Industry News | May 25, 2001

Schlotzsky's Outlines Growth, Strategy

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At today's annual meeting of shareholders in Austin, Texas, Schlotzsky's Inc. (Nasdaq:BUNZ) chairman and CEO John C. Wooley will outline the company's growth and financial strategy that includes demonstrating stronger unit economics, sales and revenue growth plans, the stock repurchase program, continued improvement to the balance sheet, and exploring the possibility of establishing a dividend to shareholders, beginning later in 2001.

"We are pushing forward with our sales growth, and our new unit economics are stronger than ever. Last year we saw a significant transition in the Company's financial position, and Schlotzsky's will continue to build on the positive trend we've established over the past several quarters,'' Wooley will say.

Wooley will outline the Company's priorities including:

• Continue to post stronger unit economics, as demonstrated in several Company-owned restaurants in its Texas home market (see attached actual and model tables).

• Execute a growth plan for new restaurants, focused on two types of units: 3,200 square-foot freestanding units as well as lower-cost units located in endcaps of prime retail shopping centers.

• Grow the number of Company-owned restaurants in its Texas home market. This should enable Schlotzsky's to further demonstrate industry leading unit economics while contributing to the Company's bottom line.

• Strengthen the balance sheet by continuing to reduce commercial bank debt. Schlotzsky's has reduced commercial bank debt from $35 million to $15 million since December of 1999.

• Control general and administrative expenses.

• Strengthen its infrastructure to support the franchise system by building industry leadership positions in training, quality assurance and use of technology.

• Take on the leadership role in defining the emerging ``upscale sandwich'' category of restaurants.

• Continue to repurchase stock. The Company has bought back 153,500 shares since December 2000.

• Explore the possibility of paying a dividend in 2001.

• Based on our experience in the Austin market, we are convinced that we have refined our unit economics to one of the best in the industry. Our restaurant operating group believes it can continue to generate stellar returns from this class of restaurants. Their success is going to ignite our next phase of growth and development," Wooley will say.

• The Schlotzsky's Inc. Annual Shareholder's Meeting will convene at 9:00 am Central Time today at the Four Seasons Hotel in Austin, Texas.