Einstein Noah Restaurant Group Reports Third Quarter 2011 Financial Results

Einstein Noah Restaurant Group, a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros. Bagels, Noah’s New York Bagels, and Manhattan Bagel brands, has reported financial results for the third quarter ended September 27, 2011.

Selected Highlights for the Third Quarter 2011 Compared to the Third Quarter 2010:

• Total revenues increased 2.1% to $103.5 million from $101.4 million.
• System-wide comparable store sales increased 1.0%.
• Adjusted EBITDA of $10.3 million compared to $10.9 million.
• Net income available to common stockholders of $2.8 million, or $0.17 per diluted share, compared to $3.6 million, or $0.21 per diluted share.

Jeff O’Neill, President and Chief Executive Officer, stated, “System-wide comparable store sales improved sequentially for the third consecutive quarter and we also benefitted from sustained growth in our franchise, license and manufacturing revenues. Although higher food costs pressured margins, we effectively controlled the remainder of our expenses and are on track to deliver annualized savings of $3.0 million. Looking ahead, we continue to identify and evaluate ways to streamline our business model without impacting the customer experience, with a particular emphasis on distribution network costs and manufacturing opportunities. In addition, our asset light, franchise first model allows us to grow our brand through unit expansion while returning value to our shareholders via our dividend program.”

O’Neill concluded, “From a brand perspective, we are concentrating on our core breakfast and lunch day parts. Specifically, we are focusing on everyday value with our $5 under 400 calories thintastic bundle, highlighting delicious fresh baked food offerings such as premium sandwiches, lower calorie bagel thins, and an enhanced coffee platform with dedicated baristas. Finally, we are building our catering business which grew approximately 20% in the quarter and we continue to evolve our franchise network, and license channel which will be a key contributor to our long term earnings leverage.”

Third Quarter 2011 Financial Results

For the third quarter ended September 27, 2011, system-wide comparable store sales increased 1.0%, reflecting strong growth in check, a favorable mix shift and strength in catering sales. This was partially offset by lower comparable transactions, as the Company continued to roll over its free bagel promotion from last year. Total revenues increased 2.1% to $103.5 million from $101.4 million.

As a percentage of Company-owned restaurant sales, total costs at Company-owned restaurants increased 150 basis points primarily due to higher commodity costs and a product mix shift towards catering and sandwiches, resulting in a gross profit margin of 17.0%. Labor costs, other operating costs, rent and related costs, and marketing costs on a combined basis held steady compared to the third quarter of 2010 as a percentage of Company-owned restaurant sales.

Manufacturing and commissary gross profit decreased to $0.8 million from $1.0 million in the third quarter of 2010. The decline in gross profit was primarily due to higher commodity costs and an unfavorable shift in product mix to third party customers.

Overall, gross profit was $18.9 million, or 18.2% of total revenues, in the third quarter of 2011 compared to $20.1 million, or 19.8% of total revenues, in the third quarter of 2010.

General and administrative expenses decreased to $8.6 million from $9.2 million due to lower variable incentive compensation, recruiting and relocation expenses.

Adjusted EBITDA was $10.3 million in the third quarter of 2011 compared to $10.9 million in the third quarter of 2010. Income before income taxes decreased $1.3 million to $4.5 million from $5.8 million.

Restructuring Expenses

During the third quarter of 2011, the Company determined that it could streamline its supply chain and reduce costs by closing its five food commissaries. As a result, the Company incurred $0.1 million in restructuring expenses including termination benefits for the employees at its Columbus, Ohio commissary, which is expected to close by the end of the year. The closure of its remaining four commissaries should occur in the first quarter of 2012. The Company estimates it will incur additional restructuring expenses between $1.0 million and $1.2 million, which will consist of employee termination benefits, lease contract terminations, and other associated costs, and be equally split between 2011 and 2012.

2011 Outlook

The Company has updated its outlook for 2011. The Company now expects to open between 60 and 65 total restaurants (compared to between 75 and 90 total restaurants previously). The change to previously disclosed estimates relates primarily to campus license units which are expected to open after the holiday season to coincide with the return of students in January.

Total 2011 capital expenditures are projected to be approximately $30 million.

The Company has secured 100% of its wheat and coffee needs for 2011, and 44% of its wheat and 70% of its coffee needs for 2012.

The Company currently estimates a 2011 annual effective tax rate of 39.3% down slightly from its previous estimate of 41.0% as a result of higher than previously expected employment tax credits; however, the Company will continue to only pay minimal cash-taxes for the next several years.

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros. and Noah’s New York Bagels brands and primarily franchises locations under the Manhattan Bagel brand. The company’s retail system consists of over 750 restaurants in 39 states and the District of Columbia. It also operates a dough production facility.

Burger King has introduced a new chicken choice to their menu with Chicken Tenders. With eight different dipping sauces, children and adults alike can have four for $1, eight for $1.99 or 20 for $4.99. To promote these new chicken tenders Burger King is mailing out coupons for 272 million tenders to families around the country. The new chicken tenders has replaced the crown shaped BK Nuggets.

Fast casual restaurants are continuing to grow, with a 17 percent rise in total visits during 2010. While other restaurant categories are losing sales or visits, the combination of a medium price point, fast turnaround and higher quality service and food has made these restaurants very popular during the recession. Many fast casual chains are planning for additional locations this year due to the growth.

Carlson Restaurants, the company that owns the T.G.I. Friday’s chain brand, plans to double their number of operating franchises. They recently announced this plan at the 2011 Global Business Conference. The plan is set for completion in 2015. To support this goal, the company plans to renovate the style and menu of the chain.

The world’s largest hot dog chain, Wienerschnitzel, has announced their new “Cash in On a Corn Dog” sweepstakes. 1 in 5 customers will win some form of a prize by purchasing a corn dog and checking the wooden stick for a prize code. The top prize is $10,000 in cash, but customers can also win smaller cash prizes and free corn dogs.

The rising costs of food, especially meat, have driven many restaurants towards using locally sourced food to avoid high delivery fees. Restaurants are limited in how much they can raise their prices due to the strain on customers from the poor economy. Many are attempting to cut costs instead of using higher prices, and local food can be more affordable due to less need for transportation while gas prices are very high.

Einstein Noah Restaurant Group, the operating company that manages chains like the Einstein Bros. Bagels and Manhattan Bagels, has added two new Executive Vice Presidents to their roster. Brian Unger was hired as the Executive Vice President of Operations, and Mike Ellis joined the team in the Executive Vice President of Franchises position. Both have extensive experience in the restaurant and real estate industries.

Bob Evans Farms is building their chain of restaurants known as Mimi’s Cafe, and they have named Mark Mears as the chief officer and President of the chain. Mr. Mears comes to the company from a successful position with the Cheesecake Factory. There are currently 145 Mimi’s Cafe locations across the United States.

Chuck E. Cheese’s has expanded their family fun center brand to Mexico with the development of 10 restaurants in the Northeastern region of the country. While this is the company’s initial entry into the country, they operate chain locations in seven total countries around the world. International locations grow the resiliency and overall popularity of a brand.

The BRAVO | BRIO Restaurant Group is celebrating Earth Day in their BRAVO! Cucina Italiana and BRIO Tuscan Grille locations. Through a partnership with Parducci Wine Cellars the group will aim to donate money for 5,000 trees to the American Forests re-forestation project. Parducci focuses on sustainability in their wine making process, making them the perfect partner for this fund raising event.

Einstein Noah Restaurant Group, a leader in the quick-casual segment of the restaurant industry operating primarily under the Einstein Bros. Bagels, Noah’s New York Bagels, and Manhattan Bagel brands, has announced the appointment of Brian Unger as Executive Vice President of Operations and Mike Ellis as Executive Vice President of Franchise and Restaurant Development, effective immediately. As previously announced Dan Dominguez, Chief Operating Officer, will retire from the company at the end of June 2011 and will transition his responsibilities to Mr. Unger. As part of his retirement Mr. Dominguez has agreed to continue to provide services to the Company on a consulting basis for a two-year period.

