FDD Talk 2017: What You Need to Know About the Bruegger’s Bagels Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk 2017 post, you’ll learn the following:

• Section I – Background information on the Bruegger’s Bagels franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Bruegger’s Bagels franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Bruegger’s Bagels franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Bruegger’s Bagels’ financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016 average, median, high, and low net sales for the 162 company-owned, 84 franchised, 2 company-owned NTV (non-traditional venue), and 5 licensed Bruegger’s Bagels Bakeries that were open throughout the entire fiscal year ending December 27, 2016 (separately stated)

• 2016 average cost of goods sold, payroll, operating expenses, marketing expenses, rent/occupancy, and EBITDA for the 162 company-owned (traditional) and 2 company-owned NTV (non-traditional venue) Bruegger’s Bagels Bakeries that were open throughout the entire fiscal year ending December 27, 2016 (separately stated)

Section I – Background Information

14 Things You Need to Know About the Bruegger’s Bagels Franchise

Sold to Caribou Coffee Co.

1.  In late August, Le Duff America Inc., Bruegger’s Bagels’ parent company, announced that it had agreed to sell Bruegger’s to Caribou Coffee Co. The sale will give Caribou’s parent company, JAB Holding Co., an even bigger share of the coffee and breakfast market – JAB already owns Einstein Bros. Bagels, Intelligentsia Coffee & Tea, Peet’s Coffee & Tea, Krispy Kreme, and Panera Bread. The deal closed at the end of September; the terms of the deal were not disclosed.

2.  Le Duff America CEO Olivier Poirot said that the sale of Bruegger’s will help Le Duff focus on expanding its French concepts (Brioche Doree, la Madeleine French Bakery & Cafe, and Mimi’s Cafe) in the United States.

3.  A spokesperson for Caribou Coffee said, “We have long respected the Bruegger’s brand, which has a loyal customer following and strong heritage in the bagel business, and we are eager to be a part of the next chapter of the company’s growth.”

Launches Fall Menu

4.  At the start of September, Bruegger’s Bagels released its new seasonal menu including new and returning items. Their limited-time offerings include: Smoky Brisket & Pastrami Egg Sandwich, Chipotle Brisket Melt, Pumpkin Bagel, Pumpkin Cream Cheese, and Pumpkin Spice Coffee.

5.  The Smoky Brisket & Pastrami Egg Sandwich is made with a seasoned fresh-cracked egg, sliced brisket and pastrami, cheddar cheese, and chipotle aioli on a toasted Everything Bagel; while the Chipotle Brisket Melt features sliced brisket, pepper jack cheese, red and green peppers, red onions, and chipotle mayo on a toasted Plain Bagel.

6.  After Thanksgiving, the Pumpkin Bagel will be replaced with the Cranberry Orange Bagel. Bruegger’s Bagels Vice President of Marketing Judy Kadylak says that the menu changes “celebrate all the savory goodness of fall.”

Celebrates 34th Anniversary

7.  Last February 2, Bruegger’s Bagels celebrated its 34th anniversary by offering customers three free bagels if they presented a coupon, which was available from the brand’s website. In order to receive the coupon, customers had to fill out a short form. The special offer was valid only from the time a store opened until 11 a.m. on that day.

8.  Bruegger’s Bagels Vice President of Marketing Judy Kadylak said, “We take great pride in our authentic bagels that have been the cornerstone of our company since the beginning. This free bagel offer is our way of saying thanks to our loyal fans across the country.”

Company History

9.  Bruegger’s Bagels, the first major bagel chain in the United States, was founded in 1983 by Nordahl Brue and Mike Dressell in Troy, New York. Brue and Dressell wanted to capitalize on the demand for bagels across the country, as fresh and authentic ones were hard to find outside of major cities.

10.  Early on, Brue and Dressell slowly and carefully expanded the business organically; franchising did not begin until 1993. Within 18 months of franchising the Bruegger’s concept, the company grew to 155 stores in 16 states.

11.  In 1996, Brue and Dressell sold the company to Quality Dining for $142 million in stock and the pair joined Quality Dining’s board. Brue, Dressell, and some franchisees were upset over how Quality Dining ran the company, so Brue and Dressell filed a complaint with the U.S. Securities and Exchange Commission (SEC) alleging a lack of strategic direction by the new owners. Using their combined 26% stake in the company, Brue and Dressell called for a reorganization of Quality Dining, which resulted in Bruegger’s being resold to Brue and Dressell for $45 million.

12.  In 2003, Brue and Dressell sold the company to James J. Greco and Sun Capital Partners; Bruegger’s was sold again in 2011 to Groupe Le Duff of France. Le Duff America announced this past August that it had sold Bruegger’s to Caribou Coffee (and its owner JAB Holding Co.) for an undisclosed amount; the deal closed at the end of September.

13.  Over the years, Bruegger’s Bagels has continued to grow and today, there are over 260 locations across the U.S.

Entrepreneur’s Franchise 500

14.  Bruegger’s Bagels has appeared on Entrepreneur’s annual Franchise 500 list a few times in the last decade. The company’s highest rank was No. 180 in 2011, while its lowest rank was No. 341 in 2010. Bruegger’s has not ranked on the list since 2014.

Section II – Estimated Costs

• Please click here for detailed estimates of Bruegger’s Bagels franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Bruegger’s Bagels initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

• In this Item 19, the franchisor provides certain historical operating results of company-owned Bakeries, franchised Bakeries, and licensed Bakeries in Table 1, and certain additional historical operating results of company-owned Bakeries only in Table 2.

Table 1 – Average Sales for Fiscal Year Ending December 27, 2016

• Table 1 provides average Net Sales for company-owned Bakeries, franchised Bakeries, and licensed Bakeries during fiscal year 2016.

Company-Owned Bakeries (162 Units):