Einstein Bros 2011 Annual Report Download - page 3

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
risk factors discussed under Item 1A.“Risk Factors” of this Annual Report on Form 10-K. We do not undertake any obligation to update or revise
any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events,
except as may be required under applicable law.
PART I
As used in this report, the terms “Company,” “ENRGI,” “we,” “our,” or “us” refer to Einstein Noah Restaurant Group, Inc. and its
consolidated subsidiaries, taken as a whole, unless the context otherwise indicates. The terms “fiscal year ended,” “fiscal year,” “year ended,” or
“fiscal” refer to the entire fiscal year, unless the context otherwise indicates.
ITEM 1. BUSINESS
General development of our Company:
Einstein Noah Restaurant Group, Inc. is a Delaware corporation operating 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 have occurred organically and through a series of acquisitions. Our
largest acquisition was in 2001 when we acquired substantially all the assets of Einstein/Noah Bagel Corp. We have also grown by opening
company-owned restaurants, working with franchisees on development agreements and promoting the licensing of our brand.
On November 29, 2011, we acquired the assets of Kettleman Bagel Company (“Kettleman Bagel”), a five-store bagel chain in Portland,
Oregon. We expect to rebrand Kettleman Bagel into Einstein Bros in the first half of fiscal 2012. We paid $5.0 million for all tangible and
intangible assets used in the business and expect the five locations, in total, to generate over $5.0 million in annual revenues on a go-forward basis.
We operate under a 52/53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2009 and 2010 each contained 52
weeks. Fiscal year 2011 contained 53 weeks. Comparable store sales percentages presented elsewhere in this report are calculated excluding the
53 week.
2
Table of Contents
Financial information about segments:
We operate in three key business segments, which are supported by a centralized corporate operation:
• The “company-owned restaurants” segment includes the restaurants that we own. These restaurants have similar investment criteria,
economic characteristics and operating characteristics.
• 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. We are in the process of closing our five food commissary facilities to help
streamline our supply chain and to reduce our cost base. We expect to complete the closures in the first quarter of fiscal 2012.
• The “franchise and license” segment earns royalties and other fees from the use of trademarks and operating systems developed for the
Einstein Bros., Noah’ s and Manhattan Bagel brands.
• 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 19 to the consolidated financial statements included in Item 8 of this 10-K for the financial results by segment for fiscal years 2009,
2010 and 2011.
Narrative description of business:
We are the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. As of January 3, 2012, we had
773 restaurants in 39 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, Noah’ s restaurants in three states on the west coast, Manhattan Bagel restaurants concentrated in eight states
primarily in the Northeast, and Kettleman Bagel restaurants located in Portland, Oregon. Currently, our Einstein Bros. and Noah’ s are
predominantly company-owned or licensed, Kettleman Bagel is company-owned and Manhattan Bagel restaurants are franchised except for one
company-owned location.
Our product offerings include fresh-baked 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
rd