Evan Angelastro/Bloomberg
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PopUp took a risk when it messed with New York-style bagels.
Its version is smaller, fluffier and comes in only a handful of flavors. The minimum order is three. Customers are directed to "grip, rip and dip" the unsliced bagels into schmears like garlicky escargot cream cheese and truffle butter, many of which rotate weekly.
PopUp Bagels, which started in a Connecticut backyard during the pandemic, now has 16 stores, seven of them in the bagel mecca of New York. Most recently valued at $60 million, the private equity-backed company is betting that it can catapult from a viral TikTok-fueled phenomenon into a national bagel juggernaut, with plans to open 300 locations across the US in the next four years.
"I hate to say it, but it was actually pretty good," said Allie Semenza, 36, who stopped into PopUp's Midtown Manhattan shop recently for a bag of sesame bagels and honey marinara schmear. "I also feel like I somehow committed sacrilege to both my Jewish and Italian roots."
Winning over bagel snobs in New York, where neighborhood shops have thrived for more than a century, is one thing. But turning a labor-intensive, low-margin business into a nationwide hit with more locations than Sweetgreen is much harder.
Businesses selling burgers, fried chicken, pizza and cookies have all successfully scaled from regional darlings to mass-market chains. But bagel shops have generally remained hyper-local, with a few exceptions like Einstein Bros. and its more than 700 outposts.
PopUp executives say they have a straightforward formula to become a breakout success: a superior fresh-baked bagel, and a streamlined way of selling them that franchisees can replicate to keep costs down. The chain is already profitable, says it doesn't carry any debt and has signed franchise agreements in more than half of the states in the country.
"Our brand is different from everything out there," said founder Adam Goldberg, who taught himself how to make bagels during the first lockdown through trial and error. "This is no longer virality. This is a strong brand with a great product."
The PopUp business model is minimalist. Shops are barebones, averaging 700 to 1,200 square feet with limited seating, making them speedy takeout operations requiring only a few workers. Each costs roughly $300,000 to $900,000 to open, according to franchise disclosure documents, less than the initial investment needed for an Einstein Bros., which ranges from about half a million dollars to more than $1 million. PopUp franchise owners pay a 6% royalty on weekly sales, according to the documents.
The company helps franchise owners find locations - most often leased - and oversees their design, with products sourced from approved vendors to ensure brand consistency. The company, which operates some of its stores, isn't currently accepting new franchise applications after 15 were selected from more than 2,500 inquiries.
"The beauty of its business is in its simplicity," said former NFL star J.J. Watt, a PopUp investor. "They nailed it." The company has attracted a slew of other celebrity backers including Michael Phelps, Paul Rudd and Michael Strahan.
Last year Stripes, an investor in buzzy brands including grocer Erewhon and Levain Bakery, took a majority stake after leading a $27 million funding round, PopUp said. At the time, the bagel company was generating around $10 million in annual revenue. In 2023, the New York firm led an $8 million raise for the brand.
"If they could create this much excitement in New York," Stripes partner Chris Carey said of PopUp, "we believed there was significant whitespace for the brand nationally."
But high-quality bagels can be tricky and expensive to make consistently, which has kept many small producers from growing beyond neighborhood-shop mode, said Burt Flickinger, managing director at consumer goods and retail consulting firm Strategic Resource Group. That has led to a market dominated by mass-produced packaged bagels sold by supermarkets and big-box retailers, and by major chains like Dunkin' and Tim Hortons that offer a wider variety of items, he said.
Breakfast, an intensely competitive food category, has also taken a hit as Americans cut back on spending - either by skipping the meal altogether or making it at home.
And food hype often has an expiration date on social media, said David Stiles, a managing director at Citizens Bank who has advised Yum! Brands. Already, the crowds have thinned at PopUp's Midtown shop, where only a few customers trickled in during several recent morning visits.
"If the fad wears down, and the lines die down, are they still going to be profitable?" Stiles said. "That's the big question mark."
PopUp rejects the notion that its bagel could become the next cruffin, Dalgona coffee or baked feta pasta - food sensations that soon faded.
"Ooh, have you tried the square cupcake, or have you tried the ice cream sundae that has 4,000 calories in it? That to me is something that goes viral," said Goldberg, who used to work in flood mitigation before turning his pandemic baking hobby into a full-time pursuit. "You want to be a part of it, you eat it and then you never have it again."
With PopUp, he said, "we focus less on the virality and more on the factor of: Can we continue to make a great fresh product that people want to buy?"
Goldberg also wants every new store to match the energy of PopUp's first brick-and-mortar location, which was tucked in an alley behind a bike shop in Westport, Connecticut.
There, party music and steam bellowed from an 800-square-foot kitchen where workers, many of them local high schoolers, were making dough by 3:30 a.m. People donated more than $1,000 for a chance to be a "spice girl" tasked with laying seeds on bagels for a day. Lines formed down the block as word spread through social media.
As PopUp rapidly expands, with plans to open 60 to 70 shops by the end of next year, the company's biggest investment is in quality control. Chief Executive Officer Tory Bartlett said he doesn't want PopUp to become like Krispy Kreme, where the doughnuts are tender and hot in its stores but an inferior product when sold through gas stations and other retailers.
PopUp is building dough distribution centers and supply warehouses to ensure its bagels stay consistently fresh. From Atlanta, for instance, company-employed drivers will haul dough on daily routes to Florida, where it will be handed off to regional supply centers.
Kal Gullapalli, a Florida-based franchise operator, has committed to more than 30 PopUp stores. The first opened in Tampa last month.
When Gullapalli evaluates brands to add to his portfolio, which includes Dave's Hot Chicken and Marco's Pizza, the goal is to be profitable within three years.
"PopUp has a unique ability to beat that," he said. "That's why it really attracts us to grow as fast as possible."
| PopUp Bagels Adds Kosher Locations |
