Issue #45: Inside the Rise of PopUp Bagels

Welcome back! I hope everyone had a nice Passover / Easter celebration with friends and family. I am feeling refreshed after a nice weekend with my family. In that light, I decided to shake things up with a more financial/numbers deep dive this week. I hope you enjoy this edition, and as always, I would love to hear any feedback. Plus, make sure to read to the end to hear some special insights from the passover seder!

In preparation for this piece, I decided to search the newsletter to see how many issues featured PopUp Bagels. 16 total issues for those wondering. It makes sense. I really admire what PopUp Bagels has been doing, especially in the partnership advertising space and the franchising expansion strategy. Couple that prior interest with reading a lot of Drew Fallon’s newsletter, Making Cents, which is financial deep dives of mid to late-stage companies, I thought it might be interesting to do a similar style piece with an earlier-stage company. Plus, it just had some big news, albeit with less information available than Drew’s deep dive. Regardless, I thought it would be interesting, so, let’s dive into the history.

PopUp Bagel’s History

In 2020, a pandemic swept the world, and many people were staying at home. Like many others, I went deep into baking, especially sourdough baking. One of the other people to go down this path was down the road in Westport, CT. At the time, Adam Goldberg was baking sourdough on the side. Once the summer came, he switched to bagels, and people liked them so much, he started selling them at his house. It was so popular that customers had to pre-order their bagels and cream cheese in increments of three, six, or twelve bagels. From there, social media plus retail did its job, popularity grew, and PopUp Bagels began popping up in existing kitchens that were not utilized in the morning. That is how PopUp Bagels was born. I personally found out about it in 2022 via Instagram, and have been following ever since. The first grip rip and dip in 2023 was a fun and tasty experience. Next up, let’s check in on location growth.

Location Explosion 🚀

As illustrated in the graphic, PopUp Bagels is utilizing franchising to expedite growth. There are 15 stores open or planned to open in 2025, and it seems that additional locations in DC, Charlotte, Atlanta, Charleston, and Florida will open this year. Pretty safe to say it is on the trajectory to hit 20 stores this year. From there, the goal is that by 2030, it will have 150-200, again seemingly propelled by franchising. For instance, it was recently announced that a series of partnerships will open up 35 California locations, 10 in San Diego and 25 in Los Angeles. In my opinion, the next year and a half will be telling. It is definitely a stretch goal, but if the franchising playbook is smooth, the pathway to 150 - 200 locations is definitely there. I am definitely going to keep monitoring to see the progress!

Revenue Streams

PopUp Bagels, despite being around for almost five years, is a very young company in retail terms. This means revenue isn’t that big yet, and it is not disclosed. However, that did not stop a noted retail growth equity firm, behind Erewhon, Levain, and more, from putting $8M into the business. There are currently three main streams of revenue.

• Corporate Owned Store Revenue - This stream is the most straightforward and consists of all the bagel, beverage, schmear, and merch revenue from the stores the company owns.

• Franchise Fees and Royalties - Many stores are franchises, like McDonald’s and Subway. A franchise restaurant is a business that operates under the branding, menu, and operational guidelines of a larger parent company, typically in exchange for fees and a share of the profits. The fees, aka the Franchise Fees, are usually a lump sum up front for the right to operate the business in an area. For instance, McDonald’s is $45k, Chick-fil-A is $10k, and some others can get as high as $100k. The franchisee then has to pay the costs to open the restaurant and build it out. Once it is open, the franchisee pays 2%-12% of revenue to the parent company as a royalty fee and 1-4% of revenue as a marketing fee, which is used to fund the marketing of the entire company. It is unknown what the exact amounts are for PopUp Bagels, but there is an extremely high likelihood that this is the structure.

• Partnership Advertising Revenue - As I wrote in Issue #7 and the long-form piece, the reason I am so bullish on PopUp Bagels is its partnership advertising strategy. This strategy involves working with a CPG company to create a custom schmear and sometimes more, like partnering with Sun-Maid to launch a custom schmear and cinnamon raisin bagel. I am almost certain these weekly partnerships are sending a marketing fee from the supplier to PopUp Bagels, irrespective of the franchising. This revenue stream is the highest margin and most likely one of the reasons Stripes got involved. I think there is a huge growth opportunity as well to add additional partnership revenue via a sponsored bagel of the week. However, there is a finite cap on this stream as there are only so many schmears they can have in a week.

In addition to the revenue streams, one of the coveted metrics in retail restaurants, especially franchising, is AUV (average unit volume), which is total sales divided by the number of locations. I took a SWAG (scientific wild a** guess) at projecting the AUV below. What do you think? For some context, CAVA is at $2.9M, Chipotle is at $3M, McDonald’s is at $3.3M, and Chik-Fil-A is at a whopping $9.3M.

For projecting PopUp Bagels’s AUV, you have to divide it into 2 catagories: city and suburbs store, because the profile of the customer varies.

• City (7) - more individuals and couples, less families, lower AOV, but higher number of transactions

  • AOV of $15 × 345 Avg. Customers Per Day x 365 Days = $1.9M AUV

• Suburbs (6) - more family orders, higher AOV, but lower number of transactions

  • AOV of $22 × 167 Avg. Customers Per Day x 365 Days = $1.3M AUV

Overall, that would leave the AUV at a weighted average of $1.6M, with room to grow. That does not include the partnership advertising revenue, which is likely in the tens of thousands to hundreds of thousands per deal. Some interesting ways to grow AUV would be around making sure customers are able to get the accessories customers need to complete the spread, like tomatoes and cucumbers, and expanding the daypart, like Pizza bagels, selectively at night.

