Einstein Bros 2009 Annual Report Download - page 22

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
During 2009, we doubled our investment in marketing to $4.6 million from $2.3 million in 2008. The increase was principally attributable to
an investment in our marketing initiatives that we started early in 2009, which were aimed at increasing transactions and launching of our new
products. We intend to continue this trend as we believe the increased marketing creates awareness of our brand which will help facilitate trial,
increase loyalty and frequency of our guest’ s visits.
In 2009 we had additional rent expense associated with the net opening of two restaurants over the last twelve months and the eight new
restaurants that opened towards the end of 2008. During the year, we negotiated more favorable lease terms with many of our landlords. These
lease modifications will result in lower future rent expense compared to the prior terms.
Manufacturing and Commissary Operations
52 weeks ended
(dollars in thousands)
Increase/
(Decrease)
Percentage of manufacturing
and commissary revenues
December 30,
2008
December 29,
2009
2009
vs. 2008
December 30,
2008
December 29,
2009
Manufacturing and commissary revenues $ 30,369 $ 30,638 0.9%
Percent of total revenues 7.3% 7.5%
Manufacturing and commissary costs $ 28,566 $ 26,573 (7.0%) 94.1% 86.7%
Total manufacturing and commissary
gross profit $ 1,803 $ 4,065 125.5% 5.9% 13.3%
Manufacturing and commissary revenues for 2009 were relatively flat compared to 2008. Manufacturing gross profit increased substantially
in 2009 as a result of substantial productivity improvements in 2009 at our bagel manufacturing facility. In addition, we experienced lower prices
of our raw ingredient costs as a result of the decrease of most of our commodity-based food costs.
Franchise and License Operations
52 weeks ended
(dollars in thousands)
Increase/
(Decrease)
December 30,
2008
December 29,
2009
2009 vs.
2008
Franchise and license related revenues $ 6,417 $ 7,512 17.1%
Percent of total revenues 1.6% 1.8%
Franchise and license gross margin 100.0% 100.0%
Number of franchise and license restaurants 223 255
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Overall, franchise and license revenue improvement was driven by strong royalty streams resulting from the net opening of 26 license
locations and six franchise locations over the last twelve months. Comparable store sales for the franchisees and licensees of the Manhattan Bagel
and Einstein Bros. brands increased 1.1% in 2009.
During 2009 we revised a development agreement with one of our franchisees to modify the number of franchise stores to be built under the
development agreement from 21 to four.
Corporate Support
52 weeks ended
(dollars in thousands)
Increase/
(Decrease)
Percentage of
total revenues
December 30,
2008
December 29,
2009
2009
vs. 2008
December 30,
2008
December 29,
2009
General and administrative expenses $ 36,356 $ 35,463 (2.5%) 8.8% 8.7%
California wage and hour settlements 1,900 — (100.0%) 0.5% 0.0%
Senior management transition costs 1,335 — (100.0%) 0.3% 0.0%
Depreciation and amortization 14,100 16,627 17.9% 3.4% 4.1%
Other operating expenses 461 725 57.3% 0.1% 0.2%
Total operating expenses $ 54,152 $ 52,815 (2.5%) 13.1% 12.9%
Interest expense, net 5,439 6,114 12.4% 1.3% 1.5%