Mr. Unger has a wealth of experience within the restaurant industry, including 25 years at McDonald’s Corporation. He began his career with McDonald’s in Downers Grove, Illinois in 1985, and joined McDonald’s International group in 1991, working in Latin America as a Senior Business Consultant and moved to Puerto Rico in 1992, where he was named Director of Operations for Central America and the Caribbean. In 1997, Mr. Unger was appointed Director of Operations for Latin America, and in 2003, was named President of the Caribbean Region, where he led in the rapid expansion of McDonald’s throughout the Region. He returned to the U.S. business in 2005, as Senior Vice President/General Manager McOpCo West Division in McDonald’s USA. In 2009, Mr. Unger moved to Toronto, Canada to lead Canadian corporate operations as Vice President, McDonald’s Canada.

Mr. Ellis has a deep background in franchising, real estate development, construction and design, and has held leadership roles at a number of world class restaurant operators. He most recently served as served as Chief Development Officer at O’Charley’s, Inc. Previously, Mr. Ellis served as the Senior Vice President of Development at Carlson Restaurants Worldwide, and before that, as Chief Development Officer at Burger King Corporation. Mr. Ellis also held various positions of increasing responsibility at Darden Restaurants Inc.

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated, “We congratulate and welcome new team members Brian Unger and Mike Ellis to the Einstein Noah team. We look forward to benefitting from their experiences and insights as we solidify our Company base and seek to accelerate our franchise organization. We also salute Dan Dominguez’s dedicated leadership, and the critical role he has played at Einstein Noah for the past 15 years. We are pleased that he will be taking some much deserved time off to spend with his wife and family, but will be eager to welcome him back to the Company early next year on a consulting basis.”

Einstein Noah Restaurant Group, Inc., a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros. Bagels, Noah’s New York Bagels, and Manhattan Bagel brands, today reported financial results for the fourth quarter and full year ended December 28, 2010.

Selected Highlights for the Fourth Quarter 2010 Compared to the Fourth Quarter 2009:

• Total revenues increased 2.2% to $106.1 million from $103.7 million.
• System-wide comparable store sales and comparable transactions increased 1.6% and 1.7%, respectively.
• Income from operations increased 17.6% to $8.9 million from $7.6 million.
• Adjusted EBITDA improved 10.1% to $14.0 million from $12.7 million. (*)
• Income before income taxes increased 26.3% to $7.2 million from $5.7 million.
• Free cash flow increased 81.2% to $6.0 million from $3.3 million. (*)

Selected Highlights for 2010 Compared to 2009:

• Total revenues increased 0.8% to $411.7 million from $408.6 million.
• System-wide comparable store sales increased 0.3% with flat transactions.
• Income from operations increased 10.7% to $27.6 million from $24.9 million.
• Adjusted EBITDA improved 7.1% to $45.3 million from $42.3 million. (*)
• Income before income taxes increased 9.2% to $20.5 million from $18.8 million.
• Free cash flow increased 66.7% to $28.0 million from $16.8 million. (*)

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated “We concluded 2010 with a strong fourth quarter, marked by robust growth in income before income taxes and adjusted EBITDA. Our performance reflects our second consecutive quarter of positive system-wide comparable store sales, the success of our ongoing cost control strategies in expanding margins, along with our continued emphasis on fresh-baked goodness and new product innovation in driving traffic. For 2011, we expect to maintain that focus by leveraging our strengths within core bagel / breakfast and healthy innovation, while promoting premium sandwiches, add-on purchases and catering to further raise our average check.”

O’Neill continued, “We anticipate that our ability to generate significant free cash flow will be a major part of our success going-forward, as it would enable us to accelerate our growth while simultaneously returning capital to our shareholders. Having redeemed the remaining Series Z Preferred Stock and secured a more flexible credit facility in the fourth quarter, we are optimistic we will execute on our asset-light franchise first model and reward our shareholders with a total-return strategy that includes our previously announced quarterly dividend and the flexibility for share repurchases going forward.”

Fourth Quarter 2010 Financial Results

For the fourth quarter ended December 28, 2010, system-wide comparable store sales increased 1.6% primarily driven by an increase in comparable transactions. Total revenues increased 2.2% to $106.1 million from $103.7 million. Company-owned restaurant sales increased 1.9% to $95.4 million from $93.7 million. Company-owned comparable store sales increased 1.0% primarily driven by an increase in comparable transactions.

Total costs at the Company-owned restaurants decreased 1.3% as a percentage of Company-owned restaurant sales resulting in an overall higher gross margin of 21.0%. Prime costs, or cost of goods sold and labor, declined by a combined 2.0% while occupancy and other operating expenses declined by a combined 0.3% as a percentage of Company-owned restaurant sales. The expansion of the Company’s gross margin was primarily driven by increased sales leverage and the continued benefits from operational efficiencies. The Company recorded tax credits within its labor costs of approximately $260,000 pursuant to the 2010 HIRE Act. The Company also experienced a decrease in health care benefit expenses within its labor costs. The Company invested $2.3 million in marketing initiatives to build traffic and drive awareness of its brands during the fourth quarter of 2010 compared to $1.1 million in 2009.

Manufacturing and commissary gross profit grew 17.3% to $1.3 million compared to $1.1 million in the fourth quarter of 2009. The substantial improvement in gross profit was attributed to favorable raw ingredient costs, coupled with higher sales volumes.

General and administrative expenses increased $1.1 million primarily due to higher variable compensation related to the Company achieving compensation plan targets.

The Company incurred $477,000 in restructuring charges, primarily severance pay, reflecting a small corporate restructuring and reorganization to support accelerated growth in our Franchise and License areas.

Adjusted EBITDA grew 10.1% to $14.0 million in the fourth quarter of 2010 compared to $12.7 million in the fourth quarter of 2009. (*)

Income from operations increased 17.6% to $8.9 million from $7.6 million. The expansion of the Company’s operating margin was primarily driven by increased sales leverage and the continued benefits from operational efficiencies.

On December 20, 2010, the Company pre-paid the outstanding balance of $85.6 million on the prior credit facility and redeemed the remaining $3.6 million of outstanding Series Z preferred stock with proceeds from the new credit facility. In conjunction with this pre-payment, the Company recorded a non-recurring, non-cash write-off of approximately $966,000 in unamortized debt issuance costs in the fourth quarter of 2010. As a result of this redemption, the Company’s capital structure has been simplified to include only the new credit facility and common stock.

Income before income taxes increased 26.3% to $7.2 million from $5.7 million.

Net income available to common stockholders increased 27.7% to $3.6 million from $2.8 million.

Fully diluted earnings per share for the quarter increased 23.5% to $0.21 per share from $0.17 per share and includes $0.05 net of tax impact for the restructuring and write off of unamortized debt issuance costs.

On February 23, 2011, the Company issued a Form 8-K under Item 4.02 stating that its previously issued Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and related earnings releases for fiscal years 2009, 2008, 2007 and 2006, and each of the four quarters of fiscal 2009 and 2008, should no longer be relied upon due to required adjustments related to income taxes.

* A reconciliation of non-GAAP measures (Adjusted EBITDA) to GAAP measures presented can be found in the accompanying tables below. Free cash flow is defined as net cash provided by operating activities less net cash used in investing activities.

New Units and Development

Restaurant openings during the fourth quarter of 2010 included 19 Einstein Bros. restaurants, which consisted of two Company-owned restaurants, seven franchise restaurants, and 10 license restaurants.

In 2010, the Company benefited from the opening of 15 additional franchise restaurants and 35 license restaurants. The effect of the new locations resulted in an increase in franchise and license related revenues of 31.8% to $2.9 million from $2.2 million.

Completion of Multiyear Deleveraging

During the fourth quarter of 2010, as previously announced, the Company completed a multiyear period of deleveraging its balance sheet and now intends to re-allocate its available cash flows to growth priorities and returning cash flows to shareholders, subject to certain limits.

As part of that effort, the Company entered into a new five-year senior $125 million credit facility with a syndicate of banks. The new senior credit facility includes a term loan of up to $75 million and a revolving credit facility of up to $50 million and provides flexibility for the Company to make share repurchases and pay dividends to shareholders.

As a result, the Company declared an initial quarterly cash dividend on its common stock in the amount of $0.125 per share, payable on April 15, 2011 to shareholders of record as of March 1, 2011. In addition, in December of 2010, the Company announced that the Board of Directors approved a two-year authorization of up to $20 million in share repurchases of the Company’s common stock.

