BusinessTN

What do you do when your wildly successful Memphis sub sandwich shop grows from one store in Bartlett to more than 50 stores across the Southeast?

What do you do when your wildly successful Memphis sub sandwich shop grows from one store in Bartlett to more than 50 stores across the Southeast?

If you are Lenny’s Sub Shop, you build 350 more.

That’s the goal for 2008 for this business and its new owners, a group of Memphis investors headed by former Gate Gourmet executive George Alvord and Memphis entrepreneur Al LaRocca.

When Len Moore re-started the restaurant in 1998—he and his wife briefly ran a sub shop in their native New Jersey in the late 1970s—he had typical entrepreneurial motivations, but never expected to be in charge of 50 stores in eight states. Besides 22 locations in Memphis, the current version of Lenny’s has a presence all over Tennessee, with stores in Jackson, Covington, Murfreesboro, Knoxville, Nashville and Franklin.

In 2003, Moore began seeking investors because Lenny’s day-to-day operations had become too stressful for Moore and his wife and business partner, Sheila. “It was hard to keep it a mom-and-pop operation,” Moore says. “We were growing beyond the resources we had in house.”

Moore says that’s why Alvord is a perfect match—the former airline food company CEO can bring the kind of corporate structure Lenny’s will need to grow. The 350 stores will be a mix of franchise- and company-owned across the country.

The group of investors—described by Alvord as high-profile Memphians—paid roughly $10 million to buy into Lenny’s. Lenny’s sales for 2004 are expected to be between $35 million and $40 million, Lenny’s marketing director Tim Flatt says.

But is growing to 400 stores in five years too ambitious?

“It will take many things going right to hit that target,” says Craig Weichmann, a former analyst with Morgan Keegan. Weichmann has a Dallas-based boutique mergers-and-acquisition firm, Weichmann-Hite Partners, that specializes in the restaurant industry.

Such “hyper-growth” is possible, he says, but Lenny’s will need to have a laser-like focus on managing its stores, training quality personnel and ensuring a quality product. Typical stumbling blocks for young, growing restaurant chains are taking on too much debt, losing key personnel and opening stores before the staff is fully trained, he says.

“The worst thing is opening stores with a green staff,” Weichmann warns. If a customer’s order is wrong, or there is no turkey available, or if the bathrooms are dirty, “these are things that cause the customer to not come back.”

Growing outside of its familiar Memphis base will be a challenge, Weichmann says. Not only will the new company need to convince customers to eat there, it also will need to convince investors and entrepreneurs to buy franchises.

“They do well in Memphis, but how will people in Kansas City know that Lenny’s is so great?” Weichmann says. Lenny’s will have to create awareness through giveaways, more advertising and grassroots marketing. “The seasoned operator knows how to work all those tricks,” Weichmann says.

But optimism reigns supreme at Lenny’s. The franchise has a “cult-like” following in Memphis, and this strong customer loyalty—along with high quality sandwiches—is what Alvord expects will propel growth.

“You may pay a little more, but you get a lot more for your money,” he says. “I mean, the damn sandwich weighs a pound. A large sub feeds a family of four. It’s a good value.”

Moore will remain a part owner of the chain and will continue to develop stores in his new home state of Florida. His entire family works for Lenny’s and helps him run his six—soon to be 15—stores.

He also will work to promote Lenny’s growth and may become the “Dave Thomas” of Lenny’s. There’s talk his image may be featured in advertisements and marketing campaigns for the chain.

He’ll also focus on keeping up the quality of Lenny’s, both in the menu mix and in the way the chain does business.

“I enjoy being in the shops and meeting the guests and working with franchisees,” Moore says. “Hopefully, you will see that friendliness in every Lenny’s—in the way we say ‘Hi’ and “Goodbye’ and ‘Thanks.’ It’s part of the business.”

In The News

If you are Lenny’s Sub Shop, you build 350 more.

That’s the goal for 2008 for this business and its new owners, a group of Memphis investors headed by former Gate Gourmet executive George Alvord and Memphis entrepreneur Al LaRocca.

When Len Moore re-started the restaurant in 1998—he and his wife briefly ran a sub shop in their native New Jersey in the late 1970s—he had typical entrepreneurial motivations, but never expected to be in charge of 50 stores in eight states. Besides 22 locations in Memphis, the current version of Lenny’s has a presence all over Tennessee, with stores in Jackson, Covington, Murfreesboro, Knoxville, Nashville and Franklin.

In 2003, Moore began seeking investors because Lenny’s day-to-day operations had become too stressful for Moore and his wife and business partner, Sheila. “It was hard to keep it a mom-and-pop operation,” Moore says. “We were growing beyond the resources we had in house.”

Moore says that’s why Alvord is a perfect match—the former airline food company CEO can bring the kind of corporate structure Lenny’s will need to grow. The 350 stores will be a mix of franchise- and company-owned across the country.

The group of investors—described by Alvord as high-profile Memphians—paid roughly $10 million to buy into Lenny’s. Lenny’s sales for 2004 are expected to be between $35 million and $40 million, Lenny’s marketing director Tim Flatt says.

But is growing to 400 stores in five years too ambitious?

“It will take many things going right to hit that target,” says Craig Weichmann, a former analyst with Morgan Keegan. Weichmann has a Dallas-based boutique mergers-and-acquisition firm, Weichmann-Hite Partners, that specializes in the restaurant industry.

