Brooklyn Water Bagel’s 14-Step Water System — Dan Smith | RTG Ep. 360

I have been doing this show long enough to know the difference between a brand that talks about quality and a brand that has actually paid for it. The tell is almost always the same: somewhere in the operation there is a step that costs real money, takes real time, and that no guest will ever see. If the brand keeps doing it anyway, the quality story is true. If they quietly dropped it two years ago when margins got tight, it was a marketing line.

Brooklyn Water Bagel has a 14-step water system in every single store. That is the step. That is the one nobody sees.

Dan Smith is the CEO, and he came to the brand the long way around — Domino’s Pizza, time with the Yum! Brands portfolio, casual dining, eatertainment, then boutique hotels and fine dining, then consulting. He got involved with Brooklyn Water Bagel as a consultant, fell for the concept, and joined full time right as the pandemic hit. That is not the résumé of a guy who wandered into bagels. That is somebody who has run every format in this industry and picked this one on purpose.

Why does Brooklyn Water Bagel build a water system in every store?

Because a New York bagel is a New York bagel largely because of New York water, and you cannot ship the stuff. Dan says they looked hard at trucking water down to Florida and ran into two walls at once: it was extremely expensive, and you cannot move water across state lines that way. So they went the other direction and rebuilt it.

New York water coming out of the Catskills has a mineral composition that is specifically great for the baking process. We went to a water expert and we analyzed what is unique about New York water. We created a 14-step proprietary water system that actually filters the water, purifies the water, and adds those New York minerals.

Dan Smith, CEO, Brooklyn Water Bagel

Here is the part I did not expect, and it is the part that turns a cost center into an asset. Because the system purifies first and then rebuilds the mineral profile, the output is identical in every market. Dan put it plainly: the same water works wherever they go, so the baking process does not have to be re-engineered store by store. A brand that hand-tunes its dough for local water has a scaling problem. A brand that manufactures its own water does not.

And it does not stop at the bagel. That same water runs the coffee, and they will pour you a glass of it if you want one — Dan describes it as bottled-water quality going into every product in the building.

What else is in the build that guests never see?

A lot, it turns out, and this is where I started nodding along. Dan ran through it: non-bromated flour from the beginning, where he notes other concepts use potassium bromate. Kettled bagels, actually boiled in that water so you get the crunch outside and the pull inside. Seeds around the entire bagel rather than the industry-standard half. A sourdough line that has to be hand-rolled because the dough is too sticky to machine, and a starter somebody is nurturing every day.

Then there is the coffee, which is its own small business inside the business. They buy green beans out of South America and Africa and roast them in their own roastery. And the iced coffee is served over coffee ice cubes.

Anybody could go out and buy commodity style coffee and anybody can pour it over ice and say that’s an iced coffee. When our ice cubes are melting, they’re injecting that flavor of coffee into your drink. Nobody else does that because it takes extra time, it takes extra care.

Dan Smith, CEO, Brooklyn Water Bagel

I want to sit on that for a second, because it is the whole thesis of the brand in one cup. Every one of those decisions is a labor decision. Hand-rolling costs labor. Seeding the whole bagel costs product. Coffee ice cubes cost a prep step every single morning. None of them show up on a menu board. All of them show up in the second bite, and in whether somebody comes back Thursday.

How do you hold a standard like that across 20 locations?

You put it in the onboarding and you never treat it as optional. Dan says the water explanation is given to team members the day they join, and the brand has trademarked the line — it is all about the water. Once the crew understands that the least visible step is non-negotiable, everything downstream gets easier to defend.

This is the same muscle Rick Rosenfield described when he walked me through four decades of scaling on culture rather than on systems alone in California Pizza Kitchen Scaled on Culture — Rick Rosenfield. The standard survives growth only if the people executing it know why it exists.

Is a bagel shop really a breakfast business?

Not at Brooklyn Water Bagel, and this was the number that reframed the concept for me. Dan says the mix runs 60% breakfast and 40% lunch. That is not a breakfast concept with a lunch attachment. That is a two-daypart business.

