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Questions about adding subs to menu...

R

Roger

New member
Currently I don’t have subs and salads on my menu. I recently was approached by the owner of a well-known and popular sub franchise in my area. He wants to co-brand with one of my pizza shops and have me sell their subs. It would be a little different than one of their typical franchises.
  • No money up front. (no franchise fee, build out, training fees, etc.)
  • They will make improvements to the inside and outside of my building. They will be spending around $30,000 between improvements, equipment, counters, signs, booths, etc.
  • Royalties are 6% of sub sales and an additional 2% for advertising.
  • They won’t interfere with how I run my business. They will only require that my employees wear co-branded uniforms, the inside and outside appearance is kept clean and that we order our sub ingredients from their supplier.
  • They will use a PLU code in my current pos system to track sub sales.
On the surface it seems like a good deal since I currently don’t sell subs and the franchise name will give me instant brand recognition. My biggest concern is the extra labor cost. I am currently opened M-F: 4pm-10pm, Sa-Su: 11am-10pm. I’m assuming the majority of sub sales are during the day, so now I would have to be open for lunch every day along with an extra employee during the evening shifts. This worries me because this shop is in a small town, rural area with very few businesses around. However, there are two large nuclear plants that employ a lot of people. From my past experiences with being open for lunch at my other shop, the majority of sales were to businesses and workers on their lunch breaks. Are any of you guys that have shops in rural area been successful opening for lunch?

What does it typically cost to make a basic 12" sub (ie. ham, cheese, mayo, lettuce, oil)? I need to figure out how many subs I will have to sell in order to break even (with the newly added expenses).

What are some of your guy’s opinions on this deal?
Those of you that have added subs to your menu, have you seen it eat into your pizza sales at all?

I’m trying to get as much information as I can so I can make an educated decision.
 
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I would first want to check the pricing of the items you are buying from their supplier. I know of a pizza franchise that has their supplier mark the food up on their franchisees well above market value and rebate the markup back to the corporate franchisor. Their franchisees pay a whole lot more in royalties than they realize.
 
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I would say the numbers do not look that bad but as an independent operation…how much would this tie your hands to expand your own menu or business if you wanted too? They are going to invest a good bit into your location and even though it might help your pizza sales…as a business are you losing your own branding within the area with your established customers. You then have the people that already dislike this franchise elsewhere that will now relate your pizza to their subs. I would almost say if you think subs would work and have the space to… invest in your own shop and try it alone. Even though your agreement is not a traditional franchise one…you will still be tied in many ways and you mentioned the remodel…with their branding and decor. Who pays if this fails and they just gut the place by pulling out their counters, booths,…etc. How much to rebrand it back to your place. All new uniforms again. Repaint and layout again. This could cost you a lot in the end. Just be careful and make sure you get all this spelled out with the lawyers before you move on any of it.
 
The plan is to split the building in half. The left side would be the dubs with their colors and branding and the right side would be my pizza shop with my colors.
 
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Ask a few questions. Do you have enough space to do this? What if the pizza operation needs more space? What happens to the other half if the sub idea fails? Don’t take my response as a total negative. I just am saying make sure you ask all the right questions and get this legally written up so you protect yourself 110%!
 
No I appreciate it. I want to hear the negatives. The half where the subs will be is currently my dining room. They plan on just rearranging the booths and putting the sub counter along the back wall. As far as space for my pizza, I have more than enough, even if I was to add more mixers, ovens, etc. I would be tied into a 1 year contract with options to extend if it’s successful. If it fails, we go our separate ways with no cost to me.

Currently I’m not opened during the day for lunch during the week, and I feel in order to be successful selling subs I will have to be. I figure I would have to have 2 people on during the day shift (which will be an additional $80 a day in wages) and at least one more person on for at least part of the evening shift (from maybe 4-7? This will be another $24 a day). I’m not sure what the additional gas and electric charges will be. I want to figure out how many subs I’m going to have to sell in order to cover these added expenses. I’m probably off with my food cost estimate, but I’m guessing it costs around $1.65 to make the average 12" sub. If this is the case I’m figuring that I will need to sell around 17 a day in order to break even after wages, food cost, and royalties. In this area I have no idea if I can sell that many subs a day.

I also look at it from another perspective in that adding subs and salads will help bring in some bigger group orders where everyone doesn’t want just pizza. This might bring me some additional orders from the nuclear plan orders where they typically order anywhere from $200-$300 each time they order. I also realize that some people will order pizza during the lunch hours as well, which will help offset some of the costs as well.