2011 Outlook

The Company expects to open between 75 and 90 total restaurants, including 10 to 14 new Company-owned restaurants, 20 to 26 new franchise restaurants, and 45 to 50 license restaurants. The Company currently has 20 signed development agreements for Einstein Bros. Bagels franchises, which would yield an ending pipeline of 100 to 110 additional franchise locations of which 19 have already opened.

In 2011, capital expenditures are projected to be in the $28 million to $30 million range, including the opening of the aforementioned Company-owned restaurants, the relocation of an additional 10 to 14 Company-owned restaurants, along with the continued roll-out of the new coffee program.

It is expected that commodity prices will escalate more rapidly in 2011 than in 2010. As of December 28, 2010, the Company has secured 100% of its wheat needs for the first half of 2011, which represents approximately 10% of total commodity costs for the Company.

The Company estimates a 2011 annual effective tax rate between 42% and 44%, however, the Company will continue to only pay minimal cash-taxes for the next several years.

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros. and Noah’s New York Bagels brands and primarily franchises locations under the Manhattan Bagel brand. The company’s retail system consists of over 730 restaurants in 39 states and the District of Columbia. It also operates a dough production facility. The company’s stock is traded on the NASDAQ under the symbol BAGL. Visit www.einsteinnoah.com for additional information.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL) today announced that it will release its fourth quarter and full year 2010 financial results after the market close on Thursday, February 24, 2011. A conference call will follow at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time) and will be webcast live from Einstein Noah’s website at www.einsteinnoah.com. Hosting the call will be Jeff O’Neill, Chief Executive Officer and President, and Manny Hilario, Chief Financial Officer.

The dial-in numbers for the conference call are 877-407-0784 for domestic toll-free calls and 201-689-8560 for international. The conference ID is 366569. A telephone replay will be available through March 3, 2011, and may be accessed by dialing 877-870-5176 for domestic toll-free calls or 858-384-5517 for international. The conference ID 366569.

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros. and Noah’s New York Bagels brands and primarily franchises locations under the Manhattan Bagel brand. The company’s retail system consists of over 730 restaurants in 39 states and the District of Columbia. It also operates a dough production facility.

It’s National Bagel Day, and to celebrate, Einstein Bros. Bagels and Noah’s Bagels have an offer that’s thick on flavor but thin on calories—not to mention your wallet.

As part of its continued commitment to provide health-conscious customers with better-for-you options, the “unofficial sponsor” of National Bagel Day is offering its Facebook fans with a tasty a freebie: the new Bagel Thin Single and Light Shmear. Through February 14, all existing and new fans who “Like” either the Einstein Bros. Bagels or Noah’s Bagels Facebook pages will have the opportunity to download a digital coupon to receive their fresh baked Bagel Thin Single and Light Shmear for free with the purchase of a beverage. Coupons are valid through February 20 while supplies last and valid at participating Einstein Bros. Bagels and Noah’s Bagels locations.

While Americans are being called to fight obesity and menu choices can be packed with a portion of calories, Einstein Bros. Bagels and Noah’s Bagels, fresh baked Bagel Thin Single and Light Shmear, have all the soft, chewy satisfying richness of a bagel and cream cheese but with as little as 225 calories. The new Bagel Thin Singles (without shmear) contain about half the calories and carbohydrates as a regular bagel, and have zero grams trans fats, no cholesterol and no saturated fat. The new Bagel Thin Single comes in three varieties: plain, honey whole wheat and everything. For complete nutritional information please visit http://einsteinbros.com/pdf/nutrition_info.pdf.

“For people who want to eat better, it’s often difficult to do so and can be full of compromises,” said Jeffrey O’Neill, chief executive officer, Einstein Noah Restaurant Group, Inc. “Our innovative new fresh Bagel Thin Singles and Light Shmear give customers a healthier alternative without sacrificing great taste and quality ingredients, and what better time to let our fans enjoy one than on National Bagel Day.”

The Bagel Thin Singles introduction comes on the heels of the company’s successful launch of Bagel Thin Sandwiches in June 2010. During that time, the company announced that it would become the first fast-casual restaurant chain to partner with the Healthy Weight Commitment Foundation, a CEO-led coalition of more than 80 of the nation’s largest retailers, non-profit organizations, food and beverage manufacturers and trade associations aimed at helping to reduce obesity.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros. Bagels, Noah’s New York Bagels, and Manhattan Bagel brands, today announced that it has completed a multiyear period of deleveraging its balance sheet and will now re-allocate its available cash flows to growth priorities and returning cash flows to shareholders.

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated, “The capital efficiency of our franchise first growth model, coupled with the expectation that our cash taxes will be immaterial over the next several years allows us the flexibility to accelerate our growth plans and return capital to our shareholders. This total-return strategy positions Einstein Noah to reward shareholders in a variety of ways over the long run as we execute our plan.”

The Company has entered into a new senior $125 million credit facility with a syndicate of banks. The new senior credit facility has a five-year term expiring December 20, 2015 and a commitment of up to $125 million, including a term loan of up to $75 million and a revolving credit facility of up to $50 million. The loans will bear interest at a combination of LIBOR, plus an applicable margin ranging from 2.5% to 3.0% and or Prime, plus an applicable margin ranging from 1.5% to 2.0%. In addition, the new facility provides flexibility for the Company to make share repurchases and pay dividends to shareholders.

Jeff O’Neill continued, “We are extremely pleased to have secured this new credit facility, which extends the maturity of our long-term debt. Through these efforts, we have demonstrated our ability to further improve our liquidity, increase our financial flexibility, and strengthen our capital structure as we pursue a sustainable growth strategy in 2011 and beyond. We appreciate the efforts of our banking syndicate in partnering with us on this new agreement.”

The Board of Directors declared an initial quarterly cash dividend on its Common Stock in the amount of $0.125 per share, payable on April 15, 2011 to shareholders of record as of March 1, 2011. The Board of Directors also announced the authorization of up to $20 million in share repurchases of the Company’s common stock. The Company may repurchase shares in the open market or in privately negotiated transactions at the discretion of management subject to its assessment of market conditions and other economic factors. This authorization expires in two years.

As part of the Company’s commitment to investing for growth, the Board of Directors also approved the expansion of the capital expenditure budget from a projected $17 million to $19 million in 2010 to a projected $28 million to $30 million in 2011. This capital expenditure budget includes the opening of 10 to 14 new corporate stores and the relocation of an additional 10 to 14 stores, along with the continued roll-out of the new coffee program.

Nelson Heumann, Chairman of the Board and Managing Member of Greenlight Capital LLC, said, “Since Greenlight Capital LLC and its affiliates became shareholders of the Company in 2003, the majority of available cash flows have been dedicated to de-leveraging the capital structure. At the end of 2003, the Company had approximately $220 million of debt and preferred stock, a shareholder deficit of $95 million supported by $23 million of annual EBITDA. As of September 28, 2010, these metrics had improved to only $93 million of debt and preferred stock, shareholder equity of positive $73 million and $44 million of trailing EBITDA.”

Nelson Heumann continued, “The Board of Directors believes that the Company has a sustainable amount of debt along with strong cash flows, which provides for the commencement of a quarterly dividend, the flexibility for future share repurchases, as well as continued investment in our accelerated growth.”

On December 20, 2010 the Company pre-paid the outstanding balance of $85.6 million on the prior credit facility and redeemed the remaining $3.6 million of the Series Z preferred stock with proceeds from the new facility. In conjunction with this pre-payment, during the fourth quarter of 2010, the Company will record a non-recurring, non-cash write-off of approximately $900,000 in unamortized debt issuance costs. With today’s announcement, the Company’s capital structure has been simplified to include only the new bank facility and common stock.

Bank of America, N.A. will serve as the administrative agent and Wells Fargo Bank, N.A. will serve as the syndication agent, while Banc of America Securities LLC and Wells Fargo Bank, N.A. will act as co-lead arrangers and co-book managers. The syndicate of banks includes Bank of America, N.A., Wells Fargo Bank, N.A., Regions Financial Corp., BBVA Compass, Bank of the West, and 1^st Farm Credit Services.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros.® Bagels, Noah’s New York Bagels®, and Manhattan Bagel® brands, today reported financial results for the third quarter ended September 28, 2010.

