Date: Thu, 18 Dec 1997 06:44:41 GMT Server: Apache/1.2.4 FrontPage/3.0.3 Last-Modified: Sat, 07 Jun 1997 13:55:54 GMT ETag: "834e4-3354-3399686a" Content-Length: 13140 Accept-Ranges: bytes Connection: close Content-Type: text/html X-Pad: avoid browser bug Manhattan Bagel Co.




The Manhattan Bagel Company Inc. (NASDAQ NMS:BGLS) chain of franchised bagel bakeries and delicatessans was founded in August 1987 in Dunellen, NJ, by Jason and Andrew Gennusa, brothers who owned a successful take-out chicken restaurant.

As of April 30, 1997, the chain had approximately 320 franchised, licensed and company-owned units in 17 states, as well as in D.C., and British Columbia, Calgary and Edmonton, Canada. Manhattan Bagel's headquarters and central commissary are located in Eatontown, NJ.

Corporate History

In June 1994, the company completed an initial public offering for 900,000 shares of common stock priced at $5 per share. Proceeds from the offering were used primarily to automate the company's Eatontown, NJ factory; to build additional plants in other parts of the country; for working capital; to retire certain outstanding debts; and for advertising and promotion.

In October 1995, the company's shares moved from NASDAQ's SmallCap Market
to the NASDAQ National Market.


In November 1995, the company completed an additional public offering of 2.5 million shares of common stock priced at $19.625 per share. Of the 2.5 million shares offered, 1.5 million were sold by the company and 1 million by selling shareholders. Proceeds will be used primarily for acquisitions, construction of new manufacturing facilities, remodelings of company-owned stores and general corporate purposes.

On June 29, 1995, the company entered the California market through the acquisition of I&J Bagels, Inc., a privately-held company that owned or licensed 16 stores in the metro Los Angeles area under the name I & Joy Bagels. Effective with the acquisition, I & Joy became a wholly-owned subsidiary of Manhattan Bagel. The stores are being converted to the Manhattan Bagel name.

In other key transactions, in May 1996, the company merged with Specialty Bakeries Inc., franchisor of 26 Bagel Builders stores, primarily in the metro Philadelphia area. In a June 1996 transaction, the franchise network added 23 Bagel Brothers units in the Buffalo, NY and Cleveland, Ohio markets. All stores in these transactions are being converted to the Manhattan Bagel name, with most operating as franchises.

Manhattan Bagel units typically range from 900 square feet for take-out only shops to 2,000 square feet or more for those providing seating for as many as 50 people. Average store size is 1,600-1,700 square feet.


MBC started to offer regional franchise rights in 1993. Regional franchisors are typically required to develop 30-60 units over a 10 year period within an exclusive territory. The regionals are responsible for selling franchises, site selection, lease negotiation, supervising store design and construction, and providing operations, training and ongoing support. Manhattan Bagel Co., in return, supplies product, store design and equipment specifications, and other support services.

In 1993, the company entered into initial regional franchise agreements for two territories: Massachusetts, Rhode Island other parts of northern New England; and Georgia, South Carolina and a portion of North Carolina. In 1994, the latter regional franchisor acquired the rights for the remainder of North Carolina, while additional territories were sold for Florida; Maryland-D.C. - Virginia; parts of Texas and western New York. In 1995, the rights were sold for the eastern portion of upstate New York, northeast Ohio and Canada. In 1996, rights were sold for regions in northern California and the southwest U.S.

In 1996, the company launched an additional program of offering area development rights within specific markets to experienced food service and franchise operators. To maintain exclusivity within their areas, area developers are required to open and operate pre-determined numbers of units within a designated timeframe. As of year end, the company had entered into agreements with area developers for markets in Nevada, Arkansas, New York, and Arizona.

In seeking locations, the chain targets shopping centers ranging from convenience-oriented strips and supermarket-anchored community centers to large "power centers". Locations in central business districts are also employed.


In 1995, Manhattan Bagel began efforts to co-brand its bagel and cream cheese spread product lines with other retail and food service operators, after being contacted by various companies. In July, the company entered into a non-exclusive, national co-branding agreement with Star Enterprises, Houston, which provides Texaco-branded petroleum products to more than 9,400 Texaco stations and Star Mart convenience stores throughout the country. In September, the company announced that leases had been signed for 13 initial locations in southern New Jersey, including five Manhattan Bagel stores on sites of Texaco service stations and eight branded cases that will be paced within Star Mart stores. The first branded case installations became operational in late September.

In October 1996, the company signed a co-branding agreement with Star's western US counterpart, Texaco Refining and Marketing Inc. The agreement covers the development of seven full-bake Manhattan Bagel units over a 24 month period within new or existing Star Markets in the Little Rock, Arkansas market. In November of 1996, the company signed a co-branding agreement to place Manhattan Bagel units within 20 Ranch*1 chicken restaurants in Manhattan (over a five year period). Discussions are underway with other major oil company and c-store chains for co-branding opportunities. In April 1997, the company announced a co-branding agreement with Jreck Subs, Inc., to open Manhattan Bagel units within Jreck Sub Shops in central and northeastern New York.

