Port of Subs, Inc.
Making a Name in the Sandwich Business
Customers have been enjoying the great taste of Port of Subs sandwiches for over 35 years. In 1972, two brothers from New Jersey opened a modest submarine shop in Sparks, Nevada called the “Sub Shop”. John Larsen, a Public Accountant who had been advising the Sub Shop owners, saw an opportunity and bought the business in 1975. After taking the helm, Larsen sponsored a community-wide contest to choose a name for the Sub Shop to differentiate it from imitators. In a review of more than 10,000 contest entries, Larsen chose the name…”Port of Subs”.
Between 1975 and 1985 the Larsens developed ten company-owned units. Throughout the years many people approached them asking for units in other cities because of the outstanding quality and taste of their products. So, with dreams of expansion, they began franchising in 1985 – and according to John Larsen, their timing couldn’t have been worse.
Sub shops are typically located in shopping centers. In the late 1980’s the country had just come through the savings and loan crisis. Shopping centers defaulted, folded and closed. Anchor tenants were gone and by the end of 1989, the future of Port of Subs was in jeopardy and they questioned whether it was possible to survive. They knew they were in big trouble.
In 1990, John contacted the advisors at the Nevada Small Business Development Center. A Nevada SBDC advisor met with Port of Subs. His first question was, “Who is your customer”. It was an ‘aha’ moment for John – he didn’t know! Nevada SBDC put together a team including UNR students to help John identify his customer profile and where he was losing money. They did a market survey of customers inside the stores. They determined which were the best performing stores and studied why customers came to Port of Subs, and why they came to successful stores and not to others.
They did a dot map analysis to identify best potential sites. And most importantly, according to John, they “tied him down” and made him think through his business plan. He realized he had 12 stores and 100 employees and – no plan. It was another ‘aha’ moment for John. They helped him create a marketing and advertising plan to draw customers, and how to be ready to grow again when the time was right. And they helped John identify what makes a good site for his restaurants.
John then sold a few franchises, but also opened several more company owned stores in Las Vegas – this time, based on the results of the Nevada SBDC advising and surveys. He now knew how to choose the right sites, how to market and advertise, how to manage his budgets – and right away Port of Subs turned the corner from losing money and questionable survival to profitability. In 1989, they lost $250,000, by 1991 they were making a small profit, and by 1992 had started a rapid growth cycle.
Most franchisees received SBA financing. Almost all of the early growth was through SBA guaranteed funding – no one had cash. Today SBA programs make up 50-60% of franchise funding.
Their success was so remarkable that in 1993, Port of Subs won the Nevada small business of the year award because they overcame adversity, received SBA help in attaining their goals and accomplished remarkable growth because of SBA and Nevada SBDC assistance.
Today Port of Subs has over 250 employees in 145 stores, of which 24 are company owned and the rest, franchisees. Profitability is the single most important goal for franchises along with the ability to work well together. Port of Subs restaurants have done well even in a tough economy. Over the last few years customer demand has shifted away from sit down restaurants to quick service restaurants as customers look to save on menu price and also to save a few dollars on tips. People are looking for value in their spending. John says, “It’s an interesting and trying time, but overall we’ve survived it pretty well. But we would have folded if we’d not gotten help to identify who customer is, how to select store sites, how to create a business plan and how to access SBA guaranteed funding. We came to understand how all the pieces fit together – and it’s brought us success.