Selected Highlights for the Third Quarter 2010 Compared to the Third Quarter 2009:

• Total revenues increased 1.3% to $101.4 million.
• System-wide comparable restaurant sales and comparable transactions increased 0.7%.
• Total gross margin improved 120 basis points to 19.8% from 18.6%.
• Adjusted EBITDA improved to $10.9 million from $10.5 million. (*)
• Adjusted net income improved to $3.4 million, or $0.20 in adjusted diluted EPS, from $2.5 million, or $0.15 in adjusted diluted EPS. (*)
• Free cash flow for the third quarter increased by $3 million, or 45%, to $9.6 million. (*)

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated “The third quarter was very successful for Einstein Noah on many levels. For the first time in 2010, system-wide comparable restaurant sales and transactions were positive, driven by the successful launch of our new line-up of bagel thin sandwiches. Our 32% adjusted net income growth was healthy, as we continued to realize cost efficiencies through ongoing initiatives at the store-level, within our supply chain, and in our manufacturing operations. Finally, we reached a new development milestone by surpassing 700 restaurants, which further underscores our mission to be the fastest growing, fast casual restaurant chain in North America.”

As of July 1, 2010, Halpern Denny had a one year option to exchange up to $7.0 million of the outstanding Series Z and accrued additional redemption amount for up to 608,695 shares of freely tradable common stock. A total of $7.1 million in Series Z preferred stock was redeemed by the Company during the third quarter of 2010, including accrued additional redemption. As of September 28, 2010, $6.5 million of the Series Z preferred stock and $0.6 million in accrued additional redemption amount held by Halpern Denny was outstanding. On October 25, 2010, the Company redeemed $3.6 million of the Series Z preferred stock, including accrued additional redemption amount, and pursuant to the terms of the agreement with Halpern Denny, the exchange option has expired.

O’Neill continued, “Our ability to generate healthy free cash flow is indicative of our operational excellence and disciplined use of capital. This enabled the redemption of our Series Z Preferred Stock, and will support our intent to finish fiscal 2010 with a balance of less than $4.0 million. It also facilitates our focus on a franchise-first growth model, which stresses franchise and licensing development along with continued Company expansion. Our asset-light approach is designed to further strengthen the Company’s financial condition, and in our estimation, is the best means to maximize value for our shareholders over the long-term. We look forward to continued progress in the fourth quarter and through 2011.”

Third Quarter 2010 Financial Results

For the third quarter ended September 28, 2010, system-wide comparable store sales increased 0.7%, which was driven by an increase in traffic growth through the quarter. Total revenues increased 1.3% to $101.4 million compared to $100.0 million in the third quarter of 2009. Company-owned restaurant sales increased to $91.8 million from $91.2 million. Company-owned comparable store sales were relatively flat (-0.2%), and reflected a 200 basis point improvement from the negative 2.2% in comparable store sales in the second quarter of 2010.

As a percentage of company-owned restaurant sales, cost of goods sold were 28.4%, favorable by 40 basis points; labor costs were 29.6%, favorable by 90 basis points; while other operating costs were 11.0%, 40 basis points higher compared to last year. The Company invested $1.8 million in marketing initiatives during the third quarter of 2010 compared to $1.4 million last year to build traffic and drive awareness of its brands.

Total gross profit was $20.1 million in the third quarter of 2010, or 19.8% of total revenues, compared to $18.6 million, or 18.6% of total revenues in the third quarter of 2009. Company-owned restaurant gross profit was $17.0 million, or 18.5% of restaurant sales in the period, compared to $16.0 million, or 17.5% of restaurant sales, last year.

New Units and Development

Restaurant openings during the third quarter of 2010 consisted of 17 Einstein Bros. units, including 1 franchise restaurant and 16 license restaurants.

In the trailing twelve months since September 29, 2009, the Company has benefitted from a net increase of 9 additional franchise restaurants and 34 license restaurants since September 29, 2009. The effect of the new locations helped increase franchise and license related revenues by 17.2% to $2.1 million in the third quarter of 2010 from $1.8 million in the third quarter of 2009.

Other Operating Items

Manufacturing and commissary gross profit grew 14.7% to $1 million compared to $0.9 million in the third quarter of 2009. The substantial improvement in gross profit was attributed to favorable raw ingredient costs, coupled with higher sales volumes.

Adjusted EBITDA grew 3.1% to $10.9 million in the third quarter of 2010 compared to $10.5 million in the third quarter of 2009.

Adjusted net income increased to $3.4 million, or $0.20 in adjusted diluted EPS, in the third quarter of 2010, compared to $2.5 million, or $0.15 in adjusted diluted EPS, in the third quarter of 2009.

* A reconciliation of non-GAAP measures (Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share) to GAAP measures presented can be found in the accompanying tables below. Free cash flow is defined as net cash provided by operating activities less net cash used in investing activities.

2010 Outlook

The Company expects to open between 57 and 65 total restaurants which is in line with the Company’s prior guidance of 57 to 74 total restaurants. By ownership type, the Company anticipates the opening of 7 to 8 new company-owned restaurants, 15 to 17 new franchise restaurants, and 35 to 40 license restaurants.

The Company currently has 20 signed development agreements for Einstein Bros. Bagels franchises, and coupled with the 4 planned additional development agreements in 2010, the Company expects to yield an ending pipeline of 100 to 110 additional franchise locations.

As of September 28, 2010, the Company has secured pricing on approximately 90% of all major agricultural commodities, including wheat, for the remainder of 2010, which should result in favorable prices compared to 2009.

The Company estimates a 2010 annual effective tax rate of 42.7%. The Company will continue to only pay minimal cash-taxes for the next several years because of the benefit realized from the Company’s NOL carryforwards.

Conference Call Today

The Company will host a conference call to discuss third quarter 2010 financial results today at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time). Hosting the call will be Jeff O’Neill, President and Chief Executive Officer and Manny Hilario, Chief Financial Officer.

The dial-in numbers for the conference call are 877-407-0784 for domestic toll-free calls and 201-689-8560 for international. The conference ID is 358791. A telephone replay will be available through November 11, 2010, and may be accessed by dialing 877-870-5176 for domestic toll-free calls or 858-384-5517 for international. The conference ID is 358791.

The conference call will also be webcast live from Einstein Noah’s website at www.einsteinnoah.com

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group is a leading company in the quick casual restaurant industry that operates locations primarily under the Einstein Bros. ® Bagels and Noah’s New York Bagels® brands and primarily franchises locations under the Manhattan Bagel® brand. The company’s retail system consists of more than 710 restaurants, including 285 franchise and license locations, in 39 states plus the District of Columbia. It also operates a dough production facility. The company’s stock is traded under the symbol BAGL. Visit www.einsteinnoah.com for additional information.

Forward Looking Statement Disclosure

Certain statements in this press release, including statements under the heading “2010 Outlook”, constitute forward-looking statements or statements which may be deemed or construed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “forecast,” “estimate,” “project,” “plan to,” “is designed to,” “look forward,” “expects,” “prospects,” “intend,” “indications,” “expect,” “should,” “would,” “believe,” “target”, “trend”, “contemplate,” “anticipates” and similar expressions and all statements which are not historical facts are intended to identify forward-looking statements. These forward-looking statements involve and are subject to known and unknown risks, uncertainties and other factors which could cause the Company’s actual results, performance (financial or operating), or achievements to differ materially from the future results, performance (financial or operating), or achievements expressed or implied by such forward-looking statements. These unknown risks, uncertainties and other factors include but are not limited to (i) the results for the 2010 quarter and period over period revenue and other financial results, comparable store sales and margin performance are not necessarily indicative of future results, and our expectations for full year 2010 results are subject to shifting consumer preferences, economic conditions, weather, competition, seasonal factors and cost containment initiatives, among other factors; (ii) our ability to improve transactions and our long-term growth are dependent upon consumer acceptance of our products and marketing initiatives, general economic and market conditions, among other factors; (iii) our ability to continue to improve store level margins and contain costs are dependent upon successfully executing plans for productivity improvements, labor efficiencies and food cost management; (iv) the ability to develop and open new company-owned, license and franchise restaurants and upgrade company-owned restaurants is dependent upon the availability of capital, securing acceptable financing and lease terms for desired locations, as well as the availability of contractors and materials, and securing necessary permits and licenses; (v) our ability to expand our development pipeline and ultimately expand our royalty stream is dependent upon the factors listed in (vi), above, and our ability to attract franchisees and licensees and negotiate favorable agreements; (vii) our ability to obtain lower costs for agricultural commodities is dependent upon weather, crop yield and production, the market, economic conditions, including market and inflationary pressures; (viii) our ability to build brand equity and create long-term value for our shareholders is dependent upon the success of our initiatives, financial results and the factors listed above, among other factors. These and other risks are more fully discussed in the Company’s SEC filings.

