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Business Observer Friday, Dec. 14, 2018 3 months ago

Sub chain CEO: 'I'll clean the worst restrooms'

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Firehouse Subs CEO Don Fox says teamwork requires sacrifice.
by: Traci McMillan Beach Contributing writer

Though some see the restaurant business as an entry level job, Don Fox has made it a 44-year career. Starting as a dishwasher at a small local New Jersey restaurant called the Godfather when he was 16, Fox says he put his head down and worked hard “because you never know how that might benefit you.”

He leveraged that experience to work his way up at Six Flags amusement parks. Then he embarked on a 23-year career with Burger King, at the time the second-largest chain in the world. In 2003, Fox joined Firehouse Subs, a 65-unit sub shop founded by two firefighters in Jacksonville.

Today, Fox is CEO of the sub chain, which now has 1,050 locations across 45 states, including 37 corporate locations. Systemwide, the franchise expects sales of $800 million in 2018.

Fox was recently in Tampa for a University of South Florida Muma College of Business “Conversation with a CEO” event. In an interview with the Business Observer, Fox talked about leadership, franchise best practices and connecting business with philanthropy. Edited excerpts:

What do you find intriguing about the restaurant industry?

What’s unique is the competitive nature of it. There is always room for the next great restaurant. This year restaurant visits are down 1% — there’s still somewhat of a shrinking pie. But it doesn’t prevent anyone from getting in, it’s the most entrepreneurial industry that there is. On a relatively shoestring budget, you can open a great restaurant.

How do you watch your competition?

We take a lot of time and effort to understand cross-usage. We use a company called Sense360. If you leave your location services on your phone, they know where your phone goes and what restaurant you visit. It allows us to see cross-usage between brands and where we may want to target advertising.

Our competition isn’t limited to the sandwich players. (Half) our customers are fast casual, they have us in a bucket with Panera, Five Guys, Chipotle. They want a certain level of food quality, are willing to spend a certain check average, are looking for a certain ambience. (The) other bucket of customers — the other 50% — just want a sandwich. It better be convenient and fast. We have to appeal to both.

What lessons can you learn from some of the franchise issues with Quiznos?

Fundamentally, they did not have the interests of franchisees at heart. You cannot grow a successful sustainable franchise system if you ever forget that you depend on the success of your franchisee. Typically in the restaurant industry, food and paper costs will be 30-32%. In Quiznos’ system, they required purchases directly through Quiznos. They marked up the costs, the food and paper costs were closer to 38-40%. They were also very indiscriminate in terms of how they franchise. So they built a system of over 5,000 single unit restaurants. They were very lax on choosing sites. They are the best business case about what to do wrong.

‘Your team has to feel there’s nothing you wouldn’t do that you’d ask of them. I can’t tell you the number of times I’ve cleaned the worst restrooms.’ Don Fox, Firehouse Subs

What’s your leadership style?

There are around 14 employees per restaurant, coming up on 20,000 employees in our system. Every one of those, I’ve walked in their shoes. There’s not a day I wake up without looking through the eyes of how they work. Having that insight is very valuable.

You have to lead by example. Your team has to feel there’s nothing you wouldn’t do that you’d ask of them. I can’t tell you the number of times I’ve cleaned the worst restrooms. If your team ever thinks you won’t go clean the soiled restroom or pitch in on dishes when they are piled up — you have to be willing to do those things. That gives you the moral authority to lead.

Part of the burden of leadership is you have to provide the motivation. It’s not sustainable to build optimism from the bottom up.

What’s a common leadership pitfall?

If you fail to hold people accountable, it all falls apart. It takes leadership to establish accountability on the team. If leadership doesn’t do it, good people leave.

What’s your advice to others hoping to make it to the C-suite?
Never stop believing you can do it. When I joined Burger King, I did not get my degree, but I never ever said that would prohibit me from succeeding or limit my ambition. As long as I continuously work hard and learn, nothing should be beyond my capacity. Never believe anything is out of your reach.

What’s the biggest disrupter in the restaurant industry?

Change in consumer behavior away from eating in restaurants. So all of the delivery services are a big disrupter. Some brands are in a better position to capture that shift in the business.

What have you done to stay ahead of disruption at Firehouse?

We made a great move a year and a half ago to change our packaging. Before, if you got it to go, you got it in a wrap and there was a good chance it was soggy. Our business was primarily dine-in (sandwich served in a basket). But a couple years ago, a majority of business shifted to more business off premise. It cost us 70 to 80 basis points on our P&L to put new packaging in place. In an industry that is negative 1%, our traffic is up 5% because we reacted to that change in consumer behavior.

How does Firehouse Subs embrace philanthropy as part of its mission?

One of the key loyalty drivers for our brand is our giving back to the community. We provide fundraising for equipment to first responders and can measure to the individual restaurant. A professor from Cornell wanted to do a white paper study on philanthropy and business results. They did two dedicated studies on our brand. Their assessment was that the strongest correlating factor was our community involvement.

What have you learned about connecting philanthropy with business?

Our brand has a strong connection with our philanthropy and the whole theme is public safety. McDonald’s has built brand with Ronald McDonald House, Wendy’s has strong ties to adoption. But a lot of people don’t know the stories, it’s not a natural connection.

We struggled for a lot of years to talk about our philanthropy overtly in our advertising. We stayed back because we felt we’d be pounding our chests. We realized we would be better fundraisers if we brought the message forward. We advertise differently now (including commercials with firefighters).

How do you close the gap between the number of baby boomers visiting the restaurant vs. millennials?

Innovation. In our own history — the best example is in 2012, when we launched Coca-Cola Freestyle across our system. We track measures for that through Technomic, and our highest scores ever for innovation happened that year. It was the only year when millennial usage exceeded boomers.

A good example of how we can move the needle is convenience, embracing delivery services, doing delivery ourselves. We launched a program called Rapid Service — we’ve moved the delivery rack close to the door for the person who has ordered online. I watch how we are executing in conjunction with others, like Starbucks mobile order, if the font is too small, or the counter is in a sea of other activity, or my cup is touching someone else’s cup.

What’s the best business lesson you’ve learned?

Empower franchisees to a greater degree in our system. If you really want them to buy in, getting their voice included is really important. Back in the recession, Firehouse saw sales down 4-5%. In absence of having a solution with an advertising agency, I stopped collecting advertising money (from franchisees.) I told franchisees to keep their 2% and empowered them to do local restaurant marketing. But it didn’t work: 30% of our system started growing in sales, but 70% didn’t.

So we changed advertising agencies and we went 180 degrees in a different direction. We asked franchisees to double the original advertising contribution to 4%. Letting them take their shot and fail gave us the moral authority to make the ask for a different effort. That fundamentally changed the direction of our brand. Sometimes you have to double down to keep improving results.

 

 

 

 

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