Sbarro

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Sbarro
Credit Suisse Leveraged Finance Conference
March 2008
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Forward - Looking Disclosure

• Some of the statements in this release constitute
  forwardlooking statements within the meaning
  of the Private Securities Litigation Reform Act
  of 1995. All statements other than those of
  historical facts included herein, including those
  related to the companys financial outlook,
  goals, business strategy, projected plans and
  objectives of management for future operations
  and liquidity are forwardlooking statements.
  Such forwardlooking statements involve unknown
  risks and uncertainties that may cause the actual
  results, performance or achievements of the
  company to be materially different from any
  future results, performance or achievements,
  expressed or implied by such forwardlooking
  statements.

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Todays Speakers

• Sbarro
• Anthony J. Missano, President Business
  Development
• Anthony J. Puglisi, Vice President and Chief
  Financial Officer

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Restaurants Overview

• Anthony J. Missano, Sbarro

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1 Italian QSR and High-Pedestrian-Traffic
Concept
Professional Management Team with Proven Results
Powerful Brand Recognition
Balanced Company-Owned / Franchise Model
Demonstrated Revitalization and Compelling Growth
Trajectory
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Sbarro History

• Sbarro began as a family-run Italian gourmet
  market in 1956 by Gennaro and Carmela Sbarro
• In 1967, Sbarro opened its first mall-based
  location at Kings Plaza in Brooklyn to take
  advantage of high-pedestrian-traffic locations
• In 1985, the Company went public with 83
  Company-owned and 53 franchised locations
• In 1999, the Sbarro family took the Company
  private

Sbarro Timeline
2007 Acquired by MidOcean
2005 5 million investment in Aloha POS system
2004 Recertification and leadership programs
initiated
1999 Take-private transaction by the Sbarro family
1985 IPO with 83 Company-owned and 53 franchised
units
1967 First mall-based location at Kings Plaza
2006 Signed joint venture in India
2004 Remodel program accelerated
2004 Introduction of new management team members
1997 First unit in Russia opened
1976 Initial push into franchising
1956 Opening of original Sbarro
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Leading Italian QSR and High-Pedestrian-Traffic
Concept

• 1 quick-service Italian concept in terms of
  systemwide sales
• LTM 9/30/07 systemwide sales of 663 million
• Company-owned sales of 342 million and franchise
  sales of 321 million
• 100 million customer transactions annually
• Fifth largest pizza chain in the world with over
  1,000 locations worldwide

• Unique by-the-slice model, comprehensive
  Italian menu offering and high-pedestrian-traffic
  locations differentiate Sbarro from competitors
• Leading Italian mall-based concept in the world
  in terms of units Times Square to Red Square
• Global restaurant base with locations in over 40
  countries
• 768 domestic units and 262 international units
• Unaided brand recognition of approximately 50
  with nominal advertising dollars
• Lease renewal rates in excess of 95

LTM 9/30/07 Systemwide Sales
Intl. Franchise 24 (262 units)
Company- owned 52 (506 units)
Domestic Franchise 24 (262 units)
Total 663 million (1,030 Units)
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Demonstrated Revitalization and Compelling Growth
Trajectory

• New Management team has revitalized operations
  and positioned Sbarro for steady growth
• Increases in same store sales and store-level
  margins through consistently improved operations
• Same store sales growth in excess of 3 in 2004,
  2005, 2006 and year to date 9/30/07
• Significant EBITDA margin expansion from 2003 to
  LTM 9/30/07
• EBITDA growth from 39.7 million in 2003 to 59.7
  million for PF LTM 9/30/07 (1)
• Average check has increased to 7.34 for YTD
  9/30/07
• For company-owned restaurants open a full year,
  average sales for the 9/30/07 LTM period were
  approximately 643,000 for a food court
  restaurant and 1,040,000 for an in-line
  restaurant
• Strong plans for Company store openings and
  significant international franchise commitments

EBITDA (1) Margin
Same Store Sales Growth
( in millions)
(2)

• Store 900 925 939 963 1,030
• Count

(3)
(3)
(1) LTM 9/30/07 Pro Forma Adjusted EBITDA
excludes operations excluded from the
transaction, as well as pre-opening store costs
and EBITDA for restaurant closings. 2003 through
LTM 10/8/06 EBITDA is calculated as Operating
income Depreciation and amortization Equity
in net income (loss) of unconsolidated affiliates
Asset impairment, restaurant closings /
remodels and loss on sale of other concept
restaurant. (2) Sbarros fiscal year ends on the
Sunday nearest December 31. Sbarros 2004 fiscal
year contained 53 weeks. All other years
presented contain 52 weeks. The 53rd week of
operations in 2004 produced revenues of
approximately 9 million and approximate income
before taxes of 2.5 million. All figures for
fiscal 2004 include the impact of the 53rd week.
(3) Same store sales adjusted to exclude 53rd
week in 2004.
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Business Revitalization
1999 2003 Events
Key Initiatives Since 2004
2007

