GOLDEN, Colo. — A victim of the bagel wars, Einstein Bros. Bagels has embarked on a corporate makeover that its new owners hope will make it the Starbucks of the bagel industry.
New World Manhattan Bagel Inc., based in Eatontown, N.J., recently bought Golden-based Einstein Bros. Bagels — the largest bagels chain in the country — out of bankruptcy for $190 million.
Over the next five to 10 years, CEO Ramin Kamfar hopes to expand to 2,000 to 2,500 stores with companywide sales of $2.5 billion, or $1 million per store, building what he calls "the Starbucks of the industry."
Einstein operates 460 primarily company-owned stores under the Einstein Bros. Bagels and Noah's NY Bagel brands. New World franchises, licenses and owns about 350 bagel stores in the United States under the Chesapeake Bagel Bakery and Manhattan Bagel brands.
"We are currently examining what to do with the company's brands and how to achieve cost-savings," Kamfar said at Einstein's Golden headquarters.
"We are not looking to change the (Einstein) concept; we think the brand and the concept work as is."
Instead, Kamfar plans to achieve economies of scale by combining ingredient purchasing. CFO Jerry Novack said that Einstein's stores will use excess capacity in New World's manufacturing plants, further cutting costs. Kamfar will decide in the next two quarters whether to convert all stores to the Einstein's name, menu and decor.
"I think Einstein's and Manhattan are both good companies and vigorous competitors, but they are fundamentally different concepts," said Nordahl Brue, chairman of top competitor Bruegger's Corp., owner of Bruegger's Bagels, the No. 2 bagel chain in the country.
Said Mark Kalinowski, an equity analyst with Salomon Smith Barney: "Will these efforts lead to a better view of bagels from Wall Street's point of view? Certainly it's a step in the right direction."
A former banker, Kamfar left Lehman Brothers in 1993 to open a New World coffee store in New York. Other New World stores soon followed, but as competition from Starbucks heated up, Kamfar sought ways to differentiate.
Once the darling of Wall Street, bagel businesses found themselves in trouble in the late 1990s as national chains discovered they had expanded too rapidly.
In 1998 and 1999, New World bought a number of chains on the cheap. Then in April 2000, Einstein filed for protection in U.S. Bankruptcy Court. The company had grown from 60 shops to more than 500 in three years.
On June 4 New World emerged the winning bidder, which began Kamfar's whirlwind quest to get $140 million in investments before a June 20 deadline.
When Kamfar heard that the final investor came through Friday afternoon, "I felt — I couldn't figure out which — excited, exhausted or exhilarated," he said.