Latino entertainer/entrepreneur raps up HOT equity deal with The New Miami Subs Grill
Franchise Times flew into Miami the last four days of 2012 to get the 411 on Mr. 305 (Miami’s area code), the international rapper/entrepreneur who had just announced his status as an equity partner in The New Miami Subs Grill franchise. Armando Christian Pérez—aka Pitbull, aka Mr. Worldwide, aka spokesman for Bud Lite and Dr. Pepper and an investor in numerous products ranging from low-calorie vodka to dissolving energy strips—was performing at the American Airlines Arena, home of the Miami Heat basketball team, on New Year’s Eve, a concert that was being aired as part of the national New Year’s Eve coverage. That concert was to be our introduction to the latest celebrity sighting in franchising—and the signal that Miami Subs, a regional chain which started business in Canada 27 years ago as Mr. Submarine, is on the comeback trail with Mr. Worldwide. Thus, The New Miami Subs Grill’s new direction: Go Worldwide.
Pitbull is Miami’s favorite son. Cab drivers can tell you the son of Cuban immigrants’ entire history growing up in a single-parent home in Miami. “Pitbull is a man of the streets,” one American-Cuban cab driver told us. “Nobody gave him nothing. He did it on his own.” A few weeks later at a reception overlooking the Miami skyline at the Franchise Expo South, an Argentine franchise litigator with Greenberg Traurig sang the performer’s praises as well. Pitbull’s appeal, he said, is his ability to use Spanglish so artfully. The hip-hop artist/entrepreneur resonates with the U.S. Latino population, a group that is becoming more and more attractive to marketers, as well as with Latin Americans, a lucrative market south of our borders. He even receives several mentions in author Tom Wolfe’s epic novel about Miami, “Back to Blood.”
As a blue-eyed, fair-skinned teen, Pérez earned the name Pitbull because during the rap battles at underground clubs in the South, he challenged the black rappers with way more street cred than he had in rapid-fire word fights, and came out the victor. In an HBO special on prominent Latinos, he joked that while pit bulls are illegal in Miami, he has papers. Now—at least in his music videos—he’s a lover, not a fighter.
His style of rap has evolved into a musical mix including hip-hop and reggae; he lets other artists like Shakira and Chris Brown sing, while he relies on the spoken word. His rat-a-tat style is a shower of images that often work in the product he’s endorsing, such as Kodak in “Give Me Everything Tonight.” Another video includes a beautiful woman pouring a glass of Voli, the premium, low-calorie vodka, he also has a stake in. Expect to see The Miami Subs Cafe appear as the backdrop in some of his upcoming videos.
Pitbull does have some history with the brand. The story is that Pitbull used to write lyrics in the Miami Beach restaurant on Washington Avenue while he waited for his lawyer—entertainment, not criminal—to bring over papers for him to sign. That’s true, he admits, but the part of the story now making the rounds, about him telling the manager that someday he wanted to own a Miami Subs, is bull----, he said, laughing.
Why rap? “The beautiful thing about music is it relates to everyone,” he said during a phone interview. “It’s admitting to what was wrong by painting pictures. Everyone has a story; a struggle.”
The company he entered into a hefty equity agreement with has had its struggles, as well. And just as Pitbull had to reinvent himself as both an artist and an entrepreneur (he is the rare rapper who wears his pants at his waist and suits and ties in music videos), Miami Subs has taken a number of colorful twists and turns to get to where it is today.
The road from Mr. Submarine to Mr. Worldwide
The chain that started as Mr. Submarine in Canada has had nine lives, said Donald Perlyn, the former president of Miami Subs, who worked with the founder Konstantinos “Gus” Boulis. Perlyn was the one who instigated the sale to Nathan’s Famous in the summer of 1999, after a TV news interview went dreadfully wrong. Perlyn remained with Nathan’s when Miami Subs was later sold to the current owners, and is on Nathan’s board of directors.
“It was the classic story of a Greek who jumped ship in Canada,” Perlyn said. Boulis and a partner bought into Mr. Submarine, and began making real estate investments. Once he amassed some significant money, he moved to the Florida Keys and started building restaurants and hotels. He renamed the restaurants, Miami Subs, because of trademark issues. While it had “subs” in the name, the menu was eclectic. “The food was good,” Perlyn said. Greek items, such as gyros and chicken pita, were prominent on the menu, plus Philly cheesesteaks and breaded and deep-fried chicken wings. The servings were hearty, which was popular with the late-night crowd. “If customers asked for it twice, (the item) was put on the menu,” Perlyn said. The fast-casual restaurants stayed open late, some 24-hours, and served champagne, but not just any champagne, said current CEO Richard Chwatt, Dom Perignon. Celebrities like material-girl Madonna would use the drive-thrus after a concert to pick up chicken wings, and bottles of Dom were fed through the sunroof of the limo.
Dieuveny Louis is an executive partner in The New Miami Subs Grill, and the franchisee for the Miami Beach location.
