Nothing beats a good bagel. Well-made bagels are delicious and versatile. They can be eaten plain or made into tasty sandwiches, or anything in between. For many, they are a go-to breakfast option that’s perfect to be eaten on the run.
Bruegger’s Bagels is a franchised chain that offers freshly made bagels and other baked goods, sandwiches, salads, and coffee. They bake their bagels in small batches throughout the day to ensure that each bagel served is as fresh as possible.
Bruegger’s is trying to amp up their presence in the United States by adding more locations. They are accepting applications from potential franchisees at this time, and look forward to meeting the newest members of their team.
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The Story Behind Bruegger’s
The idea for Bruegger’s Bagels was conceived by Nordahl Brue and Mike Dressell in 1983. Because they knew that New York City is the home to some of the best bagels in the world, that’s exactly where they headed. They spent the next two and a half years perfecting their recipe and working with a professional bagel baker to create their signature product.
Once they were satisfied with the recipes and menu they created, they set out on their journey to bring better bagels to all of America. They opened their first location in Troy, New York, just outside of Albany, and soon began spreading across the country.
They began franchising 10 years later in 1993. While most franchised companies begin selling franchising licenses much earlier in their history, Bruegger’s held off. They focused their first 10 years on growing the business steadily and organically. This helped them to lay a solid foundation on which to build, instead of growing too fast and collapsing under the weak infrastructure.
After only 18 months of franchise license sales, Bruegger’s Bagels had expanded to 155 stores spread out across 16 states. This rapid growth proved that the Bruegger’s concept was a winning one. Entrepreneurs were lining up to get their piece of the bagel chain’s success.
In 1996, Brue and Dressell sold the chain to Quality Dining for $142 million in stock, then they joined the board of Quality Dining. Several franchisees became displeased with the brand under Quality’s direction. Together, Brue and Dressell, filed a complaint with the U.S. Securities and Exchange Commission, citing the lack of direction. Because Brue and Dressel owned a combined 26 percent of the company, they were able to arrange for a reorganization of the company.
The end result of that reorganization was the Bruegger’s being sold back to the founders for $45 million.
The pair sold the brand, once again, in 2003. Since that time, Bruegger’s has changed hands several times, never seeming to stay with a parent company for very long. The latest sale occurred in August of 2017, when Caribou Coffee Company and their owners, JAB Holding Company for an undisclosed amount.
After the sale to JAB, Bruegger’s announced the closure of approximately 30 locations. As of today, there are just under 260 Bruegger’s Bagels locations across the United States.
Buying into Bruegger’s Bagels
Bruegger’s is attempting to regrow their total number of locations in the U.S. after the closures that occurred with the sale to JAB. Potential franchisees who are interested in purchasing a license will contact the franchisor directly to gather more information and start the application process.
When applying for a Bruegger’s license, it’s important to remember what they are looking for in their franchisees. Because they market themselves as a neighborhood bakery, their franchisees must be eager to contribute to the community they serve. This means being involved in local activities and giving back to the community through charitable donations.
The ideal candidate will strive to succeed with a national chain. Because of their large presence in several parts of the nation, Bruegger’s demands excellence of their franchisees, and does their part to support the efforts of the location owners.
Those with prior experience either owning or managing a quick service restaurant will be looked upon most favorably during the selection process. It is required experience, if the franchisee does not have an experienced operator to run the location. This experience will help them to navigate the process and anticipate the needs of the location, giving it a greater chance of success.
The ideal candidate will also be able to demonstrate enough financial strength to handle the costs of investment. To measure this, they require the applicants to have a minimum net worth of $400,000. Additionally, each applicant must be able to produce at least $100,000 in liquid cash. The rest may be financed through a third party lender, if necessary.
The estimated initial investment for a Bruegger’s Bagels location ranges between $368,000 and $576,000. These costs include acquiring the store space and building it out to be able to house the bakery, purchasing equipment, hiring and training staff, and initial marketing efforts.
On top of those costs, the franchisee will also have to purchase the franchise license, which Bruegger’s sells for $30,000.
Being a Bruegger’s Bagel Franchisee
When the franchisee has paid their fee and opened their location, they will begin to know what it’s really like to be in business with Bruegger’s. The relationship between the franchisor and the franchisee requires complete cooperation from both parties, as they both have expectations to live up to.
The franchisee must adhere to all standards and guidelines set forth by the franchisor. This means that the business follows all of the policies that the franchise employees. This allows the franchised locations to resemble each other and creates familiarity with the customers. Having a standard menu and an established way of doing things means that each customer who walks through the door will get the same level of service, no matter which location they are visiting.
The franchisee also must pay all of their fees to the franchisor. Most franchisors charge their locations royalties and advertising fees. They help to pay for the services offered by the franchisor, as well as serving as the revenue source for the franchisor. Bruegger’s charges each franchised location 5 percent of their gross total sales for a royalty fee. They also charge 1.8 percent for advertising fees.