The lunch menu is built to carry that weight: deli-style sandwiches and melts, Reubens, tuna melts, pizza bagels, wraps, soup, chicken salad and tuna salad made fresh daily in the restaurants, and the bagel dog — a hot dog wrapped in their own bagel dough. There is a bakery program on top of it, with muffins, cookies and sweet treats.

Dan also named the dietary lanes deliberately: vegan bagels, gluten free bagels, sourdough bagels, and avocado toast on sourdough. The Bagels with Benefits program that brought sourdough in launched in January.

The logic he gave for all of it is one I have heard from the best operators I know, and he framed it as eliminating the veto vote.

If you go and you’re telling guests all the time, no, you can’t meet their needs, that’s not a great culture. It’s not great for your people, it’s not great for the guests. We want you to walk in and feel like this is your place, that this is your neighborhood place.

Dan Smith, CEO, Brooklyn Water Bagel

And it works, by the frequency number: Dan says 30 to 40 percent of their guests are loyal, frequent guests who come in three to five times a week. If you have ever tried to build a loyalty program from scratch, you know what that kind of organic frequency is worth. Brett Linkletter and I got into the measurement side of exactly that problem in Restaurant Marketing You Can Track — Brett Linkletter, Dishio.

How much of the business is off-premise?

About 70%, per Dan. That is the number that made me sit up, and it reframes the real estate conversation entirely.

Bagels happen to be one of the few products that genuinely survive the trip — they hold temperature and texture in a way that a fried item or a dressed salad simply does not. Dan says the integrity of the bagels and sandwiches endures well in a delivery scenario, and that the brand actually posted positive sales during the pandemic because of the delivery interest. First-party delivery, third-party delivery and carry-out together are the majority of this business.

He is also not leaving hospitality at the door to get there. Dan was direct about the self-service bagel trend, and so was I — I walked into one of those and had to cut and smear my own bagel for the same price I would have paid to be taken care of. Brooklyn Water Bagel toasts it, cuts it, smears it, scoops it if you want it scooped, and triple-toasts it if that is your thing.

What does the real estate footprint look like?

Dan says the typical retail location is 1,600 to 1,800 square feet, and most of what they have built to date is inline. In a market where plenty of concepts are still chasing 3,000 and 4,000 square feet, a box that size changes what rents you can say yes to.

The interesting part is what they are doing around the edges of that box right now:

• Non-traditional. They opened their first college campus location at Nova Southeastern in Fort Lauderdale two days before we recorded, and Dan says it has been a fantastic start. He expects more campuses, plus airports and military bases.
• Drive-thru. Two under construction at the time of recording. This is brand new for them — my honest advice on air was buckle up, because a drive-thru is a different business, not a different door.
• Pickup lanes. Two locations run what they call the Brook Lane, where you order ahead, drive up, and never get out of the car.

John Lucas and I went deep on what the drive-thru actually does to a scratch kitchen in Cracking Eggs in the Drive-Thru: Farmer Boys’ John Lucas, and it is worth a listen for anybody about to open their first one.

Who is Brooklyn Water Bagel looking for as a franchise partner?

Mid-sized operators, in five-to-seven-unit territories. Dan was specific about this, and I appreciated that he did not pretend everybody is a fit.

We want people that are experienced operators that have been in this business, that understand this business and know how to operate that business, and also are well capitalized. We’re looking at territory sizes of five to seven units. So not a onesie-twosie model, but not necessarily a 50-unit model.

Dan Smith, CEO, Brooklyn Water Bagel

He did not want to talk unit economics on air, and said he would rather walk candidates through those numbers individually. Fair enough, and frankly more honest than the operators who quote an average unit volume on a podcast and let you assume it is a median.

The brand is 20 units today, all in Florida, and expanding into the Midwest, the Southwest and the Southeast. Dallas construction starts shortly, which Dan pointed out with some enthusiasm given I am up here in Fort Worth. That small-market, region-by-region discipline is the same playbook Luke Christian and Jake Philpotts described in Surcheros: The Tex-Mex Franchise Winning in Towns Everyone Else Skips.

Does local community involvement actually matter for a franchise brand?

