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FRANCHISES HELP CORNER BAKERY GO BICOASTAL

By Kimberly Tchang

Corner Bakery Cafe says it wants to be everyone's little corner of the world. That could happen. The Dallas-based fast-casual restaurant chain is certainly out to open enough units, and at plenty of corners.

Even as it plans an aggressive franchise expansion to go from about 100 stores to over 300 by 2011, Corner Bakery says it is focused on keeping its neighborhood feel through a mix of marketing initiatives, community involvement and localized design elements. "It's all about a neighborhood connection," said Diana Hovey, the chain's senior vice president of marketing. "We offer a consistent brand experience coast to coast, but there's also a different feel to each café that's reminiscent of the neighborhood where it's located."

The menu includes pastries, hot breakfast items, panini, soups, salads, pasta and desserts, and the usual ticket runs to about $7.50 per person - maybe a bit less for breakfast. Catering accounts for 20 percent of the company's sales, which last year were $208 million.

Currently, only 10 of its cafés are franchised, but the company wants to boost that to about half of the future total. Company policy is very particular about its franchisees. Candidates must have a net worth of $7.5 million, they must be best-in-class operators within their current system and an employer of choice in their area, they need to have a history of community involvement, and they must reside in the market to be developed, for starters.

"We think these franchisees will help us to connect with their local communities," said P.J. Evans, vice president of franchising. "And without that high qualification level, we don't think the franchisees would develop the brand as we want them to."

Industry observers agree that Corner Bakery is on the right track. "Not all organizations are as stringent [about franchisees], but it's absolutely a smart way to go," said Darren Tristano, executive vice president of Technomic, a Chicago-based market research firm that covers the food service industry. "They want to make sure that their brand is not diluted through franchising."

Corner Bakery has franchises in the Philadelphia and southern and central New Jersey markets, as well as in Colorado and Utah. It has additional deals in the works for the Southwest. The company will maintain a company-owned presence in its core markets, which include Dallas-Fort Worth, Houston, Atlanta, Chicago, Washington, Northern Virginia and Southern California.

Corner Bakery boasts that it enjoys the highest average annual sales volume per store - $2.2 million - of any national bakery-café chain, with 22 straight quarters of positive comparable-store sales. "They've been mostly quiet in the industry until now, and yet it's a sizable chain," said Aaron Allen, founder and chief executive of Heathrow, Fla.-based Quantified Marketing Group, a strategic marketing firm specializing in the restaurant industry. "They do a tremendous amount of business for a fast-casual chain. The profitability of $2.2 million, on that type of business, is a really good economic model."

The typical Corner Bakery footprint is 3,500 square feet, but the company plans to roll out a few measuring 4,500 to 5,000 square feet. The chain has proved to be adaptable to both urban and suburban environments. About 30 percent of its stores are in downtown urban areas. The rest are in a mix of suburban settings - lifestyle centers, open-air center endcaps, freestanding pads at regional malls. Where possible, the firm likes to play off its name by having a corner presence. Corner Bakery also has a handful of kiosks, including one at Chicago's O'Hare Airport and another in that city's Field Museum. "Our airport kiosk is generating the same type of volume as a store at the mall," said Evans.

Certainly, the chain is well positioned in an attractive category. The bakery café concept is not only the largest fast-casual segment, with $3.3 billion in sales last year (versus $2.7 billion for Mexican chains and $2.1 billion for chicken joints), but it is also one of the fastest-growing, as those sales are up 13.7 percent year on year. But this means, of course, that there is plenty of competition out there. "Franchising will be very helpful for them as they grow, because, ultimately, they're competing with Panera [Bread Company], which has well over 1,000 units," said Tristano. "Corner Bakery has to get into markets quickly and develop brand recognition and market share."

Over the past two years, the company has also worked to make its cafés comfortable and convenient. They now have soft-seating areas with sofas and upholstered chairs. And this summer the chain added free, systemwide Wi-Fi access.

The chain may be a newcomer in some markets, but it has been around for 15 years. Lettuce Entertain You Enterprises opened the first Corner Bakery in 1991, in Chicago, to provide baked goods for its other concept, Maggiano's Little Italy. Brinker International acquired Corner Bakery in 1995 and expanded both the menu and the number of units. Today CBC Restaurant Corp. owns the chain.

Developers find that the chain is a welcome change to sit-down and fast-food restaurants. "We like the quality of the food, the feel of the stores, the basic sort of operational model," said Paul Weinschenk, vice president of The Peterson Cos., a Fairfax, Va.-based development firm with one Corner Bakery unit in its The Washingtonian, a mixed-use property in Gaithersburg, Md. Weinschenk says this restaurant brings in about $500 in sales per square foot. "They've got an interesting menu that appeals to people who are affluent and who have expectations for food that's not run-of-the-mill," he said. " We have a lot of mixed-use projects going forward, and they're a natural fit." Developer Madison Marquette has a Corner Bakery at its Suburban Square, a lifestyle center in Ardmore, Pa. The firm says it plans to open another in a downtown location. "They bring in traffic at all hours," said Andrea Setian, director of leasing at Madison Marquette. "They offer shoppers a quick, easy experience that's higher-end and better nutrition than fast food."