<PAGE>
                                                                   Exhibit 10.16
 
                               ADDENDUM NO. 3 TO
                          AREA DEVELOPMENT AGREEMENT
                                        

     THIS ADDENDUM No. 3, dated February 3, 1999, is to the Area Development
Agreement, dated as of December 5, 1997, and as amended by Addendum No. 1 dated
of even date therewith, (as previously amended, the "Agreement"), by and between
EINSTEIN/NOAH BAGEL CORP., a Delaware corporation ("COMPANY"), and EINSTEIN/NOAH
BAGEL PARTNERS, L.P., a Delaware limited partnership ("DEVELOPER").

     The following shall amend and be incorporated into the Agreement.  In the
event of any conflict between the terms of the Agreement and the terms of this
Addendum, then the terms of this Addendum shall control.  All capitalized terms
not defined in this Addendum shall have the respective meanings set forth in the
Agreement.


1.   Exhibit E to the Agreement is hereby deleted and replaced, in its entirety,
     with the Revised Exhibit E attached hereto as Schedule 1.



IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have duly executed this Addendum in duplicate as of the date written below.



COMPANY:                                DEVELOPER:

EINSTEIN/NOAH BAGEL CORP.               EINSTEIN/NOAH BAGEL PARTNERS, L.P..

                                        By:   Einstein/Noah Bagel
                                               Partners, Inc.
                                        Its:  General Partner


By: /s/ Paula E. Manley                 By: /s/ Paul A. Strasen
   --------------------                    ----------------------
        Paula E. Manley                         Paul A. Strasen
Its:    Vice President                  Its:    Vice President
    -------------------                     ---------------------
<PAGE>
 
                                 SCHEDULE 1 TO
               ADDENDUM NO. 3 TO THE AREA DEVELOPMENT AGREEMENT
                   BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
                                      AND
                      EINSTEIN/NOAH BAGEL PARTNERS, L.P.
                      ----------------------------------
                                        
                            DATED FEBRUARY 3, 1999
                                  ----------------

                               REVISED EXHIBIT E

                             DEVELOPMENT SCHEDULE
                             --------------------
<PAGE>
 
                             DEVELOPMENT SCHEDULE
                             --------------------


     1.  Store Development.  DEVELOPER agrees to develop a total of Eight
         -----------------                                          -----
Hundred Eighty-three (883) Stores in accordance with the terms of this
--------------------  ---                                             
Agreement.

     2.  Development Obligations.  DEVELOPER agrees to have the number of Stores
         -----------------------                                                
specified below open during each specified "Quarter" shown below and to have
open and in operation in each Quarter indicated, the cumulative numbers of
Stores shown below:

 
                                      Development Quota/  Development Quota/
              Quarter                      Quarter            Cumulative
              -------                 ------------------  ------------------
 
        12/01/97 - 12/28/97                   20                  20
                                                        
        12/29/97 - 12/27/98                   15                  35
                                                        
        12/28/98 - 12/26/99                   10                  45
                                                        
        12/27/99 - 04/16/00                   40                  85
                                                        
        04/17/00 - 07/09/00                   45                 130
                                                        
        07/10/00 - 10/01/00                   45                 175
                                                        
        10/02/00 - 12/31/00                   45                 220
                                                        
        01/01/01 - 04/22/01                   40                 260
                                                        
        04/23/01 - 07/15/01                   45                 305
                                                        
        07/16/01 - 10/07/01                   45                 350
                                                        
        10/08/01 - 12/30/01                   45                 395
                                                        
        12/31/01 - 04/21/02                   40                 435
                                                        
        04/22/02 - 07/14/02                   40                 475
                                                        
        07/15/02 - 10/06/02                   40                 515

                                      E-1
<PAGE>
 
        10/07/02 - 12/29/02                   43                 558
                                                        
        12/30/02 - 04/20/03                   39                 597
                                                        
        04/21/03 - 07/13/03                   39                 636
                                                        
        07/14/03 - 10/05/03                   39                 675
                                                        
        10/06/03 - 12/28/03                   38                 713
                                                        
        12/29/03 - 04/18/04                   40                 753
                                                        
        04/19/04 - 07/11/04                   45                 798
                                                        
        07/12/04 - 10/03/04                   40                 838
                                                        
        10/04/04 - 12/26/04                   45                 883
 


                        Total Development Quota for the
                         Development Area (the "Total
                             Development Quota"):
                             --------------------

                                      883
                                      ---



                                              INITIALS:


                                              COMPANY:   PEM 
                                                      -----------


                                              DEVELOPER:  PS
                                                        ---------

                                      E-2