“Our early R&D was asking two Greek guys if they liked it (the new food item),” Perlyn said. “If they liked it, it was on the menu.”
Perlyn became involved with the chain when his business partner, John Y. Brown Jr., the former governor of Kentucky and an executive with KFC who later switched to Kenny Rogers Chicken, wanted him to find a concept for the pair to invest in. “I found it” Perlyn said. “It was glowing in the night, with cars lined up around it, and the place was packed. The menu went on forever.” At the same time, a flight attendant told Brown about this great place to eat in Miami—Miami Subs.
The two invested in the chain and went to work making the concept franchiseable. Perlyn started working on paring down the menu and putting systems and procedures into place.
It’s never easy, but the process is even more difficult with a flamboyant owner like Boulis. “He was dynamic,” Perlyn said. He would work until 10 at night and then go see the restaurants, and he often expected Perlyn and others to put in the same long hours.
Boulis wanted restaurants opened as quickly as possible, even if the inspectors didn’t have time to sign off on them. He liked to open restaurants on Friday night, Perlyn said, while the “inspectors were home sleeping,” so they could get in a weekend of sales before the government was back on the job. “He’d rather beg forgiveness than ask permission,” Perlyn said.
One of the ways the chain grew quickly in the early days was conversions. Perlyn tells the story about negotiating a deal with Bojangles’ Famous Chicken ‘n Biscuits for the 17 units they were closing in Miami years ago. Perlyn received permission from Bojangles’ then president to purchase the leases, and he gave Boulis the addresses so he could check out the locations. Three weeks later, while Perlyn was still working on closing the deal, he received an angry phone call from Bojangles’ president saying the landlord was calling his people, screaming at them because someone was tearing apart five of his buildings. Perlyn immediately called Boulis who said to tell Bojangles’ president the landlord was wrong. Perlyn remembers relaxing until Boulis’ next statement: “Tell him it’s eight, not five.”
The conversions were excessive, as more than one QSR chain had opened too many units and needed to get out of leases. “We were swept up in available real estate,” he said. “That was 20 years ago—half a lifetime ago.” Miami Subs became a victim of its own success. It grew too quickly, the result of which was management wasn’t able to support franchisees as needed. Restaurants weren’t kept up, and pizza was added to the menu and name in a haphazard fashion, Chwatt said.
Adding to the quirkiness of the time, a local, well-known muralist was hired to paint original Miami-style art on one wall of each restaurant. The artist, however, could only paint in the nude. The solution was to cover the windows at night so he could work without alarming passersby, said Chwatt, laughing.
While Perlyn ran the company, Boulis went off in another direction. He became involved in off-shore casino boats, which needed to be at least three-miles off Florida’s coast in order not to break laws governing gambling.
Everything came tumbling down, the day Perlyn and Boulis saw a TV newscast of a SWAT team repelling out of helicopters onto one of Boulis’ casino boats. Boulis rushed down to the port.
Later Perlyn said he remembers turning on the television and seeing Boulis screaming at the sheriff on the local news, every third word bleeped out.
“We were a public company,” he said. “I told him, ‘you can’t do that.’” Perlyn arranged for Miami Subs to be bought by Nathan’s Famous, a hot dog company, which at the time wanted to develop its foodservice business.
Boulis’ story doesn’t have a happy ending. In 2001, he was murdered gangland style—two cars boxed his car in, while a third vehicle drove by spraying him with bullets. Ironically, the hit took place in front of a Miami Subs restaurant. (For more on the casino story, watch the documentary “Casino Jack,” which details the scandal surrounding lobbyist Jack Abramoff, which ultimately led not only to Boulis’ murder, but to the Bush White House.)
Hot dog, we have a new owner
Nathan’s Famous did extremely well during the time it owned Miami Subs, but unfortunately, the sub chain was the proverbial step child. Franchisees discovered they could make more money selling off their free-standing buildings with drive-thrus to banks, Chwatt said. Co-branding attempts didn’t pan out. The chain was languishing.
Three years ago, investors in the chain, Chwatt and Bob Vogel, a multi-unit Burger King franchisee who has since turned over the Burger Kings to his son to run, bought the chain with the idea of restoring it to its former grandeur. During its heyday, thanks to its electric pink and blue neon, it was a “beacon in the night,” as Perlyn described it.
The chain at one time had as many as 300 units, but now was down to double-digits. The first thing Chwatt did as CEO was to hire a team of young, bright people who could take what was right with the chain and capitalize on it, while getting rid of what didn’t work. He took a hard line with franchisees. His philosophy, he said, is “renovate, relocate or terminate.” “And I meant it,” he said. “I had to close stores to show I was serious.”
Richard Chwatt, left in both pictures, with business partner Bob Vogel, and son-in- law Evan Friedman who is moving his family to Ft. Lauderdale to head up sales and development. Behind them is the original artwork produced by the artist who could only paint in the nude.
