SUPERMARKET SANDWICH SUPPLIER REPORTS LOSSES

Lynne Miller

SEATTLE -- Struggling sandwich-shop chain Briazz, until recently a supplier to a number of supermarkets, reported mounting losses and said it may have to close down if it cannot find new financing or pay overdue bills.

The company no longer supplies supermarkets with products, according to a filing last month with the Securities and Exchange Commission. Following an extensive analysis of its wholesale business, company officials concluded the "economics of wholesale accounts did not support the grocery segment," according to the SEC filing. As a result, the company reported it voluntarily withdrew its products from QFC stores in the Seattle area at the end of 2002, and terminated tests with Albertsons in October and with Target earlier this year, according to the filing.

Briazz operates 45 cafes in Seattle, San Francisco, Chicago and Los Angeles, and they primarily serve office workers with lunch and breakfast items, such as prepackaged sandwiches, salads and soups. Some cafes inside office towers are an amenity designed to serve the building's tenants.

The company said it has been hurt by lower office-occupancy rates, particularly in San Francisco and Seattle over the last two years. In recent months, Briazz closed its central kitchens in Los Angeles, Chicago, Seattle and San Francisco, and has outsourced food production to Flying Food Group, an airline caterer with its own commissaries. The kitchens Briazz operated had run significantly below capacity, the company said.

The sandwich chain and FFG work together to supply sandwiches and salads to Starbucks stores in Chicago and New York. Before working with Briazz, FFG had been a supplier to Starbucks in Chicago, New York and Los Angeles.

Briazz reported it had incurred losses of $15.1 million during the fiscal year ended Dec. 29, 2002, eclipsing the previous year's losses by several million dollars. In its eight years of operation, the company has posted a history of losses, accumulating net losses of $63.2 million at the end of last year.