Einstein Bros 2013 Annual Report Download - page 5

10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312514073832/d629623d10k.htm[9/11/2014 10:05:27 AM]
service. We believe that our online ordering system and investment in search engine optimization has been successful, resulting in
more new customers and increasing the order frequency of existing customers. Additionally, we believe that our catering operation
continues to benefit from this on-line ordering capability as well as an outsourced and expanded call center, digital marketing and an
optimized menu. Catering accounts for approximately 9% of our company-owned restaurant sales.
• Product Supply: Our purchasing programs provide our 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. Our company-owned
restaurants purchase their products from approved vendors and/or from our manufacturing facility. Because we utilize fresh ingredients
for most of our menu offerings, we are able to maintain our inventory at modest levels.
• 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
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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 us. 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 rights
senior to ours for such use, but we do not consider any of these uses, either individually or in the aggregate, to materially impair our
ability to use such marks. It is our policy to defend our marks and their associated goodwill against encroachment by others.
• Government Regulation: Our restaurants are 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.
• Investment in Information Technology: Beginning in fiscal 2013, we launched a multi-year initiative to improve the organization’ s
business intelligence capabilities, which we believe will improve executive and operational management decision making. This
initiative includes the following elements:
• The redesign of our data warehouse;
• The implementation of a master data management approach to provide a single, accurate set of data; and
• The transition from a static excel-based reporting system to a dynamic mobile reporting and analysis solution.
• 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.
• Competition: The restaurant industry is intensely competitive. We experience competition from numerous sources in our trade areas.
Our competitors are different for each daypart. Competitive factors include brand awareness, advertising effectiveness, location and
attractiveness of facilities, hospitality, environment, quality and speed of guest service and the price/value of products offered. We
compete in the fast-casual segment of the restaurant industry, but we also consider other restaurants in the fast-food, specialty food and
full-service segments to be our competitors.
Manufacturing:
We generated approximately 8% of our fiscal 2013 total revenue from our manufacturing operations.
• Manufacturing: We currently operate a bagel dough manufacturing facility in Whittier, California and have contracts with two suppliers
to produce bagel dough and sweets to our specifications. These facilities provide frozen dough, partially-baked frozen bagels and
sweets for our company-owned restaurants, franchisees and licensees. We use excess capacity to produce bagels for sale to third party
resellers.
• Commissaries: In an effort to streamline our supply chain and to reduce our costs, we closed all our commissaries as of March 2012.
We estimate these closures will result in continued savings to the company of approximately $1.5 million per year. We recorded
restructuring charges of $0.7 million during fiscal 2011 and $0.5 million during fiscal 2012 related to these closures.
• Product supply: We have proprietary recipes and production processes for our bagel dough, cream cheese and coffee. We believe these
recipes ensure product consistency and that our processes allow for the delivery of a variety of consistent, superior quality products at