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Rolling In The Dough

[ 0 ] Jan. 7, 2013 | SBO Editor

Under new leadership tasty Submarina is ready to soar.

Submarina® makes the most scrumptious sub around, and that hasn’t changed since the first shop opened 35 years ago outside San Diego, where the chain is held in high regard. However, even the best food on the block doesn’t make you an industry leader without the right leadership. Since acquiring the 50-plus store chain in September 2009, longtime investment banker Bruce Rosenthal has been peeling back the layers and reorganizing and reinvigorating the company. Now with a highly skilled management team focused on enhancing revenues and profits of the franchisees, Submarina is positioned for aggressive expansion in its founding state – where it has more than 40 locations – and throughout the country.

With its northernmost California location in Santa Clarita, just outside Los Angeles, Rosenthal is focusing in-state growth in Los Angeles and Orange County and expanding northward. “Customers love our high quality food. There are numerous cities and towns in California that don’t have a local Submarina. We are committed to changing that,” he says, adding that West Coast expansion will likely target Oregon and Washington as well.

Nationally, Submarina currently has locations in Georgia, Ohio, Michigan, New York, Tennessee and Guam. Rosenthal is committed to building a strong area developer network throughout the East, Mid-Atlantic, Southeast and Southwest regions of the U.S., particularly the states of Florida and Texas. Rosenthal is targeting 30 locations for the Lone Star State alone in the next 30 months.

Rosenthal was already a fan of Submarina when he first met Jeff Warfield about a half-dozen years ago. Warfield – the son of one of Submarina’s founders and CEO at the time – was looking for additional capital. Warfield would later lead the company through a successful rebranding, but his successor as CEO began making a litany of poor management decisions that threatened to take down the company.

In June 2010 – only nine months after Kerensa Investment Fund, I LLC, a private equity fund managed by Rosenthal, had bought most of the assets and the rights to the Submarina name, Rosenthal was forced to terminate the CEO and assume operating control. When the Submarina assets were originally purchased the investment company was a passive investor; however, Rosenthal was compelled to make a change.

Relying on his lifelong passion about quality food and his 30-plus years of investment banking experience in a myriad of industries including retailing, Rosenthal wasted no time in reorganizing. He reduced expenses, streamlined processes and enhanced the Submarina product. The area developer network, by which the company operated its expansion program, was reinvigorated. This included a restructuring of the marketing and promotional fund to give proven area developers authority and control over local advertising. The logistics contract was renegotiated and a new supplier found, and Rosenthal utilized his own real estate and retailing background in taking a hands-on approach in working with franchisees in site selection. This has resulted in greater profitability for both the company and its franchisees.

“Submarina had people with tremendous skill sets and knowledge in the corporate office and great performing franchisees, but the decisions of prior leadership turned the company upside down,” Rosenthal said. “In spite of the management missteps, the thing that saved Submarina is that we have a very loyal customer base.”

Today, Jeff Warfield is a successful multi-unit operator and area developer for Submarina. “Jeff knows store operations better than anyone,” said Rosenthal. “With his wartime flight-deck operations background, his stores run like clockwork and he instills this discipline in the franchisees he oversees.”

The changes have already made an immediate impact, with Submarina franchisees enjoying both increased margins and sales. The company saw an 11-fold improvement in operating performance during the first half of 2011. The balance sheet was enhanced with a small equity sale in December 2010, and Rosenthal said several other parties are interested in making additional investments.

Unlike other concepts, Submarina passes on all savings derived through its group purchasing program directly to franchisees. There is no markup on any food products.

Submarina describes itself as “fast casual, not fast food,” with meats sliced fresh in front of the customer, just like one would find at a neighborhood deli. No ingredients are pre-packaged or arrive at the stores pre-sliced. Expanding upon a foundation of serving fresh bread, Submarina has launched a program that will introduce in-store fresh baked bread in all new locations.

Rosenthal has other exciting plans: encouraging franchisees to expand delivery options beyond catering, expanding and enhancing Submarina’s already delicious line of California salads and the introduction of a premium sugar- and corn syrup-free mayonnaise.

From Submarina’s founding in San Diego to restaurants in areas from Guam to Clarksville, Tennessee and Valdosta, Georgia, the chain has a significant presence in cities and towns with a large military presence. In the future.

Bruce Rosenthal has always had a passion for quality in every aspect of his professional life. Running Submarina is no exception. The chain is held in high regard among its loyal customer base and the company gives back by working with non-profit organizations dedicated to helping military personnel and their families.

THE BEGINNINGS OF A LEGENDARY BIZ

Two U.S. Postal Service workers – Les Warfield and Ron Vickers, along with their wives, opened the first Submarina in Poway, California, outside of San Diego in 1977. Originally, from Brooklyn, NY, Warfield and Vickers moved to Southern California for the weather, but the pair couldn’t find a decent sub, one of their lunchtime favorites.

The pair opened their own sub shop – aided by their wives, Lynn Warfield and Maureen Vickers, who ran the shops for several years – and found success by gaining a reputation for great food and service. Warfield and Vickers finally left the postal service in the late 1980s to join the shops on a full-time basis. Submarina started franchising in 1988. Both original founders are currently franchisees, with Les Warfield having re-opened the original Submarina in Poway.

Submarina® Inc. is headquartered at 300 Rancheros Dr., Suite 120, San Marcos, CA 92069. Call 760-471-3377, ext. 104 for info or visit:
www.submarina.com



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Category: Magazine, Start Your Own Business, Start Your Own Business Spring 2013