Lakewood-based Einstein Noah isn’t just a bagelry anymore. The company, which has undergone a financial turnaround, is working toward becoming a bakery empire.
It has changed its name from New World Restaurant Group to Einstein Noah Restaurant Group, altered its image, banked some cash and signed its first franchising deal. The company also has relocated from Golden to Lakewood as part of its cost-cutting.
The commitment of customers to Einstein’s helped boost confidence at corporate headquarters while executives worked through bankruptcy woes, a change in ownership and financial instability over the past five years, company executives said.
“What I found amazing about the brand is through thick and thin, there’s been amazing loyalty from customers,” said Paul Murphy, president and chief executive. “That is what drove me, the fiber of guest loyalty to the brand. That gave me the faith and impetus to work on fixing what we needed to fix.”
The chain, which operates Einstein Bros. Bagels, Manhattan Bagel, Noah’s Bagels, Chesapeake Bagel Bakery and New World Coffee, operates 600 locations.
In addition to the franchises, Einstein Noah plans to open 11 to 15 company-owned stores this year and more than 20 next year. Including franchises, licensing and its own stores, the company plans to expand from 600 stores to 2,000 in the next several years.
The $400 million company has evolved from being a bagel-only concept to a casual bakery concept in the past four years. It has expanded its offerings to include salads, sandwiches and breads and is launching its pizza bagels nationally.
“We’ve entered a different stage of our life – we are now a growing company,” Murphy said. “Previously, this company was one that was just surviving.”
Einstein Noah’s annual revenue reached $390 million last year, up from $373 million in 2004. The number of stores decreased from 747 in 2002 to 598 last year as the company weeded out underperforming stores to increase revenues.
In May, the company posted $1.1 million in net income, compared with the previous year, when the company reported a net loss of $12.1 million.
The company closed its public offering of 5 million shares in June and raised $83.7 million, said Richard Dutkiewicz, chief financial officer.
Prior to the turnaround, the company was overshadowed by its debt burdens, underperforming stores and little to no brand marketing, analysts said.
“They figured out what those issues were; they slowed growth, closed stores, which was very appropriate, and worked to fix the capital structure,” said Nicole Miller, senior research analyst at Piper Jaffray & Co., in Minneapolis. “They had a lot working against them.”
The company improved its branding, created unique food initiatives and is expected to continue to be a growth story. What Einstein’s did have in its favor was the power of the brand and a concept that worked, Miller said.
“They have not only basically cleaned up their balance sheet and invested in the financial side of it, they also have the human-element side of it,” she said. “This is a fresh start for the company.”
To continue finding success, analysts say, the company should not get carried away and should stay on a steady pace. That’s the plan, said Paul Carolan, senior vice president of franchising and licensing.
The franchising program is being rolled out by region – first in the southeastern United States – so the company can maintain tight control over the process.
In April, the company signed a 21-store deal with Orlando, Fla.-based MC Squared Investments LLC to open its first franchises in northern Florida.
New franchisees are required to have a net worth of at least $1 million, have liquidity of $400,000 and invest in at least five stores. The franchise fee is $35,000 plus other fees.
Average sales per store are $900,000 annually, Dutkie wicz said.
“Our brands are alive and growing,” said Carolan. “Our customers vote every day with their dollars.”
Staff writer Elizabeth Aguilera can be reached at 303-954-1372 or eaguilera@denverpost.com.
