Einstein Bros 2007 Annual Report Download - page 8

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http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
In addition, we created a "bundle" program to support our seasonal offerings or signature items.
Lunch
Our lunch offerings at Einstein Bros. Noah's and Manhattan are natural extensions of our heritage as bakers. All of our concepts offer a line of
both hot and cold sandwiches as well as a line of soups and salads. We turn our sandwiches into meals with the addition of regular and premium
sides. At Einstein Bros, our premium sides include a cup of soup, fresh cut fruit, or a small green salad. In addition to our traditional Einstein Bros.
favorites, such as the Tasty Turkey, Veg Out®, and Italian Chicken Panini, we have recently introduced a line of melts, wraps and Noah's-inspired
deli sandwiches, the Reuben and Rachel. We also reintroduced our popular mix and match product offering that allows our guests to choose
between a small soup, salad and half a deli sandwich on their choice of fresh baked bread. Manhattan Bagel offers all sandwiches on a choice of
bagel, wrap, roll or freshly baked foccacia bread.
Noah's menu continues the heritage of a New York deli with popular grilled sandwiches made with corned beef, pastrami, turkey or chicken.
These hot offerings are complemented with traditional cold deli sandwiches including roast beef, roast turkey breast, and both tuna and chicken
salad. We also introduced the pizza bagel product offerings to Noah's in early 2008.
Snacks
In addition to our breakfast and lunch items, we also offer products designed for consumption between traditional meal times, including four
varieties of pizza bagels, cookies and frozen drinks. Each company owned restaurant offers four types of cookies that may be enjoyed by our
guests throughout the course of the day. Einstein Bros. has a line of frozen drinks called Bros. Blenders™, and the flavors include Café Caramel,
Café Mocha, Strawberry, and more recently added a fat-free fruit-based option. In the Spring of 2007 we rolled these new product offerings to
Noah's and Manhattan Bagel.
Site Selection Process
We consider our site selection process critical to our long-term success. Our site selection process focuses on identifying markets, trade areas
and specific sites based on several factors, including visibility, ready accessibility (particularly for morning and lunch time traffic), parking,
signage and adaptability of any current structures. We then determine the availability of the site and the related costs. Our site selection strategy
emphasizes high visibility locations with good parking in neighborhood shopping centers and power centers with easy access from high-traffic
roads. Neighborhood shopping centers are locations with other retailers such as a grocery store anchored center, along with other
8
smaller retailers. A power center is a large exterior shopping center with usually two or more big box retailers, and then several smaller retailers
and restaurant pads in front.
Our average unit volume goal for a new restaurant is at least $1.0 million calculated on an annualized basis based on sales at the end of the
first full year of operations. We believe by leveraging and implementing the key attributes of our new restaurant design, as well as understanding
the characteristics driving the performance of our strongest restaurants, we will be able to open restaurants that operate at this level. Excluding
tenant improvement allowances, the cost of a new restaurant is approximately $550,000, but can vary based upon square footage, layout and
location. The cost includes equipment, leasehold improvements, furniture and fixtures, and other related capital. In our experience opening new
company-owned restaurants in 2007, tenant improvement allowances have averaged approximately $50,000 per restaurant, however, the amount of
the allowance can vary widely depending on the location of the restaurant and other terms of the lease. To the extent available, we plan to open
locations with greater visibility, drive-through windows and/or units at the end of a retail center (end-cap units). Adding a drive-through window
system increases our lease and construction costs by approximately $50,000 per restaurant, but we generally see an increase in our restaurant
revenues by more than $150,000 per year per restaurant.
Support of Our Restaurant Operations
We believe controlling the development, sourcing, manufacturing and distribution of our key products is an important element in ensuring
both quality and profitability. To support this strategy, we have developed proprietary formulations, invested in processing technology and
manufacturing capacity, and aligned ourselves with strategic suppliers.
Purchasing