New World Restaurant files for i.p.o.

by Eric Schroeder
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GOLDEN, COLO. — New World Restaurant Group, Inc., the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States, filed a registration statement April 10 with the Securities and Exchange Commission to sell up to $125 million of its common stock as part of a public offering.

The Golden-based operator of bagel restaurants did not reveal an estimated number of shares it planned to sell or a price range for the offering, but did note that it plans to use proceeds from the offering to repay debt. Included in that debt is a $25 million subordinated note and $65 million second lien term loan in full. New World Restaurant also said it plans to repay part of its $80 million first lien term loan.

New World, which expects to change its name to Einstein Noah Restaurant Group, Inc. on or about May 3, 2007, has applied to be listed on the Nasdaq under the symbol "BAGL."

Morgan Stanley, Cowen and Company and Piper Jaffray & Co. are listed as underwriters for the offering. Before the offering, Greenlight Capital owned 94.1% of the company’s stock. Chief executive officer Paul J.B. Murphy III held a 1.7% stake. Founded in 1996, Greenlight is a New York-based investment management firm that manages a series of value-oriented alternative investment vehicles specializing in publicly-traded U.S. securities. The investment firm is not selling any of its shares as part of the offering, New World Restaurant said.

In the year ended Jan. 2, 2007, New World Restaurant Group sustained a loss of $6,868,000, which compared with a loss of $14,018,000 in fiscal 2005, a loss of $17,405,000 in fiscal 2004, a loss of $87,944,000 in fiscal 2003, and a loss of $72,488,000 in fiscal 2002.

Net revenues in the year ended Jan. 2, 2007, were $389,962,000, up narrowly from $389,093,000 in fiscal 2005. Revenues were $373,860,000 in fiscal 2004, $383,306,000 in fiscal 2003, and $398,650,000 in fiscal 2002.

During 2006, more than 60% of the company’s revenues were generated during the breakfast daypart. In its S.E.C. filing, New World Restaurant cited several risk factors that may impact future earnings, including intense competition in the restaurant industry.

"Although we operate in the fast-casual segment of the restaurant industry, we also consider restaurants in the fast-food and full-service segments to be our competitors," the company said. "Several fast-casual and fast-food chains have recently announced their intentions to focus more on breakfast offerings. This could further increase competition in the breakfast daypart."

As part of its strategy to compete in the marketplace and expand sales and profitability at its existing restaurants, the company said it has introduced 13 new lunch items and 10 items for the afternoon daypart during the past year.

"As we have expanded our menu, we have refined its layout to simplify the presentation while highlighting the breadth of our offerings," the company said.

New World Restaurant also said it has stepped up its restaurant sales through catering. The company currently has catering operations in 13 major markets with plans to add catering specialists in approximately five additional markets during 2007.

The company also said it plans to open a total of 11 to 15 new company-owned restaurants during 2007. The company has targeted Atlanta, Chicago, Las Vegas, Phoenix and various cities in Florida as sites for Einstein Bros. restaurants. For Noah’s, the company intends to focus development on Portland, Ore.; Seattle and various cities in California.

New World Restaurant operates approximately 600 restaurants in 36 states and the District of Columbia under the Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel brands. The company’s product offerings include fresh bagels and other bakery items baked on-site, made-to-order breakfast and lunch sandwiches on a variety of bagels and bread, soups and salads, desserts, coffees and an assortment of snacks.

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