I ask every franchisor this, because the answers vary more than you would think. Dan did not hedge. He pointed at Peter Cancro and what he built at Jersey Mike’s as the role model — somebody who did not just talk about giving back but made it part of the company culture and walked it.

Brooklyn Water Bagel is heavily involved in the Walk to End Alzheimer’s, and Dan mentioned they had just finished a Stuff the Bus drive for school supplies heading into the school year. His framing was that they try to engage consistently, year round, and that the community has returned it.

What does the CEO order?

I ask every operator this and it is always the best two minutes of the episode. Dan’s go-to is the Williamsburg on a toasted everything sourdough bagel — cream cheese, smoked salmon, tomato, onion, capers on his. He is a New Yorker by birth, so that is how he learned to eat a bagel.

His off-menu build is better: pastrami and corned beef on a toasted everything bagel, heavy spicy mustard, sauerkraut, double meat. He name-checked the old Stage Deli and Carnegie Deli sandwiches as the reference point, said he would not go a full pound of meat, but might go a half. I am a Reuben guy who hunts down an old Jewish deli in every city I land in, so he had me.

Frequently asked questions

What is the Brooklyn Water Bagel water system?

It is a 14-step proprietary system installed in every Brooklyn Water Bagel location. It filters and purifies the local water, then adds back the mineral profile found in New York water from the Catskills, which CEO Dan Smith says is what gives New York bagels their characteristic crust and chew. Because the water is rebuilt rather than sourced, the result is consistent in any market.

How many Brooklyn Water Bagel locations are there?

Twenty at the time of this recording, all in Florida. Dan Smith says the brand is now expanding beyond Florida into the Midwest, Southwest and Southeast, with construction starting in Dallas, a first college campus location open at Nova Southeastern in Fort Lauderdale, and two drive-thru units under construction.

How much of a bagel shop’s business is off-premise?

At Brooklyn Water Bagel, roughly 70% — combining first-party delivery, third-party delivery and carry-out. Dan Smith attributes the strength partly to the product itself, since bagels and bagel sandwiches hold their quality in transit better than most restaurant food, and notes the brand posted positive sales through the pandemic on delivery demand.

What size space does a Brooklyn Water Bagel franchise need?

Dan Smith says the typical retail location runs 1,600 to 1,800 square feet, and most units to date have been inline. The brand is also pursuing non-traditional formats including college campuses, airports and military bases, plus drive-thru and drive-up pickup lanes.

What kind of franchisee is Brooklyn Water Bagel signing?

Experienced, well-capitalized multi-unit operators taking five-to-seven-unit territories. Dan Smith describes the target as mid-sized franchisees rather than single-unit owners, while remaining open to larger operators where the cultural fit and market knowledge line up.

Takeaways for operators

• Find your invisible step. The thing that costs you money and time and that no guest ever sees is usually the thing competitors cannot copy quickly. Brooklyn Water Bagel’s is a water system. Yours is something.
• Engineer the constraint out rather than sourcing around it. Shipping New York water was expensive and illegal across state lines. Rebuilding it was neither, and it made the brand portable.
• Check your daypart assumption. A 60/40 breakfast-to-lunch mix in a concept everyone files under breakfast means the menu, the labor model and the site criteria all need to be built for two rushes.
• Off-premise is a product question before it is a technology question. Seventy percent travels because the food travels. Know honestly whether yours does.
• Eliminate the veto vote. Frequency of three to five visits a week comes from a menu that never forces somebody in the group to say no.
• Size the territory to the partner. Five to seven units filters for operators who can actually build infrastructure, without needing a 50-unit balance sheet.

Dan mentioned Dallas construction is starting shortly, so I may not have to wait long. If you want to learn more about the brand or the franchise opportunity, everything is at brooklynwaterbagel.com.

Want the whole conversation? Read the full transcript of this episode with Dan Smith.

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This episode is brought to you by Restaurant Technologies, whose closed-loop cooking oil management keeps kitchens safer, cleaner and more consistent, and by Yelp, helping restaurants get discovered by the guests already looking for them.

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