Use of Non-GAAP Financial Information

In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”) included in this filing, the Company has provided certain non-GAAP financial information, including earnings before interest, taxes, depreciation, amortization, adjustment for Series Z modification, and other operating expenses (“adjusted EBITDA”); net income adjusted for changes in our tax valuation allowance and all adjustments related to the Series Z modification (“adjusted net income”); earnings per share adjusted for changes in our tax valuation allowance and all adjustments related to the Series Z modification (“adjusted EPS”) and free cash flow, or net cash provided by operating activities less net cash used in investing activities. Management believes that the presentation of this non-GAAP financial information provides useful information to investors because this information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company’s Board of Directors uses this non-GAAP financial information to evaluate the performance of the Company and the management team. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information on page 22 in this Form 10-Q to the nearest GAAP measure.

We include in this report information on Company-owned, franchise and license and system-wide comparable store sales percentages. Comparable store sales percentages refer to changes in sales of our restaurants, whether operated by the company or by franchisees and licensees, in operation at least thirteen months including those restaurants temporarily closed for an immaterial amount of time. Some of the reasons restaurants may be temporarily closed include remodeling, road construction, rebuilding related to site-specific catastrophes and natural disasters. Franchise and license comparable store sales percentages are based on sales of franchised and licensed restaurants, as reported by franchisees and licensees. System-wide sales include sales at all restaurants, whether operated by the Company, franchisees or licensees. Management reviews the increase or decrease in comparable sales to assess business trends. Comparable store sales exclude closed locations.

We use company-owned store sales, franchise and license sales and the resulting system-wide sales information internally in connection with restaurant development decisions, planning, and budgeting analyses. We believe comparable store sales information is useful in assessing consumer acceptance of our brands; facilitates an understanding of our financial performance and the overall direction and trends of sales and operating income; helps us appreciate the effectiveness of our advertising and marketing initiatives; and provides information that is relevant for comparison within the industry.

Comparable store sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP, and may not be equivalent to comparable store sales as defined or used by other companies. We do not record franchise or license restaurant sales as revenues. However, royalty revenues are calculated based on a percentage of franchise and license restaurant sales, as reported by the franchisees or licensees.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros.® Bagels, Noah’s New York Bagels®, and Manhattan Bagel® brands, today reported financial results for the second quarter ended June 29, 2010.

Selected Highlights for the Second Quarter 2010 Compared to the Second Quarter 2009:

• Total revenues of $103.5 million compared to $104.4 million.
• Total gross margin of 20.0% in line with the second quarter of 2009.
• Adjusted EBITDA of $11.7 million compared to $11.9 million. (*)
• Free cash flow for the second quarter increased by $2.7 million to $4.7 million. (*)
• Redeemed $6.0 million in Series Z Preferred Stock in the second quarter.

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated “Despite intensifying competition in the breakfast daypart, we invested in temporary price incentives in an effort to build traffic. Similar to prior quarters, we focused on various marketing initiatives, and promotional activity to expand our customer base through the launch of healthy innovation, fresh baked goodness and a strong line-up of new products. In addition, we continued to successfully execute on our cost control strategies at both the store-level and in our manufacturing business. This focus on driving traffic and, top-line momentum in a disciplined cost environment, is a key tenet of our strategy, and is intended to deliver consistent and reliable earnings growth over the long run”.

O’Neill continued, “As part of our ‘asset-light’ business strategy, we intend to maximize shareholder value through significant cash flow generation, and are therefore particularly pleased to have increased our free cash flow by $2.7 million compared to the year-ago quarter. We are also strengthening our capital structure by meeting or exceeding all of our financial obligations, including the disciplined redemption of Series Z Preferred Stock. Finally, we are focused on unit expansion with our ‘franchise first’ model, and we look forward to surpassing 700+ stores across the portfolio this year.”

Second Quarter 2010 Financial Results

For the second quarter ended June 29, 2010, system-wide comparable store sales were down 1.1%, reflecting an investment in average check relative to prior year. Total revenues fell slightly to $103.5 million compared to $104.4 million in the second quarter of 2009. Company-owned restaurant sales similarly decreased modestly to $94.2 million from $95.1 million, although the Company benefitted from a net increase of six additional company-owned restaurants since June 30, 2009. Company-owned comparable store sales were negative 2.2%.

As a percentage of company-owned restaurant sales, cost of goods sold were 28.5% favorable by 50 basis points, labor costs were 29.1% favorable by 130 basis points, while other operating costs were even in the second quarter of 2010 compared to last year. The Company continued to invest in marketing initiatives and coupon-related discounts to build traffic and drive awareness of its brands during a period of heavy competitive discounting.

Total gross margin of 20.0% remained flat to the second quarter of 2009. Company-owned restaurant gross profit was $17.4 million, or 18.5% of restaurant sales in the second quarter of 2010, compared to $18.2 million, or 19.2% of restaurant sales, in the second quarter of 2009.

New Units and Development

Restaurant openings during the second quarter of 2010 consisted of nine Einstein Bros. units, including one company-owned restaurant, four franchise restaurants, and four license restaurants. One company-owned restaurant and two license restaurants were also closed during the period.

In the trailing twelve months, the Company has benefitted from a net increase of eleven additional franchise restaurants and twenty-one license restaurants since June 29, 2009. The effect of the new locations helped increase franchise and license related revenues by 17.0% to $2.0 million in the second quarter of 2010 from $1.7 million in the second quarter of 2009.

Other Operating Items

Manufacturing and commissary gross profit grew 25.3% to $1.2 million, compared to $1.0 million in the second quarter of 2009. The substantial improvement in gross profit, despite the lower revenue base, was attributed to lower raw ingredient costs, primarily wheat, as well as production and labor efficiencies at the Company’s bagel commissary facilities.

Adjusted EBITDA decreased to $11.7 million in the second quarter of 2010, compared to $11.9 million in the second quarter of 2009.

Adjusted net income slightly decreased to $3.1 million, or $0.19 in adjusted dilutive EPS, in the second quarter of 2010, compared to $4.0 million, or $0.24 in adjusted dilutive EPS, in the second quarter of 2009.

As of June 30, 2010, $14.0 million of the Series Z Preferred stock and accrued additional redemption amount held by Halpern Denny III, L.P. was outstanding, and the Company intends to redeem all remaining outstanding shares, inclusive of the accrued additional redemption price, on or before June 30, 2011, subject to Halpern Denny’s right to exchange Series Z shares for shares of our common stock. A total of $6.0 million was redeemed by the Company during the second quarter.

* A reconciliation of non-GAAP measures (Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share) to GAAP measures presented can be found in the accompanying tables below. Free cash flow is defined as net cash provided by operating activities less net cash used in investing activities.

2010 Outlook

The Company anticipates the opening of 10-12 new company-owned restaurants, 12-17 new franchise restaurants, and 35-45 license restaurants.

The Company currently has 19 signed development agreements for Einstein Bros. Bagels franchises, and coupled with the efforts to sign additional development agreements in 2010 is expected to yield an ending pipeline of 90-100 additional franchise locations.

As of June 30, 2010, the Company has secured contract pricing on approximately 60% of all major agricultural commodities for the remainder of 2010, which should result in favorable prices compared to 2009, along with an opportunity to benefit from further reductions in the market.

The Company estimates a 2010 annual tax rate of 42.6%, excluding the impact of the March 17, 2010 amendment of the Series Z. Most of the recorded tax expense represents the benefit realized from the Company’s NOL carryforwards and the Company will continue to only pay minimal cash-taxes for the next several years.

