Einstein Bros 2008 Annual Report Download - page 3

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312509042707/d10k.htm[9/11/2014 10:10:56 AM]
substantially all the assets of Einstein/Noah Bagel Corp. in an auction conducted by the bankruptcy court. To consummate this acquisition, we
engaged in several rounds of financing that included the issuance of $165.0 million of debt and $65.0 million of mandatorily redeemable preferred
stock. In mid-2003, we recapitalized our balance sheets with the issuance of $160.0 million of indentures and the issuance of $57.0 million of
mandatorily redeemable preferred stock. In June 2007 we completed a secondary offering which provided $83.3 million which was used to pay
down a substantial portion of the Company’ s debt.
Financial information about segments:
We operate three business segments plus a corporate support unit:
• The company-owned restaurants segment includes our Einstein Bros. and Noah’ s brands, which have similar investment criteria and
economic and operating characteristics.
• The manufacturing and commissary segment produces and distributes bagel dough and other products to our restaurants, licensees and
franchisees and other third parties. Inter-company sales to our company-owned restaurants have been eliminated during consolidation.
• The franchise and license segment earns royalties and other fees from the use of trademarks and operating systems developed for the
Manhattan, Einstein Bros. and Noah’ s brands.
• Corporate support unit consists of overhead and other activities related to the prior business segments, as well as interest on our debt
and depreciation on our assets.
See Note 20 to the consolidated financial statements included in Item 8 of this 10-K for the financial results by segment for fiscal years 2006,
2007 and 2008.
Narrative description of business:
Einstein Noah Restaurant Group, Inc. is the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States.
As of December 30, 2008, we had 649 restaurants in 36 states plus the District of Columbia. As a leading fast-casual restaurant chain, our
restaurants specialize in high-quality foods for breakfast, lunch and afternoon snacks in a bakery-café atmosphere with a neighborhood emphasis.
Collectively, our concepts span the nation with Einstein Bros. restaurants in 26 states and in the District of Columbia, Noah’ s restaurants in 3 states
on the west coast and Manhattan Bagel restaurants concentrated in the Northeast. Currently, our Einstein Bros. and Noah’ s restaurants are
predominantly company-owned or licensed, while Manhattan Bagel restaurants are predominantly franchised, with one company-owned location.
Our product offerings include fresh bagels and other bakery items baked on-site, made-to-order breakfast and lunch sandwiches on a variety
of bagels, breads or wraps, gourmet soups and salads, assorted pastries, premium coffees and an assortment of snacks. Our manufacturing and
commissary operations prepare and assemble consistent, high-quality ingredients that are delivered fresh to our restaurants through our network of
independent distributors.
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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.
Licensing and franchising our brands allows us to increase our geographic footprint and brand recognition. We also generate additional
revenues without incurring significant additional expense, capital commitments and many of the other risks associated with opening new company-
owned restaurants.
Company-owned restaurants
Approximately 91% of our 2008 total revenue was generated by restaurant sales at our Einstein Bros. and Noah’ s company-owned
restaurants. For the year to date period ended December 30, 2008, approximately 64% of our revenues were generated from restaurant sales during
the breakfast hours, 28% were generated during the lunch hours and 8% were generated during the late afternoon hours.
• Principal products and services sold: Einstein Bros. offers a menu that specializes in high-quality foods for breakfast and lunch,
including fresh-baked bagels and hot breakfast sandwiches, cream cheese and other spreads, specialty coffees and teas, creative soups,
salads and sandwiches, and other unique menu offerings. During fiscal years 2006, 2007 and 2008, Einstein Bros. company-owned
restaurants generated approximately 80% of our total company-owned restaurant sales.
Noah’ s is a neighborhood-based, deli-inspired restaurant that serves a variety of signature sandwiches, fresh baked breads, home-style
soups, tempting sweets and our award-winning bagels. Noah’ s offers a menu that specializes in high-quality foods for breakfast and