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QUIZNO’S RAISES STAKES IN SUBMARINE WARFARE

By Joseph DiStefano

Quizno’s serves up oven-toasted subs in its colorfully decorated deli-style restaurants.

Things are heating up for Quizno’s, a fast-growing chain of Italian deli-style sandwich restaurants that has sought its fortune in strip centers for the past two decades.

Quizno’s has grown from 18 units in the Denver area in 1991 — it opened its first strip center unit in 1987 at Crossroads Shopping Center in Boulder — to 1,360 restaurants in 38 states and 10 foreign countries, including Costa Rica, Japan and Canada. And it’s looking to expand even further: Quizno’s CEO Rick Schaden says he plans to have 7,000 to 8,000 stores in 10 years in 40 countries.

Distinguished by its hot subs and Italian decor, Denver-based Quizno’s tries to set itself apart from other fast-food outlets by appealing to pickier customers — the kind who get their coffee at Starbucks. And like Starbucks, it has seen dramatic growth, becoming the third-largest operator of submarine sandwich shops in the United States after Subway and Blimpie.

Subway, owned by Milford, Conn.-based Doctor’s Associates, has 15,500 stores in the United States and 74 foreign countries. Blimpie, New York City, has 1,955 units in the United States and 15 countries.

Last year was a particularly big one for Quizno’s: Its store base grew by 53 percent to 972; it will have opened between 400 and 500 locations by the end of the year and plans to keep up the same pace for 2002.

Quizno’s strongest markets are Texas, California and Chicago; the company is just starting to move into the Northeast and plans to concentrate on that market next year.

Quizno’s is an excellent tenant, said John Delatour, managing director of Regency Centers, Jacksonville, Fla. Regency, which specializes in grocery-anchored strip centers, has 26 of the restaurants in its portfolio and plans to add another seven in the next six months.

What sets Quizno’s apart, Delatour said, is its high level quality of product and presentation. He likened the difference between Quizno’s and other sandwich operations to the difference between Pizza Hut and Sbarro.

Strip centers have played a big part in the company’s growth, and will continue to be the linchpin of its real estate strategy, executives say. According to Schaden, 98 percent of the restaurants are located in strip centers or shopping center outparcels.

Quizno’s executives say they prefer strip centers, because they can draw the customers of other tenants and familiarize them with the chain, especially in new markets. Moreover, strip centers are cheaper than freestanding units, he added.

An appetite for clustering
Quizno’s often chooses to locate in what the company calls an adult “quick service restaurant (QSR) cluster,” or a group of restaurants with operators such as Starbucks and fresh-Mex chains. Far from hurting Quizno’s, locating next to eateries with a similar customer base has proven to be a boon, Schaden said. “People are not going to eat a burrito every day.”

Quizno’s has tended to stay away from regional malls, preferring the greater exposure afforded by strips and stand-alone locations. But, for all that, it does have 50 mall locations. “They’ll always be a small part of our mix,” Schaden said.

One person who wishes regional malls were a bigger part of Quizno’s real estate strategy is David Grossman, director of franchise development, for Chicago-based General Growth Properties. Grossman is charged with leasing the firm’s food courts.

General Growth has six Quizno’s units in its portfolio, and the restaurants are doing quite well, according to Grossman.

Enclosed malls offer an opportunity to further grow the Quizno’s brand, he added. “They’re missing the boat on the enclosed mall.”

Quizno’s mall units fall in the range of 600 square feet to 700 square feet, while freestanding stores start at 1,200 square feet and can be as large as 1,800 square feet.

Part of Quizno’s identity includes decor elements in keeping with its Italian theme, from its signature green and red logo to the colorful floor tiling and bright red chairs. But then there is the food: A major point of difference between Quizno’s and other players in the sandwich game is that it serves its subs warm. Each is prepared open-face and run through a conveyor oven that toasts the bread, melts the cheese and enhances the flavor of the meats. Italian- style meats include wine-cured Genoa salami, pepperoni and cappicola.

Quizno’s fare provides a more upscale alternative to traditional QSRs, said Schaden. It falls into what has become known in the food-service industry as the adult QSR category, which also includes fresh-Mex operations such as Chipotle Mexican Grill and Rubio’s.

According to the company, Quizno’s appeals to the same high-end consumer as Starbucks, yielding some of the highest check averages in the industry and resulting in high annualized sales volumes. The company’s domestic systemwide sales for 2000 were $273 million, up 80 percent from $152 million for 1999, according to the company.

Quizno’s gives consumers a quality alternative to other fast-food restaurants, said Bob Goldin, executive vice president of Technomic, a Chicago-based restaurant consulting firm.

“So much of the traditional shopping center food court fare is hamburgers, tacos, fried food,” Goldin said. “Quizno’s offers variety. It’s perceived as a little healthier. I think they should do pretty well.”

Technomic recently ranked it as the seventh-fastest growing restaurant chain in the United States.

“We’re opening one restaurant every 18 hours right now,” said Jim Bishop, Quizno’s vice president for real estate, design and construction.

 

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