Bruegger's Founders Announce Growth Plans.

Business Editors

BURLINGTON, Vt.--(BUSINESS WIRE)--Jan. 6, 2000

Bruegger's Corporation co-founders Nordahl Brue, Chairman and CEO, and Michael Dressell, President and Chief Concept Officer, announced today that they will be restarting the growth engine at Bruegger's.

"Industry fundamentals are now good," stated Nord Brue. "For the last two years, we have been disciplined in waiting as the market shake-out occurred in the bagel segment. During the 1995-1997 time period, the growth rate of bagel shops significantly outpaced bagel consumption. However, we have never lost sight of the fact that per capita bagel consumption has been growing at a double-digit rate each year for the last fifteen years. We knew that we just needed to stay focused and wait for the number of bagel bakeries to come back in line with demand."

According to Michael Dressell, "we have used the last two years to build the platform for growth. Specifically, since our repurchase of the concept from Quality Dining (October 20th, 1997), we have rebuilt our infrastructure, re-established the positioning and personality of our brand, and developed, tested and verified several significant sales building initiatives."

"With the bagel segment's underlying economics returning to solid ground and our new infrastructure and systems now in place, we want to start the growth phase of our business plan," stated Brue. "Specifically, we will be implementing several franchising strategies that leverage our existing brand equity, asset base and operating talent. Our five point plan incorporates the lessons we learned when the industry over-expanded in the mid 90's. We will focus on quality of growth, not quantity of growth."

"First, we will be concentrating our franchising efforts in and around markets where we already have a strong brand name, where we can utilize our existing commissary system and where we can capitalize on our well-developed operating talent. The bakeries in and around these markets have an average pre-royalty cash flow north of 20%," stated Brue. "We believe franchising in these markets will set new franchisees up for success, improve the economics for current bakery owners and solidify Bruegger's leadership position."

"Second, we will be selling several `seed markets.' These markets already have profitable units; however, we have not fully penetrated them. Nor will we for some time. We would rather sell these markets to new or current franchisees who can focus on dominating them sooner than we can."

"Third, we wish to give our current operators a chance of becoming owners. We founded our system on sharing equity with our operating partners because we wanted them to be close to our customers. This relationship has proven to be fruitful for the participants, for Bruegger's and, most importantly, for our customers. We now think the time is right to take our founding philosophy to the next step by providing an opportunity for our operating partners, district managers and general managers to become owners. Shortly, we will be announcing the details of an `Operator-to-Owner' program where qualified operators will have the option to purchase some of our affiliated units or new turnkey units. Under the scenario of turnkey units, Bruegger's Corporation will take the risks relating to real estate selection and construction management, thus allowing our existing operators to focus on managing bakeries. To support the `Operator-to-Owner' program, we have registered Bruegger's with the Small Business Administration. As a result, franchisees of Bruegger's are eligible for expedited SBA loan processing."

"Fourth, we will also be talking with independent competitors who are in our growth markets about converting to Bruegger's Bagels," stated Brue. "We are the only national player with fresh dough and a totally traditional process. Consequently, the only groups that we have a strong appetite for consolidating with are local and regional operators who make a similar product and use a similar manufacturing and baking process."

"Fifth, we want to encourage growth with our existing franchisees. Towards this effort, we will be waiving the initial franchise fee for all existing franchisees on any new leases signed prior to June 15th, 2000. If this initiative proves successful, we will consider extending it for another six months."

In 1983, Nordahl Brue and Michael Dressell founded Bruegger's Bagels. Bruegger's Corporation is privately held and headquartered in Burlington, Vermont. Bruegger's currently has 310 bagel bakeries in 20 states.