Erin Hasselgren spent nearly two decades with Corner Bakery before he left the chain in 2016. But early last year, he was talked into visiting Dallas to discuss coming back as the brand was being sold to SSCP Management.
Hasselgren didn’t like what he saw when he got there. “Things were so bad when I started,” he said. “We didn’t have P&Ls, we didn’t have reporting. Nobody knew how they were doing. There were no uniforms, equipment was broken, carpets were torn, awnings were trashed.”
And yet, despite that, the brand generated average unit volumes of $1.7 million. “We have great food,” Hasselgren said. “We have a loyal following. We have some of the best locations. We have people that really love eating breakfast and taking their families out to Corner Bakery.”
With that foundation, the chain’s new owners and new management team under CEO Chris Dharod began a complex and difficult turnaround.
The company has improved operations, spruced up stores, replaced equipment and reignited its marketing. The brand is now starting to gain traction, with those unit volumes up closer to $2 million.
Corner Bakery now eyes more remodels, new units for the first time in years, and some realization of the fast-casual chain’s long-unfulfilled potential.
The history
Corner Bakery was founded in 1991, on a corner in downtown Chicago, by Lettuce Entertain You Enterprises. It was later sold to Chili’s owner Brinker International, which in 2005 sold the brand to Il Fornaio, which was in turn sold to Roark Capital in 2011.
The brand had long been considered a worthy competitor to the much bigger Panera Bread, a bakery-café chain with all-you-can drink coffee and a strong lunch business.
But it never quite realized that promise. It grew from 80 locations in 2002 to a peak of 197 restaurants in 2015, according to data from Restaurant Business sister company Technomic.
Caption exterior Corner Bakery. | Photo by Jonathan Maze.
“I think we were the best of the best in the day,” Hasselgren said. “We probably didn’t grow as quickly as we should to gain market share. Panera kind of outran us, but I think our guest service and food has always been top notch.”
The pandemic was brutal for bakery-café concepts that relied heavily on urban workforces for their business. And by 2020, Roark put Corner Bakery on the market.
Jay Pandya, a former Pizza Hut and Dunkin’ franchisee with a track record of unpaid bills and legal troubles, stepped in to buy the chain, assuming $42.3 million in debt and paying an additional undisclosed sum.
Others who had looked at the deal at the time felt he overpaid for the brand. But Pandya paired the fast-casual with the other concept he bought that year, Boston Market, and called the company Engage Brands.
Yet it would soon become clear exactly how Pandya planned to make a return on Corner Bakery: With severe cost cuts.
The brand stopped paying bills without steep discounts. The company would be sued more than 84 times over the next two and a half years by landlords and other vendors. The chain shuttered 78 locations since the end of 2019, many of them over unpaid rent or other bills. The company now has 104 locations.
By late 2022, Corner Bakery’s owner wasn’t paying the company’s lender, Goldman Sachs, which put the company’s debt on the market. (Read more about Corner Bakery under former ownership here.)
That’s when SSCP, a franchisee of Applebee’s and owner of Cici’s Pizza, stepped in.
Loan to own
SSCP is a Dallas-based operator and real estate company, founded by Sunil Dharod. It is perhaps known most for creating the $1 margarita, or Dollarita, and Applebee’s late night segment.
“No one thought anyone would want to go to an Applebee’s at 1 a.m.,” Chris Dharod said on a recent episode of the Restaurant Business podcast A Deeper Dive. “But we opened them up. We put some food specials up, we did half-price appetizers. And sales took off.”
Dharod started working in the family business in middle school, working in his father’s Burger King restaurants, which the company has since sold. He started on the Whopper line and then moved up to the cash register and the drive-thru. The family later bought some Applebee’s locations, and Dharod worked in those while in college.
A finance major, Dharod worked in banking for a few years before he rejoined the family business. “It’s been a lot of fun,” he said. “I have my dream job. I love what we do. I love so many parts of our industry and our business.”
The company operates Sonic locations in addition to Applebee’s but in recent years it has started targeting brands, using a combination of financial expertise, operations and its approach to marketing. It first bought Roy’s Restaurants from Bloomin’ Brands in 2015.
It was then part of a group that bought Cici’s out of bankruptcy in 2021. That brand has seen improvement thanks to better operations and a renewed focus on video games.
SSCP eyed Corner Bakery in 2020 and then again in late 2022, when the debt was offered for sale on the secondary market. SSCP acquired that debt at a discount to its face value.
As secured lender, SSCP had certain rights and early last year forced Corner Bakery into a bankruptcy filing. From there, it proposed an exchange of its debt for equity in the company, meaning it was able to take ownership of Corner Bakery for the price of the debt it acquired on the secondary market, a process many call “loan to own.”
