The next time a shopping center owner or broker is looking to add a sandwich shop as a tenant, Bill Knight hopes they’ll choose Lenny’s Sub Shops. “Instead of Subway or Quizno’s, we’d like to be at the top of their list,” says the director of franchise development for the Memphis, TN-based sub sandwich chain. “”The biggest challenge is becoming the top of mind brand for real estate owners and brokers.”

Lenny’s, which was founded in 1998 by Len Moore, a father looking for a way to pay for his daughter’s college tuition, is in an explosive growth mode after being sold to Lenny’s Franchisor, LLC two years ago. Heavily concentrated in the south and southeast with 84 stores, the chain has nailed down franchisee commitments for 600 new restaurants over the next five years, Knight says. He expects to have commitments signed by the end of the year for 1,000 new units in more than 14 states.

“We wanted to take this concept national, and we think we’ve done it in a smart way,” Knight tells GSR. The chain has been selective in choosing its franchisees, assigning market developers to specific regions with the expectation that each one will develop at least five stores. “We’re going about our growth differently from Subway or Quizno’s, which typically have franchisees with only one or two stores,” he says. “Our ideal franchisee is a more sophisticated operator who is well capitalized.”

The chain, whose claim to fame is service and personality along with oversized sandwiches (the regular-size sub is 7½ inches with a half pound of meat and cheese) that are made from hand-sliced ingredients and doused with a secret sauce containing hot pepper relish, recently opened its first stores in Las Vegas through its market developer LVNR. The new franchisee plans to build 25 restaurants in the Las Vegas Valley, Knight says, opening up a new region for Lenny’s. “Vegas is a big growth area and sets the stage for our expansion in the West,” he says. The chain has recently signed agreements for several new stores in Sacramento, Reno and Lake Tahoe.

Knight says that new Lenny’s stores are bringing in a higher volume than most of its competitors; the average unit volume last year was $540,000. The chain prefers 1,600 sf to 2,000 sf of inline space with an 1,800-sf end cap with a drive through space ideal, he notes. In addition to the recent market developer agreements for Nevada and California, Lenny’s has signed several large agreements for development in Florida and Texas. For example, Lenny’s signed Dynamic Growth Partners Inc. of Boca Raton last summer to develop 124 restaurants in Southern Florida including Palm Beach and Broward counties. The agreement is expected to add more than $1 billion in revenues for the Lenny’s system. Additionally, Lenny’s founder Moore has become one of the chain’s biggest franchisees by agreeing to develop 80 stores in the Houston market. Four hours north of Houston, another market developer is planning 98 stores in the Dallas-Fort Worth Metroplex, Knight says.

Knight says that Lenny’s is facing competition from other sub sandwich operators, not just for customers, but for franchisees. “One of our biggest challenges is making sure that we have great franchisees – they don’t grow on trees,” he quips.

Looking forward, Lenny’s hopes to expand in North Carolina (except for Charlotte), Louisiana, Kentucky and South Carolina. “We’re focused on those areas, but we want to grow overall land we’re geared to go anywhere in the country,” Knight says.

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