Einstein Bros 2009 Annual Report Download - page 4

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312510040721/d10k.htm[9/11/2014 10:09:50 AM]
specialty coffees and teas, soups, salads and other unique menu offerings. During fiscal years 2007, 2008 and 2009, Einstein Bros.
company-owned restaurants generated approximately 80% of our total company-owned restaurant sales.
Noah’ s is a neighborhood-based, New York City inspired bakery/deli restaurant that serves fresh-baked bagels, hot breakfast
sandwiches, made-to-order deli-style sandwiches, cream cheese and other spreads, specialty coffees and teas, soups, salads and other
unique menu offerings During fiscal years 2007, 2008 and 2009, Noah’ s company-owned restaurants generated approximately 20% of
our total company-owned restaurant sales.
Manhattan Bagel provides a traditional New York City style boil and baked bagel. Manhattan Bagel also serves a variety of grilled
sandwiches, freshly made deli sandwiches, freshly prepared breakfast sandwiches, soups, and a variety of other fresh-baked
sweets. Similar to Einstein Bros. and Noah’ s, Manhattan Bagel also features a full line of fresh brewed coffees and specialty
coffee/espresso beverages. In late 2007, we acquired a location from one of our franchisees, which made it our only company-owned
Manhattan Bagel restaurant. We use this location for employee and manager training, and to test out new products and services before
they are rolled out system-wide.
• Status of products/services: We are planning to open new company-owned restaurants under the Einstein Bros. and Noah’ s brands
within existing markets. Our expansion plans are intended to increase penetration of our restaurants in our most attractive markets. In
2009, we opened seven new company-owned restaurants. In 2010, we plan to open 10 to 12 new company-owned restaurants and
upgrade 10 to 20 of our existing restaurants.
Throughout most of our Einstein Bros. restaurants, we have implemented an improved kitchen display ordering system (“KDS”) that
reduces the time our guests wait in line before they receive their food. We believe that this system improves production accuracy
compared to the paper tickets process and helps to reduce waste. For 2010, we plan to implement the KDS in most of our Noah’ s
restaurants as well as some of our Einstein Bros. restaurants.
We believe catering is an effective and incremental way to leverage our existing restaurant infrastructure with little or no additional
capital investment and to expose more people to our food and our brands. We recognize that an effective catering program requires
different skills for effectively selling to businesses that frequently utilize catering. In the fourth quarter of 2009, we implemented a new
software program and on-line ordering capabilities which helped us to establish a new process to generate, fulfill and deliver catering
sales. This change should reduce the cost of our catering program considerably in 2010 while at the same time providing a more robust
method of attracting new customers and increasing the order frequency of existing customers.
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• Product Supply: Our purchasing programs provide our company-owned restaurants and our franchised and licensed restaurants with
high quality ingredients at competitive prices from reliable sources. Consistent product specifications, as well as purchasing guidelines,
help to ensure freshness and quality. Because we utilize fresh ingredients in most of our menu offerings, inventory at our distributors
and company-owned restaurants is maintained at modest levels. We negotiate price agreements and contracts depending on supply and
demand for our products and commodity trends. These agreements can range in duration from six months to five years.
• Trademarks and service marks: Our rights in our trademarks and service marks are a significant part of all segments of our business.
We are the owners of the federal registration rights to the “Einstein Bros.,” “Noah’ s New York Bagels” and “Manhattan Bagel” marks,
as well as several related word marks and word and design marks related to our core brands. We license the rights to use certain
trademarks we own or license to our franchisees and licensees in connection with their operations. Many of our core brand trademarks
are also registered in numerous foreign countries. We are party to a co-existence agreement with the Hebrew University of Jerusalem
(“HUJ”), which sets forth the terms under which we can use the name Einstein Bros. and the terms and restrictions under which HUJ
could license the name and likenesses associated with the Estate of Albert Einstein to a business that competes with the Company. We
also own numerous other trademarks and service marks related to our other brands. We are aware of a number of companies that use
various combinations of words in our marks, some of which may have senior rights to ours for such use, but we do not consider any of
these uses, either individually or in the aggregate, to materially impair the use of our marks. It is our policy to defend our marks and
their associated goodwill against encroachment by others.
• Seasonality: Our business is subject to seasonal fluctuations. Because of the seasonality of the business and the industry, results for any
quarter are not necessarily indicative of the results that may be achieved for any other quarter or the full fiscal year.
• Government Regulation: Each of our restaurants is subject to licensing and regulation by a number of governmental authorities, which
include health, safety, labor, sanitation, building and fire agencies in the state, county, or municipality in which the restaurant is located.
A failure to comply with one or more regulations could result in the imposition of sanctions, including the closing of restaurants for an
indeterminate period of time, fines or third party litigation.
• Competition: The restaurant industry is intensely competitive. The industry is often affected by changes in demographics, consumers’
eating habits and preferences, local and national economic conditions affecting consumer spending habits, population trends, and local