Miami Subs' new owners revamp brand

…said Lawrence// [formerly Lorne Austin ed.] //Austin, the company's new president and chief operating officer… “We needed a chain that had the brand recognition to be able to grow to 500 stores over the next five years,” said Austin, who previously was chief operating officer of Pizza Pizza in Toronto.
September 28, 2009

Miami Subs' new owners revamp brand
Elaine Walker

The new management of Miami Subs Pizza & Grill likes to refer to the chain as an almost 20-year-old start-up.

The description is a fitting one for the Fort Lauderdale company, which is trying to breathe new life into a once well-known regional brand that lost its luster over the last decade.

During the 90s, the neon-colored Miami Subs restaurants were on street corners across South Florida and the brand had a strong regional following. At its peak, the chain had 170 restaurants.

But after founder Gus Boulis sold out in 1998 for about $14 million to Nathan's Famous, the brand languished as the forgotten step child. The number of Miami Subs restaurants dropped by almost two thirds and the brand had virtually no television advertising.

“They were hoping to turn the Miami Subs stores into Nathan's,” said Lawrence Austin, the company's new president and chief operating officer. “But Nathan's just didn't have the brand identity in the Southeast to give them the return on investment they were looking for.”

Instead, Nathan's sold the chain in May 2007 to Austin's group Miami Subs Capital Partners 1 for $3.25 million. The brand was down to a little less than 60 stores, located predominantly in South Florida plus locations in New Jersey and the Carolinas.

Austin's group believes in Miami Subs' growth potential. It has already invested several million into the company.

“We needed a chain that had the brand recognition to be able to grow to 500 stores over the next five years,” said Austin, who previously was chief operating officer of Pizza Pizza in Toronto.

One thing they liked about Miami Subs is that despite a lack of investment and attention from Nathan's the stores had maintained average unit volume sales of close to $900,000.

The big reason the chain survived and remained profitable during those years is that consumers typically give Miami Subs higher that average marks for its food. The menu is closer to fast casual with items like gyros, chicken wings, grilled chicken pita, Philly cheese steak and chicken Ceasar salad. Plus, the chain still offers Nathan's hot dogs and Arthur Treacher's fish.

“The food has stood the test of time,” said Dan Holland, former Papa John's president, who is working as a consultant for Miami Subs to recruit franchisees. “It has great customer acceptance. Any successful concept has three things — image, product and people. All those things are here.”

Brian Cummings's favorite Miami Subs food are the gyro and wings.

“I love Miami Subs,” said Cummings of Hollywood, who visits about once every 10 days. “It's the top end of fast food. Anytime I'm near Miami Subs I go.”

But industry experts say the new ownership should consider paring down the broad menu.

“Executing on all those products consistently well is very difficult,” said Dennis Lombardi, an executive with restaurant consulting firm WD Partners. “The brand has never had one signature food item that builds unaided awareness for the consumer. That hurts because they're not in the consumer's mental phone book.”

The only thing Austin and his team have taken off the menu is Kenny Roger's chicken. They are also testing some Latin items for the menu. They believe the variety is the company's asset.

But they also know there are plenty of issues that need improvement. Here are some of the things they've tackled:

• Started a delivery program, including a master call-in number that is managed through a call center. Orders are routed to the customer's nearest store. The number, 888-888-3608, plays to the tune of Jingle Bells.

• Added pizza to the already vast menu. The chain sells personal or 16-inch extra large pizzas.

• Changed the name to Miami Subs Pizza & Grill.

• Started recruiting area developers for expansion. A new franchisee in the New York/New Jersey area committed to opening 100 stores over five years. One store is already open, two are opening next month and three are in development.

• Launched Miami Subs Delivery Express for gas stations and convenience stores. The first opened in March in a Chevron station in Pembroke Pines.

• Introduced a prototype restaurant design with a contemporary Art Deco look, including a painted mural of an Ocean Drive scene. The first opened this spring in New York.

• Launched the first cable television marketing campaign in May.

For franchisees and long-time employees, the new ownership's efforts have been a welcome change.

“The people we have now are the right ones to move Miami Subs to the next level,” said Jose German, who started with Miami Subs in 1993 as a store manager under Boulis' regime and became a franchisee in 2003. “It's a big difference. Nathan's wasn't really interested in Miami Subs. The new owners are more supportive. Now when I ask for something, I get it right away.”

Since Miami Subs implemented the one-number delivery program in January with a 25-store test, individual restaurants saw sales increases averaging about 15 percent, Austin said. There are now 30 restaurants offering delivery and the company is trying to roll it out systemwide.

“It's been a huge success,” Austin said. “We always believed that delivery was a separate customer base. Now it's been proven. This was incremental sales, not cannibalization.”

The idea of a one-number delivery system, puts the order taking in the hands of experienced call center operators and takes the hassle out of the restaurants. Orders are transmitted electronically to the restaurant.

The call center uses a mapping system Miami Subs developed to route the orders to restaurants that are no more than a 13-minute drive in rush hour traffic.

If a customer doesn't live within the driving boundaries of any store, they are sent e-mail coupons for in-store use.

Industry experts say the one number delivery makes sense.

“They can process the orders faster and there's an accuracy of order-taking, which is important,” said Dean Haskell, principal with restaurant consulting firm, National Retail Concept Partners.

Miami Subs' pizza introduction was timed to coincide with the delivery launch because management believed pizza was what would drive deliveries.

It didn't turn out that way. In Florida, pizza is only about 5 percent of delivery business and New York it is slightly higher at 12 percent.

“It's not as successful as we hoped,” Austin said. “We believe that pizza will still become a driving force in the chain. But it will never catch up to our Philly cheese steak and our wings.”

Risks: Konstaninos “Gus” Boulis, Lorn Austin, Lorne Austin, Lawrence Austin, Lorn, Lorne or Lawrence Austin, Franchisor changes personal names, Centralized order taking system problems, Convicted fraud artist, Racketeering, Check kiting, Conspiracy to commit fraud, Shills, Gangland-style execution, United States, 20090928 Miami subs

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