In the supermarket arena, the company has commitments to lease space for Manhattan Bagel bakeries within 13 Kroger supermarkets in Georgia and North Carolina (most would be operated by local franchisees). The first three Kroger stores opened in June and July 1996 in metro Atlanta and Raleigh, NC. In August 1996, the company signed an agreement with The Vons Companies to place franchised Manhattan Bagel bakeries within Vons and Pavilions supermarkets in Southern California. The agreement initially covers seven sites operated by the 325-unit supermarket chain. The first four opened in October and November 1996. By the fall of 1996, licensed and franchised full-bake units were also operating within Genuardi's Family Markets, Clemens Markets and Foodtown stores in Pennsylvania and New Jersey. Discussions are underway with a number of other chains.

The company and its franchisees have also placed branded cases and kiosks within supermarkets, including such chains as H.E.B's, Furr's and Smith's Food and Drug - as well as at a number of other alternative locations, including convenience stores (in addition to Texaco), universities and hospitals.



Coupled with the rapid expansion of the chain's stores, these co-branding and other ventures tie-in with the company's objective to establish Manhattan Bagel as the first nationally recognized brand name in fresh bagels.


While growing rapidly, the retail bagel market remains highly fragmented (mom and pop operators predominate) and highly concentrated geographically. At this time, a little bit more than two-thirds of the nations' bagel shops are located in four states: New Jersey, New York, Florida and California. Manhattan Bagel has identified numerous regions throughout the US and Canada which it feels offer opportunities for franchise sales.

First, the menu at Manhattan Bagel appeals to a wide variety of tastes and is not restricted to the ethnic orientation traditionally associated with this product. Choices in bagel sandwiches vary from ham and cheese to bacon cheeseburgers to cream cheese and lox.

Second, product recognition has been vastly expanded through nationwide exposure within supermarkets by Lender's and other companies.

Third, Manhattan Bagel is a proven concept. The company has developed and fine-tuned procedures for efficiently opening and operating franchises, with a manufacturing system that takes the difficult and time-consuming dough creation and bagel formation tasks out of the franchisee's hands.


Key Executives

Jack Grumet - chairman and chief executive officer

Mr. Grumet joined Manhattan Bagel as chairman and CEO in April 1991, acquiring a one-third interest in the business. Initially overseeing the company's franchise development, finance and real estate activities, Mr. Grumet came to Manhattan Bagel with extensive experience in the franchsing industry, most notably as founder and former chairman of Jo-Ann's Nut House Inc. He established the Aberdeen, NJ-based company in 1972 and directed its growth into a chain of 149 units in 19 states - the second largest franchise network in the retail candy/nut field. Mr. Grumet also launched the wholesale and manufacturing facilities that supplied the chain's Jo-Ann's Nut House and Chez Chocolat strores. The franchising, wholesale and manufacturing operations were sold to Carrol's Corp(NYSE) in 1983.

Jason & Andrew Gennusa - president/chief operating officer and executive vice-president, respectively

They founded Manhattan Bagel in 1987. Today, Jason has overall responsibilty for manufacturing aand store operations. Andrew oversees store construction, fixturing and equipment. The Gennusa brothers have been involved in the take-out food industry since the early 1980's, owning and operating a Chicken Holiday take-out restaurant in Dunellen, NJ. When larger space became available in that center for their successful Chicken Holiday, they decided to retain the original location for a new concept that would give them a breakfast and luncheon business. Thus, Manhattan Bagel was born!


David Goldsmith - vice-chairman

Mr. Goldsmith joined the company in April 1996 with 22 years of experience in food manufacturing and distribution. Most recently, he was president and CEO of Ventec Inc., a management concern which marketed regional-branded dairy products in a 34 state area. As vice chairman. Mr. Goldsmith directs Manhattan Bagel's efforts in product marketing while working with Mr. Grumet in strategic planning and Jason Gennusa in manufacturing and distribution.


James J. O'Connor - chief financial officer

Mr. O'Connor joined Manhattan Bagel in March 1997, bringing over 30 years of experience in corporate accounting and finance. Most recently, he spent 18 years with RJR Nabisco Holdings and its predecessor companies, where he rose through the financial and accounting ranks to become assistant corporate controller of Nabisco, Inc. While at Nabisco, he was involved in areas ranging from initial public offerings and SEC filings to MIS systems, and evaluations of acquisitions.


Daniel D. Levy - VP franchise development

Mr Levy, a certified public accountant, joined the firm in February 1994, with over 17 years expereince in public accounting, property and investment banking. Most recently, he was manager of Executive Monetary Management, Inc., New York. Earlier in his career, he was a tax supervisor at Laventhol and Horwath, East Brunswick, NJ; and a tax senior at Price Waterhouse & Co., New York.

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