He also hired a former COO in order to have continuity with the past when the chain was flourishing. And proof of the chain’s power, some of the old franchisees are coming back to open units again. Food, which was always their strong suit, was upgraded to include fresh ingredients and made to order. The Dom Perignon was reinstated. It may be a loss-leader or a break-even item, Chwatt is the first to admit, but the big bottles with the luxury-sounding name sitting at the bar will provide some caché, along with creating a buzz.
Ambrose Whyms, director of training and operations, said one of their biggest consumers of the champagne is the Miami Beach limo drivers who buy a bottle along with a 40-wing bucket to have in the back of their limos for their special fares.
But, perhaps, the regional chain’s greatest asset is its nostalgic pull. People remember Miami Subs in the good old days when it was the place to hang out. The challenge when resurrecting an iconic brand, Chwatt said, is knowing what to leave in and what to take out. You want it to resonate with fans, he explained, to not be stripped of everything they cared about. But you also want it to attract the next generation, too.
Currently, about 60 percent of their business comes through the drive-thru. “Our challenge is getting people inside,” Chwatt said. In its heyday, the restaurant on Lincoln Avenue in South Beach attracted nationally known musicians after their concert performances, along with lesser-known celebrities, because it was open after concerts and after the bars and nightclubs closed.
“Launching back into South Beach is huge for us,” Chwatt said. The franchisee who will accomplish that feat in grand style is Dieuveny (D.J.) Louis, who owns nightclubs, among other investments, and is one of the hip, young up-and-coming businessmen in South Beach. He’s also an equity partner who will be opening more units. Louis’s business partner, who “discovered” Pitbull the rapper, introduced the artist and the restaurant group.
Chwatt admits that when Pitbull was first mentioned as an investor, he had to ask his grown children who Pitbull is. Now he’s a fan.
“He’s the real deal,” Chwatt enthused. “He takes you to another level.” Pitbull not only has a significant equity stake in the company, he has development rights for parts of Latin America.
“Miami works on the following (premise),” Louis says, “Who knows who.” Thanks to Louis, and now Pitbull, Miami Subs execs will know a lot of “who’s who” in town.
Louis can see nightclub patrons going to The New Miami Subs Grill after the clubs close, because the look will be in line with a nightclub, but more mellow. And food will be the focus of the visit, and Pitbull’s music will be playing in the background.
The old look of neon arches discreetly resurfaces in the new prototype. “I told Armando we’re going to do it sexy,” Chwatt said.
OMG really means Oh! Miami Grill
Miami Subs isn’t content with just adding Grill to its name. It’s developing a second prototype, the Pitbull OMG!, short for Oh! Miami Grill, a larger footprint that is more upscale and features tapas and appetizers; a full bar, rather than just beer and wine; and a sophisticated nightclub feel. Its natural habitat will be airports and sports arenas, Chwatt said. The value of being in airports, especially for Latinos, is the entire family drops off the passenger, often staying to have a meal together. That’s great visibility for the brand.
Miami Subs’ former president described the original lit-up prototype as a ‘beacon in the night.’
Pitbull, Chwatt said, is not a pitch man, he’s involved in everything from adding Cuban items to the menu to selecting the music played in the restaurants—a lot of which feature him. Miami is considered the gateway to Latin America, and Pitbull is even more popular there, where much of the chain’s international expansion is expected. Pitbull’s other strength is social media, where he has more than 27.5 million likes on Facebook.
Nor is Pitbull a figurehead. He may be young, but Pitbull has a keen business sense. “‘I’m at a stage of life when I don’t buy green bananas,” Chwatt jokes. Pitbull, however, is young. If he ever decides to give up his “day job,” Chwatt said he can see the entrepreneur taking over The New Miami Subs Grill as CEO.
Judging by his New Year’s Eve performance, Pitbull won’t be giving up the music scene anytime soon. After all, he just turned 32 this January. He learned about business through the school of hard knocks, he said, not formal training. The music business is a great educator: Feedback is instantaneous, and you have to constantly adjust and modify to keep up with a fickle public’s tastes.
“I can’t guarantee that I’ll win them all,” he said. “But I guarantee I won’t lose them all.”
If you are easily offended by the clothed, but gyrating, bodies of young women, you may want to skip the video version in favor of the audio. However, seeing Pitbull perform is half the fun of his music.
International Love (with Chris Brown)
Don’t Stop the Party
Give me Everything Tonight
Although Miami Subs started as a Greek diner, Philly Cheesesteaks are one of the most popular items. Choose original, fajita, Italian or nacho style.
Get them deep-fried and crispy, grilled or naked, where the wings are fried, but not breaded. Chauffeurs in Miami have been known to place a 40-wing bucket, along with a bottle of Dom Perignon, in the backseat of their limo to welcome VIP guests.
Speaking of Dom, the higher-end champagne is returning as a mainstay on the menu. They may not sell a lot, but just seeing the bottles in a fast-casual restaurant is a talking point, if not a selling one.
Gyros and chicken pita are top menus items, and now with the partnership with Pitbull, Cuban items have been added to the menu.