FDD Talk 2015: The Einstein Bros. Bagels Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2015 post, you’ll learn the following:

• Section I – Background information on the Einstein Bros. Bagels franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an Einstein Bros. Bagels franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Einstein Bros. Bagels’ financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• 2014 average gross sales for the 42 franchised and 381 company-owned Einstein Bros. Bagels Restaurants (with and without a drive-thru) that were open for the entire year during the company’s last fiscal year, which started on January 1, 2014 and ended on December 30, 2014

• 2014 average gross revenue, discounts, gross sales, cost of products sold, gross margin, labor expenses, other operating expenses, profit after operating expenses, non-operating expenses, cash flow, imputed royalties, imputed marketing contribution, and adjusted cash flow (after franchisee expenses) incurred at the 398 company-owned Einstein Bros. Bagels Restaurants that were open for all 52 weeks of the company’s last fiscal year

Section I – Background Information

Einstein Noah Restaurant Group is the nation’s largest operator of bagel bakeries and a leader in the quick casual segment of the restaurant industry. The company owns Noah’s New York Bagels and Manhattan Bagel, but its best-known chain is Einstein Bros. Bagels.

With 800 restaurants operating under its umbrella, the company knows a few things about how to run a bagel shop. From the selection of the right blends of coffee to making and producing fresh bagel dough, there’s a lot of back-of-the-house operations at which Einstein Bros. excels.

Here’s how Einstein Bros. keeps the bagels, and its franchise, nice and fresh:

It’s About the Dough

Years of expertise go into the Einstein Bros. dough production facilities, from crafting the dough to freezing it in just the right way so the bagels come out as close to perfect as possible, every time. There are two places where the dough is made. One is a company-controlled facility in Whittier, California, and the other is in Avon, Indiana, run by a third-party operator who adheres to the Einstein Bros. strict specifications.

Kudos

Einstein Bros. ranked #8 in Fast Casual’s Top 100 Movers and Shakers as one of the best and fastest growing bakery-café chains in the fast-casual segment. The chain also made it into the Nation’s Restaurant News 2015 Top 100 listing (#87) largely based on system-wide sales, which were $498 million for Einstein Bros. last year.

The Right Atmosphere

An Einstein Bros. bagel shop can be described as oozing both warmth and eccentricity. It goes to great lengths to establish shops with a neighborhood feel that work as breakfast joints, coffee shops, or sandwich outlets. If you’re a regular, you can bet the staff will know your favorite orders, as well as your name.

Darn Good Coffee

If you say Einstein Bros. serves Darn Good Coffee, you’re not just spouting an opinion because it happens to be the brand name of the coffee served throughout the chain’s locations.

Getting It Right

You’ve heard that it’s all about location, location, location, but Einstein Bros. also layers in as much focus on operations, operations, operations. That’s why it recently made the decision to close as many as 39 shops, 11 of which are in the Chicago area. This kind of decision is never easy, but it shows initiative in dealing with consistently underperforming units.

Menu Innovation

You might not think there’s a whole lot you can do with a bagel menu, but Einstein Bros. recently proved otherwise with the July introduction of its brand new Bagel Toppers. These are bagels with cream cheese that are dressed for success, topped with one of four choices: Berry Goodness (strawberry cream cheese, sliced strawberries, honey, and granola), Nutty Monkey (Nutella, banana slices, and almond slivers), Spicy Devil (jalapeño cream cheese, sliced jalapeños, and bacon) and the Herbivore (garlic and herb cream cheese, cucumbers, tomatoes, and arugula), representing a good ratio of sweet as well as savory choices (which can also be mixed and matched with each half of your bagel).

Section II – Estimated Costs

• Please click here for detailed estimates of Einstein Bros. Bagels franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis