Bagel brands seek whole new image with fast-casual makeovers

Moving beyond their bagel shop origins, major bagel chains continue to evolve into fast-casual cafes in bids to win back customers who’ve been lured away by bakery-cafe chains and others that have added bagels to their menus.

Bagel segment leaders New World Restaurant Group and Bruegger’s Bagel Bakery, which have nearly 850 outlets between them, are focusing on such initiatives as afternoon snacks, specialty coffees, improved merchandising and increased customer service to ward off further encroachment from the likes of Panera Bread, coffeehouse chains and traditional fast feeders with proliferating breakfast offerings.

While breakfast continues to be the strongest daypart for bagel shops, lunch and late afternoon have emerged as lucrative opportunities for additional sales.

“We have become much more of a restaurant; we are no longer a little bagel shop,” said Daniel Dominguez, chief operating officer of Golden, Colo.-based New World Restaurant Group, whose systems encompass 434 Einstein Bros. Bagels units, 76 Noah’s New York Bagels units and 80 Manhattan Bagel units. Dominguez noted that when he joined the company 11 years ago, all of its bagel brands offered little more than bagels and cream cheese.

Also evolving is Bruegger’s, the 256-unit chain based in Burlington, Vt., that opened its first shop 24 years ago when bagel brands were a novelty.

“We have made the transition from just a bagel bakery into fast-casual positioning,” spokesman Scott Hughes said.

As those brands have evolved, so has interest from potential franchisees, the chains say. Einstein Bros. expects to start franchising for the first time this year, and Bruegger’s said it was expanding at an accelerated pace, with plans to open at least 40 units this year and 50 next year, compared with 25 openings in 2006.

Prospective franchisees especially like the fast-casual positioning, Hughes said.
Today, New World’s brands, especially the flagship Einstein Bros., offer everything from panini sandwiches to salads to frozen lattes. Einstein’s latest experiment, now being tested in 28 Denver-area stores, is an open-faced pizza bagel finished in new high-speed ovens. Dominguez would not specify daypart percentages, but he said lunch and afternoon snack sales have grown dramatically.

Einstein Bros. is promoting newer sweet and savory bakery items, along with frozen coffee items and, in some locations, espresso drinks, as ideal for afternoon snacks. Last year, the chain rolled out bagel pretzels, frozen coffees, fruit drinks and such sweet baked goods as a cinnamon twist and strudels. Noah’s will get the seasonal blended drinks this year.

Bruegger’s plans to introduce salty snacks and desserts, aimed at midafternoon customers, during the second half of this year.

“We see growth opportunity in the late afternoon,” Hughes said, adding that sales are now about evenly split between breakfast and the rest of the day.

Espresso beverages, now in six outlets, are expected to be added to more units soon, Hughes said. Specialty drinks, such as iced coffees, are offered seasonally.

Combo meals beyond a sandwich with chips and a soft drink are another new twist for some bagel chains. Bruegger’s Duo, a choice of a half sandwich and a half salad or soup, is expected to boost perceptions of value and menu variety.

Although combo meals may convey value, other elements being featured by bagel chains are geared toward establishing a more upscale position. Both companies are rolling out upgraded decor packages and implementing the first of several service upgrades.

“Hospitality is a major emphasis for our company this year,” Dominguez said. One service upgrade is a hand-held ordering system to reduce customer wait times. Crew members walk down the line of customers to take orders, which often are ready by the time guests reach the counter.

“This also makes sure orders are correct instead of using handwritten order forms,” Dominguez said. Crew members offer to deliver eat-in orders to the tables and to refill coffee cups.
Bruegger’s has a new training program that reinforces positive crew behaviors, including making eye contact with customers, smiling and thanking them, Hughes explained. The chain also is using more mystery shoppers and consumer feedback studies.

The service upgrades, product rollouts and other enhancements appear to be paying off. New World reported a combined same-store sales spike of 4.5 percent for 2006, and Bruegger’s reported a 5.1-percent increase for the year.

Officials of Big Apple Bagels of Deerfield, Ill., whose system has at least 150 units, did not return calls seeking comment on their chain’s plans. But the company’s website depicts a varied menu of breakfast and lunch items, its proprietary Brewster’s espresso and coffee line, and a variety of smoothies.

