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FDD Talk: The Lenny’s Sub Shop Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on March 22, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Sandwich Franchise, Sub Sandwich Franchise

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Lenny's Sub Photo by The_Mac_Daddy

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Lenny’s Sub Shop franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Lenny’s Sub Shop franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Lenny’s Sub Shop’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average sales, total labor, cost of sales, total rent, utilities, all other expenses, total expense, and EBITDA (plus total restaurant count and number of restaurants inside and outside the Greater Memphis area) for the top 5, top 50%, bottom 50%, and all 61 franchised Lenny’s Sub Shops that originally opened before January 1, 2013; remained open as of March 31, 2015; had the same franchise owner since January 1, 2013; and submitted information in time for publishing the 2015 franchise disclosure document

Section I – Background Information

Lenny’s Sub Shop has a simple tag line: “Everybody Deserves Great Food.”

Len Moore was born in 1955 and started out in the industry as a 16-year-old busboy at a restaurant in Wilmington, Delaware, but by age 18 had already worked his way up to dishwasher, then grill cook, and finally general manager. He went on to hold key management positions with TGI Fridays, Olive Garden, and Ruby Tuesday′s restaurants, and was one of the earliest Chick-fil-A franchise owners.

In 1998 he and his wife Sheila opened up the first Lenny’s Sub Shop in Bartlett, a suburb of Memphis, TN. They originally only planned one location in order to help pay for their daughter’s college education, but people clamored for more and by the end of their first year in business they had opened five more locations in the greater Memphis area. By 2001 there were 20 locations throughout the Southeast, which is the year franchising began.

Their original competitive advantage was in avoiding pre-packaged foods and not tolerating impersonal service. One of the chain’s popular mottos is “More Food, More Taste, More Personality!”

Len sold a majority share in the company to a group of private investors in 2004 but stayed involved in the company as a franchisee in Houston, TX, until his death in 2008.

With 112 locations throughout the U.S., here’s how Lenny’s keeps serving up great food in the highly competitive sub sandwich segment:

Ready for a Comeback?

At its peak in 2008, there were more than 177 locations, but that figure has declined steadily ever since, and now stands at just 112.

Rick Johnson and Kevin Martin took over the chain in 2012. The duo is investing a whole lot of time, energy, and capital to revitalize the Lenny’s brand. Johnson is now the CEO and Martin is the CFO.

The two have put much effort into figuring out how to streamline operations in ways that will benefit franchisees. They’ve also brought on a new COO in the person of Jason Vaughn, the former senior director of operations at Taco Bell and division vice president of Wendy’s International.

Major Facelift

Lenny’s is getting a major overhaul in both appearance and menu. The new colors are cool grays, reds, and blues rather than muted (and rather dated) beiges and taupe in most locations. Corrugated metal details, faux wood floors, and concrete tiles are all being used for a hipper atmosphere and look.

They’re also using the flagship location as a menu-innovation testing facility. The chain is looking to expand its Philly cheesesteak offerings, as well as add more nutritious options for Millennials and other increasingly health-conscious consumers.

Simple, Good Menu

Lenny’s keeps its menu very simple with 9 cold subs and 9 hot subs along with a few Kaiser sandwiches and sides. Fresh-baked craft breads in white, wheat and multigrain kick things off, followed by quality deli meats that are hand-sliced to order and finished with fresh toppings.

Section II – Estimated Costs

  • Please click here for detailed estimates of Lenny’s Sub Shop franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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