Bruegger's: bagel chain seeks to raise more dough by serving different dayparts

When Bruegger's Enterprises Inc., parent company of the 244-unit Bruegger's bagel cafe chain, was founded in 1983, bagels were largely a novelty outside of major U.S. cities.

But times have changed in the more than 20 years since then. Bagels now are as common as doughnuts, sold nationwide in flavors ranging from poppy seed to blueberry to chocolate chip, and the Burlington, Vt.-based chain has been forced to change its game plan.

In response, Bruegger's--helped greatly by a recent infusion of cash from a new owner--has relaunched its brand in a fight for market share. Although freshly baked bagels and flavored cream cheeses still are core products, the company has expanded its menu with a variety of new, made-to-order sandwiches and more healthful items, like fresh salads, intended to build lunch and dinner business.

In addition, the chain's stores are being refurbished. At the 60 stores that already have been remodeled, business is on the rise. Officials say sales at revamped company-owned units jumped 30 percent immediately after reopening and leveled off at a rate that was up 10 percent.

"We looked at the [segment] generally and concluded that Bruegger's had started the whole [fast-casual] segment but had lost the lead because it was too leveraged," says James J. Greco, who in August 2003 was named chief executive to lead a turnaround of the 1,800-employee company.

Greco took control of the chain after he and private-equity firm Sun Capital Partners of Boca Raton, Fla., purchased Bruegger's from its founders for an undisclosed sum. At the time of the sale the chain was highly leveraged because its founders, Nord Brue and Michael Dressell, in 1997 had borrowed an undisclosed amount to repurchase their concept from Mishawaka, Ind.-based Quality Dining Inc., which had acquired Bruegger's in 1996.

"The timing couldn't have been worse," Greco says of the move by Brue and Dressell. The company took on a lot of debt, and fast-casual competitors like Panera Bread and Atlanta Bread Co. took the lead, he says. Greco stepped in after selling Fieldbrook Farms Inc., a Dunkirk, N.Y.-based ice-cream manufacturer that sells private-label ice cream and frozen desserts to grocery stores and restaurants. He had been chief executive of Fieldbrook Farms since 1996.

Sun Capital's acquisition of Bruegger's has given the chain access to capital that was unavailable before and is helping to breathe new life into the chain, says David T. Austin, Bruegger's president and a seven-year veteran of the brand.

Through a renovation program, restaurants are being made to resemble New England farmhouses, with soft lighting, hardwood floors, wooden furniture and light colors, Austin says. All units, most of which are about 2,000 square feet and seat between 40 and 50 customers, are scheduled to be remodeled by the second half of 2006.

Along with those renovations Greco and his colleagues have embarked on a series of sweeping initiatives that are intended to revitalize the chain's menu, service and marketing.

Because market research showed that Bruegger's had excellent brand recognition and a reputation for quality and wholesomeness, the company's name, which was created by the wife of co-founder Nord Brue, was carried over.

"The fast-casual segment was created in the early '80s by Au Bon Pain and Bruegger's," Greco notes, which he says increased his desire to purchase Bruegger's and led him to believe that it could be turned back into a fast-casual leader.

"We're using the equity we've established" over the years, says Scott Hughes, vice president of marketing. In order to combat competitors, however, the chain first needed a fresh look and a greater number of enhanced menu items, he says.

Given Americans' increasingly sophisticated palates, new menu items have heightened flavor profiles, Hughes says. Among the sandwiches are Radishy Roast Beef, with roast beef, cheddar cheese, lettuce, tomatoes, red onions and tangy horseradish mayonnaise: Perky Turkey, with premium turkey, green chilies, lettuce, green peppers, roasted red peppers, red onions and chipotle mayonnaise: and Cuban Chicken, with grilled chicken strips, honey ham, Swiss cheese, lettuce, pickles, Dijon mustard and chipotle mayonnaise.

New salad offerings include Tangy Tango, with mandarin oranges, dried cranberries, blue cheese and sliced almonds on field greens with balsamic Dijon vinaigrette; Orient Express Asian Chicken, with grilled chicken strips, sesame seeds, sliced almonds and chow mein noodles on field greens with sesame-ginger dressing; and Chicken Caesar, with grilled chicken strips, Asiago cheese and croutons on field greens with Caesar dressing.

And because the chain targets a more educated and affluent audience that skews female, the menu is designed to reflect women's concerns with maintaining a healthful diet.

While the company did not unveil a low-carbohydrate bagel during the height of the low-carb craze because a quality product could not be achieved, a low-carb wrap was introduced last April, Greco says. And the chain has taken note that low-fat fare is making a comeback, Hughes says.