• In conjunction with the take-private transaction
  in 1999, the Company pursued a cash preservation
  strategy and transitioned to a new generation of
  family members
• Organizational challenges were compounded by the
  events of 9/11 and the resulting slowdown in mall
  traffic
• In addition, the Companys sole distributor went
  bankrupt in late 2002 driving up food costs
• All of these factors combined resulted in a
  decline in EBITDA from 78.7 million in 2000 to
  39.7 million in 2003

• In 2004, a new management team led by CEO Peter
  Beaudrault was selected to revitalize operations
• The new team implemented a number of key
  initiatives including
• Reorganize management structure
• Revitalize restaurants and operations
• Return to historical unit growth

• Comp store sales growth 3 through Quarter 3
  2007
• Economic headwinds causing Comp Store sales to
  slow
• Commodity Cost Fluctuations
• Cheese
• Flour
• Fuel

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Reorganize Management Structure

• The team has extensive experience in the
  restaurant industry
• Executive management team averages approximately
  24 years of industry experience
• Two Senior Vice President of Operations average
  approximately 25 years of industry experience
• Six vice presidents of operations average 23
  years of industry experience

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Return to Historical Unit Growth
Franchise Locations
Company-Owned Stores
2006-2007
2006-2007
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1 Italian High-Pedestrian-Traffic Concept

• Leading Italian mall-based concept in the world
  in terms of units
• Growing presence in several high-pedestrian-traff
  ic locations including
• Shopping malls 472 units
• Downtown 17 units
• Airports 4 units

• Casinos / Theme Parks 8 units
• Universities 3 units
• Travel Plazas 2 units

Note Store counts by location include
Company-owned units only.
Company-Owned Units
Systemwide Units
Total 1,030 units
Note Units as of December 30, 2007.
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Attractive Model for Company and Franchisees
Compelling unit economics lead to an attractive
investment proposition for Sbarro and potential
franchisees High EBITDA margins and immediate
profitability leads to high returns on invested
capital and payback periods of less than 3 years
Typical Unit Economics by Venue
( in thousands)
(1) Represents construction and equipment costs.
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Strong Franchisee Base
Today the Company has a total of 524 franchise
locations with 262 domestic sites and 262
International sites Our domestic franchise base
is oriented towards larger foodservice operators
and includes Host Marriott, Compass USA,
Foodbrand and Delaware North Going forward our
international franchise efforts are focused on
significant development deals with experienced
operators (e.g. Russia, Turkey - T.G.I.F., and
India - Ruby Tuesday) The Company has in
excess of 1,100 international franchise
commitments at December 30, 2007.
Franchisee Base Summary
Franchisees by Location
Total 524 units
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Strong Emphasis on Food Preparation and Quality

• The Sbarro menu has always centered on authentic
  Italian recipes prepared with fresh, wholesome
  ingredients
• Below are several examples of Sbarro quality
  standards
• All of Sbarros dough is made fresh daily
• Each menu item is prepared and cooked at each
  restaurant location
• Sbarro carefully sources all of its tomatoes to
  ensure they meet specific criteria and are
  consistent across the store base
• Pizza is cooked in an open kitchen format
  providing visible freshness to Sbarro customers
• Detailed proprietary recipes and procedures are
  provided for each dish, ensuring consistency and
  quality
• Strict guidelines for food safety

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Financial Summary

• Anthony J. Puglisi, Sbarro

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Historical Revenue, Adjusted EBITDA
( in millions)
( in millions)
Revenue Performance
EBITDA (2)
EBITDA Margin 12.0 12.6 14.5 17.2 16.7
S.S.S. Growth (1) (3.4) 5.2 5.7 4.4 3.0
(1) Same store sales adjusted to exclude 53rd
week in 2004. (2) Pro forma LTM Adjusted EBITDA
excludes operations excluded from the
transaction, as well as pre-opening store costs
and EBITDA for restaurant closings. 2003 through
LTM 9/30/07 EBITDA is calculated as Operating
income Depreciation and amortization Equity
in net income (loss) of unconsolidated affiliates
Asset impairment, restaurant closings /
remodels and loss on sale of other concept
restaurant.
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Significant Pro Forma Free Cash Flow Generation

• Substantial free cash flow generation promotes
  immediate and sustained deleveraging
• On an LTM basis, pro forma for the
  capitalization in the Transaction, the Company
  would have generated 12.9 million of free cash
  flow

High Free Cash Flow Generation
(2)
(1)
(1) Net change in working capital calculated
using 9/30/07 and10/8/06 figures as follows
Receivables, net of allowance for doubtful
accounts Inventories Prepaid Expenses -
Accounts Payable - Accrued Expenses. (2) Capex
includes expenditures on QSR restaurant openings
and renovation activity.
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Capital Expenditure Summary
Historical Annual Capex
( in millions)
16.4
2006
(1)
(1) Capex includes expenditures on a QSR
restaurant openings and renovation activity.