Einstein Bros 2011 Annual Report Download - page 21

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Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
We have a 52/53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2009 and 2010 ended on December 29, 2009
and December 28, 2010, respectively, and each contained 52 weeks. Fiscal year 2011 contained 53 weeks and ended on January 3, 2012.
Comparable store percentages presented in this Item 7 are calculated excluding the 53 week.
Overview
We are the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. 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. 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.
2011 Highlights and Trends
Our results for 2011 reflect the soundness of our business model, the underlying strength of our brands and the talent and dedication of our
employees. Despite significant headwinds from commodity costs and another year of a challenging economic environment for our consumers, our
results progressively improved as we went through 2011. We continued to focus on our key strategies which are:
• Drive comparable store sales growth;
• Enhance corporate margins; and
• Accelerate unit growth.
Our 2011 system-wide comparable store sales were positive in each of the last three quarters of 2011, with sequential improvement for all
quarters in 2011. Comparable store sales in our third and fourth quarters were progressively stronger than the first-half of 2011 on a system-wide
and company-owned restaurants basis.
Q1 Q2 Q3 Q4 Year
System-wide comparable sales -1.0% +0.2% +1.0% +1.2% +0.4%
Company-owned comparable sales -1.4% -0.3% +0.7% +0.8% +0.0%
The primary reasons for this sequential improvement was strong growth in average check, a favorable mix shift and strength in catering
sales. This was partially offset by lower comparable transactions due largely to the rollover of free bagel promotions in 2010.
We grew our breakfast sandwich business, on a comparable store basis, by 12.8% which benefited from the continued success of our bagel
thin sandwich platform and our focus on healthy, low calorie food options. Our catering business, on a comparable store basis, grew by
approximately 16.5% with our focus on our online ordering system and on search engine/online marketing. We targeted our marketing investments
at coupons, directional billboards and digital online media. In 2011, we launched our enhanced coffee program which helped bolster comparable
coffee sales by approximately 9% in the fourth quarter. Coffee sales now represent over 10% of our menu mix and continue to grow.
The impact of higher commodity costs negatively impacted our operating margin at our company-owned restaurants and was the primary
underlying cause for the 1.1% increase in cost of goods sold as a percentage of company-owned restaurant sales. Most of the commodity pressure
was related to wheat, coffee and dairy. As a
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percentage of company-owned restaurant sales, cost of goods sold increased to 29.6% from 28.5% in 2010. On a combined basis, labor, other
operating expenses, occupancy and marketing expenses were flat to 2010 as a percentage of company-owned restaurant sales. To partially offset
the impact of inflation, we increased our menu prices and delivered on planned initiatives to reduce our costs.
Q1 Q2 Q3 Q4 Year
Inflation 2.0% 3.4% 6.0% 4.6% 3.0% to 4.0%
Pricing 0.6% 0.8% 2.0% 0.6% 4.0%
Cost Initiatives $— $0.4 $1.0 $1.3 $2.7 million
Our cost initiatives drove $2.7 million in savings primarily driven by:
• Changes to bagel thin manufacturing and pricing;
• Changes to bulk bagel packaging; and
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