Brand Tactics: Bruegger's Is Twice Baked
Bruegger’s adopts a new look and lunch menu as it evolves into a bakery cafe.
By Donna Hood Crecca, Contributing Editor -- Chain Leader, 9/1/2004
 CEO James Greco (l.) and President David Austin are rolling out a new design and expanded menu to 250 Bruegger’s stores to reposition the beleaguered bagel chain as a fast-casual bakery-cafe. |
Drop the word “bagels” from the name. Expand the menu from bagel-centric to feature freshly prepared salads and sandwiches and an upgraded soup offering. Change the decor to a more upscale, comfortable look. What have you got? An aggressive strategy to morph a beleaguered bagel brand into a fast-casual bakery-cafe.
Will it work? James Greco says he had his answer within four months of taking the helm as CEO of Bruegger’s Enterprises Inc. last August. The company tested the reimaging package and expanded menu at five Bruegger’s.
“These units saw same-store-sales increases as high as 30 percent immediately and have sustained increases in the teens. Average checks rose to $5 from $4.60, and traffic is up. Our research also tells us customers are in favor of the changes,” recounts Greco, an attorney and former CEO of Fieldbrook Farms Inc., an ice-cream company.
The new menu items began rolling into the 130 corporate locations and 120 franchised units in July. Burlington, Vt.-based Bruegger’s has updated 30 corporate locations so far; another 30 will be renovated by year-end and 60 in 2005. Two West Coast franchisees are adopting the new look, and as
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many as 20 additional franchise locations will open next year.
“Bruegger’s is doing the right things; they’re doing a lot, and they need to do a lot,” says Ron Paul, president of Chicago-based research firm Technomic Inc. “This is not a situation where subtle changes will move the needle.”
Bumpy Road
Founded in 1983 as a bagel bakery, Bruegger’s grew to 475 units under the ownership of Quality Dining during the late 1990s. Overleveraged and unable to keep the concept fresh, Bruegger’s saw its same-store sales begin declining in 1999. By 2002, Quality Dining was shuttering locations and shopping the concept to prospective buyers.
Taken with the chain’s 90 percent unaided brand recognition, the quality of its product—bagels made from fresh dough, kettle boiled then baked—and locations, Greco formed Sun Capital Partners to acquire the chain last year for an undisclosed amount.
“Sun Capital and Jim Greco injected capital into the company that’s allowing us to pursue a much-needed reimaging and repositioning program and get on with new unit growth,” says David Austin, president of Bruegger’s since 2001.
With the new look and menu and 10 locations opening this year, Greco anticipates 2004 systemwide sales will reach $158 million, up from $150 million last year, and expects same-store sales to grow 2 percent. The company plans to open 30 to 40 stores in 2005, 10 of them corporate. Development costs for each location are about $300,000; converting a unit costs an estimated $100,000.
Greco, Austin and the existing management team developed the repositioning plan before the purchase was finalized, enabling them to hit the ground running.
The first new stores opened just 90 days after the acquisition, boasting earth tones, natural-wood facings on counters and tabletops, wood and tile flooring, booth seating, armchairs and couches. Twenty units offer wireless Internet access.
While sandwiches have been a part of the Bruegger’s menu for several years, most were served on the chain’s signature bagel or its thinner, square bagel called Softwich.
“Most of the sandwiches were based on the bagel-and-spread platform by adding meats and vegetables,” says Philip Smith, corporate executive chef at Bruegger’s since 2002. “With the new items, we were looking to be more complex and add more interesting ingredients.”
Beyond Bagels
The result is sandwiches such as the Radishy Roast Beef, $4.69, with cheddar, lettuce, tomato, red onion and horseradish mayonnaise; and the Herby Turkey, $4.69, featuring herb-garlic cream cheese, sun-dried tomato spread, lettuce and red onion.
Smith also created four new salads, including the popular Tangy Tango, $5.99, which features Mandarin oranges, dried cranberries, blue cheese and sliced almonds on field greens with balsamic-Dijon vinaigrette dressing.
Organic and vegetarian varieties now round out Bruegger’s soup offerings, and Smith upgraded traditional favorites.
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Bruegger’s looked to leverage its reputation as an authentic bagel bakery and expand into new bread products. Honey Wheat Stone Hearth Bread, the first in a line of new stone-hearth-baked breads, debuted in June. Additional breads are in development. The company rolled out low-carb wraps in March.
Bruegger’s researched and then rejected the possibility of a low-carb bagel. “We labored hard at it, and then realized we couldn’t do it without belittling our product, so we sought another carb-friendly option and created the wrap,” says Smith.
In developing the new menu items, the Bruegger’s team ensured each would work within the existing operational system. As with bagels, dough for the new bakery items is prepared in the 15 commissaries that deliver four times a week to the 258 locations.
The other element left unchanged is Bruegger’s commitment to its core product, the bagel. “We’re in no way leaving bagels behind,” says Austin. “Bagels are our heritage, and we’ll continue to feature bagels as our point of differentiation.”
Concept of Evolution
Banking on the repositioning program, John Gantes and Paul Abel are the first franchisees to adopt the new look. Together, the pair owns a Bruegger’s commissary; Gantes’ company operates 10 units and Abel’s operates nine.
“We’ve been waiting for this,” says Abel, who has operated San Diego-based Pacific Bagels LLC since 1996. “The [Greco] regime has done more for Bruegger’s in nine months than anyone else has done in the past nine years.” Abel anticipates that the addition of the lunch items will bolster checks at his locations from an average of $5.50 to $6.50.
Gantes is looking for a shift in daypart sales at the operations run by his Pacific Bagel Partners LP, based in Rancho Santa Margarita, Calif. “Currently we do 80 percent of our business in the morning. We’re hopeful that the breakfast-to-lunch ratio will move to 65-35,” he says.
Filling the Gap
Some other players in the once-crowded bagel segment, many of whom are owned by Golden, Colo.-based New World Restaurant Group, are making similar moves. Einstein Bros. expanded its menu in May to include lunch sandwiches, salads and soups, as well as breakfast panini sandwiches; it rolled out a low-carb bagel earlier this year. Following several acquisitions, New World reported that operating profits increased for the first quarter of this year, the first such gain since 2002.
For its part, Bruegger’s is looking to transcend bagels and compete more directly with the likes of Panera Bread, Au Bon Pain and Corner Bakery. No easy task, but Bruegger’s says it has a few advantages.
 Despite expanding into sandwiches, salads and soups, Bruegger’s remains committed to its core product, the bagel, as its point of differentiation. |
“Bruegger’s was actually doing fast-casual before there was a name for it,” Greco says. “The company developed problems in the late ’90s, however, and other concepts took a leadership role. We’ve now improved our appearance and menu to reposition ourselves to compete on par with those concepts.”
“Our setup and execution allows for speed of service those competitors can’t match,” says franchisee Abel. “Our goal is 3 to 4 minutes from order placement, and we meet that with a fresh, made-to-order, quality product. You can’t get served that quickly at Panera.”
Technomic’s Paul also notes that the fast-casual bakery concepts boast average checks well above Bruegger’s systemwide average of $5.
“Even with an upward nudge in average check that will likely come from the more expensive lunch items, Bruegger’s is slipping in between the level of Subway and the traditional bagel shops and the concepts like Corner Bakery and Panera. Bruegger’s can fill that price gap, which makes them very attractive,” he says.
The company will have to do so quickly, however. Boca Raton, Fla.-based Sun Capital Partners is a venture-capital firm and will likely look for an exit strategy in about five years.
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