Upper Crust

Move over, sub, hero and hoagie: the sandwich has gone upscale. And for enterprising entrepreneurs, it's the best thing since sliced bread.

David Doran

Magazine Contributor

June 1, 1999 6 min read

This story appears in the June 1999 issue of Entrepreneur. Subscribe »

The year is 1765. A marathon card-playing session is underway in a London club. One famished player, John Montagu, the fourth Earl of Sandwich, orders a bit of salted beef between two slices of toasted bread. Within a few short years, the tasty and portable sandwich, as it came to be called, was the favorite food of working people all over England.

More than two hundred years later, sandwiches have become an American fast-food staple. Sandwich chains such as Subway and Blimpie have thousands of outlets nationwide; sandwich franchises can even be found in exotic locales like Saudi Arabia and Taiwan. While the market for sandwiches seems to be very close to becoming saturated, according to retail and restaurant marketing consultant Ray Coen, the truth is there's always room at the top for restaurants offering higher quality at a correspondingly higher price. "In every [fast-food] category, after the initial expansion, there comes segmentation, because the only way to grow a category beyond a certain point is for new entries to develop a different position [for themselves]," says Coen. "Upscale sandwich shops are definitely identifying a new segment position."

Like politicians and actors, food items can undergo image makeovers to improve their salability. Take Ruth's Chris Steak House, the wildly successful Metairie, Louisiana-based steakhouse chain. When Ruth's started franchising in 1976, many felt it would drown in a sea of steakhouse competitors, all offering essentially the same food. But Ruth's took the steakhouse concept upscale, serving gourmet beef on a white tablecloth with a good bottle of wine. While a steak at Ruth's was more expensive than one at, say, Sizzler, diners with a taste (and budget) for quality food flocked to Ruth's in droves.

"The improved national economy is giving consumers the confidence to go out and spend money on a better quality sandwich or meal," says Coen. "People are simply enjoying the money they're making. As long as things go well, these upscale stores will continue to proliferate. Even when the economy falters, the stronger sites will survive and prosper."

The Right Stuffing

What exactly is the difference between a mainstream and an upscale sandwich store? According to Coen, it's all about identity and perception. "If a franchisor calls itself upscale, there had better be a perceivable difference in quality and price," he says. "It's OK to have a higher price, as long as you've made a noticeable improvement [over other chains] in decor, atmosphere and food quality. Most working people eat lunch out 22 times a month, so consumers are the ultimate authority on the differences in food quality."

Upscale sandwich stores use a more diverse selection of food items to differentiate themselves in a crowded marketplace. Mike Stimola, 41, founder of Redding, Connecticut-based Sandella's Cafe, believes his franchise's distinctive menu selections are a large factor in the chain's success. Sandella's offers 80 different sandwiches, including pita wraps inspired by ethnic cuisines, as well as soups, salads and smoothies. "We found having a sandwich that people could only get at Sandella's gave them a reason to come here," says Stimola, who grew Sandella's from a single coffee bar he opened in Redding to an eight-restaurant chain in five years. "They can get turkey, ham and roast beef sandwiches anywhere. What really sets us apart is our creativity and the uniqueness of the product. We're going after that sophisticated consumer who's looking for something different in a sandwich from what they get every day."

Lacking the heavy fried food items and greasy hamburgers of most fast-food chains, upscale sandwich shops are able to capitalize on a trend toward healthier eating spearheaded by aging (and generally prosperous) baby boomers. The menu selection at Wall Street Deli, an upscale sandwich franchise with more than 115 stores nationwide, puts a strong emphasis on healthy foods. "We saw where the market was going and felt there was a tremendous opportunity to tap into foods that were perceived as healthier than traditional burgers, fries and pizza concepts," says David Thomas, senior vice president of marketing for Wall Street Deli. "We knew from past experiences that we could produce sandwiches very quickly and efficiently, so the upscale sandwich concept works well for us."

With the Greatest of Ease

Unlike many other quick-service franchise concepts, gourmet sandwiches require little cooking or other preparation, making an upscale sandwich franchise ideal for entrepreneurs who lack restaurant experience, says Stimola. "I designed this concept so you don't have to be a [restaurateur] to run it. There's no cooking in our stores--the food comes ready to go--just [reheat] and serve it to customers. Even the business side isn't as demanding. We have computerized cash registers that track inventory, labor costs, accounting and purchasing, which makes it very simple to run our stores." And because much of the food comes prepared, the average upscale sandwich franchise doesn't require a large outlay of capital for ovens, fryers and other kitchen equipment.

While being a successful upscale sandwich franchisee may not demand much in the way of cooking skills, you should still have some general business experience, a drive to succeed and, most important, a friendly attitude, says Stimola. "We're looking for outgoing people who are entrepreneurially spirited," he adds. "At the end of the day, the most important thing is people skills. If you don't like to be around people, you don't belong in the restaurant business."

Upscale sandwich franchises are a relatively new phenomenon. As such, a large segment of the potential market for these gourmet foods remains untapped, says Jim Kucik, 30, a Wall Street Deli franchisee in Orlando, Florida. "Business is good and getting better, but with one of these [sandwich] stores, building a night business is one of the big challenges," says Kucik. "If you open in a good market, your lunch crowd is going to be there without a doubt. The difficulty is building [traffic during] the rest of the day."

While there may not be an upscale sandwich shop on your block yet, expect the growing popularity of this quick-service concept to quickly attract large numbers of hungry competitors, says Coen. "Right now, [upscale sandwich shops] are still a relatively small segment of the market. In terms of development, this is a good stage to get in on it. The only downside to getting in early is there are more mistakes to be made. But the higher the risk, the higher the reward."