The franchisor provides the advertising and marketing materials for each franchised location. The 1.8 percent that they pay helps to recoup the cost of the national television and radio commercials, as well as the printed marketing supplies.
In addition to the national advertising provided by Bruegger’s, the franchisee is also required to spend 2 percent of their gross sales on local advertising.
Bruegger’s also provides training to their franchisees. The initial training is required for all new franchisees. It’s how they learn the business and get familiar with the products and set of standards. Bruegger’s will also provide ongoing training when necessary. Most trainings are provided to both the franchisee and their employees, allowing it to be more effective than trainings that have to be passed on.
The initial training is rather intense. It is required that the franchisee, and their operator if they choose to employ one, participate in this training. It will take place in a certified training bakery, a Bruegger’s location that has met the standards to train new franchisees, and last up to 8 weeks. This hands-on training will allow the franchisee and operator to get a real feel for what it’s like to operate a location. The experience gained during this time will be invaluable.
With both parties holding up their end of the bargain, it creates a stable working relationship that lends itself to success on both sides. When either side slacks, nobody wins.
Franchisees should be especially concerned with staying in compliance with their franchisor because of the possible ramifications of failing to do so. Locations that are not following standards can be fined or receive disciplinary action up to and including termination of contract. Following the rules is good for the efficiency of the location, but it will also help to keep the franchisee in business.
Franchise Performance
Before making the decision to purchase a franchise license, the applicant should really consider all sides of the agreement. The culture of the company, the level to which they are expected to participate in the day to day operations, and the potential for earning are all important facets to the venture. They could each make or break the relationship.
Bruegger’s has gone through its share of troubles in the last 20 years, but they have managed to stay afloat through it all. Even with being sold several times, they have kept their location count up and continue to pursue additional expansions through the sale of franchise licenses.
Of their 260 locations in the United States, only 98 are franchised. This is a drastic difference from most franchise systems. Having so many corporate stores compared to their franchise location raises a lot of questions to the potential franchisee.
Why is the franchise count so low? It could be that Bruegger’s is having trouble finding quality franchisees who are able to sustain their locations. When that happens, it can be easier for the franchisor to retain control of majority of the restaurants to ensure the vitality of the brand. Entrusting most of your business to franchisees who have not proven to be efficient is not a sound business move.
By retaining most of their locations, Bruegger’s ensures that even if all of their franchised locations go under, the Bruegger’s brand will not. They will still have a decently large presence in the country and a stable foundation on which to rebuild.
The low franchise count could also point to a poor franchise system. Even if they have the best franchisees in the world, if the system itself is broken, they will not succeed.
Over the years of being sold multiple times, Bruegger’s franchised location count has been on a roller coaster of ups and downs. From 2010 to 2015, the total count dropped from 107 to 94. Since 2015, they have been attempting to climb back up, but have only managed to add 4 locations in 3 years.
Their slow growth and consistent struggles with maintaining location count are cause for concern. Franchisees who are successful with a brand tend to expand and open additional locations. This does not appear to be happening with Bruegger’s. Without access to revenue totals for these locations, the profitability of the chain must be figured using other methods. Unfortunately, it doesn’t look good at this point.
Begging the Question
Deciding on a franchise license to purchase requires a lot of thought and analysis. Because it is such large investment, it’s important to consider all facts regarding the agreement.
At $30,000, the purchase price for a Bruegger’s Bagels franchise license is fairly low cost. It’s hard to find any franchise license for much lower than that in this economy, and most of the ones that are lower in price also offer less in terms of brand recognition and earning potential.
Bruegger’s Bagels is well-known in many parts of the country. As far as bagel-centric restaurants go, they are one of the leaders. Unfortunately for them, it doesn’t seem to be enough to provide them with franchising stability.
Without the stability in numbers, it’s hard to justify a Bruegger’s license. They can’t maintain their numbers, putting any new franchisees at risk. Something is causing their franchised locations to close and until that problem is identified and resolved, new locations are not advisable.
It takes a great deal of time and money to open a location. Having it close due to a poor franchise system could potentially mean financial ruin for the owner. While no business is guaranteed success, it’s smart to invest with those that have a better track record for sustaining themselves.
Bruegger’s had quite the presence at one time, but over the years it has shrunk and failed to recover fully. Seeing these trends should be a red flag to potential franchisees that something is amiss with their practices.
Knowing that they were recently purchased by JAB Holding Company, a firm with a pretty good track record for success may be a sign of better times on the horizon. Because they have not been under the direction of JAB for very long, it’s hard to gauge exactly how well the arrangement will work out for them, but it seems promising.
JAB Holding Company has some pretty successful chains in their arsenal, including Panera Bread and Krispy Kreme. Their success with these brands gives hope for Bruegger’s to make a rebound under their direction. Potential franchisees may wish to put off purchasing a license until a period of time where JAB’s effect on the brand can really be determined.
Bruegger’s Bagels is in a rebuilding period at the moment. Whether that rebuilding will be successful or not remains to be seen. They have quality products and a powerhouse of a parent company behind them. It may just be enough to spark a major comeback.