapeake Bagel Bakery" and "New World Coffee" Marks. Some of our
Marks are also registered in several foreign countries. We are aware of a number of companies that use various combinations of words in our
Marks, some of which may have senior rights to ours for such use, but we do not consider any of these uses, either individually or in the aggregate,
to materially impair the use of our Marks. It is our policy to defend our Marks and the associated goodwill from encroachment by others. The
Marks listed above represent the brands of the retail outlets that we own. We also own numerous other Marks related to our business.
Competition
We experience competition from numerous sources in our trade areas. Our restaurants compete based on customers' needs for breakfast, lunch
and afternoon "chill-out", which is the period after lunch and before dinner. Our competitors may change based upon the daypart we offer our
products in. The competitive factors include location, environment, customer service, price and quality of products. We compete for leased space
in desirable locations. Certain of our competitors may have capital resources exceeding those available to us. Our primary competitors include
specialty food and casual dining restaurant retailers including national, regional and locally owned restaurants.
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General Economic Trends and Seasonality
We anticipate that our business will be affected by general economic trends that affect retailers in general. While we have not operated during
a period of high inflation, we believe based on industry experience that we would generally be able to pass on increased costs resulting from
inflation to our consumers. Our business may be affected by other factors, including increases in the commodity prices of flour, butter and/or green
coffee, acquisitions by us of existing stores, existing and additional competition, marketing programs, weather and variations in the number of
location openings. Although few, if any, employees are paid at the minimum wage, an increase in the minimum wage may create pressure to
increase the pay scale for our employees, which would increase our labor costs and those of our franchisees and licensees.
Our business is subject to seasonal trends. Generally, our revenues in the first fiscal quarter are somewhat lower than in the other three fiscal
quarters.
Government Regulation
Each of our locations is subject to licensing and regulation by a number of governmental authorities, which include health, safety, labor,
sanitation, building and fire agencies in the state or municipality in which the store is located. A failure to comply with one or more regulations
could result in the imposition of sanctions, including the closing of locations for an indeterminate period of time or third-party litigation. Our
manufacturing, commissary and distribution facilities are licensed and subject to regulation by either federal, state or local health and fire codes,
and the operation of our trucks are subject to Department of Transportation regulations. We are also subject to federal and state environmental
regulations.
Our franchise operations are subject to Federal Trade Commission regulation and various state laws, which regulate the offer and sale of
franchises. Several state laws also regulate substantive aspects of the franchisor-franchisee relationship. The FTC requires us to furnish to
prospective franchisees a franchise offering circular containing prescribed information. A number of states in which we might consider franchising
also regulate the sale of franchises and require registration of the franchise offering circular with state authorities. In August 2003, the New York
Attorney General's office commenced an investigation into prior sales of franchises in New York. See "Item 3. Legal Proceedings."
Employees
As of December 30, 2003, we had 7,464 employees, of whom 7,181 were store personnel, 80 were plant and support services personnel, and
203 were corporate personnel. Most store personnel work part-time and are paid on an hourly basis. We have never experienced a work stoppage
and our employees are not represented by a labor organization. We believe that our employee relations are good.
Available Information