Some franchisees of Westmont, Ill.-based Great American Bagels, a chain of 48 units in 11 states, have added an espresso bar and a line of smoothies to the chain’s regular fare. Operators are given some decor leeway, and at least one franchisee has added a fireplace, live plants and upholstered chairs to create a cafe atmosphere.

WiFi and coffee

Cafés with free Internet take the place of offices

Mark Yurich and Ralph Dor-Ghali, who work in sales at Sysco Food Services, took over a corner of Panera Bread in Troy last week.

Their laptops were buzzing. Pastry remnants surrounded their tables. Steaming coffee cups were filled to the brim. They took calls and placed orders for clients from their computers, which were connected to wireless Internet Panera provides its customers for free.

"We know all the Paneras in metro Detroit," said Yurich, a district sales manager who has an office in Canton, which he admits outright he rarely visits.

Yurich and Dor-Ghali are among a growing number of workers using coffee shops as offices. While there are no hard statistics showing how many workers are doing this, experts say an entrepreneurial boom is driving more people to utilize cafés. At the same time, more coffee shops are offering free wireless Internet, or WiFi, an attractive feature for workers on the go.
"It's a definite trend," said John A. Challenger, chief executive officer of the Chicago-based outplacement consultancy firm Challenger, Gray & Christmas Inc.

Challenger added that he works out of Chicago-area coffee shops when he needs to.
"There are also a lot more self-employed people these days who don't want to have the expense of an office," Challenger said. "It's also a way to cut back on gas spent during expensive commutes. And not only that, but commuting is a big waste of time. So, it cuts back on that, too."

Look in a metro Detroit coffee shop and you'll find a sea of workers ranging from sales people to pharmaceutical representatives. Not only do they work from laptops, they also meet with clients and hold meetings at coffee shops.

"It's nice to have a place to stop on the road to work," Yurich added. "It's a great place to meet clients. And, who can beat the baked goods and coffee? We definitely spend a lot of money here."
WiFi -- which allows data to be transmitted via a wireless network -- is a major draw for workers, observers say.

Of Panera's 1,056 locations in the country, 940 are equipped with free WiFi, said spokeswoman Liz Scales.

"We're the largest provider of free WiFi in the country," Scales said. "There are people that are there and don't want to buy anything and that's all right. But most people do and we have had nothing but positive remarks about this."

Java Hutt in Ferndale and the Mobile Lounge in Birmingham also offer free WiFi to patrons.
Jill Jordan, a career coach who closed her Farmington Hills office last year and went virtual, said working from coffee shops has helped business.

"Clients appreciate that you are virtual," she said. "They like knowing that they're not paying for your pretty chair, your pretty desk, your pretty paintings."

"We purposely decided not to have offices because we figured we could save the dollars we would spend investing in an office and pump it directly into our business," she added.

Frank Rubino, a local construction manager, said coffee shops are great to work from when he is moving from site to site.

"One of our sites is right across the street," he said, as he worked at the Troy Panera. "They have great bagels here. And, yes, I have a good-sized office. But this is much more convenient."
Melissa Williams, a pharmaceutical rep for Pfizer, regularly works out of the Grosse Pointe Woods Caribou Coffee.

Caribou Coffee spokesman Ryan King said the store installed free WiFi in September. All WiFi is free for the first hour and after that the system requires you to spend $1.50 every half hour.
"I like it here because the first hour of Internet is free and it's less congested than other places," Williams said. "We also don't have our own offices. We are required to have one at home, but when you're on the road and need to stop somewhere and read a report, this works out much better."

"There are a lot of jobs where you can't really do this," Challenger said. For example, some professionals, such as attorneys, should keep their offices for image reasons.

"If you want to show a big company that you're a big company, too, you might need an office," he added.

Bakeries: Upscale Shopping Experience

Consumers are increasingly amiable to paying more for quality bakery products. Bakers are leading the charge by upscaling product offerings, updating bakery interiors and improving customer service.

The days of the mom-and-pop bakery in every neighborhood are gone. Now, consumers are inundated with bakery products in nearly every shopping environment, from the local gas station to the discount store. Some may worry that this is denigrating bakery products in general, however, enterprising bakers are fighting back by offering unique, high-quality products and charging an equally high-quality price. The result? Consumers are eating it up.

What these bakers understand is that to live up to the expectations their prices raise, the bakeries, as well as the products, have to be a memorable and enjoyable experience. "We are trying to be more customer-friendly," says Jack Elmer, owner of JaCiva's Chocolatier and Bakery, Portland, Ore. "All they have to do is ask, and we will have the answers. We will do anything we need to do to get them the answer."

People no longer want to just buy, they want an experience when they are shopping, says Mark Atwood, owner of Atwood's Bakery, Alexandria, La. He recently moved into a new location, and that "experience shopping" factored heavily into the design of his store. "We tried to style the bakery around some ‘wow' factor. We didn't want untouchable, like lot of copper or marble, but we wanted it to still be pretty," he adds.

Atwood researched the effect colors have on people, and he chose a peachy color called coral beach for the stucco-looking walls and green floors, which evoke a homey feeling. "We wanted people to feel comfortable here for awhile," he says.

A bakery's appearance factors greatly in how much customers are willing to spend. "We can go more upscale with our products because people feel comfortable, but not intimidated. They feel like we are charging a fair value for what they're getting," Atwood adds. "The baking industry is so price-sensitive, but most consumers don't care about price as long as they feel it is worth it. Part of that is the products, part of that is the sales staff. All of it is about making the customer feel good."

Bakery as a night spot

With JaCiva's renewed focus on the customer's experience, Elmer recently extended the bakery's hours on Friday and Saturday evenings for "JaCiva's After Dark." Along with the extended hours, JaCiva's also expanded product offerings to include gourmet coffee and chocolate drinks. During JaCiva's After Dark, the bakery serves fancy chocolates and special desserts. "We are focusing on the things we make already, we were already upscale," Elmer says. While the bakery is only open two nights a week, he plans to eventually be open five evenings a week. "I agreed to start out small, but I think this is going to end up being huge," he adds.

While the longer hours do require additional sales staffing, Elmer is not expecting any additional costs. All of the production will be done during normal production hours with the same amount of staff. He estimates that about three-quarters of the bakery's showcases, including the chocolate case, will be full for the evening customers. Only the breakfast items that are prepared each morning will not be available.

Atwood's Bakery also is open two nights a week to draw additional customers. Atwood plans to keep the night hours limited to Thursday and Friday to help retain the specialness of the bakery as a night spot. The deli does reopen and all of the bakery's products are available, but customers generally want the three specialty plated desserts that are only offered in the evenings. The most popular item recently was a mountainous-looking dessert that featured a scoop of gelato shielded by three brownie wedges and topped with hot fudge, caramel, whipped cream and nuts. Atwood's charges from $3.50 to $6.50 for the desserts, and the offerings change weekly.

"At 5 o'clock, we switch to china and crystal with a higher level of service, no more paper. It lends to a feeling of family and hominess," Atwood says. "We want people to think of this as an extension of their living room. It's easier for them to meet here, and we even clean the dishes."

Upscaling product quality

With remodeled stores and extended hours, bakery products have to live up to customer expectations, and many bakers are meeting those expectations with upscaled products. "We do upscale our products, but then again, what is upscaling?" says Hans Nadler, owner of Nadler's Bakery & Deli, San Antonio. "Artisan bread is upscaling, but that hasn't taken off in our area. But we are doing more in petit fours and fancy pastries and tortes," he adds. Sales of these items have increased, and Nadler is seeing customers spend more money on products than they have in the past.

Nadler has definitely noticed more demand for quality in decorated cakes. "People want what they want, and they are very particular now. For the most part, they are willing to pay for it," he adds. While the bakery is able to accommodate the special decorated cake requests, he notes that it does put a strain on his staff. The number of people who are capable of doing the fancy detail that customers are asking for is limited, but the bakery has been able to meet demand so far. "It puts a big load on the top personnel in the decorating department, but they are doing it," he says.

Ingredient selection and production processes play a large role in presenting an upscale image. While all-scratch baking is often perceived to be the only upscale route, Nadler found his quality control and product flexibility improved when he switched to mixes for certain items. "Retail bakers can't be the best at everything," he says. "You have to look around and see how others are doing things."

Nadler's had always made peanut brittle during the winter holiday season, but due to its labor-intensive production, the staff usually only made a pan or two. This year, Nadler switched to a mix that still maintained product quality and allowed the staff to make 10 to 20 pans at a time. "We had peanut brittle coming out of our ears," he says. "But customers bought it. When it was packaged, they bought it like crazy."

Packaging completes image

Packaging plays a large role when bakeries are trying to present a more upscale image, and in turn, charge the upscale prices. "Quality packaging helps sell product," Atwood says. For example, products in clear plastic domes will sell, but when those same items are in quality, high-end packaging, bakeries can sell three to four times as much, he adds.

"Packaging is a big word today," Nadler says. He credits some of the sales to the fact that it is very hard to find gifts under $50 that are worth giving. "But you come to the bakery and you can have a great gift for $15 or $20. The recipients can eat it and enjoy it without worrying about finding a place for the gift," he adds. The Internet has been a boon for finding packaging, he adds. It allows him to shop around and find inexpensive packaging that looks great, and by using the Internet to order packaging, he only has to purchase the amount the bakery needs.
One of Nadler's most popular forms of packaging are box towers. He buys the boxes in sets of five with the boxes nestling inside each other, so storage is not a pressing issue.

Although the boxes are purchased in sets of five, the bakery offers the towers in all sizes. "We build towers to order. Some want two boxes, some want three. We can do whatever they desire," Nadler says. Customers also can specify which product they want in each box, such as candies, fudge, peanut brittle or cookies.

"This past Christmas we had a pharmaceutical company that spent $14,000 with us because we had the towers," he adds.

Make accents seasonal

When purchasing packaging, Nadler suggests staying away from holiday or season-specific designs. Try to purchase packaging that is more evergreen. "You can make it look Christmasy by adding ribbon, but with non-seasonal items, you don't have worry about using them up or storing them until next year," he says.

Nadler's also adds sales by upscaling the packaging on certain items that might not sell well without being packaged. Take for example, the bakery's ring cake, which retailed for $5.99 and did not sell all that well. When Nadler packaged them in plastic and wrapped a bow around them, sales took off, and he charged more, $12.99, for them. "They will buy it wrapped, so they can give it as a gift. They might not want to buy it to take to the office or wherever, but they will buy it for a gift," Nadler says.

Atwood's sells large numbers of finished gift baskets, but the bakery has recently begun offering baskets customers can create to their specifications. Atwood refers to it as global customization. "People want custom products, but you have offer products that are as universal as possible, so you give them choices, but on your terms," he says.

For customized packages, the bakery offers nine different container choices; three wicker, three ceramic and three metal; with each container listing the number of products that it can fit. The bakery products are then displayed nearby, with each product packaged to about the same cubic inch size. Customers select their container and the products to fill it. Atwood also has plastic overwrap bags to fit each different container, so once the customer make the selection, the staff can assemble it in a matter of minutes.

"What it boils down to is making the customer feel good about giving you their money," Atwood says.

Branding Goodwill

Introducing the world to your brand sometimes means inviting the world inside your store. A new initiative from the National Restaurant Association aims to make that process easier.

The quick-service industry has a chance to join the tourism and travel industries in improving this country’s image abroad, say industry and government officials. The opportunity is being presented by a coalition of companies as diverse as the National Restaurant Association, the Walt Disney Company, Enterprise Rent-a-Car, Anheuser-Busch, and the Loews and Marriott hotel chains.

The private business sector’s efforts started with the World Travel & Tourism Council convention in Washington, D.C. in April 2005 and culminated with the formation of the Discover America Partnership in September 2006. The group’s mission is to attract 10 million more international visitors each year.

Attracting tourists to the United States became a critical issue after the September 11, 2001 terrorist attacks. Security measures imposed by the government after 9/11 prompted travel, tourism, and restaurant industry leaders to ask Congress to resolve visa and airport security measures that kept people from entering the United States.

A survey of foreign travelers commissioned by the Discover America Partnership revealed that travelers rate America’s entry process as “the world’s worst” by greater than a 2-to-1 margin over the next-worst destination. Two-thirds of travelers surveyed feared they would be detained at the border because of a simple mistake or misstatement, and 54 percent said immigration officials were “rude,” according to the survey of 2,011 non-U.S. resident international travelers.

“Travelers are more afraid of U.S. government officials than the threat of terrorism or crime,” says Geoff Freeman, executive director of the Discover America Partnership. “Whether it’s reality or not doesn’t matter,” he says. “We have a problem on our hands.”
But the survey also found positives: 72 percent of travelers said they had a “great” time once they got into the U.S. Sixty-three percent said they felt more favorable toward the United States as a result of their visit.

