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H&H Bagels secures debt financing as it expands nationally

Richard Collings
Sep 7, 2022
The interior of H&H Bagels new location on the Upper West Side, which includes a long counter with white tiled walls and floor.
The interior of H&H Bagels' new store format. Photo: H&H Bagels

H&H Bagels, which is celebrating its golden anniversary this year, is embarking on national expansion with plans to open 10 units over the next 18 months, CEO Jay Rushin tells Axios.

Why it matters: Retail and restaurant concepts that originated in New York City have a history of mixed success when it comes to national expansion and don't always translate outside of the five boroughs, from Barneys to Fairway.

  • Rushin says H&H doesn't plan to slow down, with the potential to open between 500 and 1,000 locations in the U.S.

Details: To fund its growth, H&H lined up a combination of project financing and a line of credit provided by KeyBank, Rushin says.

  • "We did just finalize after a long arduous process a bank debt package so we are using some debt to finance our bakery," he says.
  • Last year, H&H raised a Series A financing in exchange for 5% equity. Rushin declined to disclose additional details about the financings, as well as revenue H&H.

Flashback: Rushin, during the final years of a 20-year stint on Wall Street as an equity analyst, was looking for a "second career" and a business to invest in.

  • In 2014 he bought the remaining H&H assets tied to the Upper East Side location, after hearing about the opportunity via a family connection.
  • "I am the world's worst salesperson so I was looking for something that kind of sold itself," Rushin explains, adding, "I wanted something less cyclical and economically driven, so that pointed to something like H&H Bagels."

Yes, and: After Rushin acquired the business, he overhauled the company's financial infrastructure, began testing new ovens and production technology, and remodeled the Upper West Side store.

  • The renovated location, which opened in April, will serve as the store template for national franchising.
  • H&H also invested in a new production facility in Queens that will supply both its wholesale business and its store operations, as it was important to make the bagels with New York City water.
  • The company sells frozen bagel products in the U.S. and around the world, with a large export business to South Korea, for example.

Catch up fast: H&H was originally launched in 1972 in an existing bagel shop by two brothers-in-law from Puerto Rico, Helmer Toro and Hector Hernandez (the H&H behind the name).

  • From there it was a long and winding history, including a bankruptcy in 1979 that left an Upper East Side store (one of two locations at that time) in the hands of a new owner.
  • In 1985, Toro bought his partner Hernandez out of the Upper West Side location.

Of note: Along the way H&H was also making a national name for itself by being featured in television series such as "Seinfeld," "Sex and the City" and "The Office."

  • There was then a 2000 dispute over name-usage rights, with Toro emerging victorious.
  • In 2011, however, Toro filed for bankruptcy again.

State of play: While there are a number of independent bagel shops across the U.S., the space is led by JAB Holding-owned Einstein Bros. Bagels.

  • Grupo Bimbo, which owns both the Thomas' Breads and Lender's Bagels brands, also produces the baked good for sale at retail.

The bottom line: According to Rushin, the bagel category remains fragmented and overdue for modernization.

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