Conference Call Today

The Company will host a conference call to discuss second quarter 2010 financial results today at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time). Hosting the call will be Jeff O’Neill, president and chief executive officer and Manny Hilario, chief financial officer.

The dial-in numbers for the conference call are 877-407-0784 for domestic toll-free calls and 201-689-8560 for international. The conference ID is 353917. A telephone replay will be available through August 12, 2010, and may be accessed by dialing 877-660-6853 for domestic toll-free calls or 201-612-7415 for international. Participants must enter account 3055 and conference ID 353917.

The conference call will also be webcast live from Einstein Noah’s website at www.einsteinnoah.com

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group is a leading company in the quick casual restaurant industry that operates locations primarily under the Einstein Bros. ® Bagels and Noah’s New York Bagels® brands and primarily franchises locations under the Manhattan Bagel® brand. The company’s retail system consists of 697 restaurants, including 267 franchise and license locations, in 38 states plus the District of Columbia. It also operates a dough production facility. The company’s stock is traded under the symbol BAGL. Visit www.einsteinnoah.com for additional information.

Forward Looking Statement Disclosure

Certain statements in this press release, including statements under the heading “2010 Outlook”, constitute forward-looking statements or statements which may be deemed or construed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “forecast,” “estimate,” “project,” “plan to,” “is designed to,” “look forward,” “expects,” “prospects,” “intend,” “indications,” “expect,” “should,” “would,” “believe,” “target”, “trend”, “contemplate,” “anticipates” and similar expressions and all statements which are not historical facts are intended to identify forward-looking statements. These forward-looking statements involve and are subject to known and unknown risks, uncertainties and other factors which could cause the Company’s actual results, performance (financial or operating), or achievements to differ materially from the future results, performance (financial or operating), or achievements expressed or implied by such forward-looking statements. These unknown risks, uncertainties and other factors include but are not limited to (i) the results for the 2010 quarter and period over period revenue and other financial results, comparable store sales and margin performance are not necessarily indicative of future results, and our expectations for full year 2010 results are subject to shifting consumer preferences, economic conditions, weather, competition, seasonal factors and cost containment initiatives, among other factors; (ii) our ability to improve transactions and our long-term growth are dependent upon consumer acceptance of our products and marketing initiatives, general economic and market conditions, among other factors; (iii) our ability to continue to improve store level margins and contain costs are dependent upon successfully executing plans for productivity improvements, labor efficiencies and food cost management; (iv) the ability to develop and open new company-owned, license and franchise restaurants and upgrade company-owned restaurants is dependent upon the availability of capital, securing acceptable financing and lease terms for desired locations, as well as the availability of contractors and materials, and securing necessary permits and licenses; (v) our ability to expand our development pipeline and ultimately expand our royalty stream is dependent upon the factors listed in (vi), above, and our ability to attract franchisees and licensees and negotiate favorable agreements; (vii) our ability to obtain lower costs for agricultural commodities is dependent upon weather, crop yield and production, the market, economic conditions, including market and inflationary pressures; (viii) our ability to build brand equity and create long-term value for our shareholders is dependent upon the success of our initiatives, financial results and the factors listed above, among other factors. These and other risks are more fully discussed in the Company’s SEC filings.

Use of Non-GAAP Financial Information

In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”) included in this filing, the Company has provided certain non-GAAP financial information, including earnings before interest, taxes, depreciation, amortization, and other operating expenses (“adjusted EBITDA”), net income adjusted for changes in our tax valuation allowance and all adjustments related to the Series Z modification (“adjusted net income”), and earnings per share adjusted for changes in our tax valuation allowance and loss on debt modification (“adjusted EPS”). Management believes that the presentation of this non-GAAP financial information provides useful information to investors because this information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company’s Board of Directors uses this non-GAAP financial information to evaluate the performance of the Company and the management team. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. The Company has reconciled the non-GAAP financial information included in this release to the nearest GAAP measure in context.

As part of its ongoing commitment to provide its customers with healthier meal choices, Einstein Noah Restaurant Group, Inc., the nation’s leading fast casual bagel restaurant company, announced bagel thin sandwiches, a new line of lower calorie, lower fat sandwiches available now at participating Einstein Bros. Bagels and Noah’s New York Bagels locations.  

In addition, the company announced that it will become the first quick service restaurant chain to partner with the Healthy Weight Commitment Foundation, a CEO-led coalition of more than 90 of the nation’s largest retailers, non-profit organizations, food and beverage manufacturers and trade associations aimed at helping to reduce obesity.  The company made its commitment on the heels of the release of the action plan by the White House Childhood Obesity Task Force.

“Smart nutrition is a part of the Einstein Noah Restaurant Group DNA and we are leading the way with our new bagel thin sandwiches and partnership with the Healthy Weight Commitment Foundation,” said Jeff O’Neill, CEO, Einstein Noah Restaurant Group, Inc. “While we recognize that our customers are looking for simple ways to eat better, they don’t want to sacrifice great taste.  We are committed to this consumer insight as we develop new, innovative lower calorie and lower fat menu items.”

“We applaud Einstein Noah Restaurant Group for their leadership in becoming the first quick service restaurant to join the Healthy Weight Commitment Foundation,” said Lisa Gable, executive director of the Healthy Weight Commitment Foundation. “The message is clear: The private sector can come together and provide healthier food options while continuing to meet consumers’ needs for taste, convenience and value.”

Available in three options, the Turkey-Bacon and Avocado thin, the Tuna thin, and the Turkey thin, bagel thins are available at participating locations for $4.29 a la carte or a combo for $5.99 including chips and a regular beverage.  All bagel thin sandwiches are made fresh to order, with quality ingredients.

MonkeyMedia Software, a provider of web-based operations solutions for the foodservice industry, today announced that Einstein Noah Restaurant Group, Inc. (ENRG) has successfully deployed both MonkeyOnlineOrdering™ and MonkeyCatering™ 3.0 to enable end-to-end visibility and control over the catering business for its Einstein Bros. Bagels brand. With more than 600 restaurants in 36 states, ENRG is a leading fast casual restaurant group with operations including Einstein Bros. Bagels, Noah’s New York Bagels®, and Manhattan Bagel®.

With the restaurant market more competitive than ever, ENRG needed to find a way to make its popular catering program even more appealing to its customers, and especially more efficient for businesses that regularly place large catering orders. Once ENRG successfully integrated MonkeyOnlineOrdering™ and MonkeyCatering™ into its catering platform, the company introduced www.ebcatering.com, its new catering website, to customers of Einstein Bros. restaurants across the nation. The website was designed to simplify the ordering process by allowing customers to place a pick-up or catering order directly online, instead of calling to place an order with an employee at a local restaurant.

In addition to enabling an efficient online ordering solution for takeout and catering, ENRG experiences further benefits with MonkeyOnlineOrdering™ and MonkeyCatering™, such as:

• Seamless integration of back-of-house and front-of-house operations. The company’s online ordering system has automated the ordering process, which helps increase order accuracy and maximize operational performance. ENRG can easily deliver a seamless catering experience to its customers with front-end and back-end management operations in place, allowing the manager to have more time to engage in higher-level and customer-focused activities.
• Enhanced visibility into all business units. ENRG can run comprehensive reports from the web to track each unit’s performance and better understand customer patterns and behavior.
• Improved customer service. With better reporting and real-time visibility, ENRG is able to improve and speed up the decision-making process, allowing the company to be more responsive to customer needs and the changing business environment.

As a company that has been built on a platform of industry knowledge and experience, MonkeyMedia Software’s offerings go far beyond foodservice software. ENRG took advantage of MonkeyMedia Software’s Catering Education services, which are designed to educate organizations at a strategic, sales and operational level and teach best practices for growth and management of centralized catering operations within a multi-unit environment.

“We’ve found MonkeyMedia Software’s team to be extremely knowledgeable about the catering business,” said Beth Briggs, Vice President, Information Technology with Einstein Noah Restaurant Group. “They’re more than just a catering software provider – they have been a great partner to lean on during our deployment. Our investment in new technology has strengthened our catering business, and MonkeyMedia Software has played a big role in that success.”

“It is a pleasure to work with such a respected brand that has a reputation for quality and customer satisfaction,” said Erle Dardick, CEO, MonkeyMedia Software. “We’re proud of the success Einstein Noah Restaurant Group has experienced thus far with the help of our team and our technology, and we look forward to our partnership of continually striving to improve ENRG’s catering business in 2010 and beyond.”

