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Mike Phillip of the Fayetteville, Ark.-based management group for two Einstein Bros. Bagels stores in Springfield says weekly revenue is up nearly 30 percent since a sale in October.
Mike Phillip of the Fayetteville, Ark.-based management group for two Einstein Bros. Bagels stores in Springfield says weekly revenue is up nearly 30 percent since a sale in October.

Ark. franchisee courts area Einstein Bros.

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The bagel business didn’t provide the bang for the buck two active area businesswomen had hoped.

A franchisee from northwest Arkansas is pursuing the purchase of two Einstein Bros. Bagels stores in Springfield after Terry Reynolds and Rita Baron sold their franchise stores back to the Lakewood, Colo.-based corporation last fall.

Mike Philip of Fayetteville, Ark.-based franchisee Philip Enterprises said he and operations partner Aaron Nickell were contracted to manage the Springfield properties in October when Einstein Noah Restaurant Group Inc. (Nasdaq: BAGL) took them over.

Philip said the local stores were underperforming compared to national sales averages for Einstein Bros. franchise stores.

“When we first got here, I made employees park in the front so we looked busy,” Philip said.

Philip owns two Einstein Bros. stores – in Rogers and Fayetteville, Ark. – and he is interested in buying the two Springfield stores that he claims are now growing in sales.

Philip said the average annual revenue for an Einstein Bros. store is $850,000 per year. He said weekly sales volumes are up about 30 percent in March compared to October, and he projects Philip Enterprises is now on track to hit the national sales average in 2015.

Springfield-based franchisee RT Development Co. LLC brought the bagel brand to town in mid-2010, opening a store at 1933 S. National Ave. and later at 4430 S. Campbell Ave. The partnership, which at the time included Reynolds, Baron and restaurant/nightclub owners Paul Sundy and Jay Hickman, started with a bang as the South National store recorded the highest opening week sales for a new franchise store in 2010. The early performance earned the Springfield partners recognition during an annual franchisee summit at the bagel chain’s headquarters.

Reynolds, the owner of property manager C. Arch Bay Co., confirmed via email RT Development last year sold the franchise properties, including a store in Chicago, but she did not provide reasons for the sale. While Sundy and Hickman stepped out of the picture in early 2011, Reynolds said the franchise has been dissolved, and she declined to disclose the sale price.

The original franchise agreement spelled out RT Development was scheduled to open four stores by 2014, as well as additional stores in Chicago, according to Springfield Business Journal archives.

Baron, the founder of architecture firm Baron Design & Associates LLC, said the franchisees asked the corporate parents if they could manage the company after RT Development’s operations director moved to California last spring. After some talks that also addressed the problem of needing to build two more stores in the area, she said Einstein Noah Restaurant Group Inc. made an offer to buy.

“It was an amazing offer, and hard to refuse,” she said, adding the company is giving the former franchisees a percentage of ongoing sales as part of the transaction.  

She said the stores were performing well at the time of the deal – with roughly $18,000 in weekly sales – but not up to the standards they’d set. And sales were not high enough to justify building two more stores, she said. Acknowledging winter sales are generally lighter, Baron disputed the notion that sales had jumped under the new management compared to the year prior.

Baron and Reynolds remain in business together through RTT Hospitality LLC, a partnership with Tim O’Reilly of O’Reilly Hospitality Management LLC. The group is developing a $10 million, five-story hotel expected to be complete in mid-June across from Mercy Hospital Springfield.

Christine Beggan, a spokeswoman for Einstein Noah Restaurant Group, said RT Development pursued the franchisor with long-term concerns about operations.

“We are currently looking to refranchise the market under new local ownership as the previous franchisee wanted to pursue new opportunities,” Beggan said in an email. “In the meantime, we remain committed to the success of Einstein Bros. in the Springfield area … as we identify the appropriate local partner to operate this store locally over the long term.”

Philip, who also serves as chairman of an advisory council for Einstein Bros. franchisees, said he and Nickell are driving to Springfield on alternating weeks trying to grow the brand. Acknowledging the former Springfield franchisees had multiple business interest tugging at them, Philip said they might have fallen into the trap of being overly focused on early profit and loss results.

“It’s a relationship-based business,” he said, adding the group plans to join the Springfield Area Chamber of Commerce and is now donating leftover bagels to Victory Mission. “We want to give back to the community and develop that culture of Einstein’s that has made it a success nationwide.”

Noting employee turnover had been a problem at the stores, Philip said he and Nickell are working to develop relationships internally, as well.

Einstein Noah Restaurant Group, which includes Einstein Bros., Noah’s New York Bagels, and Manhattan Bagel brands, posted 2013 revenue of $114.2 million, up 3.2 percent from $110.6 million a year earlier, for its more than 850 locations. Last year, the company opened a record 61 stores and this year is projecting roughly 80 store openings.

Considering the Springfield franchise rights include Branson and Joplin, Philip said the Joplin market would be his first expansion target as franchise owner. Einstein Bros. doesn’t currently operate in the city.

“I think Joplin is a great market,” he said, noting the Springfield market isn’t quite ready for a third store. “Unfortunately, because of the tornado, there is a boon of new commercial growth.

“Would we like to do another store in Springfield? Yes. Do we think that would happen anytime soon? No,” he said.[[In-content Ad]]

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