Americas

Operator profile: Firehouse Subs

Posted on

SHARE ON

Firehouse Subs CEO Don Fox tells Tina Nielsen about steering a growing brand through an ever-changing market

For almost 25 years flavor, hospitality and an unwavering commitment to serving the local community of first responders, has spurred the steady growth of national sandwich chain Firehouse Subs.Launched on a shoestring – and financed by credit cards – by brothers Chris and Robin Sorenson in Jacksonville, Florida, the chain has now spread to 45 states across the US and in Canada.

Don Fox came to Firehouse Subs in 2003 when he joined as director of franchising. He brought a wealth of industry experience with him, having spent the previous 23 years working for the Burger King Group. He became the group’s chief operating officer in 2005 and since 2009 he has been the chief executive officer.

When he joined there were 65 Firehouse Subs restaurants, today the number stands at over 1,100. “There has never been a day in these years that we haven’t grown,” he says. “We have never retreated and that is because we have some core disciplines that we have established and maintained.

In a sluggish restaurant market Firehouse Subs bucks the trend – store traffic is up 5% and sales are up 6% – and continues to grow. Fox says he expects the chain will have opened around 100 new stores this year and it will be similar in 2019.

“Right now we are having one of the best years we have ever had and the overall environment in the US at the moment is one of modest growth, in fact industry traffic is negative, but we are an exception to that,” he says.

A local connection

It was back in 1994 when the Sorenson brothers decided to open their own restaurant. They come from a family of fire fighters – their father worked with the fire department for 43 years – and both joined the service, which eventually provided the inspiration for their restaurants. After launch Chris stayed on working for the fire department for four years to keep money coming in.

“There is a deep tradition in the family of working with the first responder community, the core [of Firehouse Subs] honors the fire fighter community and stores are filled with memorabilia,” says Fox. “We work with local fire departments wherever we open and they are more often than not eager to donate photos and artefacts for the restaurant. This forges a local connection with guests.”

He says the connection with first responders is “100% baked into the business”; this connection only strengthened when the Firehouse Subs Public Safety Foundation was launched in 2005. To date it has donated more than $35m of equipment to first responders, helping them deal with emergencies such as the destructive impact of Hurricane Harvey in Texas in 2017. The majority (70%) of donations come from customers who have several ways of supporting the foundation.

Coin canisters at the tills collect spare change in the more traditional way of fundraising, but the bigger impact comes from what the company calls round-up. In this initiative all customers are invited to round their bill up to the nearest dollar.

A less conventional way of raising money was thought up by one of the Firehouse Subs franchisees who came up with the idea to sell empty five gallon pickle buckets at $2 each. “Those are high-quality durable plastic pails,” says Fox. “If you were going to the home improvement store you’d pay three times more for the exact same product.”

Around 85% of the pickle buckets used in the company are subsequently sold for fundraising – in the last year alone $500,000 was raised for the foundation through the pickle bucket sales.

With the family history in the fire service, the public service aspect was always going to feature heavily in the three-pronged mission statement of Firehouse Subs: food, hospitality and the commitment to public safety.

“One of the main measures we do exceedingly well at is our support in the local community and that is the reflection of the work we do through our foundation. So we have to be great at those things; our HQ in a support role and our franchisees in an execution role,” says Fox.

Part of the leading pack

In 2017 Firehouse Subs received Technomic’s Chain Restaurant Consumer’s Choice award as number one overall brand, and number one among the top 10 most craveable sandwiches for its signature Hook and Ladder sub, which comprises smoked turkey breast and Virginia honey ham with Monterey Jack cheese.

With the recent challenges experienced by Subway – the proverbial 800-pound gorilla, as Fox calls the company, experienced more than 900 store closures last year and has seen an increasing number of unprofitable stores amid franchisee discontent – the wider picture of the sandwich sector is one of modest decline in the number of units.

Looking back to the turn of the century, Subway was one of two dominant sandwich brands in the US. The other, Quiznos, eventually built up to around 5,000 restaurants.

The smaller regional brands that were seeing some success, each within their own geographical area, included Firehouse Subs based in the south east, Jimmy Johns in central US and Jersey Mikes, which despite originating in the east had most success in California. “Everybody had their respective parts of the sandbox,” says Fox.

The virtual collapse of Quiznos and the demise of another big player Blimpies followed by the more recent challenges experienced by Subway have changed the market considerably.

“As they were imploding, other brands were growing and three brands: us, Jimmy Johns and Jersey Mikes have emerged as national brands,” he says. “The competitive environment is much different today; it is more common to find us all developing in the same market and frankly it makes it a greater challenge than it used to be.”

As Firehouse Subs faces off against the competition, differentiation is key. On the product front, unlike competitors, Firehouse has always offered hot subs, using their own unique way of preparing them. “We steam the meat and cheese separately and toast the bread separately, too. It is a little more complex from a preparation point of view but it makes the best sandwich,” explains Fox. “We treat every ingredient the way it should be treated.”

These are heady times in a saturated restaurant market and the sandwich segment does not allow operators to rest on their laurels. Fox calls the off-premise market – all transactions that don’t involve the customer walking up to the cash register to place an order – the next battleground in differentiation.

