Thinking of Buying a Fast-Casual Franchise? Read this report first.

Ones to Watch | By Judy Kneiszel

Hannah’s Bretzel
hannahs bretzel

Everyone in the world spells the name of the chewy twisted bread product with a “b” rather than a “p” except those who speak English, says Florian Pfahler, founder and president of Hannah’s Bretzel. But spelling is not the only way this Stuttgart, Germany, native is trying to get Chicagoans to be more European.

“I started Hannah’s to bring a whole grain bread focus to the food-to-go concept in Chicago,” Pfahler says. “We love bread in Germany. There’s a bakery every half mile there, but it’s very grainy bread.”

While traditional twisted bretzels and small bretzel-bread baguettes are available ala carte at Hannah’s Bretzel, sandwiches are its bread and butter, so to speak. And they all start with breads made from old German recipes.

Sandwiches are served on organic whole grain bretzel bread, farmer’s bread made with whole wheat and rye, or multigrain bread with visible grains and seeds.

“All three breads are whole grain focused because there are enormous health benefits for the heart, the prevention of cancers … you name it.” Pfahler says.

The fillings for the sandwiches are also healthy and organic. Pfahler believes Americans eat more meat than is good for them, so many menu items are vegetarian, like the Vegetable Bomb sandwich, made with sliced cucumbers, tomatoes, avocado, onions, sprouts, watercress, and baby arugula drizzled with homemade vinaigrette on a whole grain baguette for $7.99.

Pfahler does not completely dismiss meat but insists it be extremely lean and high quality. Sandwiches on Hannah’s menu are made from meats like imported Italian Parma ham, French Madrange ham, and wild Alaskan salmon along with Swiss Gruyere, French Camembert, and Holland Gouda cheeses. A Parma ham and fresh mozzarella sandwich with baby arugula and sun-dried tomato mustard on a bretzel baguette sells for $8.99.

“There are really wonderful meats and cheeses out there that no one in this segment is touching,” Pfahler says.

Sandwiches come with one of four sides, but there’s not a deep fryer on the premises. Choices include roasted almonds, roasted soy nuts, fresh fruit, and Terra kettle chips.

Pfahler, who came to Chicago in 1998 to work for advertising giant Leo Burnett, spent seven years getting first-hand experience at lunch in the Loop, the Windy City’s downtown business district. There were plenty of opportunities to get an ordinary sandwich in the $3–$5 range, but Pfahler would have been happy to spend $8–$9 to get a sandwich made with healthy, organic ingredients. He took a gamble others felt the same way.

Hannah’s Bretzel

PRESIDENT: Florian Pfahler

HQ: Chicago

YEAR STARTED: 2005

ANNUAL SALES: $1.95 million

TOTAL UNITS: 2

FRANCHISE UNITS: 0

WEB SITE: www.hannahsbretzel.com

“I was a lunch customer like everybody else,” Pfahler says. “And I also learned about Whole Foods Market, a retailer which brought a consciousness about food and where it comes from to Chicago people—the organic, environmental, sustainable farming idea. I thought there must be an opportunity for a carry-out business to focus on that same characteristic.”

In 2005 Pfahler opened the first Hannah’s Bretzel on West Washington Street, naming it after his then 2-year-old daughter. It is a sparse 1,200 square feet and focuses primarily on carry-out with seating for only four guests. A second, more spacious 1,700-square-foot location with seating for 32 opened about nine blocks east on North Michigan Avenue in 2007.

Despite the slumping economy, overall sales have increased 25 percent from 2007 to 2008. Pfahler says he hopes to open a third location in the Loop sometime this year “when credit starts to loosen up and the economic dust settles.” In the meantime, he raised prices in early 2009 for the first time in two years.

“I increased sandwiches 1 to 5 percent,” he says. “We’ve seen prices on ham increase quite a bit.”

Hannah’s customers are primarily urban professionals ages 18 to 45 who walk to the eateries for lunch. The restaurants are also open for breakfast, serving egg sandwiches. Catering is the fastest-growing segment of the business and stands at about 20 percent of sales, up from 15 percent in 2007.

“Our marketing has been word-of-mouth and PR; no advertising,” Pfahler says. “I know of customers who walk seven to eight blocks to eat with us, which is unheard of in this category when there are places to get a sandwich around every corner.”

In addition to his staunch commitment to nutrition, Pfahler is also an environmentalist. The Michigan Avenue location is LEED certified by the U.S. Green Building Council and Pfahler received a Chicago magazine 2008 Green Award.

“I’ve been pushing this since 2005–before everyone else jumped into the green movement.” Pfahler says.

Hannah’s does not sell soda, but stresses healthy beverages including high-end teas along with organic juices, organic milk, and soy milk plus organic coffee and espresso drinks.

Hannah’s Bretzel is not all serious nutrition, environmentalism, and no fun, however. Both locations have what is known as “the wall of chocolate.”

“We have 200 or more SKUs and 25 to 35 different brands from all over the world,” Pfahler says. “The wall of chocolate makes up 9 percent of our revenue.”

But why chocolate?

“Chocolate is a wonderful, simple, daily pleasure that has health benefits if not overdone,” Pfahler says. “Our customers love it. It all comes back to providing new flavor experiences and giving our customers an opportunity to try them.”