The ubiquitous Noah’s Bagels, a fixture of the Malibu breakfast culinary scene for the last few years, is no more. According to Sarah Hale, store manager at Blockbuster Video, Noah’s next door neighbor in Malibu Colony Plaza, there was a sudden meeting called at 9 p.m. last Wednesday for managers of 15 of Noah’s Southern California locations. At that time, a company officer advised them their stores were being closed, effective immediately. He also told them that while they were meeting, company officers were going to the various locations, removing cash, the registers and financial records. They were told the employees would be paid through Sunday, and that the closure in L.A. was part of a larger closure nationwide.
The Malibu store employed about 14 people, including several store managers and clerks and four bakers. The bakers usually arrive very early in the morning to beginning baking the day’s bagels, which were baked fresh on the premises. But as they arrived last Thursday morning, they were greeted by the store manager, who told them the bad news.
The Malibu Noah’s is among the company’s smaller stores and has a very limited menu. According to sources, many of the stores closed were the smaller stores which had limited menus. It was rumored that the store on National and Barrington in West L.A. and another in Westlake were among the casualties.
Although the closing was a shock, it was not totally unexpected. Noah’s had closed 14 stores last year, including one on Main Street in Santa Monica. On March 31, the Los Angeles Times ran a story about troubles in the bagel shop industry and fear that they might go the way of the Yogurt store craze of a few years ago. Only days earlier, the country’s largest bagel chain, Golden Colorado-based Einstein Noah Bagel Corp., had said in its annual 10-K filing with the SEC that it might not have enough money to keep the company operating if new financing couldn’t be found. Einstein Noah owned 539 stores nationwide, including more than 50 in Southern California, and indicated in corporate filing it might default on a $125 million debt payment due in October.
To try and handle the shift in public taste that seems to be moving away from bagels, Einstein Noah began adding sweets and lunch items; according to reports, breakfast bagels have shrunk to less than 40 percent of the business. Many other fast-food chains have broadened their menus to survive in an era of rapidly changing public tastes.
But the shifting trends and problems with corporate debt restructuring were secondary to Cortland Bond, an employee of Noah’s, who arrived Thursday morning to work his shift and found the windows and door papered over and a “Closed” sign on the door. His problem was much more personal. He was out of a job. The store manager, Danielle, whom he described as a wonderful person to work for, had already told the bakers, and she was there to greet the other employees as they showed up for work. Bond said he thought the store was doing okay, but limited space kept them from carrying a full menu. This may have doomed the store to closure.
What Bond couldn’t know was that the Einstein Noah Bagel Corp., which is publicly traded on the OTC market, had filed a bankruptcy petition in U.S. Bankruptcy Court in Phoenix, Ariz., for Chapter 11 reorganization. In a company press release the same day, Einstein Noah CEO Robert Hartnett attributed the company’s problems to “an excessive debt burden created by undisciplined capital spending and store growth, excessive overhead levels and weak store performance … The company has also been prevented from realizing its full potential by a significant number of unattractive real estate deals entered into during the same period of rapid store growth.” As part of its reorganization plan, the company is closing 74 Einstein Bros. Stores and Noah’s New York Bagel’s stores located primarily in Los Angeles, Boston, Philadelphia and New York. Malibu, unfortunately, was one of the causalities. The proposed plan would also convert the $125 million in debt into stock. The reorganization plan still has a way to go before it becomes a reality but without it, the prognosis is grim, the company told the SEC.