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Einstein Noah debuts new menu boards

Bagel player eyes larger sales from combo meals and price increases

Einstein Bros. Bagels and sister brand Noah’s New York Bagels rolled out new menu boards this week that included combination meals for the first time, as well as a 1.5-percent price increase.

Presenting at the ICR XChange investor conference Wednesday, Einstein Noah Restaurant Group chief executive Jeff O’Neill said the new menu boards are aimed at building check averages at the 587-unit Einstein Bros. and the 72-unit Noah's. The company also operates and franchises the 74-unit Manhattan Bagel chain, which is scheduled to roll out the new menu boards in the second quarter.

After struggling with declining sales in 2009, systemwide same-store sales and transactions turned positive in 2010 with a 0.7-percent increase during Einstein Noah’s Sept. 28-ended third quarter. Momentum continued into the fourth quarter, O’Neill said, though the company has not yet reported year-end results.

The Lakewood, Colo.-based company attributed the improvement to higher traffic resulting from a new bagel thin sandwich line. O’Neill said he sees the new bagel thin offerings as a big opportunity for the company as menu labeling focuses consumer attention on calories. The bagel thins, which are simply a slimmer version of traditional bagels, are lower in calories and appeal to carbohydrate-adverse diners.

At the fast-casual Einstein Bros., an egg white sandwich with asparagus, mushrooms and Swiss cheese on a bagel thin contains 290 calories and has become the top seller in the past four months, appealing especially to that brand’s target of affluent “working mom/super moms,” O’Neill said.

The company first began offering bagel thins in May 2010 in Einstein Bros. and Noah’s stores, adding them later in the year at Manhattan Bagel. The earlier version, however, is described by company officials as more of a bread-bagel hybrid.

An improved version of the bagel thins, however, rolled out this week at Einstein Bros. and Noah’s, made from bagel dough and baked in house. Manhattan Bagels will begin offering the new version later this year.

The bagel thins are also now available in the bakery case, and O’Neill projected that they could grow to represent up to 25 percent of sales within that niche on the menu.

“Bagel thins have a lot of breadth,” O’Neill said. “It’s a product that has legs.”

Also new on the menu boards are a line of non-carbonated beverages, which are also higher check items. “Non-carbonated beverage is what’s growing,” said O’Neill. “Soft drinks are not growing.”

In addition, Einstein Bros. recently added new snack items to help boost incremental sales, including a packaged bag of bagel chips that O’Neill said could become a branded product in grocery stores.

And the company is testing the use of baristas in stores with upgraded equipment to serve specialty coffee drinks as an option in addition to the self-serve coffee traditionally available.

On the new Einstein menu, examples of the multiple combination meal items include a bagel and cream cheese, a fruit cup and regular coffee for $4.99; or a bagel thin egg white sandwich with a fruit cup and regular coffee for $5.99. At lunch, combos include a bagel dog, chips and a regular fountain drink for $6.49; or a Tasty Turkey sandwich, chips and a regular fountain drink for $7.99.

“Combos, as you know, are an everyday part of the restaurant business and we haven’t done combos, so we feel this is another opportunity to build check as we go into 2011,” O’Neill said.

Einstein Noah has not raised prices in two years and has focused instead on building traffic at breakfast, which has become an increasingly competitive daypart, he said.

“In the first quarter 2010, it looked for a while like the world had landed in the breakfast category,” said O’Neill, with Subway adding breakfast, McDonald’s offering a $1 breakfast menu and Burger King beefing up its morning offerings.

Despite the increased activity, O’Neill said Einstein Noah grew its share of transactions in breakfast occasions by focusing on its message of offering freshly baked products.

Breakfast sandwiches, in particular, are an underdeveloped opportunity that Einstein Noah aims to capitalize on, O’Neill said. Citing NPD Group statistics, Einstein Noah said breakfast sandwiches represented about 40 percent of sales across the quick-service segment but only about 16 percent of sales within the fast-casual realm.

In advertising, the company also is targeting competitors from a calorie-count standpoint. One print ad, for example, shows an Einstein Bros.’ sausage and egg white bagel thin sandwich at 230 calories compared with a McDonald’s Sausage Egg McMuffin with 450 calories.

O’Neill said the company is also focusing on growing the Einstein Bros. brand by franchising and licensing, with a big presence in airports, college campuses and health care settings.

Contact Lisa Jennings at [email protected].

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