Bruegger's also is paying increased attention to service, says Kim Nastri, the company's vice president of training and franchise services. Nastri, a 30-year foodservice industry veteran, has headed up training for Bruegger's for the past two years.

"The service standards are the same in all of the bakeries. We are as consistent as we can be," she explains, adding that the aim is to deliver quick, friendly, efficient service.

To achieve that goal, Bruegger's operates roughly 20 training bakeries in such places as Belmont, Mass., and Cincinnati.

Bruegger's annual sales are $153 million, and average annual sales per unit are $632,700. Same-store sales for 2004 rose 1.4 percent over those of 2003, officials say. The average check is about $5, but renovated stores with the revamped menu are reporting slightly higher averages.

Harry Balzer, vice president of the NPD Group, a Port Washington, N.Y.-based firm that conducts consumer market research, says Bruegger's must gain market share to succeed.

After a period of enormous growth it's "now a market-share battle" against Au Bon Pain, Cosi, Atlanta Bread Co. and other competitors, he says.

He points out that while Bruegger's original emphasis on bagels served the company well, that party is winding down. Bagel sales made up 3.5 percent of breakfast sales in 1989 and soared to 12.8 percent of breakfast sales in 1998. As of 2004, however, that percentage was on the wane, with bagels accounting for 9.3 percent of breakfast sales.

Nonetheless, Bruegger's has no intentions of abandoning the product that first brought the concept to the consciousness of consumers.

The dough for Bruegger's bagels and breads is made fresh daily in commissaries that are positioned no farther than 200 miles from any store. The bagel dough is shipped to individual units, where it is kettle boiled for several minutes and baked in ovens for eight to 10 minutes before being served.

In October the company selected Waterbury, Vt.-based Green Mountain Coffee Roasters Inc. as its official supplier of specialty coffee. The brand was selected based on its strength, consumer preference and its Fair Trade position, officials say. Fair Trade certification guarantees small-scale farmers a fair price for high-quality coffee beans, which helps them to afford better nutrition, education and health care for their families.

During an eight-week test, exit surveys revealed a 20-percentage-point increase in customer satisfaction in units where the coffee was sold. Bruegger's bakeries will carry at least one Fair Trade-certified coffee each day.

The company also is seeking new franchise partners in its drive to expand the chain. Currently, Bruegger's has 132 company-owned units and 112 franchised ones. Since the company was acquired by Sun Capital, it has added two company-owned and five franchised units. Three more company-owned units currently are in development.

Looking ahead, Greco says, the company's strategy is to expand into areas that adjoin existing markets. That way the company can leverage the commissaries it already operates and tap into Bruegger's existing brand loyalty.

"Customers who are familiar with the Bruegger's experience in existing markets create a built-in customer core and a source for excitement around a new Bruegger's opening," he says.

Marketing has been souped up as well, says Greco, with grand reopenings and VIP parties for some units, designed to "let people in the area know" about the relaunch.

Meanwhile, the chain doesn't want customers to forget that they still can get a fresh, hand-made bagel at the bakeries, even as additional offerings are added. "They're still a big part of the business," Greco says.

AT A GLANCE

CONCEPT: Bruegger's

OWNER: Bruegger's Enterprises Inc., owned by Sun Capital Partners, Boca Raton, Fla.

HEADQUARTERS: Burlington, Vt.

YEAR FOUNDED: 1983

NO. OF UNITS: 244

CHAIN'S ANNUAL SALES: $153 million

AVERAGE ANNUAL SALES PER UNIT: $632,700

PER-PERSON CHECK AVERAGE: $5.10

TARGET DEMOGRAPHICS: adults 18-49

WHERE IT TRADES: Arizona, California, Colorado, Connecticut, Florida, Iowa, Massachusetts, Michigan, Minnesota, North Carolina, Nebraska, New York, Ohio, Pennsylvania, Tennessee, Vermont, Wisconsin

NEW MARKET TARGETS: Still in planning stages

TOP EXECUTIVES: James Greco, chief executive; David Austin, president; Scott Hughes, vice president of marketing; Scott Berkman, vice president of purchasing, manufacturing and distribution; Benson Hodgson, vice president of information technology; Kim Nastri, vice president of training; Bob Parette, vice president of finance; Matt Riley, director of human resources; Donald Ritacea, vice president of bakery operations; John Wadhams, vice president of development

COPYRIGHT 2005 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2005 Gale Group