Atlanta Bread Company International, Inc.

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Atlanta Bread Company International, Inc.

1955 Lake Park Drive, Suite 400
Smyrna, Georgia 30080
U.S.A.
Telephone: (770) 432-0933
Toll Free: (800) 398-3728
Fax: (770) 444-1991
Web site: http://www.atlantabread.com

Private Company
Incorporated: 1993
Employees: 1,500
Sales: $200 million (2004)
NAIC: 445299 All Other Specialty Food Stores; 311811 Retail Bakeries

Atlanta Bread Company International, Inc., operates and franchises a chain of bakery-cafés, relying almost entirely on franchisees to expand the chain. The company operates more than 160 restaurants in 27 states, offering a menu of baked goods, such as muffins, croissants, bagels, and cookies, as well as sandwiches and salads. Select units offer an expanded menu of pizza, pasta, calzones, and omelettes, part of the company's attempt to cultivate more breakfast and dinner business (lunchtime business accounts for 75 percent of the company's sales). Atlanta Bread's restaurants are served by a central commissary in Smyrna, Georgia. The company hopes to have as many as 800 stores nationwide by at least 2015.

Origins

Atlanta Bread was founded by two St. Louis natives, brothers Bob and Rick Auffenburg, but the chain owed its existence entirely to another pair of brothers, Jerry and Basil Couvaras. The Couvaras brothers were born and raised in South Africa, the sons of Stavros Couvaras, a second-generation South African with Greek ancestry. Stavros Couvaras worked as a dealer of provisions and supplies to ships, earning his fortune in the port of Durban following the closure of the Suez Canal. With the money he made as a ship chandler, Stavros sent his sons to college. Both attended the University of Witwatersrand in Johannesburg, where Jerry earned a degree in political science and economics and Basil earned a degree in industrial psychology. Jerry, nine years older than his brother, worked as an investment banker in Johannesburg and teamed up with Basil to manage two investment companies. Next, the brothers embarked on careers in the franchised foodservice business. Jerry operated as a franchisor of a 12-unit casual steakhouse chain called Digger's Grill. Basil worked as the director of a multi-store franchise of Chicken Licken, a chain of 260 quick-service restaurants based in Johannesburg. The pair left South Africa in the early 1990s, arriving in Atlanta in 1993.

The Couvaras brothers became joint venture partners with the Auffenburg brothers, who had opened two sandwich cafés in Sandy Springs, a suburb of Atlanta. Jerry was in his mid-30s and Basil was in his mid-20s at the time the agreement was made. When the Couvaras brothers inked the deal with the Auffenburgs, a third unit opened that drove home the potential of the Atlanta Bread concept in the minds of the two South Africans. The third unit, located in suburban Norcross, Georgia, was an immediate success, generating more sales than the other two units combined. Jerry Couvaras, in a January 25, 1999 interview with Nation's Restaurant News, remembered the success of the Norcross restaurant. "Basil and I were both working the unit," he said. "We saw what they had and knew we could improve it by setting up the right systems. Of course, it helped that they were looking to sell the entire thing at that stage." The Couvaras brothers bought the Atlanta Bread concept from the Auffenburg brothers in 1994, and immediately set about turning the concept into a sprawling chain.

During their first years in business, the two brothers revamped much of what they had purchased. Sweeping changes were made, as new designs, menus, marketing methods, and operational controls were tested, enabling the Couvaras brothers to fine-tune the concept. The brothers relied on their business experience in South Africa, using the managerial, marketing, and operational models of Chicken Licken and Digger's Grill to help guide them. To achieve expansion, the Couvaras brothers intended to franchise their concept, something they began to do in 1995. That year, Atlanta Bread signed its first franchisee, Dino Bylos, the first of scores of franchisees who would create a chain of Atlanta Bread bakery-café restaurants. A decade later, virtually all of the units bearing the Atlanta Bread banner were operated by franchisees.