“That’s a prescription for change,” Freeman says. “If you want to win hearts and minds, one of the best things you can do is get people into America.”

Why Tourism Matters

U.S. Rep. William Delahunt (D-Mass.), a member of the House International Relations Committee, issued a statement noting that America’s image problem could undermine our economy. The issue is bigger than the oft-hyped war between Islam and the West, Delahunt says.

“The surplus from international tourism is used to offset the nation’s trade deficit,” he says. “America’s share of the growing worldwide travel market dropped by 36 percent between 1992 and 2005, costing the nation $42 billion in lost revenue last year alone.”

A separate report by the travel industry shows that America has fallen to sixth place as a dream destination. The survey also discovered that 77 percent of international travel agents said America was harder to visit than other countries. A glimmer of hope comes from overseas residents’ favorable view of Americans as people, as opposed to America as a country. In Germany, positive opinion of Americans was 29 percent higher than that of America as a country; in France, it was 28 percent higher; and in Japan, 19 percent, according to a Pew

Research report.

Yet the conclusion of most statistics is sobering: The United States is being bypassed in favor of Europe by business travelers. Business arrivals to the United States fell by 10 percent, to 7 million, over the 2004–2005 period, while the number of business visitors to Europe grew by 8 percent, to 84 million, during the same period. Commerce Department data shows that international travel to the United States fell from $103 billion in 2000 to $80 billion in 2003. It returned to $103 billion in 2005, but industry leaders remain concerned about future growth.
“America’s declining image has an enormous impact on the country’s economic and national security,” says Stevan Porter, president of InterContinental Hotels Group and chairman of the Discover America Partnership.

During a meeting with hospitality leaders in Chicago in November 2006, Gutierrez identified quick-serves as a critical component of the Discover America Partnership effort due to the segment’s pop-culture status and ubiquity.

Making a Difference

Shortly after Discover America’s launch, the U.S. Commerce Department served notice that it was seeking nominees for a renewed Travel and Tourism advisory board with a mandate to advise Commerce Secretary Carlos Gutierrez on “the development, creation, and implementation of a national tourism strategy.” Gutierrez, a former CEO of Kellogg, took an active role in shaping the advisory board’s report, which came out in September.

The 38-page report, titled Restoring America’s Travel Brand, noted that while security is important, this country’s visa and other entry procedures must be improved. The report called for a national marketing campaign to boost the United States as a tourist destination, and reviewing border-crossing issues on the Canadian and Mexican borders to make cross-border access easier.

During a meeting with hospitality leaders in Chicago in November 2006, Gutierrez identified quick-serves as a critical component of the Discover America Partnership effort due to the segment’s pop-culture status and ubiquity. He encouraged quick-serves to get involved with the movement—for their country and their bottom line. More tourists mean more sales. “That’s what it’s all about,” Gutierrez says.

Discover America Partnership has launched an ad campaign urging Americans to support international tourism to the country. The group is also pursuing strategies to help the United States better compete for international travelers, including examining the U.S. entry process and how the nation balances security and economic prosperity; tapping the travel industry’s expertise in hospitality to develop creative and better ways to welcome visitors to America; and studying how other countries compete for international travelers.

Branding Goodwill

Ana Guevara, deputy assistant secretary for services at the U.S. Commerce Department, says quick-serves can help by taking advantage of her department’s Commercial Service groups. The teams are charged with helping U.S. businesses promote their offerings abroad. Quick-serves with an international presence could even consider using a worldwide sweepstakes offer in appropriate markets with a visit to America as a prize, suggests Guevara.

Other avenues for expanding quick-services’ promotional capabilities include Visit USA committees overseas or cooperative marketing programs at state tourism offices or local convention and visitors bureaus.

Robert Ebbin, senior director of research projects for the National Restaurant Association, offered these tips on how quick-services can take advantage of travelers’ and tourists’ business:

• Highlight regional tastes and flavors by offering crab cakes in Boston or Southwestern chili in Houston.
• Get to know concierges and front-desk workers at local hotels so they will think of you when they give recommendations to travelers on where to eat.
• List your restaurant in tourism guides, both online and in print.
• Write opinion essays and send them to the local newspapers, boosting the idea of promoting local tourism.