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Exhibit 10.5

SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

        This Settlement Agreement and Mutual General Release ("Agreement") is
entered into by and between Anthony Wedo ("EMPLOYEE") and New World Restaurant
Group, Inc., ("NEW WORLD").

        For purposes of this Agreement, EMPLOYEE shall be defined to include
Anthony Wedo and anyone claiming or liable through him including, but not
limited to, his past, present and future agents, attorneys, representatives,
heirs, executors, administrators, spouses and family.

        For purposes of this Agreement, NEW WORLD shall be defined to include
New World Restaurant Group, Inc. and anyone claiming or liable through NEW WORLD
including, but not limited to, any and all parents, divisions, sister companies,
subsidiaries, affiliates, and/or other related entities of NEW WORLD (whether or
not such entities are wholly owned) and the predecessors, successors and assigns
of each of them.

        The term "Effective Date" shall refer to the date, seven (7) days after
the Agreement is signed by EMPLOYEE on which date this Agreement becomes
binding.

RECITALS

        WHEREAS, on or about October 1, 2003, EMPLOYEE resigned from his
positions as an officer, director and employee of NEW WORLD;

        WHEREAS, on or about October 1, 2003, NEW WORLD accepted EMPLOYEE'S
resignation;

        WHEREAS, EMPLOYEE and NEW WORLD seek to amicably resolve and settle any
and all existing and/or potential claims and disputes of any nature that each
party may have against the other party;

        NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements contained herein, the parties agree as follows:

        1.     In light of EMPLOYEE'S resignation, the Amended And Restated
Employment Agreement entered into between EMPLOYEE and NEW WORLD on or about
June 17, 2002, is hereby terminated, and EMPLOYEE and NEW WORLD are each
released from any and all obligations under the Amended And Restated Employment
Agreement except that EMPLOYEE and NEW WORLD are still bound to adhere to
paragraphs 5.1 (Non-Competition), 5.2 (Separate Covenants), 5.3 (Non-Disclosure
and Non-Solicitation), 5.4 (Corporation) and 6.11 (Indemnification).

        2.     EMPLOYEE hereby acknowledges that he has been paid all accrued
salary and accrued vacation that were owed to him as of his date of resignation
and that he has been reimbursed for all outstanding business expenses.

        3.     On or before the Effective Date, EMPLOYEE hereby agrees to return
to NEW WORLD all company property and equipment in EMPLOYEE'S possession,
including, but not limited to, all computer equipment (both hardware and
software), office equipment, cellular telephones, credit cards, telephone or
long distance cards, keys and identification cards. EMPLOYEE acknowledges that
his compliance with this paragraph is part of the consideration upon which NEW
WORLD relies in executing this agreement; provided, however, that EMPLOYEE may
retain his laptop computer and blackberry once all company information has been
deleted.

        4.     After the Effective Date and contingent upon EMPLOYEE'S
compliance with paragraph 3 above, New World hereby agrees to pay EMPLOYEE a
separation payment equal to Five Hundred Eighty-Three Thousand Dollars
($583,000), which includes an automobile allowance in the amount of Eighteen
Thousand Dollars ($18,000) (collectively, the "Separation Payment"). The
Separation Payment shall be payable to EMPLOYEE by NEW WORLD for a period of
fifty-two (52) weeks commencing October 1, 2003, and ending September 30, 2004,
with the last payment being made no later than

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October 12, 2004, (the "Separation Payment Period") with payments to be made on
NEW WORLD'S regularly scheduled pay dates for executive officers; provided,
however, that the first payment shall not be made until the first pay period
following the Effective Date of this Agreement and that first payment shall be
retroactive to October 1, 2003. During the Separation Payment Period, NEW WORLD
shall continue to pay EMPLOYEE'S medical, dental and life insurance premiums (in
each case at a level commensurate with senior executives of NEW WORLD) through
September 30, 2004, with the EMPLOYEE continuing to pay that portion of his
premiums that he has heretofore been paying. Thereafter, EMPLOYEE shall be
eligible for COBRA. During the Separation Payment Period, EMPLOYEE shall have no
employment duties or obligations to NEW WORLD, and EMPLOYEE shall be permitted
to be employed by a third-party subject to EMPLOYEE'S compliance with the
non-compete and other continuing obligations specified in paragraph 1 of this
Agreement.