About MonkeyMedia Software

MonkeyMedia Software specializes in web-based operations solutions for the foodservice industry. The company’s applications are meticulously designed to fit the way you work – whether you’re a small business, a medium-sized regional company, or an enterprise-class organization with coast-to-coast operations. With strong roots in catering and food production and their flexible, scalable web-based platform, MonkeyMedia Software delivers the next generation of enterprise-class management solutions for foodservice companies. MonkeyMedia Software solutions feature a complete front-to-back system to manage sales, production and supply chain, powerful reporting for real-time visibility and results-based decision-making, a 100% web-based platform that is configured to fit a unique business process and easy integration with current web and accounting systems. For more information on MonkeyMedia Software, visit www.monkeymediasoftware.com.

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros.® and Noah’s New York Bagels® brands and primarily franchises locations under the Manhattan Bagel® brand. The company’s retail system consists of more than 600 restaurants in 36 states and the District of Columbia. It also operates a dough production facility. The company’s stock is traded on the NASDAQ under the symbol BAGL. Visit www.einsteinnoah.com for additional information.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry, is opening new franchise territories nationwide as demand builds among local investors to be part the Einstein Bros. Bagels brand.

Leading the way in new-product launches, healthful meal options and innovative marketing programs, the brand is targeting the Greater Denver Area, including Fort Collins and Colorado Springs, Dallas/Fort Worth, Atlanta and Baltimore/Washington, D.C., for growth through franchising.

“We are in a growth mode, and the recent openings of new locations and signed multi-unit franchise agreements confirm that demand for our brand continues to build,” said Jeff O’Neill, chief executive officer of Einstein Noah Restaurant Group. “We want to be the fastest growing fast-casual restaurant chain in America, and with the innovative programs we’ve initiated that goal is well within reach.”

As of January 8, 2010, the company has signed 14 multi-unit franchise agreements, which, when fully developed, represent a total of 57 additional stores. The first two franchise locations opened in Jacksonville, Fla., and Rogers, Ark., in 2008. Additional franchise locations opened in 2009 in Texas and Georgia.

Einstein Bros. Bagels plans to open 12-16 franchise locations in 2010 in addition to opening 10-12 corporate stores. Momentum also continues to build for opening new licensed locations. Einstein Bros. opened 31 licensed locations in 2009 and plans to exceed that number this year.

Excitement for the franchise opportunity is being spurred by recent new-product launches, including Bagel Poppers and Twisted Bagels, the Lighter Fare Menu and the offering of Activia yogurt parfaits. Einstein Bros. Bagels also is the first nationwide chain to sell gluten-free bagels, available in certain test markets.

“In addition to creating interest with new products, our innovative marketing programs including the First 100 Breakfast Giveaway at grand openings and the bagel giveaway on Facebook have exceeded our expectations and are drawing heightened interest among local investors,” O’Neill said.

With more than 350 company-owned restaurants and 180-plus licensed locations, Einstein Bros. has built a strong presence and loyal following throughout the United States.

Enjoying brand awareness well beyond what is typical for a chain of its size, Einstein Bros. Bagels is well-positioned in three of the strongest growing areas for the restaurant industry: the fast-casual segment, the breakfast daypart and the fresh/healthy segment, where Einstein Bros, has the reputation of providing fresh and healthy meals. Einstein Bros. was named one of the healthiest QSR chains in America by Health Magazine in March 2009.

Known for its award-winning bagels and shmear varieties, made-to-order breakfast and lunchtime sandwiches, five different flavors of Darn Good Coffee®, hearty soups, fresh innovative salads, baked goods and decadent desserts, Einstein Bros. Bagels has secured its distinctive place among competitors in the rapidly expanding fast casual restaurant category. Moreover, the brand’s trendy restaurant decor and contemporary atmosphere is designed to attract a loyal guest base that can feel at home while dining.

Anyone interested in franchising opportunities can contact Kevin Kruse at kkruse@einsteinnoah.com.

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros.® and Noah’s New York Bagels® brands and primarily franchises locations under the Manhattan Bagel brand. The company’s retail system consists of more than 600 restaurants in 36 states and the District of Columbia. It also operates a dough production facility. The company’s stock is traded on the NASDAQ under the symbol BAGL. Visit www.einsteinnoah.com for additional information. For information about franchise opportunities, contact Kevin Kruse at kkruse@einsteinnoah.com.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), a leader in the quick-casual segment of the restaurant industry operating under the Einstein Bros.® Bagels, Noah’s New York Bagels®, and Manhattan Bagel® brands, today reported financial results for the fourth quarter and full year ended December 29, 2009.

Selected Highlights for the Fourth Quarter 2009 Compared to the Fourth Quarter 2008:

• Total revenues were virtually flat at $103.7 million vs. $103.9 million.
• System-wide comparable store sales decreased (1.4%), a 130 basis point improvement over the third quarter trend.
• Total gross margin improved to 21.0% compared with 20.7%, due to strong cost controls as well as a substantial improvement in manufacturing & commissary profitability.
• Adjusted EBITDA improved $1.0 million to $12.7 million compared to $11.7 million.
• Redeemed an incremental $2.0 million in Series Z Preferred Stock on December 29, 2009, for a total redemption of approximately $5.0 million.

Selected Highlights for 2009 Compared to 2008:

• Total revenues declined modestly to $408.6 million from $413.5 million
• System-wide comparable store sales decreased (2.4%), while transactions decreased (2.3%).
• Total gross margin was 19.0% compared to 19.8%.
• Adjusted EBITDA was virtually flat at $42.3 million compared to $42.2 in 2008.
• Maintained an unrestricted cash balance of $9.9 million after making payments of approximately $25.0 million and $8.1 million on the Series Z and term loan respectively.

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated, “The results we reported today underscore the progress we’ve made in building a platform for sustainable long-term growth. Our comparable store sales, transaction performance, and gross margins were the highest of the year in the fourth quarter, and demonstrate the continued build from our marketing and merchandising initiatives, as well as our disciplined approach to execution and cost control. Even in today’s economic environment, I am gratified that we can create equity for our brand, generate substantial cash flow and meet our financial goals.”

O’Neill continued, “Our key strategies for 2010 are straightforward and build upon our prior-year accomplishments. We intend to drive transaction growth by increasing brand trial through our core bagel/breakfast offerings, rebuild gross margins through our focus on supply chain, manufacturing and operational efficiency, and accelerate unit growth primarily through franchise and license expansion. With a committed team and results-oriented culture, I am confident that we can succeed in all of these areas to maximize shareholder value.”

Fourth Quarter 2009 Financial Results

For the fourth quarter ended December 29, 2009, system-wide comparable store sales, which include Company-owned, franchised, and licensed locations, decreased (1.4%). Total revenues were virtually flat at $103.7 million vs. $103.9 million in the fourth quarter of 2008. Company-owned restaurant sales decreased (0.7%) to $93.7 million from $94.3 million, mostly as a result of a (1.7%) decrease in comparable store sales, which was partially offset by a net increase of two additional company-owned restaurants since December 30, 2008.

The Company’s on-going investments in marketing initiatives to build traffic and drive awareness of its brands yielded a modest decline of (1.5%) in transactions during the fourth quarter and a significant build on trends coming into 2009, when transactions were declining in the (8%) to (9%) range. Marketing initiatives and trial generating incentives increased $0.7 million and $0.4 million, respectively, compared to the prior-year period. Company-owned restaurant gross profit was $18.5 million, or 19.7% of restaurant sales in the fourth quarter of 2009, compared to $18.9 million, or 20.0% of restaurant sales, in the fourth quarter of 2008.

As a percentage of company-owned restaurant sales, cost of goods sold were favorable by 130 basis points in the fourth quarter of 2009 compared to last year. Labor costs, as a percentage of company-owned restaurant sales, rose 100 basis points in the fourth quarter of 2009 compared to the prior-year period due largely to higher health benefits costs, along with continued investments in the Company’s catering business.

New Units and Development

The Company benefitted from a net increase of six additional franchise restaurants and 26 license restaurants since December 30, 2008. The effect of the new locations helped drive franchise and license related revenues up 17.1% to $2.2 million in the fourth quarter of 2009 from $1.9 million in the prior-year period.