“These are delivery orders, online ordering and mobile phone app orders and they account for 20% of our business at the moment while traditional orders account for 80%,” says Fox. “The question is when we are going to reach a point of equilibrium. We know we have to be more and more active in how we integrate those non-traditional transaction methods into our business.”

As part of the battle for that off- premise market, Firehouse has rolled out a new program named Rapid Rescue, tied to online ordering. Customers place their order online and when they arrive at the restaurant the display rack is just inside the door.

“People can open the door, grab the order and go – it has been very popular with customers,” says Fox. But the fundamental challenges in growing a sandwich brand remain the same as ever: getting the right operator and the best real estate. “In the US getting quality real estate at an affordable cost is the top restriction on the pace of our growth,” says Fox. On average he starts the year with 175-200 potential projects in the pipeline, sites to consider for a new restaurant, and typically only 60% or 65% will get developed.

The increase in off-site transactions has been reflected in the changing requirements of space in new restaurants. Dine-in sales have traditionally been high for Firehouse Subs – at its highest point it was 53% of transactions – but this has decreased to 40% and it continues on the downward trajectory.

“I am not sure where it is going to stabilize but it means we have to reflect it in the sites,” says Fox. “For a number of years we had a minimum requirement of 50 seats, but this is now closer to 35 seats. Square footage has reduced from 2,000 to closer to 1,600.”

Potential franchisees are expected to source the potential location for a new restaurant – this, Fox concedes, is different from how things are usually done, but it is important. “Franchisees should have some ownership in the decision; our role is to approve the site because we won’t allow them to go into a site that we don’t think stands a good chance of being successful,” he explains.

In addition to the obvious aptitude for hospitality and a willingness to work long hours, the key to a potential franchisee working out for the company is found in hat mission statement; they must embrace all three elements. “Let’s say one has great service and excellent focus on the food quality, but if they are not doing the fundraising or reaching out to the local firehouse; they won’t be as successful as they otherwise could,” he says. “Those are the three buckets for the candidate. If they can deliver that we will give them the education, the ongoing support and the training they need to be successful.”

Power of entrepreneurship

Franchising has proven to be a great way to grow for the business. After launch The Sorenson brothers grew the chain to over 30 company owned stores but decided to focus on franchising as a means of growing in 2001. By that point they had just a few franchised restaurants and found that outside the home market of Florida, franchisees were more successful than company owned sites. Today only 37 are company owned. “Through franchising it is much easier to achieve scale and build the brand at a much higher level,” says Fox.

But above all, he adds, they wanted to embrace the power of entrepreneurship through franchising. “Their success was a result of their frugality, their pride of ownership and their discipline.”

The brothers’ background makes up a big part of the solid brand identity, which is among the chain’s biggest strength when it comes to differentiation. “The theme of the restaurant being based around fire fighters and first responders is unique and helps differentiate us,” he says.

Today constant innovation and embracing new technology ensures the continued growth of Firehouse Subs. As an example Fox cites the decision to invest in Coca-Cola’s Freestyle machine, offering guests over 120 beverage selections. It was installed in all of the Firehouse restaurants by the end of 2011 and subsequently advertised in a campaign the following year. These decisions to embrace technology pay off, according to Fox. “It was the most successful sales year we have had,” he says. “It is a great example of how you can differentiate and create a better customer experience through innovation.”

Of course demographic changes and the preferences of new customers present a different challenge altogether. The arrival of Millennials and Generation Z has brought a better informed and more demanding customer group. For Firehouse Subs it means there is a tightrope to walk in striking a balance between catering to the existing customers who like the subs that they know and attracting a new customer group keen to experiment with new flavors – and discuss with their peers on social media.

“The challenge for a traditional brand like ours – we are in the sandwich segment and very mainstream – is that if you consider unique flavors that might appeal to Millennials and Generation Z, you also have to fit with the brand persona that the consumer has established as your identity,” says Fox.

To help them manage this balance there has been significant investment in the culinary team. He points to an initiative that brought much success this year when the company launched a new sandwich on the menu – the pastrami Reuben. “Obviously a Reuben is corned beef, sauerkraut and Thousand Island dressing, but we make it with pastrami, coleslaw, mayonnaise and a honey mustard,” says Fox. “It created conversations on social media about what a Reuben should be. The bottom line is how does it ring the cash register – and it is very successful. We are continually coming up with new things.”

The younger generations like Firehouse Subs for other reasons – widely believed to have an increased awareness of social issues and community values, the public fire safety foundation work chimes with Millennials and Gen Z.

“The philanthropic message we are putting out there at the moment is really resonating with them,” says Fox. “We never embarked on the philanthropy to promote the business, but because it is in our culture and we hesitated to promote it because it might appear less genuine or self-serving.”

However, they have found that sharing the public safety fundraising has boosted business. “The two things are symbiotic so if exposing the customer to the message helps make the business more successful, then it will ultimately help the charity to be more successful,” says Fox. “We think we have a great balance in the messaging and right now we are having one of the best years we have had in a trading environment that is negative.”

Tina Nielsen