        5.     NEW WORLD and EMPLOYEE acknowledge and agree that EMPLOYEE holds
Three Thousand Six Hundred Eighty-Nine (3,689) shares of NEW WORLD common stock
and Twenty- Seven Thousand Nine Hundred Seven (27,907) vested stock options,
having an exercise price of Fifteen and 65/100ths Dollars ($15.65) per share.
EMPLOYEE hereby agrees to waive, relinquish and/or forfeit any and all unvested
options under any of NEW WORLD'S stock option plans.

        6.     EMPLOYEE hereby releases and forever discharges NEW WORLD, its
parents, divisions (including, but not limited to, Einstein Bros., New World
Coffee, Manhattan Bagels, Noah's Bagel and Chesapeake Bagel Bakery),
subsidiaries, affiliates, sister companies, insurers and related entities and
the past, present and future owners, trustees, shareholders, fiduciaries,
administrators, agents, directors, officers, employees, attorneys, and the
predecessors, successors, and assigns of each of them (the "Company Released
Parties") from and agrees not to participate in any lawsuit against the Company
Released Parties, except pursuant to Court Order, and/or to sue the Company
Released Parties, for any and all claims, whether known or unknown, which he now
has, has ever had, or may have in the future against the Company Released
Parties which arose from the beginning of time up to October 1, 2003. Without
limiting the generality of the foregoing, this General Release applies to any
and all claims which in any way relate to, arise out of, or result from
EMPLOYEE'S employment with NEW WORLD, including, but not limited to, any claims
which could have been asserted under any employment or other contract, any tort
law (including defamation or invasion of privacy), and any claims that could
have been raised under any state's Labor Code, any state's Wage Claim Act, any
state's Civil Rights and/or Discrimination Act, Title VII of the Civil Rights
Act of 1964, the Age Discrimination in Employment Act ("ADEA") (except for
rights or claims under ADEA which may arise after the execution of this
Agreement), or any other federal, state or local law, regulation, ordinance or
common law claim. The foregoing general release shall not apply to (i) any
claims arising under this Agreement or (ii) any claims for which EMPLOYEE is
entitled to indemnification from NEW WORLD.

        7.     Except for claims arising from conduct committed personally by
EMPLOYEE which constitute fraud or willful misconduct and which were unknown by
NEW WORLD's Board of Directors at the time of EMPLOYEE'S resignation and which
expose NEW WORLD to liability in terms of monetary damages, fines or
administrative sanctions, NEW WORLD hereby releases and forever discharges
EMPLOYEE from, and agrees not to sue EMPLOYEE for, any and all claims, whether
in EMPLOYEE'S capacity as an officer, director, or shareholder of NEW WORLD,
whether known or unknown, which it now has, has ever had, or may have in the
future against EMPLOYEE which arose from the beginning of time up to October 1,
2003. For purposes of this paragraph, a claim is "known" if on October 1, 2003,
the information was in the possession of NEW WORLD'S Board of Directors, Grant
Thornton, Deloitte or Proskauer Rose, LLP.

REPRESENTATIONS AND ACKNOWLEDGMENTS

        8.     EMPLOYEE expressly warrants and represents that he has not
transferred or assigned to any other person, firm or corporation or other legal
entity any claims, rights, or causes of action which he might have against the
Company Released Parties.

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        9      NEW WORLD expressly warrants and represents that it has not
transferred or assigned to any other person, firm or corporation or other legal
entity any claims, rights or causes of action which it may have against
EMPLOYEE.

        10.   EMPLOYEE hereby warrants and represents that he has not brought
and will not bring any legal or administrative action against the Company
Released Parties.

        11.   NEW WORLD hereby covenants and represents that it has not brought
and will not bring any legal or administrative action against EMPLOYEE in
connection with claims being released under this Agreement.