Exit Potential

Currently, the bagel market is very localized and fragmented. There aren’t really companies dominating the market, with 1000s of franchised locations, like you see in other verticals. Here are some of the largest chains, including those that don’t exclusively sell bagels:

• Dunkin - 9,000 locations

• Einstein Bros Bagels - Over 700 locations

• Bruegger's Bagels - 260 locations

• Au Bon Pain - 200 locations (not exclusively bagels)

• Jeff’s Bagel Run - 83 locations (also founded in 2020)

In terms of exits, there are two routes for a retailer like this: IPO and sell to a strategic/PE firm. In the bagel case, none have grown large enough to be public. Here are some of the notable exits:

• Einstein Noah Restaurant Group (Einstein Bros. Bagels, Noah’s New York Bagels, Manhattan Bagel) was acquired by JAB Holding Company for $374M

• Bruegger's Bagels was sold from Sun Capital Partners to Le Duff America in 2011 for an undisclosed amount

• Call Your Mother Deli sold an undisclosed stake to investment firm Invus in 2025

It will certainly be a difficult road, but the pathway to exit is definitely there, albeit depending on the number of locations. If PopUp is able to reach more than 1000 locations, and an IPO is on the table. Anywhere above 100 locations and below the amount needed for an IPO, that is where a PE firm would get interested. As always, it will be exciting to follow along!

Bluestone Revamps POS Terminals With Square

Does anyone who reads this newsletter work at Bluestone Lane or Square? Based on my understanding, the answer is no. However, all the way Issue #16, I wrote about the importance of retailers enabling tap-to-pay in their stores. Bluestone was notably not accepting tap payments, which is especially strange because adoption outside the US of tap-to-pay is much higher. Well, they say great minds think alike because this week, it was announced that Bluestone and Square have partnered to use Square terminals in all US locations. Specifically, they are using the registers, handhelds, and a kitchen system. In the press release, it is claimed that the ordering on the handhelds from the customers has made ordering go 50% faster. Not too shabby, the more turns the better! On a separate, but interesting note, notably Walmart does not accept tap-to-pay right now. I wonder when that will happen.

KFC Building Tech In House

It’s no secret that software has taken over the world. For companies, there is the ever-present question should we build the software ourselves, or instead should we buy it from a specialty vendor. Most companies opt to outsource it, after all, the outsourced vendors are experts. However, with the rise of AI, in particular tools that help you code faster, more companies are opting to build tools in house in partnership with other vendors. Notably, in the retail world, KFC just announced a partnership with Nvidia to launch a couple of features:

• AI-powered voice ordering for phone ordering and drive-throughs

• Enhancing the internal ops with AI (not sure what this means, maybe an internal chatbot?)

• Using computer vision to review video footage to find erroneous orders

• Filtering customer feedback through AI to determine what to provide to managers and what the sentiment is

These tools will be rolled out to 500 locations soon, and if successful, could be deployed at up to 61,000 restaurants. A parting thought from Yum (KFC parent compnay) Chief Digital and Technology Officer Joe Park on outsource vs build: “We want to own the intellectual property. We want to own the technology. That’s a shift in our strategy as we think about AI.”

Manischewitz Undergoes Yassifcation

Yassification (noun) - to improve something, especially by making it more beautiful or glamorous. This word/meme has increased in popularity; however in the CPG world it has come to take on a certain kind of branding. Branding that is simultaneously new and old, refreshing a boring category, typically associated with a rebrand or a brand new product, etc. If there is a rebrand that could be in the dictionary as an example of yassification, it would be Manischewitz to a tee. Manischewitz is a brand of kosher products founded in 1888 in Cincinnati. It is best known for its matzah, pantry staples, and wine. It became a public corporation in 1923, but remained under family control until January 1991, when it was bought out by a private equity firm. Since then, there have not been many changes, besides some re-orgs and manufacturing shake-ups. That all changed in April 2024, around Passover, when the new brand was revealed, albeit more for the future of the brand. It instantly was controversial, like any yassification. However, from a retail POV, it certainly makes the products pop more when they are on the shelves, while still clearly identifying what it is and making homages to the past brand. At the Passover seders I attended, this topic was discussed frequently and contentiously. So, I decided to pose it to the “Retail Is Not Dead?” community, what do you think?

Additional Links:

1. Weee!, the largest Asain eComm grocer, is now accepting SNAP benefits via a partnership with Forage (read more here)

2. Madison Reed, the omnichannel haircare and coloring startup (founded by a UConn alum!), expands its omnichannel presence through a retail partnership with Sally Beauty (read more here)

3. A great deep dive into the peer-to-peer consumer clothing rental marketplace, Pickle (read more here)

4. How are tariffs affecting creators? (read more here)

5. Wegman’s is launching an upscale sushi bar in NYC, its second location for the concept (read more here)

6. A 57 unit Burger King franchise operator has filed for bankruptcy (read more here)

7. 7-Eleven plans to open 1,300 stores by 2030 in North America (read more here)

8. Lid’s, the sports apparel retailer, is redesigning its store experience by focusing on customization (read more here)

9. Walmart is using geospatial data to improve its delivery efficiency by adjusting zones in real time and not limiting itself to zip codes (read more here)

10. Ikea adds small format store in Dallas (read more here)

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