Einstein Noah CEO on possible sale, future plans

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Jeff O’Neill, chief executive of Einstein Noah Restaurant Group Inc., recently said the time is right for the parent of the Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel brands, to explore strategic alternatives.

In an interview with Nation’s Restaurant News, O’Neill elaborated on why he feels it’s the right time to look at options that might increase shareholder value — including a possible merger or sale — as well as the growth and savings opportunities that lie ahead for the Lakewood, Colo.-based company.

Why do you feel this is a good time for Einstein Noah to look at strategic options?

It really is a positive development for Einstein Noah. Results for the company are really strong and we’re really optimistic about the year we have ahead.

When you look at the brand’s momentum coming out of last year and the strength of the industry overall, we felt it was the perfect timing for a broad evaluation. Our financial performance was solid. We’re acting from a position of strength, if you will.

We’re in early phases of this. It’s a process that’s different for every company and it’s going to last several months, probably through summer and possibly through the end of the year. In the meantime, I’ve got the organization continuing to focus on the goals we have so we can delight every customer every time.

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In recent years, you’ve really expanded the specialty beverage program. Can you expand on how that’s going?

Last year, we invested $8 million in our coffee program. This was improving the quality of beans. We basically purchased gold standard equipment to make specialty coffee, and then we brought in coffee specialists to focus on coffee stations in restaurants and make cappuccinos and lattes and all of those [drinks]. Our customers responded extremely well. Coming out of the year, our specialty coffee [sales] are up exponentially, overall total beverage sales are up 10 percent, which was beyond our expectations, and we’ve continued that momentum into the first quarter of this year.

We also just launched a line of low-fat smoothies at the end of April. Three to four weeks in, it’s gone way beyond our expectations. We’ve been scrambling for supply a little bit because it caught us off guard.

It fits really well with the whole idea of combining the fact that we’re the king of bagels -— we’re the fresh-baked bagels — with a world-class specialty coffee and beverages program. Coffee and bagels go together. The other people out there may be offering world-class coffee, but they aren’t offering fresh-baked-on-premises, by-the-hour bagels and fresh-prepared sandwiches. That puts us in a really unique position. We offer quality and freshness of a bakery/café with the speed of a QSR.

Catering is another area the company has grown. It's now 7 percent of the mix and growing by double digits. How have you done that?

We restructured the catering business coming into 2010, and the last two years it has grown by strong double digits. Last year it grew 20 percent, and we're continuing that momentum this year. We did a couple of things: Went to online ordering. We restructured our organization and outsourced our call center to ensure 24/7 service from catering point of view. We focused on national accounts, and it’s been really rewarding as a team to see the response we’ve gotten, not only at breakfast but also at lunch.

I’d really like to get it to over 10 percent to 11 percent of our business. When we started, coffee was 8 percent and we got that up to 11 percent. That would be a good goal to reach double digits on catering as well.

Can you talk about growth?

Another key initiative is accelerating unit growth for Einstein Bros. through franchise and licensing development. We opened about 55 restaurants last year and will open more than 60 this year. Off the base that we have, we’re looking at 10-percent growth in units, and that puts us in the top tier of the restaurant business. We’ve got a good pipeline of franchisees and franchisee openings, and we plan to continue opening corporate restaurants as well.

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