As the Couvaras brothers worked to develop their perfect franchise model, expansion of the chain occurred at a fairly rapid pace considering the nascence of the concept. By 1997, there were 33 bakery-cafés in operation, most of them located in the greater Atlanta area. By the end of 1998, Atlanta Bread Co. was a 47-unit chain, with restaurants stretching from Florida to New York and from Georgia to Texas. By this point, many of the lasting characteristics of the concept had developed, yielding what the Couvaras brothers believed was a successful blue-print for accelerated expansion. The brothers had developed a hybrid breakfast, lunch, and dinner concept, featuring wood floors, open fireplaces, and classical music piped through sound systems. The menu included the company's signature sourdough "Loaf of Soup," zucchini muffins, jalapeno bagels, and almond croissants. The brothers intended to roll out the concept nationally, making Atlanta Bread Co. a fixture in markets across the country. "Our unwritten mission is to be the McDonald's for baby boomers, selling fast, affordably priced meals and artisan baked goods in homey neighborhood ambience," Jerry Couvaras explained in his January 25, 1999 interview with Nation's Restaurant News.

New Facilities Provide Support for Expansion in the Late 1990s

The Couvaras brothers approached expansion more aggressively at the end of the 1990s, assembling the franchisees to fuel the chain's growth and establishing the infrastructure to serve the new units. The 47 units in operation at the end of 1998 were operated by 35 franchisees, a total that was expected to grow quickly because the company had signed agreements with 35 more franchisees to open 51 new restaurants. The majority of these new units were slated to open by the end of 1999. To provide support for the growing chain, the brothers invested $5 million in a new headquarters and commissary facility, the construction of which was finished in January 1999. The 68,000-square-foot complex replaced a 14,000-square-foot facility, giving the company the capability to supply at least four times the number of stores it had in operation at the time. "As far as storage and mixing machinery, our commissary is a League of Nations," Jerry Couvaras remarked in his interview with Nation's Restaurant News. "The $195,000 flour silos, including scales, are German; the pastry line equipment, costing $150,000 and capable of producing 5,000 cinnamon rolls or similar pieces an hour, is Swiss; the mixers are French."

As Atlanta Bread began pressing forward with its expansion plans, work continued on improving the bakery-café concept. The Couvaras brothers wanted Atlanta Bread to be a breakfast, lunch, and dinner destination, but the majority of the company's business was lunchtime business, accounting for 75 percent of its sales. The brothers wanted a more balanced business base, so they turned to their director of operations and corporate executive chef, Peter Teimori, to help cultivate more breakfast and dinner business. Teimori, who joined Atlanta Bread in 1997, began his culinary career in Tehran, Iran, studying with his grandfather, a French-trained baker and chef. Teimori received his formal education in the United States, earning his Master's degree in management from Indiana State University. He became a certified chef, pastry chef, bakery chef, and chocolatier, serving as a senior chef instructor at the California Culinary Academy and as corporate pastry chef for the Ritz-Carlton Hotel chain. Teimori began experimenting with menu changes in 2000, attempting to build upon Atlanta Bread's soup and sandwich base. He developed a test menu that added five new sections to the chain's menu, creating hot entrees that included a variety of pizzas, pasta entrees, calzones, hot breakfast specialties, and omelettes. The work begun in 2000 would not be unveiled publicly for several years, but when the changes were introduced, their influence created a new type of restaurant.

As Teimori worked on the recipes, logistics, and training to introduce a more comprehensive menu, the Atlanta Bread chain expanded. The company generated nearly $70 million in revenues in 2000, a total that marched upward as new units opened. By the spring of 2001, there were 93 restaurants in operation scattered across 18 states. The Couvaras brothers hoped to open 60 more units by the end of 2001 and 100 additional restaurants in 2002—goals that would not be reached. The beginning of 2002, however, saw Teimori's months of experimentation unveiled to the public. Atlanta Bread entered its ninth year of business with a new prototype unit.

