Einstein Bros 2012 Annual Report Download - page 3

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312513085036/d445565d10k.htm[9/11/2014 10:07:50 AM]
future litigation and other matters, and are generally accompanied by words such as: “believes,” “anticipates,” “plans,” “intends,” “estimates,”
“predicts,” “targets,” “expects,” “contemplates” and similar expressions that convey the uncertainty of future events or outcomes. These risks
and uncertainties include, but are not limited to, the 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.
We operate under a 52/53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2010 and 2012 contained 52 weeks.
Fiscal year 2011 contained 53 weeks. Comparable store sales percentages for fiscal 2011 presented elsewhere in this report are calculated
excluding the 53 week.
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.
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• The “manufacturing” segment produces and distributes bagel dough and other products to our company-owned restaurants, licensees
and franchisees and other third parties. In an effort to help streamline our supply chain and to reduce our cost base, we began the
process of closing our food commissary facilities in September 2011 and completed the closures by March 2012.
• The “franchise and license” segment earns royalties and other fees from the use of trademarks and operating systems developed for the
Einstein Bros. 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 2010,
2011 and 2012.
Narrative description of business:
We are the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. As of January 1, 2013, we had
816 restaurants in 39 states and in the District of Columbia. In January 2013, we opened an Einstein Bros. franchise in Montana, our fortieth state.
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
California and Manhattan Bagel restaurants concentrated in eight states primarily in the Northeast. Currently, our Einstein Bros. and Noah’ s are
predominantly company-owned or licensed and our Manhattan Bagel restaurants are predominantly franchised.
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
and independent distribution network delivers high-quality ingredients that are delivered fresh to our restaurants. We seek to create an inviting
atmosphere which enables us to attract a diverse group of customers, approximately 60% women and 40% men, primarily in the middle to upper-
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