Restaurant openings during the fourth quarter of 2009 consisted of 15 outlets, including four Einstein Bros. company-owned restaurants, two Manhattan Bagel franchise restaurants, and nine Einstein Bros. licensed restaurants. Three licensed outlets were also closed during the period.

Other Operating Items

Manufacturing and commissary revenues increased modestly to $7.8 million in the fourth quarter of 2009 vs. $7.7 million, while gross profit grew 58.3% to $1.1 million, compared to $0.7 million in the fourth quarter of 2008. The substantial improvement in gross profit was attributed to lower raw ingredient costs as well as production and labor efficiencies at the Company’s bagel manufacturing facility.

Adjusted EBITDA increased $1.0 million to $12.7 million in the fourth quarter of 2009, compared to $11.7 million in 2008. The 8.5% increase in adjusted EBITDA is attributable to the improvements previously mentioned.

In the third quarter, the Company reversed the valuation allowance on its deferred tax asset. Accordingly, 2009 now includes a charge of $2.9 million for incomes taxes compared to $0.5 million in 2008. The Company also reported $0.7 million of accrued additional redemption costs on the unredeemed portion of the Series Z Preferred Stock. The 2008 results include minimal income tax expense and no charge for the Series Z Preferred Stock.

Taking the aforementioned charges into account, net income was $2.8 million in the fourth quarter of 2009, or $0.17 per diluted share, compared to net income of $5.8 million, or $0.36 per diluted share, in the fourth quarter of 2008.

2009 Financial Results

For the full year ended December 29, 2009, system-wide comparable store sales, which include Company-owned, franchised, and licensed locations, decreased (2.4%). Total revenues declined modestly to $408.6 million from $413.5 million last year.

Company-owned restaurant sales decreased (1.7%) to $370.4 million from $376.7 million, inclusive of a comparable store sales decline of (3.4%). Company-owned restaurant gross profit was $66.2 million, or 17.9% of restaurant sales, compared to $73.5 million, or 19.5% of restaurant sales, in 2008.

Franchise and license related revenues increased 17.1% to $7.5 million in 2009, compared to $6.4 million last year. The Company benefitted from a net increase of 32 franchise and license locations, along with a comparable store sales increase of 1.1%.

Manufacturing and commissary revenues increased to $30.6 million, compared to $30.4 million last year, while gross profit grew 125.5% to $4.1 million, vs. $1.8 million in 2008.

Adjusted EBITDA was virtually flat at $42.3 million in 2009, compared to $42.2 million in 2008.

In the third quarter, the Company reversed the valuation allowance on its deferred tax asset. Therefore, income tax expenses for both periods are not comparable. Additionally, the Company recorded a charge of approximately $1.5 million of accrued additional redemption costs on the unredeemed portion of the Series Z Preferred Stock. The 2008 results did not have this charge.

Net income was $72.0 million for 2009, or $4.36 per diluted share, compared to net income of $21.1 million, or $1.29 per diluted share for 2008.

Rick Dutkiewicz, chief financial officer of Einstein Noah, added, “We substantially improved the quality of our asset base this past year, while investing in projects that generate significant returns on our capital. Inclusive of the 45 locations that were upgraded in 2009, approximately 50% of our Company-owned restaurants were built or remodeled in the last four years. Our balance sheet also improved in 2009. It remains well-capitalized, and we paid down a total of $8.1 million of long-term debt and redeemed nearly $25.0 million of Series Z Preferred Stock throughout the year. In addition, our valuable deferred tax asset will minimize our cash taxes paid for the next several years. We will utilize this asset to continue to reduce our indebtedness as well as provide sufficient capital to grow our business. We will continue to accelerate our franchise and licensing development in 2010 and have an asset light business model that sets the stage for strong free cash flow. Together, these items are an important part of driving returns for our shareholders.”

2010 Outlook

The Company anticipates the opening of 10-12 new Einstein Bros. Bagels company-owned restaurants, 12-16 new Einstein Bros. Bagels franchised restaurants, and 35-45 Einstein Bros. Bagels licensed restaurants.

The Company currently has 14 signed development agreements for Einstein Bros. Bagels franchises. This coupled with the efforts to sign additional development agreements in 2010 is expected to ultimately yield an ending pipeline of 90-100 additional franchise openings.

The Company has secured contract pricing on approximately 50% of all major agricultural commodities that will result in favorable prices compared to 2009, with an option to benefit from further reductions in the market.

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group is a leading company in the quick casual restaurant industry that operates locations primarily under the Einstein Bros.® Bagels and Noah’s New York Bagels® brands and primarily franchises locations under the Manhattan Bagel® brand. The company’s retail system consists of more than 680 restaurants, including more than 175 license locations, in 36 states plus the District of Columbia. It also operates a dough production facility. The company’s stock is traded under the symbol BAGL.

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On the heels of its successful Bagel Bonanza – the world’s largest online bagel giveaway – Einstein Bros. Bagels is again offering a delicious deal to its Facebook Fans.  To celebrate National Bagel Day, February 9, all fans of the Einstein Bros. Facebook page will have the opportunity to download a digital coupon for a free Einstein’s bagel with the purchase of a bagel. Coupons will be available via www.facebook.com/einsteinbros to existing and new fans on National Bagel Day (February 9, 2010) only and are valid through February 16. Offer continues while supplies last and is valid only at participating Einstein Bros. Bagels locations.

“There’s no better place to enjoy National Bagel Day than at Einstein Bros. Bagels, America’s number one bagel restaurant brand,” said James O’Reilly, Chief Concept Officer, Einstein Noah Restaurant Group, Inc.  ”To celebrate, we want to reward our fans on Facebook and new ones with an offer to get a delicious bagel for free.  This is just one of the many ways we’re using Facebook to engage our fans.”

The Free Bagel Bonanza launched January 25 and grew the Einstein Facebook following from

4,000 fans to more than 300,000 in less than two days. The free offer was launched to drive restaurant traffic, while quickly building the Einstein Bros. Brand on Facebook where the company is planning more customer engagement and future promotions.

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros. and Noah’s New York Bagels brands and primarily franchises locations under the Manhattan Bagel brand. The company’s retail system consists of approximately 600 restaurants in 36 states and the District of Columbia. It also operates a dough production facility. The company’s stock is traded on the NASDAQ under the symbol BAGL. Visit www.einsteinnoah.com for additional information.

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Becoming a Facebook Fan of Einstein Bros. Bagels just got a whole lot tastier with the launch of the “Free Bagel Bonanza,” the world’s largest online bagel giveaway.  Beginning today, consumers who become fans of the Einstein Bros. Bagels Facebook page (www.facebook.com/einsteinbros) will receive a digital coupon valid for a free bagel and shmear.  Coupons are good while supplies last and are valid at participating locations.

“We want to thank all our Facebook Fans for their support with a tasty, fresh bagel and are planning on giving away hundreds of thousands of free bagels as we build our presence on Facebook,” said James O’Reilly, Chief Concept Officer, Einstein Noah Restaurant Group, Inc. “Facebook is a fantastic way for Einstein Bros. Bagels to build relationships with our core audience in the fun, playful tone of our brand personality by allowing us to have a two-way conversation with them.”

The Free Bagel Bonanza will be supported with an online campaign, including a Facebook homepage roadblock and targeted sidebar ads, the first of its kind for the brand. The free offer will help drive restaurant traffic, while quickly building the Einstein Bros. Brand on Facebook where the company is planning more customer engagement and future promotions. The brand’s characters and inventive founders, Melvin and Elmo, will be an integral part of the communications strategy. The digital initiative was created and managed by Creative Alliance Inc., a full service advertising agency in Louisville, KY.

About Einstein Noah Restaurant Group

Einstein Noah Restaurant Group, Inc. is a leading company in the quick casual restaurant industry that operates and licenses locations primarily under the Einstein Bros. and Noah’s New York Bagels brands and primarily franchises locations under the Manhattan Bagel brand. The company’s retail system consists of approximately 600 restaurants in 36 states and the District of Columbia. It also operates a dough production facility. The company’s stock is traded on the NASDAQ under the symbol BAGL. Visit www.einsteinnoah.com for additional information.

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