Einstein Bros 2009 Annual Report Download - page 24

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
operations. Adding to this was a decrease in our general and administrative expenses related to decreased stock-based compensation expense and
other cost savings, decreased interest expense related to the debt redemption in 2007, offset by an increase in depreciation expense from the new
restaurants that have been opened and upgrades that have been completed. Additionally, our operating expenses included $1.9 million related to the
settlement of two class-action lawsuits in California and the $1.3 million from the senior management transition costs.
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Table of Contents
Company-Owned Restaurant Operations
Our company-owned restaurants vary in their unit volume, profitability and recent comparable store sales performance. As of December 30,
2008, we had 123 restaurants that generate an average unit volume in excess of $1 million. These 123 restaurants had an average unit volume of
approximately $1.2 million and an average gross profit of $322,000. In the aggregate, these restaurants contributed approximately 39.5% of total
restaurant sales and 53.8% of total restaurant operating profit.
52 weeks ended
(dollars in thousands)
Increase/
(Decrease)
Percentage of
restaurant sales
January 1,
2008
December 30,
2008
2008
vs. 2007
January 1,
2008
December 30,
2008
Company-owned restaurant sales $372,997 $ 376,664 1.0%
Percent of total revenue 92.6% 91.1%
Cost of sales:
Cost of goods sold $110,397 $ 112,675 2.1% 29.6% 29.9%
Labor costs 111,453 112,007 0.5% 29.9% 29.7%
Other operating costs 35,786 37,781 5.6% 9.6% 10.0%
Rent and related, and marketing costs 39,544 40,653 2.8% 10.6% 10.8%
Total company-owned restaurant cost of sales $297,180 $ 303,116 2.0% 79.7% 80.5%
Total company-owned restaurant gross profit $ 75,817 $ 73,548 (3.0%) 20.3% 19.5%
Comparable store sales for our restaurants for each quarter in 2007 and 2008, compared to the same periods in the previous year were as
follows:
Fiscal 2007 Fiscal 2008
First Quarter 1.0% 3.6%
Second Quarter 5.2% 1.0%
Third Quarter 5.2% -1.7%
Fourth Quarter 3.2% -3.3%
Company-owned restaurant sales for 2008 increased $3.7 million, when compared to 2007. These results were primarily due to price
increases at Einstein Bros. and Noah’ s coupled with a net increase in the number of restaurants opened over the previous twelve months, partially
offset by a decline in volume. On average, the restaurants opened since January 1, 2008 had higher volumes relative to those that were closed over
the same period, which positively contributed to our sales.
For 2008, our restaurant comparable store sales were relatively flat with a decrease of 0.1%. This was due to a decrease in the number of
units sold, which we believe was mostly related to both the economic climate and its negative impact on consumer discretionary spending and
from a decrease in our hours of operation. This was offset by system-wide price increases since January 1, 2008 and a shift in product mix to
higher priced items.
Our gross profit decreased 3.0% in 2008 primarily due to the increase in our commodity-based food costs and a rise in labor costs due to
changes in base pay from minimum wage rate increases.
Most of our commodity-based food costs increased in 2008. Flour represented the most significant raw ingredient we purchase. The market
cost of wheat and in turn the cost to produce flour increased substantially in the last half of 2007 but stabilized by the end of the second quarter of
2008 and stayed at these levels through the remainder of 2008. To mitigate the risk of increasing market prices, we used a third party advisor to
manage our wheat purchases for our company-owned production facility. As a result of this relationship, our wheat costs remained relatively
constant throughout 2008.
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