Knobias Clip Report (06-12-2008)
Submitted By Knobias ClipReport
BAGL: Signs License Agreement with ARAMARK; Gains Entry to Universities
Thursdays session saw oil pull back during the morning session only to retrace and gather some of those losses back. The move had the market up over triple digits in early trade only to pare back in the afternoon in a normal negative correlationary move. News about a potential strike in the Nigerian oil fields was likely the cause.
In the financials, Lehman released their CFO and Operations Chief in a swift retaliatory move to halt souring investor sentiment. Also making headlines were Anheuser Busch’s receipt of a takeover offer north of $45 billion by InBev.
In the small cap space, one company announced some fairly positive news. Einstein Noah Restaurant Group (BAGL) is a leading company in the quick casual restaurant industry that operates locations primarily under the Einstein Bros. and Noah’s New York Bagels(R) brands and primarily franchises locations under the Manhattan Bagel(R) brand. The company’s retail system consists of approximately 600 restaurants, including more than 100 license locations, in 36 states and the District of Columbia. It also operates a dough production facility.
On Thursday, the Company announced that they had reached an agreement and signed a strategic license development pact with ARAMARK to open licensed locations over the next few years.
ARAMARK is a leader in professional services, providing award-winning food services, facilities management, and uniform and career apparel to health care institutions, universities and school districts, stadiums and arenas, and businesses around the world.
With the ARAMARK deal, the Company could gain entry into multiple universities and school districts. The recent trend in schools has been towards lower fat and sugar content in the offerings of these institutions. With bagels being a fairly healthy addition to many diets, the Company could see a surge in the already 600 locations.
With an increase in locations comes an increase in buying power and a shift in some of the control of supplier prices. With food costs surging, most notably, corn and grain, the extra control in input prices would definitely be a welcome addition to the management of the Company.
While the number of potential locations included in the deal wasn’t announced, investors would be wise to keep a keen eye as university and other school locations could be a potential large market for the Company.
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