Debut of Prototype Restaurants in 2002

In early 2002, the expanded menu was introduced in three new units in Atlanta and Dallas. The addition of pizzas, pasta entrees, calzones, hot breakfast specialties, and omelettes necessitated a change in store design. To prepare the new items, a grill and wood-burning oven were added to the design format, as well as 500 additional square feet for a total of 5,200 square feet. The prototype cost 15 percent more to build, but Jerry Couvaras expected the new format to generate an additional 20 percent in revenue. "My term for this is 'casual chill-out' breakfast and dinner," he said in a September 30, 2002 interview with Nation's Restaurant News. "This is a chef-designed concept that's been in the planning for three years. It creates a tremendous point of difference. We can offer dinner for 20 to 30 percent less than Olive Garden. That's what quick casual is all about." When the new units were opened, there were 132 units in operation in 25 states. Short-term expansion plans called for opening an additional 110 units by the end of 2003, expansion that was to include the debut of 18 prototype units by mid-2003.

Company Perspectives:

The concept behind Atlanta Bread Company is simple: great food made from the freshest, highest quality ingredients—quick, friendly service—and a comfortable setting in a convenient, neighborhood location. Our mission is to provide the premier bakery café experience where caring people serve quality products. And it all began with an idea . . . great food.

The Couvaras brothers again failed to reach their ambitious expansion objective, but the shortfall did not detract from the chain's success. The business press hailed the achievements of the Couvaras brothers, but in 2004 the brothers attracted attention for all the wrong reasons. Atlanta Bread's franchisees, who enjoyed a particularly close relationship with the central office in Smyrna, Georgia, were shocked by the news. On March 21, Jerry Couvaras, while visiting in Johannesburg, was arrested and detained, charged with multiple counts of securities fraud and theft. The charges stemmed from the collapse of the Couvaras brothers' South African investment companies in the early 1990s, a collapse that allegedly cheated approximately 2,000 investors of ZAR 38 million, or $5.8 million. Following the arrest of Jerry Couvaras, who was released on bail but not allowed to leave South Africa, senior investigators in Johannesburg issued an arrest warrant for Basil Couvaras for related charges. After issuing the warrant on May 18, South African officials began working with the Federal Bureau of Investigation (FBI) to arrest Basil Couvaras in the United States. Initially, Basil Couvaras refused to return to South Africa, but in late June he agreed voluntarily to join his brother in Johannesburg. An interim president took over at Atlanta Bread while the company's two senior executives were detained. By the fall of 2004, the threat that the company might lose its senior management disappeared. All the charges were dropped except for one count that Jerry Couvaras settled in court through a plea agreement. The brothers returned to their offices in Smyrna, ready to enter the most ambitious expansion phase in Atlanta Bread's history.

When the brothers returned to Atlanta Bread's helm, they presided over a $200 million business. There were 160 restaurants in existence, operating in 27 states. Expansion plans announced at the end of 2004, if fulfilled, promised the emergence of a truly national chain, one whose reach extended into scores of markets. In 2005, the company planned to open up to 30 stores in the northeastern United States and in Florida. By 2008, the Couvaras brothers hoped to have 500 locations in 50 states. Ultimately, they envisioned a chain with roughly 1,000 restaurants, a long-range goal they hoped to meet between 2010 and 2015. In a January 31, 2005 interview with Nation's Restaurant News, Jerry Couvaras offered his thoughts on the company's future, expressing the confidence that underpinned the company's ambitious growth plans. "We just have a lot of confidence in the brand," he said. "We have a lot of dedicated franchisees who have been with us for a decade and continue to grow and give us a lot of inspiration. Although we've been one of the fastest growing companies in Georgia, the most important thing to us is to open up strong stores that can withstand competition and withstand time. It's more sustainable than being fashionable and going with the trade winds. We're building this company to last, rather than being a fad."

Principal Subsidiaries

Atlanta Bread Company.

Principal Competitors

Panera Bread Company; New World Restaurant Group, Inc.; ABP Corporation.

Key Dates:

1993:: Jerry and Basil Couvaras invest in a small sandwich shop business in Sandy Springs, Georgia.
1995:: The Couvaras brothers begin franchising the Atlanta Bread concept.
1999:: The construction of a new commissary is completed, giving the company the ability to supply at least 200 restaurants.
2000:: Experiments begin on an expanded menu.
2002:: Prototype restaurants, featuring an expanded menu, first appear.
2004:: Atlanta Bread announces the goal of 500 stores in 50 states by 2008.