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Einstein Noah grows amid sales slump

LAKEWOOD Colo. Einstein Noah Restaurant Group Inc., which saw a slip in profit for the second quarter, is continuing to aggressively pursue franchisees and licensees for its Einstein Bros. Bagels brand.

American Equity International LLC, lead by president Jon-Michial Carter, agreed to open five stores during the next five years in the greater Houston area, including Sugar Land. The agreement gives the Einstein Bros. nine multi-unit deals for up to 60 stores since the company began franchising the brand in 2007.

The bagel chain also said this week it expects to add 20 more licensed stores by 2010.

Franchising and licensing has been a major piece of the bagel company’s growth strategy, said senior vice president Paul Carolan.

“Demand for the brand is building and we intend to see that we expand with the right franchisee partners who can carry on the Einstein Bros. tradition,” he said.

Same-store sales for franchised and licensed units posted a 2.2 percent increase in the second quarter which ended June 30, while same-store sales for corporate units declined 3.2 percent in the quarter, compared with the same period in 2008, Einstein Noah recently reported.

Profit also declined for the company, which owns or franchises approximately 600 restaurants under the Einstein Bros., Noah New York Bagels and Manhattan Bagels names. Net income totaled $6.4 million in the second quarter, or 39 cents per share, compared with $6.9 million, or 42 cents per share, in last year’s second quarter. Revenue fell 1 percent $104 million.

Einstein Noah executives expect to open five more corporate Einstein Bros. this year, between four and six franchised units and between 18 and 23 more licensed restaurants.

Chief executive Jeff O’Neil said the company has boosted its marketing and merchandising program and while transactions and same-store sales remain down in the recession, they did show signs of improvement in the second quarter.

Operational initiatives to improve productivity, food cost management and labor efficiencies helped drive margin improvement by 430 basis points, O’Neil said.

The company also said it expects to get a break in the second half of the year with a $900,000 drop anticipated for agricultural commodities costs.

Contact Dina Berta at [email protected].

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