Penn Station East Coast Subs customers know the sandwich franchise, which was named the No. 1 sandwich chain by the 2015 Nation’s Restaurant News Consumer Picks survey, for its grilled, made-to-order sandwiches, fresh-cut fries and hand-squeezed lemonade.
As a franchisor, though, Penn Station is known for its outstanding profitability and return on investment. In 2016, the brand was named one of the Best Franchises to Buy by Forbes and one of the Best Franchise Deals by QSR Magazine.
“Franchising is staged entrepreneurism,” said Craig Dunaway, president of Penn Station. “It requires passion, energy and time combined with the ability to follow the franchisor’s proven systems. Franchisees who can accomplish both should have the most success, especially as multi-unit franchisees.”
Penn Station has made some key achievements in recent years and will build on those in 2017. Penn Station launched its first-ever mobile app and loyalty program last year. The app allows users to find a location, refer a friend via social media, pay for their orders and send digital gift cards. The app gives Penn Station the ability to surprise and delight customers with double points days or other offers to reward app users.
The app also integrates with Penn Station’s new loyalty program. Employees scan a barcode from the app at the register, so that customers earn points for their order. For every dollar spent, customers get one point. Points are tracked on the app and customers get notifications when they are eligible for a reward. Dunaway said Penn Station will also expand the app to allow for mobile ordering this year.
“Launching our app and loyalty program were huge steps forward for Penn Station,” Dunaway said. “It’s another tool our franchisees can use to grow their sales and engage their customers.”
Penn Station has overhauled its training programs in the last couple of years, even earning a coveted spot on Training Magazine’s 2017 Training Top 125 list, and is continuing to fine tune the process in 2017. “My Penn Path” is a training and career path program designed to help franchisee employees move from entry-level crew member to crew leader, assistant manager and even general manager.
“With only one company owned unit, we wanted to provide franchisees with a great tool to help them with their most valuable assets: their employees,” Dunaway said. “Our system can be more than a job for anyone who works with our franchisees. My Penn Path shows employees what and how to advance in today’s competitive hiring environment.”
The program, along with training videos, quizzes and modules, is built into Penn Station’s proprietary POS system. Penn Station is in the process of completely eliminating printed training manuals and creating a custom learning management system this year.
“The training videos alone have already reduced training time by about half, and test scores on the various stations have improved significantly since the videos were implemented,” Dunaway said. “Our efforts on improving training and providing a career path have greatly benefitted franchisees in hiring and retaining employees.”
Focus on Profitability
Dunaway said Penn Station focuses obsessively on ROI and profitability for its franchisees. The company concentrates on opening one successful restaurant and then another and so on, instead of opening as many as possible without regard for failures. To help franchisees succeed, Penn Station typically grows in a concentric circle from Cincinnati. Penn Station is currently exploring options for an incentive program for 2017 development. They anticipate it will roll out within the next 30 to 60 days pending state and federal approval.
“The concentric circle gives us the three things we need to enter a new market: logistics, brand recognition and our oversight and support,” Dunaway said. “In 2017, Penn Station’s growth plans focus primarily on filling out markets in which we currently exist. We were voted the best sandwich in America, so we know our food can be national in scope. However, it’s important to us from a brand perspective to build out existing markets before expanding to many new markets.”
With only the one company-owned unit, the brand invests its resources in helping franchisees maximize their return instead of competing with them. For example, in 2016, Penn Station invested just under a half million dollars to create a regional franchise consultant program to help franchisees assess their business, including profit and loss statements and balance sheets, and make specific recommendations on ways to improve. Penn Station also sends area representatives to visit franchisees six to eight times per year to provide detailed notes and a consultant post-visit. While the individual restaurants don’t simply run themselves, focusing on creating more tools to allow franchisees to run their business more profitably can prove to be more successful in the long term.
Penn Station does not profit from rebates from suppliers from franchisees’ purchases. Instead, Penn Station negotiates a lower price or invests the rebates back into the system. That has helped keep Penn Station’s controllable and food costs low.
Dunaway said return on investment is top of mind in everything Penn Station does. For example, when the brand launched a new design in 2016, each element was carefully chosen for durability, cost effectiveness, function and aesthetics.
Multi-Unit Franchising Opportunity
Penn Station franchisees sign multi-unit agreements. In addition to the capital needed to cover the franchisee’s growth plan, Dunaway said Penn Station looks for franchisees with small business acumen and experience, especially with P&L statements and hiring and firing. It’s critical that franchisees are process compliant and able to follow the brand’s 106-page operations manual.
“We take great care in selecting our franchisees, and when we find people who fit our culture, understand the restaurant industry, have small business acumen and are looking for a superior return on investment, we’re both set up for success,” Dunaway said. “When a franchisee’s goals align with Penn Station’s, we can provide a clear strategy to reach those objectives. This is a difficult industry. Proven systems, hard work and diligence are all required before any franchisee can even begin to think about success. If they’re not willing to follow the model and work harder than they’ve ever worked before, the potential for success can decline.”
Penn Station uses online behavioral assessments to choose managing owners and provides those assessments for franchisees to choose their general managers. Dunaway said the assessments help determine which people have the necessary personality traits to succeed in a position beyond their job experience and skill set.
Dunaway said the quality of Penn Station’s products helps separate it from other multi-unit franchising opportunities. Penn Station uses proprietary hearth baked bread, meats and cheeses sliced fresh throughout the day and nationally branded products.
“We grill, we fry and we bake,” Dunaway said. “Our food is made fresh in the restaurant every day, and customers can see watch as their food is prepared in our open display kitchens. We’re a bunch of passionate zealots about the food we serve, and our franchisees are extremely proud of the high quality products Penn Station offers.”
Penn Station has made great brand improvements in recent years, including the launch of the mobile app and loyalty program, implementing training videos and debuting a new restaurant design. The company is readier than ever for expansion in 2017 and expects to open 15 to 20 new locations.