Cousins Subs makes its sandwich comeback
CEO Christine Specht, center, with the management team at Cousins Subs. Jason Westhoff, second from right, was named president of the family-owned brand in March.
At corporate headquarters in late April in Menomonee Falls, Wisconsin, Cousins Subs CEO Christine Specht was feeling fine. Her management team, assembled “person by person” over the last few years and finally in place as of January, was especially proud of the 40-store deal just inked with OM Group, two brothers who are experienced operators in Chicago.
“It doesn’t happen overnight and it’s not a sweeping change,” she says about getting the right team in place first and then the right growth plan afterward. The journey started with many, many tough conversations.
“We needed to be honest and bold enough” to dig in and evaluate Cousins, the sub sandwich maker founded in 1972 by her father Bill Specht and his cousin, the late Jim Sheppard. What the team saw: “A tired environment. AUVs were not what they should be. Some unhappy franchisees. Not a clear growth strategy,” says Specht.
“These are heavy questions” that need to be addressed before any brand can move forward, and particularly difficult when a franchise is family-owned like Cousins—any criticisms can sting the same people you’ll be dining with at Thanksgiving.
“I think you have to be honest about your brand, and that’s exactly what the leadership team did,” said Specht, who was named president in 2008 and added the chief executive job when her father retired, in 2015.
Over the last four years, the team worked on pruning about 40 stores that didn’t fit the system. They increased average unit volumes 48 percent from 2011 to 2018, to $653,000 for traditional locations. They insisted on remodeling requirements that had gone unenforced in the past, so now 44 percent of the system is refreshed, and putting in grills in the 94 units now open, about the same number as before the closings and changes.
She also oversaw a remodeling of corporate headquarters, with wide-open spaces to encourage collaboration today, and the original sandwich board and a photograph of the first Cousins Subs shop to honor yesterday.
Refreshed Cousins restaurants feature design elements highlighting the brand’s heritage.
Attractive scenes on the walls share sayings about hard work and “Believe in Better,” the company slogan. There’s even a 22-foot gleaming wood competition-grade shuffleboard game properly sprinkled with sawdust, a gift from her father for the new HQ.
At first she wondered if she should spend the money to remodel the support center, but it proved fruitful. “It’s just been really transformational,” especially for increased communication. “The millennials are highly social. The baby boomers and Gen Xers benefit, too,” the latter being where she fits, at age 44.
“Is it worth the investment? Yeah, it’s worth the investment. There’s a certain pride we take in our brand,” she says.
In the first quarter Specht announced that her CFO, Jason Westhoff, would become president to focus on day-to-day operations, while her mission would be strategy, people and culture. “He and I are yin and yang,” she declares. “I’m top line and bottom line, he’s everything in between.”
Westhoff joined Cousins in 2012 and worked with Specht and the team to make improvements, like remodels and restructuring. “We did all the re’s you have to do when you have a 45-year-old brand,” he says. “Two years ago we were at the inflection point,” but all the carefully laid growth tactics weren’t yet bearing fruit. “It’s like in life, plans are what you put together and then life happens,” he says.
Then the 40-store deal in Chicago happened, with the OM Group, nephews of existing Cousins franchisees in Wisconsin, at first signing for 10 stores but then asking for the entire market to box out others who wanted a piece.
Attracting sophisticated big-city operators like the Patel brothers, who also own Dunkin’, Wingstop and Rosati’s restaurants, gave Cousins an economic and psychological boost and validated their hard work. Does the biggest deal in modern Cousins history make Specht nervous? “It makes us just nervous enough to not take it for granted,” she says.
Westhoff was chief financial officer at a large operator of Applebee’s and Pizza Hut restaurants. “I got to see what good systems do,” he says. “Applebee’s was one of the darlings” at the time, and now “I get to take that knowledge and put it into a 100-store brand.”
Asked for his forecast for the company, his franchisee chops really show. “We’re looking at seven times growth over 10 years,” he says, with one year, three-year and 10-year goals articulated, “and then we have 90-day increments” to reach in order to hit the full-year plan.
Does he mean 7X growth in sales, where most franchisors focus? No, he says, his goal is 7X growth in “value of the business” or EBIDTA, also known as gross earnings or cash flow. He believes when you focus on that metric, the bottom line, “that gives you the flexibility to work with everything above the line,” he says, including acquisitions, cost-cutting and much more.
Inquiries from investors come in routinely, he says, but for now he and the team aren’t interested. “We want to see what we can do on our own,” he says.
Specht puts it this way: “You have to be willing to take risks and you have to be engaged with growth or you become a brand of the past.”
CEO Christine Specht, left, and new prez Jason Westhoff unwind over shuffleboard.
Competition stacked high in the sandwich biz
Cousins Subs operates in a crowded segment, with no fewer than 15 franchise sandwich competitors listed on the Franchise Times Top 200+ published each October. Jersey Mike’s had a boffo year, last year’s ranking shows, growing sales by 18.2 percent. Firehouse Subs and Charley’s Philly Steaks both grew more than 5 percent.
Cousins ranked toward the bottom of six brands that had modest sales improvements, starting with Erbert & Gerbert’s with 2.7 percent growth, Cousins at 0.6 percent and Penn Station East Coast Subs at 0.1 percent.
Then there were the decliners, with Jimmy John’s down 0.3 percent, Great Steak down 7.6 percent, Blimpie down 15.4 percent and Pita Pit down a dismal 16.4 percent.
Christine Specht, CEO of Cousins, says her goal is to ignore the shiny baubles. “We know they’re out there but we will focus on what makes Cousins special,” she says. “Stay disciplined so you’re not distracted by the competition or chasing down the rabbit hole.”
One way she keeps focus is to get out in the stores, even working as a cashier from time to time to stay grounded. “I always say the magic is out there,” she insists, indicating the Cousins restaurants, not the corporate headquarters. “The action is out there.” She’s betting that action will translate into better numbers when the next ranking comes around.