In 1987, the Blimpie franchise chain came down with a bad case of indigestion. While sales were still growing, store expansion had stalled, and the sandwich chain's parent, New York's Astor Restaurant Group, was in bad shape. Much of the problem stemmed from an investment Astor had made in a new Mexican chain, USA Border Cafe Inc. Two of the three outlets were floundering, sucking up cash that should have gone into support services for Blimpie franchisees. While Blimpie co-founder Anthony Conza was ignoring his 149 franchisees, rival Subway sandwich shops were devouring the market.
Conza decided he had to move quickly or lose the chain. "I realized I wasn't being fair to people around me," he says. "And if we got our act together, we could beat Subway."
That hasn't happened yet, but Conza has instituted wide-ranging changes that have pushed Blimpie's sandwich sales to record levels. Coming at a time of rising tensions between franchisees and franchisors, Blimpie's turnaround shows how some franchisors are taking steps to improve relations on their own. While some franchisors are doing so to fend off regulation, in Blimpie's case it was also a matter of improving the bottom line. Since 1987, Blimpie's system-wide sales have jumped 38%, from $96 million to $132 million. The number of franchised stores has soared, from 149 to 570, while store failures are down, from 10% to 3%. "Tony is highly committed," says Steven T. Anderson, a Michigan franchisee. "It's obvious that he believes he can succeed only if we do."
NO BALONEY. Conza began the turnaround by closing one of the Border Cafes and selling another. He hired a consultant to help evaluate Blimpie and learned that his big challenge was regaining franchisees' trust. "We felt they expanded too quickly without giving us appropriate marketing support," says David Holt, a Georgia franchisee.
Conza set about rebuilding this trust by opening communications as never before. He flew to stores in more than 75 cities to meet the owners. He formed a franchisee advisory council to get their input on key issues, including new products and pricing. He launched No Baloney News, a newsletter, and an 800 hotline to give tips to franchisees. And he gave franchisees more control over their own advertising through regional advertising co-ops.
Many praise the changes. "Before, Conza was like an absentee president," says Robert Benincasa, who has worked in his father's franchise in Georgia for the past 12 years. "He has gotten much more hands-on, and it has really made a difference."
But rough spots still exist. Since 1987, Blimpie has expanded into highly competitive territories such as Chicago, where Subway and others have established strong beachheads. "Opening a big market like this, you need extra advertising support from headquarters to help establish name recognition," says a Chicago area franchisee who failed. Yet the corporate office had devoted no added resources to the area and confirms that a further three of the nine franchisees there are failing.
Recognizing the problem, Conza recently let Chicago franchisees divert their 6% royalty fees to advertising. "We don't want to open a bunch of stores someplace like Chicago and have them fail. That's just not the way we like to do things," says Conza. It may have taken him a while, but this franchisor is finally listening.