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Miami Subs and Pitbull team up to revive the restaurant chain
As work on the turnaround continued, Chwatt was contacted about Pérez. In addition to entertainment industry savvy, Pérez aspires to entrepreneurial success. He has his own Voli vodka line and has sponsorships from Dodge, Fiat and others. To Miami Subs’ benefit, Pérez in earlier days had frequented one of its stores on Miami Beach and wanted a stake. He got a board seat.
Now, Chwatt just has to convince new well-heeled franchise buyers to drop dollars on new stores — a franchise costs $30,000, plus another $237,000 to $428,000 investment to lease space and open a restaurant. The royalty is 6% of gross sales, plus another 4% slice for advertising.
So far, Chwatt says, 119 franchisee stores are in the works internationally, 65 of them in the Middle East and 59 in New Zealand. Only one of the 119 has opened, in Guyana in September. In Latin America, outside Guyana, where Pérez has the rights to sign franchisees, no deals have been announced. The company has announced 58 franchisee stores for Hawaii — the first is set to open in March — but otherwise do-mestic deals have been scant. In Hawaii, Chwatt plans to test eliminating “Subs” from the brand name. Sub sandwiches are just 2% to 3% of sales, and “Subs” perhaps confuses people new to the brand.
Industry pros say a revival will be hard. The fast casual segment is taking market share from quick-service and table-service restaurants, but competition is fierce and other fast-casual chains already have many of the concepts Chwatt says Miami Subs will introduce — counter ordering but delivery to tables, real plates rather than plastic for platters, glassware for beer and wine, fresh ingredients — and have brought out more innovations. “It’s very difficult for brands that have been as large as Miami Subs that have lost their relevance to consumers by shrinking in size,” says Darren Tristano, executive vice president of the Technomic consulting firm. “It may be too little, too late for Miami Subs.”
As for Pérez’s influence, “It’s a lot of buzz marketing, and we’re all going to forget down the road that he’s engaged in it,” Tristano says. “I don’t think it’s meaningful to the brand’s success or failure.”
The revamp will work, Chwatt insists. Franchisees that invested the $200,000 to $300,000 needed to renovate their stores saw sales double, he says.
Chwatt declined to release a copy of Miami Subs’ franchise disclosure document, the disclosure that lays out key information that prospective franchise buyers should know about performance. A copy of the document, obtained by Florida Trend from a document service, shows more modest gains, albeit dating from 2010. In that year, renovated stores had increases of 6% to 42% in gross annual sales. For the 33 stores opened for all of 2011 — renovated or not — stores in the top quartile averaged $1.37 million in gross sales. That puts Miami Subs’ best at only about half the McDonald’s franchise average. Those in Miami Subs bottom quartile averaged $480,299, according to the document.
For 2011, the last year available, the parent franchisor turned a $578,645 profit on $1.9 million in franchisee fees, royalties and other revenue, making Miami Subs a small business. Systemwide, gross sales were only $28.9 million. Chwatt says systemwide gross sales, franchisee sales and the franchisor revenue all are up since 2011.
“When you can take something over with a name like Miami Subs,” says Chwatt, “and then rebrand it, that’s what we’re all about and we’re winning.”
