Bakery-cafes rise in Second 100 rankings despite higher food costs

Even as soaring commodity prices, especially for wheat and oil, exert unprecedented pressures on the industry’s top and bottom lines, operators in the bakery-cafe segment are fighting back by adding new products and portion sizes, strengthening under-performing dayparts and services, and stepping up franchising efforts.

“Basically, bakery-cafes are trying to be more innovative and relevant to consumer demands,” says Malcolm Knapp, president of Malcolm M. Knapp Inc., a New York-based restaurant consulting firm. “There’s been more emphasis on sandwiches. We’re seeing more salads, too, and everyone’s working on their beverage strategies.”

Foodservice veterans note, however, that wheat costs continue to be a wild card for future growth. Wheat futures have risen from $3.45 per bushel in 2004 to $9.26 per bushel recently. While the price of wheat has moderated considerably from a high of $12.80 in February, operators have had to deal with “historic” fluctuations in prices this year, says John Barone, president of Market Vision Inc., a Fairfield, N.J.-based firm that provides commodities analysis and purchasing support services.

Yet, while the economy presents an undeniable challenge, many of the Second 100 players have been moving up in the ranks. James Greco, chief executive of Bruegger’s Bagel Bakery, says the Burlington, Vt.-based chain just completed its 17th consecutive quarter of positive same-store sales growth, although he notes that business appeared to slow a little in the second quarter.

BAKERY-CAFE CHAINS RANKED BY U.S. SYSTEMWIDE SALES

In the meantime, the 270-unit chain has launched several new products, including its popular Brueggaccino Frozen Coffee as well as sandwiches, salads and omelets for the summer. Bruegger’s—which broke into the Second 100 at No. 200 with annual sales of $178 million—also is testing snack items for the fall to build business in the afternoon while giving customers “lighter” options in the midday meal period.

Bruegger’s also is opening 30 company-owned and franchised outlets in 2008 compared to about 20 in 2007. New markets include Las Vegas and South Florida, specifically Broward and Palm Beach counties.

A new franchising program begun in 2007 has helped Einstein Bros. Bagels climb four rungs to No. 114 and increase annual sales to $400 million. The Golden, Colo.-based chain signed four franchisees, giving it a total of 464 locations, says president and chief executive Paul Murphy.

“The company is getting back into growth mode,” he says. The brand also signed two multiunit development deals with on-site feeders Aramark and SSP.

Over the past year Einstein introduced new menu boards and is testing efforts to focus customers’ attention on items in the $3 to $5 range. “We’re making the more value-oriented items more prominent and showcasing a range of choices, which we think helps to address the consumer’s economic issues,” Murphy says.

The chain also has updated its service system by adding wireless capabilities and a new kitchen display system.

BAKERY-CAFE CHAINS RANKED BY GROWTH IN U.S. SYSTEMWIDE SALES (Year-to-year percentage change)

“They are allowing us to move more transactions through in a shorter period of time and improve order accuracy,” he says.

Dallas-based Corner Bakery moved up from No. 190 to No. 178 this year on sales of $224 million. Over the past five years, the chain also increased its average-unit volume by 30 percent, from $1.7 million to $2.3 million.

Senior vice president of marketing Diana Hovey says “explosive growth” in the brand’s catering business has contributed to Corner Bakery’s movement up the ranks.

She notes Corner Bakery invested back into its fleet of refrigerated vans and that catering accounts for about 20 percent of the brand’s sales.

To build in-house business, Corner Bakery continues to roll out its neighborhood-cafe prototype, which has customized decor and signage to reflect the marketplace it serves. The chain also introduced free Wi-Fi at all locations.

While Corner Bakery has debuted new sandwiches, Hovey says the biggest area of growth lies in breakfast, fueled by a new self-service, upgraded coffee program.

BAKERY-CAFE CHAINS RANKED BY NUMBER OF U.S. UNITS

Hovey says Corner Bakery also has embarked on an aggressive new franchise push and recently signed The Briad Group in Livingston, N.J., to open 35 outlets.

Au Bon Pain, which rose two notches to No. 148 on sales of $287.8 million, has responded to consumers’ demands for more choice by launching several hot and cold selections across all dayparts. At the same time, the Boston-based chain introduced its 14-item line of selections that contain 200 calories or less. Senior vice president of marketing Ed Frechette says the line, introduced in April, has been “a big hit, particularly with women.” Selections include a turkey, asparagus and cranberry chutney rollup; hummus and cucumber; and Cheddar with crackers and grapes.

The new category, which is priced at $3.49 for protein selections and $2.99 for nonproteins, accounts for 2 percent of all sales for the 230-unit chain, Frechette says.

The line will be refreshed in August, and the company is looking to add dessert portions.

BAKERY-CAFE CHAINS RANKED BY GROWTH IN NUMBER OF U.S. UNITS (Year-to-year percentage change)

Sales in general have responded well to the launch of new menu items, he continues, adding same-store sales are up 6 percent to 7 percent over last year.

Second 100 chains see slowed sales growth for second consecutive year