        12.   The terms and conditions of this Agreement are confidential.

        a.     Except as may be required to enforce this Agreement or as
required by law, EMPLOYEE hereby warrants and represents that he will not reveal
or engage in any action which he knows or has reason to believe will result in
the revelation of any information concerning the negotiations and/or terms of
this Agreement to anyone including, but not limited to, past, present and future
employees of NEW WORLD; provided, however, that EMPLOYEE may reveal the terms of
this Agreement to any accountant that he may retain with respect to tax
reporting or any attorney hired to represent EMPLOYEE or as required by law;
however, EMPLOYEE shall instruct said individuals that the terms of this
Agreement are confidential and are to be maintained as such.

        b.     Except as may be required to enforce this Agreement or as
required by law, NEW WORLD warrants and represents that it will not reveal or
engage in any action which it knows or has reason to believe will result in the
revelation of any information concerning the negotiations and/or terms of this
Agreement to anyone including, but not limited to, past, present, and future
employees of NEW WORLD; provided, however, that NEW WORLD may reveal the terms
of this Agreement to its officers, directors, accountants, attorneys, advisors,
consultants, and insurers in the normal course of business; however, NEW WORLD
shall instruct said individuals that the terms of this Agreement are
confidential and are to be maintained as such.

        c.     Because the actual damages which would result from a breach of
the obligations set forth above in paragraphs 12(a) and 12(b) are uncertain and
would be impractical or extremely difficult to fix, EMPLOYEE promises to pay NEW
WORLD $20,000 as liquidated damages for each such violation of his obligations
under paragraph 12(a) and NEW WORLD hereby agrees to pay EMPLOYEE $20,000 as
liquidated damages for each such violation of its obligations under
paragraph 12(b); provided, however, that the party alleging the breach has the
burden of proving that the breach was committed by the other party.
Notwithstanding the foregoing, EMPLOYEE and NEW WORLD agree that either party
may enforce any other provision of this Agreement by exercising any rights or
remedies it may have in law or in equity, including specific performance.

MISCELLANEOUS TERMS

        13.   In compliance with the requirements of the ADEA, as amended by the
Older Worker's Benefit Protection Act of 1990, EMPLOYEE acknowledges by his
signature below that he has read and understands this Agreement and specifically
understands the following:

a.That he has been advised in writing to consult with an attorney prior to
executing this Agreement.

b.That he is releasing NEW WORLD from, among other things, any claim that he
might have against it pursuant to the ADEA as amended by the Older Worker's
Benefit Protection Act of 1990.

c.That this Agreement does not cover any rights or claims that may arise under
the ADEA after the date of execution of this Agreement.

d.That he has been given a period of up to at least twenty-one (21) days in
which to consider this Agreement.

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e.That he may revoke this Agreement during the seven (7) day period following
the execution of this Agreement, and that this Agreement will not become binding
and effective until the seven (7) day revocation period has expired.

        14.   Nothing contained herein shall be construed as an admission by
either party hereto of any wrongdoing of any kind.

        15.   In the event that either of the parties must resort to legal
action in order to enforce any provision or right under this Agreement or to
defend such suit, the prevailing party shall be entitled to receive
reimbursement from the non-prevailing party or parties for all reasonable
attorneys' fees and costs incurred in the litigation of such suit.

        16.   This Agreement, the surviving terms of the Amended And Restated
Employment Agreement, and EMPLOYEE'S 1994 Stock Plan Stock Option Agreement
constitute the entire agreement and understanding between the parties with
respect to the subject matter hereof and all prior negotiations, agreements,
understandings, written or oral, between the parties are deemed superseded and
are replaced hereby. No provision may be changed, waived or modified, except in
writing, signed by the parties hereto.

        17.   This Agreement shall in all respects be interpreted, enforced and
governed by and under the laws of the State of Colorado applicable to
instruments, persons and transactions which have legal contacts and
relationships solely within the State of Colorado.

        IN WITNESS WHEREOF, the parties have set their hands and seals as of the
day and year written below.

Dated: October 17, 2003       ANTHONY WEDO
 
 
By:
 
/s/  ANTHONY WEDO      

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        ANTHONY WEDO
Dated: October 25, 2003
 
 
 
NEW WORLD RESTAURANT GROUP, INC.
 
 
By:
 
/s/  PAUL J.B. MURPHY, III      

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        Name   Paul J.B. Murphy, III         Title   Chairman and Chief
Executive Officer

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SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE