Einstein Bros 2012 Annual Report Download - page 7

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312513085036/d445565d10k.htm[9/11/2014 10:07:50 AM]
agreements vary by venue, but typically have a five-year term and provide that the licensee pays us an up-front license fee of $12,500
and a weighted average royalty fee of 6.6%. Our license restaurants that have been open for one year generally have average unit
volumes of approximately $450,000, reflecting the predominance of college campus locations with a profitable but condensed selling
season.
• Status of development plans or expansion: We are planning to expand our presence through a significant expansion of franchise and
license restaurants. We are continuously signing new franchise development agreements and there could be the potential to sell existing
company-owned restaurants to prospective franchisees. This strategy allows us to generate additional revenues without incurring
significant additional expense, capital commitments or many of the other risks associated with opening new company-owned
restaurants. We continue to actively market the Einstein Bros. brand franchise rights in an effort to sign multi-location deals. As of
February 25, 2013, we have 28 development agreements in place for 136 total restaurants, 34 of which have already opened. Based
upon the development agreements, we expect the remaining 102 new restaurants will open on various dates through 2021. In fiscal
2012, we opened 13 franchised locations and 27 licensed locations. We are currently planning to open 15 to 20 franchise restaurants
and 30 to 40 license restaurants in fiscal 2013.
• Product supply: Our franchisees and licensees are required to purchase proprietary products through our designated suppliers or directly
from us.
• Seasonality: This segment is subject to the same seasonal fluctuations as our company-owned restaurant segment. Additionally, as
many of our license locations are on college and university campuses, they are impacted by school schedules which typically include
summer and winter breaks. 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: Our franchise operations are subject to Federal Trade Commission (the “FTC”) regulation and various state
laws which regulate the offer and sale of franchises. Several state laws also regulate substantive aspects of the franchisor/franchisee
relationship. The FTC requires us to furnish to prospective franchisees a franchise disclosure document containing prescribed
information. A number of states in which we might consider franchising also regulate the sale of franchises and require registration of
the disclosure document with state authorities. Our ability to sell franchises in those states is dependent upon obtaining approval of our
disclosure document by those authorities.
• Competition: We compete against similar fast-casual and quick-casual restaurants that franchise and license their brands in the states
where we operate.
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Table of Contents
Corporate Support
• Principal products/services sold: The support center is not a profit center and is designed to manage and support all of our operations as
well as provide general corporate governance.
Financial information about geographic areas:
Our manufacturing operations sell bagels to third parties who take possession in the United States and sell outside of the United States. As
the product is shipped FOB domestic dock, invoiced in U.S. dollars and paid in U.S. dollars, there are no international risks of loss or foreign
exchange currency issues. Export sales are included in manufacturing and commissary revenue, and were $5.3 million, $7.1 million and $8.8
million for fiscal years 2010, 2011 and 2012, respectively. We attribute these increases in revenue to increased sales volume. All other revenues
were from sales to external customers located in the United States.
Available Information:
We are subject to the informational requirements of the Exchange Act. We therefore file periodic reports, proxy statements and other
information with the Securities Exchange Commission (the “SEC”). Such reports may be obtained by visiting the Public Reference Room of the
SEC at 100 F Street, N.E., Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site
(www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.
Additionally, copies of our reports on Forms 10-K, 10-Q and 8-K and any amendments to such reports are available for viewing and copying
through our internet site (www.einsteinnoah.com), free of charge, as soon as reasonably practicable after filing such material with, or furnishing it
to, the SEC. We typically post information about us on our website under the Financial & Media tab. We do not incorporate any information found
on or accessible through our website into this Annual Report on Form 10-K.
We also make available on our website and in print to any stockholder who requests it, our Audit and Compensation Committees charters, as
well as the Code of Conduct that applies to all directors, officers and associates of the company. Amendments to these documents or waivers