Einstein Bros 2007 Annual Report Download - page 11

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Manhattan Bagel Franchising
We currently have a franchise base in our Manhattan Bagel brand that generates a recurring revenue stream through royalty fee payments and
revenue from the sale to our franchisees of products made from our proprietary recipes. Our Manhattan Bagel franchise base provides us with the
ability to grow this brand with minimal commitment of capital by us, and creates a built-in customer base for our manufacturing operations. The
core market for this brand is the northeastern United States with the majority of the Manhattan Bagel restaurants located in New Jersey, New York,
Pennsylvania and Delaware.
We look for franchisee candidates with appropriate operational experience and financial stability, including specific net worth and liquidity
requirements. We typically receive continuing royalties on sales from each franchised restaurant. Our Manhattan Bagel franchisees are not required
to buy all of their non-proprietary products directly from us, but rather their product sources must be approved by us. The typical Manhattan Bagel
franchise agreement requires an up-front fee of $25,000 per restaurant and a 5% royalty based on sales.
Over the past three years, we have terminated our relationships with certain franchisees for failure to comply with the requirements of their
franchise agreements. Additionally, we have allowed certain franchisees to terminate their franchise agreements in locations that are outside our
core markets. In 2007, we opened 2 new Manhattan Bagel restaurants. One restaurant was opened by an existing Manhattan Bagel franchisee and
the second was opened by a new franchisee. Both are located in our core markets for this brand.
In late 2007, we acquired a location from one of our franchisees, which will make it our only company-owned Manhattan Bagel restaurant.
We intend to use this location for employee and manager training, and to test out new products and services before they are rolled out system-
wide.
Marketing and Advertising
Our 2008 marketing and advertising strategy focuses on publicizing and increasing awareness of our food, beverages, seasonal and retail
offerings.
From a media standpoint, we typically utilize outdoor, radio and internet advertising, as well as a cohesive in-store point of purchase display
program and our merchandise displays. We are also developing a new packaging program to strengthen each brand's identity.
We have an annual marketing calendar that is divided into three trimesters with specific products supporting our overall objective of
reinforcing our strength in the breakfast daypart while building the lunch and afternoon dayparts. Our first trimester is focused on core breakfast
products: egg sandwiches, breakfast paninis and our Darn Good Coffee®, including two seasonal flavors in each brand.
Training
We strive to maintain quality, consistency and a positive experience for our guests in each of our restaurants through training and supervision.
Our restaurant general managers and assistant managers undergo an intensive, seven-week training program, including training in the classroom
and in specially designated training restaurants. We have initiated a program that provides economic incentives for our training restaurants and
general managers to provide a consistent training experience for our new general managers and assistant managers. Each new associate undergoes
a one-week training period in the restaurant. Also, as part of our associate training program, each associate is assigned a mentor during his or her
orientation and training period.
In late 2007, we launched "Development Days" training programs for our Einstein Bros. and Noah's general managers. These programs
provide communication on new initiatives, training on food
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preparation, hospitality and other topics, refocus our managers on our vision; and align our managers with our goals. These meetings are held every
few months, and focus on two to three key relevant topics, including operational initiatives, specific training on menu items, product-specific
information, associate motivation, suggestive selling, and other methods aimed at enhancing the guest experience.
Associates
As of January 1, 2008, we had 7,190 associates, of whom 6,786 were restaurant personnel, 177 were plant and support services personnel, and
227 were corporate personnel. Most restaurant personnel work part-time and are paid on an hourly basis. We have never experienced a work
stoppage and our associates are not represented by a labor organization. We believe we have good working relationships with our associates.