BAB, Inc.

Company structure

Parent company with three wholly owned subsidiaries:
- BAB Systems, Inc. (Systems)
- BAB Operations, Inc. (Operations)
- BAB Investments, Inc. (Investments)
Systems focuses on franchising the BAB and MFM brands. MFM was acquired in 1997 and is included in Systems. Brewster’s Coffee and SweetDuet (SD) branding can be added to BAB or MFM locations.
Operations was formed in 1995 to operate company-owned stores.
Investments was formed in 2009 for acquisition activities.
Incorporated in Delaware on July 12, 2000.

BAB (Big Apple Bagels): bagels, cream cheeses, premium coffees, bagel sandwiches, desserts, and smoothies.
MFM (My Favorite Muffin) in two formats:
- MFM Bakery (Gourmet Muffin Bakery): muffins and coffees.
- MFM Cafe (Your All Day Bakery Café): muffins, coffees, and bagel sandwiches.
SD (SweetDuet): self-serve frozen yogurt available as an add-on brand within BAB or MFM locations.
Brewster’s Coffee: sold in most franchised units.

Core revenue from ongoing royalties paid by franchisees and from initial franchise fees.
Additional revenue from sale of licensed products, including My Favorite Muffin mix and Brewster’s Coffee, to franchisees, licensees, and approved customers.
Product distribution between brands (muffin products in BAB units and bagel products/Brewster’s Coffee in MFM units) supports servicing efficiency.

Royalties: 5% of net sales.
Marketing fund: 3% system-wide marketing contribution.
Franchise fees:
- BAB: $25,000 for the first full production BAB store; $10,000 veterans discount; $20,000 for subsequent production stores.
- MFM: $30,000 for the first full production MFM store; $25,000 for subsequent production stores.
Preliminary Agreement for first production store: $10,000, refundable under specified conditions; entire $10,000 applies toward the initial franchise fee if the site is approved.
Franchise term: 10-year agreements with renewal rights; stores expected to be in operation within 10 months of signing.

Industry: quick-service restaurant sector with competition from national, regional, and local chains. Key risks include changes in consumer preferences, economic conditions, supply disruptions, and food and labor costs.
Intellectual property: trademarks include Big Apple Bagels, My Favorite Muffin, SweetDuet, Brewster’s Coffee, and Jacobs Bros. Bagels (acquired 1999).
Regulation: subject to the FTC Amended Franchise Rule and applicable state and local franchise laws, along with health, safety, licensing, and labor regulations.

Primary customers are franchisees across a varied geographic and demographic mix. The company provides marketing, training, recipes, bulk purchasing, and brand support.
Major suppliers include The Daily Java, Dawn Food Products, Coca-Cola, SYSCO, and Gordon Food Service. The company states it is not dependent on a single supplier for future growth.

Corporate employees: 11 full-time and 1 part-time at headquarters in Deerfield, Illinois.
No union agreements; active 401(k) plan with up to 4% matching.

Principal executive office: approximately 5,300 square feet in Deerfield, Illinois.
Lease signed February 15, 2024 for a six-year term (April 1, 2024 to March 31, 2030) with a five-year renewal option.

Controls in place: firewall, intrusion detection, antivirus, VPN with end-to-end encryption, email filtering, regular security updates, password protection for sensitive files, regular data backups, and cybersecurity insurance.
Incident response: defined plan assigning roles to the CFO/COO and the Audit Committee.