Re-Branding, Co-Branding, and New Leadership Help Schlotzsky’s Rebound

No. 5 Schlotzsky’s — It could end up becoming one of the greatest comebacks in franchising. Less than a decade ago, Schlotzsky’s, a brand that has been around since 1971, was in bankruptcy and shuttering company-owned stores. But a change of ownership that took the publicly traded company private, brought in new executive leadership, and launched a re-branding initiative has meant a turnaround for the chain known for its oven-toasted sandwiches prepared on round rolls.

Consistent growth in recent years culminated in an announcement earlier this year of a 170-unit franchise agreement with one partner to cover a territory that includes Ventura, Los Angeles, and Riverside counties in California, stretching from just south of Santa Barbara to the Nevada/Arizona borders.

Schlotzsky’s fortunes turned in 2004 when it was acquired by the Bobby Cox Companies, which made necessary overhauls to improve the Austin, Texas-based company’s standing. Two years later, FOCUS Brands, an affiliate of private equity firm Roark Capital Group, parent company of Moe’s Southwest Grill, Carvel, Cinnabon, and Auntie Anne’s, acquired Schlotzsky’s.

Schlotzsky’s President Kelly Roddy is credited with much of the recent success. Under his watch, a re-branding effort began at the end of 2011 with circle-themed store interiors featuring new colors and signage. The menu, with at least 15 sandwiches per store and 25 system-wide, also includes pizza and soups with the recent addition of fresh-tossed salads.

But perhaps the biggest change for franchisees is Schlotzsky’s plan for moving forward. FOCUS Brands is tri-branding Schlotzsky’s with two of its other brands—Cinnabon and Carvel Ice Cream—with all three existing under the same roof at every new Schlotzsky’s that opens.

Initial investment costs of opening a Schlotzsky’s franchised business with a Cinnabon Express and a Carvel Express inside ranges from $182,098 to $773,141. While the agreements involve greater expenses for the franchisee, the arrangement also translates into increased revenue potential for the combined business.

Schlotzsky’s has returned to top franchise status with a goal of having upwards of 700 locations by 2016, which would bring it back to where it was in 2001 before bankruptcy.

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