I’m just not sure what I want to do yet. One minute I have myself talked in to it and the next I talk myself out of it.
 
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The “being open for lunch” part would worry me.

Do you deliver? If so, are you going to deliver subs?

Will both “sides” of the business be open during all open times?
 
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How much of your pizza is dine-in? How many seats are you going to lose with their setup? Not only will your costs go up but you might take a hit on pizza sales. Take a long look at your market and I would run some hard numbers over and over before making up your mind. Be careful.
 
If you have the space, why would you even consider putting a franchise sub in, why not just do your own thing?

You would be able to do it in your own kitchen with better labor efficiency and cost control. you would be able to determine what type subs to offer that compliment your pizzas to cross-use most of your inventory.
 
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Registered Guest:
The “being open for lunch” part would worry me.

Do you deliver? If so, are you going to deliver subs?

Will both “sides” of the business be open during all open times?
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That’s what worries me the most. If I was already opened and had an established lunch business, I would most likely take the deal. I do deliver and would be delivering subs. If I open for lunch, I will do both.
qcfmike:
How much of your pizza is dine-in? How many seats are you going to lose with their setup?
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A very small percentage is dine-in. A couple of customers a night, if that. They will actually be adding more seats and the dining room will be shared.
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Penelope:
If you have the space, why would you even consider putting a franchise sub in, why not just do your own thing?

You would be able to do it in your own kitchen with better labor efficiency and cost control. you would be able to determine what type subs to offer that compliment your pizzas to cross-use most of your inventory.
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I’m considering this offer because they are very popular in our area and I will sell a lot more subs than if I went at it myself. I’ve tried opening for lunch and doing subs at my other store in the city and didn’t really have that much success.

This past Saturday I drove to a couple of pizza shops that have the same deal in place with this franchise. Unfortunately each of the owners weren’t in but I was able to speak to their employees and managers at 2 of the places. They both told me that the owner seems to be satisfied and that they sell twice the amount of subs than what they did before. The owner at one of the places is supposed to be in tomorrow around 3:00, so I plan on stopping back to talk to him. I’m sure I will learn quite a bit tomorrow. Although, I’m in a different situation than these places since they already had an established lunch business with subs in place.
 
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It’s certainly true that no one outside of your particular situation will have the correct answer…but I’m wondering the same as Penelope on this one. If you have the room, and if you have projected estimated sub sales, have you thought about simply adding them in with your current menu and doing a lunch?

We’re technically not a ‘pizza place’ so it’s different with us I understand all that, but as far as hardware we have $500 in a gently used True 48" prep table, an used Hobart slicer for $600 and some cheap baking sheets that ran me $40 for a dozen at Restaurant Depot.

We run a Vie de France “Milano” sub roll through our XLT and have a very nice “fresh baked” hoagie roll daily. You’d have the labor, but it sounds as if that’s on you anyway.

Best of luck in whichever direction you head though!
 
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Subs are an easy addition for a pizza place. There could be some potential here, but I think more importantly, how are the subs? A good sub isn’t too hard to make, but many places (blimpie for example) have craptastic subs.
 
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Roger:
Registered Guest:
The “being open for lunch” part would worry me.

Do you deliver? If so, are you going to deliver subs?

Will both “sides” of the business be open during all open times?
Click to expand...
That’s what worries me the most. If I was already opened and had an established lunch business, I would most likely take the deal. I do deliver and would be delivering subs. If I open for lunch, I will do both.
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I don’t know your staff structure - but I’ll tell you from experience, one of the staffing issues with a lunch that is not always busy is that you have to have you best staff working during the slowest part of the day. Because you won’t be able to afford a lot of people, you will need your best people so they will be able to handle the surprise rush when it happens. People are under such a time limit for lunch they won’t be willing to wait very long - especially for deliveries.

Once you open for lunch, I think you will find it very hard to close unless it is a total failure. If we had to do it over again, we wouldn’t be open for lunch. Every few months we think about closing because it is on average a break even situation. Of course, the few days after thinking about it the stores have a crazy busy lunch.
 
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pman you are so right that making a sub is easy but so so many screw it up big time. There is a small chain down in the South East US called Two Jays Deli. Dang I wish they were nationwide! They do it all right. :!:
 
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