“With Corner Bakery, we believe the food, the products, are better than our peers,” Dharod said. “We believe it’s got a great brand, a great name. The locations are really strong.”
Corner Bakery caption about the menu. | Photo courtesy of Corner Bakery.
Such deals are risky, however. Brands whose debt is put up for sale are typically struggling and often close to bankruptcy. And they’re often in that position for a reason.
In Corner Bakery’s case, the company had angry vendors, stores with broken equipment and stressed employees. “Typical private equity would not have the stomach for those situations,” Dharod said.
A solid foundation
How do you fix a brand, however, with no uniforms and broken equipment and a lot of unpaid bills?
“It’s more like, what have we not done?” Dharod said.
The first thing the company did was to recruit a management team. Dharod is the CEO. The company brought in a pair of Corner Bakery veterans, including Hasselgren, the chief operating officer, and Bob Hartmann, the VP of development. It also brought in Melanie Barichivich to head marketing and Glenn Hurley to oversee procurement.
Those executives also saw some real potential, particularly with the unit volumes it was generating amid its downfall. “I knew we could get over $2 million [AUVs] pretty quickly, just by following the basics,” Hasselgren said.
Much of those volumes came from loyal customers. Corner Bakery’s loyalty program had some 200,000 members, who continued to use the chain coming out of the pandemic and through its struggles.
“It’s pretty significant for having not focused on it the past couple of years,” Barichivich. Indeed, those loyal customers may have saved the chain, she said. “It’s really a miracle we’re still here.”
Still, it required work to translate that foundation into a true turnaround. SSCP had to make some major investments behind the brand, acquiring uniforms and getting workers the benefits they deserve. The brand also brought back bonus systems for management for the first time in years.
The company is also remodeling units and replacing equipment. “We’re putting a lot of money into the cafes,” Hasselgren said. “And we’re spending a tremendous amount of money on equipment, remodels, design and development for reopening some locations that have been closed.”
Executives also spent a lot of time inside the restaurants, holding roadshows with the general managers in each market and visiting each location.
And the company added tipping, which was important for staff. “That’s something small,” Dharod said. “But most of our competitors or all of our competitors do it. That’s added a lot of excitement for our hourly team members. They’re making more money. They’re more interested in taking care of customers now.”
Corner Bakery is also investing in new kiosks to improve ordering inside the restaurants. It also added new software from Qualtrics XM that uses guest surveys to provide management with visibility on operations efforts and their effect on customers.
“Brinker taught this brand how to follow and create routines and great systems,” Hasselgren said. “Just bringing back a lot of those systems where your day is the schedule and your week is the schedule and your month and your quarter. And there’s certain measurements in place to see who’s performing and who’s not.”
Marketing the brand
But turning around a brand isn’t just about operations. The company needed to start talking again.
The company brought in Barichivich to oversee marketing. She started working with SSCP early last year, initially to oversee marketing for all the company’s brands. But she then worked on the acquisition and was ultimately made head of marketing.
“There hadn’t been marketing done in 18 months or so,” she said. “There hadn’t been any engagement whatsoever with any of the social platforms, whether organic or paid. And there was nothing on digital.”
“The fruit was hanging very low,” she added.
So the company’s strategy was to rebuild that digital and social presence and build awareness.
The company brought in the Addison, Texas-based marketing agency Champion Management to oversee marketing and public relations.
Corner Bakery is working to rebuild its catering business, which is vital for a brand with a lot of locations around business districts.
“That’s how I found out about the brand many years ago,” Barichivich said. “I connected to the brand through catering. So a lot of what we do, and the opportunity that we have, is communicating with our catering guests.”
The results so far are there. Corner Bakery’s sales have improved over the past six months, up about $200,000 per location, thanks to picking some of that low-hanging fruit. And now the brand is working to remodel more locations.
The company plans about 10 remodels this year and expects to open five to seven new units, which would be the first new Corner Bakery restaurants in years. Barichivich also plans to focus more attention on that loyalty program by the end of the year.
It also plans more food innovation. “I’m fairly confident, once we get all these things in place, we’ll be flirting with $2.5 million average unit volumes in 18 to 24 months,” Dharod said. That’s “pretty significant for a brand like ours. It’s exciting, really, really exciting.”
But it’s also a long-term strategy. It’s one thing to generate sales off short-term wins. But the brand has been through a lot over the past four years. This is not an overnight turnaround.
“It’s a little surreal,” Hasselgren said. “We have a long way to go. But we’ve made a lot of progress and it feels good.”