MANHATTAN BAGEL TO ROLL ON DESPITE CHAPTER 11

ROSEANNE HARPER

EATONTOWN, N.J. -- Manhattan Bagel Co. here said it will continue with its present business plans, including pursuing its partnerships with supermarkets, despite the fact it has filed for reorganization under Chapter 11 of the Federal Bankruptcy Act.

The company announced late last month that the voluntary Chapter 11 action taken in the U.S. Bankruptcy Court for the District of New Jersey in Trenton resulted from recent losses and being placed in default by its primary lender, First Union National Bank.

Manhattan Bagel said the reorganization will enable it and its franchisees to conduct business while it develops a reorganization plan.

The company said it told franchisees they will continue to receive a steady supply of bagel dough and spreads from its manufacturing plants, as well as operational and marketing support.

The type of disclosure about the company's financial structure to prospective customers will have to be modified, but that's about the extent of the effects on anyone outside the corporate office, Rocco Fiorentino, vice president of business development, told SN.

"In fact, on a go-forward basis, the company sees much of its growth in the supermarket sector. And that's for a good reason. The investment of capital by the franchisee is substantially lower," Fiorentino said.

Asked about its partnership with 16-unit Clemens Markets, Kulpsville, Pa., in particular, Fiorentino said, "Our plans haven't changed. They've given us the go-ahead for all their stores by the end of next year."

As reported in SN, the fourth full-bake Manhattan Bagel operation was installed in a remodeled Clemens unit in Lansdale, Pa., earlier this month with more set for the first and second quarters of next year.

Fiorentino said the company had contacted all its supermarket partners to talk to them about its Chapter 11 filing and that they did not exhibit much concern.

The company is pursuing a number of actions to improve its operating results, officials said.

With company-owned stores identified as a major component of the operating losses, the company has undertaken a program to sell those stores to franchisees or to close them. Other steps include a downsizing of the corporate staff and a revamping of its senior management team, officials said.

Fiorentino added Manhattan Bagel's management team and its accounting firm believe the company has a viable core business.

In addition to Clemens, other supermarket chains that have either full-bake operations, branded kiosks or self-service Manhattan Bagel operations include H.E. Butt Grocery Co., San Antonio; D&W Food Centers, Grand Rapids, Mich.; Kroger Co., Cincinnati; Smith's Food & Drug Centers, Salt Lake City; and Vons Cos., Arcadia, Calif.