Einstein Bros 2009 Annual Report Download - page 3

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
Einstein Noah Restaurant Group, Inc. (the “Company”) operates primarily under the Einstein Bros. Bagels (“Einstein Bros.”), Noah’ s New
York Bagels (“Noah’ s”) and Manhattan Bagel Company (“Manhattan Bagel”) brands. We commenced operations as an operator and franchisor of
coffee cafes in 1993. Substantial growth in our restaurant counts occurred through a series of acquisitions. Our largest acquisition was in 2001
when we acquired substantially all the assets of Einstein/Noah Bagel Corp. in an auction conducted by the bankruptcy court. Since then, we have
grown organically by opening company-owned restaurants, working with franchisees on development agreements, and promoting the licensing of
our brand.
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 franchise and license segment earns royalties and other fees from the use of trademarks and operating systems developed for the
Manhattan Bagel, Einstein Bros. and Noah’ s brands.
• The manufacturing and commissary segment produces and distributes bagel dough and other products to our company-owned
restaurants, licensees and franchisees and other third parties.
• The corporate support unit consists of overhead and other activities related to the three key business segments, as well as interest on our
debt and depreciation on our assets.
See Note 17 to the consolidated financial statements included in Item 8 of this 10-K for the financial results by segment for fiscal years 2007,
2008 and 2009.
Narrative description of business:
We are the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. As of December 29, 2009, we
had 683 restaurants in 37 states and in 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 36 states and in the District of Columbia, Noah’ s restaurants in three states on the west coast and
Manhattan Bagel restaurants concentrated in eight states 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.
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.
2
Table of Contents
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 avoid many of the other risks associated with opening new
company-owned restaurants.
As of December 29, 2009, the Company had 7,054 associates, of whom 233 were corporate personnel, 147 were manufacturing and
commissary personnel and 6,674 were restaurant 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.
Company-owned restaurants
We generated approximately 91% of our 2009 total revenue from restaurant sales at our Einstein Bros. and Noah’ s company-owned
restaurants. For the year ended December 29, 2009, approximately 65% of our revenues were generated from restaurant sales during the breakfast
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, freshly prepared lunch sandwiches, cream cheese and other spreads,