Such “hyper-growth” is possible, he says, but Lenny’s will need to have a laser-like focus on managing its stores, training quality personnel and ensuring a quality product. Typical stumbling blocks for young, growing restaurant chains are taking on too much debt, losing key personnel and opening stores before the staff is fully trained, he says.

“The worst thing is opening stores with a green staff,” Weichmann warns. If a customer’s order is wrong, or there is no turkey available, or if the bathrooms are dirty, “these are things that cause the customer to not come back.”

Growing outside of its familiar Memphis base will be a challenge, Weichmann says. Not only will the new company need to convince customers to eat there, it also will need to convince investors and entrepreneurs to buy franchises.

“They do well in Memphis, but how will people in Kansas City know that Lenny’s is so great?” Weichmann says. Lenny’s will have to create awareness through giveaways, more advertising and grassroots marketing. “The seasoned operator knows how to work all those tricks,” Weichmann says.

But optimism reigns supreme at Lenny’s. The franchise has a “cult-like” following in Memphis, and this strong customer loyalty—along with high quality sandwiches—is what Alvord expects will propel growth.

“You may pay a little more, but you get a lot more for your money,” he says. “I mean, the damn sandwich weighs a pound. A large sub feeds a family of four. It’s a good value.”

Moore will remain a part owner of the chain and will continue to develop stores in his new home state of Florida. His entire family works for Lenny’s and helps him run his six—soon to be 15—stores.

He also will work to promote Lenny’s growth and may become the “Dave Thomas” of Lenny’s. There’s talk his image may be featured in advertisements and marketing campaigns for the chain.

He’ll also focus on keeping up the quality of Lenny’s, both in the menu mix and in the way the chain does business.

“I enjoy being in the shops and meeting the guests and working with franchisees,” Moore says. “Hopefully, you will see that friendliness in every Lenny’s—in the way we say ‘Hi’ and “Goodbye’ and ‘Thanks.’ It’s part of the business.”

In The News

MEMPHIS—Former U.S. Treasury official R. Richard Newcomb has joined the Washington, D.C., law offices of Memphis-based law firm Baker, Donelson, Bearman, Caldwell & Berkowitz. As director of Foreign Assets Control since 1987, Newcomb was responsible for implementing and enforcing economic sanctions and embargo programs ordered by the president and authorized by Congress.

Cascades will spend about $3.87 million on a newly acquired Memphis paper mill to get it ready for production this month—two months ahead of schedule. The Canada-based company bought the 40,000-ton-a-year factory in March for $11.5 million. The mill will make bathroom tissue and paper napkins.

Shipper DHL has opened a regional sort center in Memphis, the home of its largest rival, FedEx. The $3 million facility is the third of seven new regional sort centers the Germany-based shipper plans to add over the next two months as part of a $1.2 billion North America investment program. The center will create 29 jobs locally and will pump $500,000 into the economy.

FedEx Corp. has purchased Parcel Direct for $120 million. The Wisconsin-based company coordinates shipping for e-commerce and catalog retailers. Parcel Direct is now a subsidiary of FedEx Ground, the shipping giant’s trucking company. In other news, FedEx Corp. shares made a series of record high prices, reaching $87 in September, and some analysts raised their target prices to $100.

For the 10th year in a row, First Horizon National Corp. has been tapped as a mother-friendly employer by Working Mother magazine. The Memphis-based company, among 100 chosen by the magazine, scored high in the categories of flexibility, advancement of women, compensation, leave for new parents and child care resources.

Two of Memphis’ oldest law firms will merge, effective Jan. 1. The new firm—Harris Shelton Hanover Walsh PLLC—is a merger of Harris, Shelton, Dunlap, Cobb & Ryder and Hanover Walsh Jalenak & Blair. The new firm will have 44 lawyers and will serve a variety of specialties, including labor unions, pension plans, health care and bankruptcy.

Long-time Memphis bank National Commerce Financial Corp was no more in September, following final regulatory approvals and an overwhelming shareholder vote. NCFC, founded in Memphis in 1873, was sold to SunTrust Banks. Among shares voted, 97.3% of SunTrust’s approved the deal and 98.7% of NCFC’s approved it. The deal, announced in May, called for SunTrust to pay $7 billion for NCFC—which includes National Bank of Commerce, NBC Bank and First Market Bank. It also means the new SunTrust has become the country’s 7th-largest bank, with $148 billion of assets, $97 billion in deposits and 1,723 full-service offices.

Memphis-based spinal products company Medtronic Sofamor Danek was ordered to pay $110 million in damages to a scientist who had claimed the company was cheating him out of rights and royalties for products he created. A jury found in September that certain Medtronic Sofamor Danek products had infringed on inventor Gary Michelson’s patents and that the company may be ordered to pay additional amounts after another phase of the trial. A date for this phase had yet to be set. Parent company Medtronic was not found to be in violation of any agreements with Michelson.

A bill going the rounds in Washington, D.C., may provide $1 million for the Memphis Biotech Foundation The appropriations bill, if passed as is, also includes $500,000 for land acquisition for Huntingdon and $250,000 for development of an industrial park in Ripley. These are part of $8.75 million for projects throughout the state, according to a release from senators Bill Frist and Lamar Alexander.

Tennessee Sen. Bill Frist has named the CEO of Memphis-based Pinnacle Air lines, Philip H. Trenary, to the National Commission on Small Community Air Service. The commission reports to a Senate transportation committee on ways it has found to enhance and promote commercial air service to communities in rural areas and communities with small populations.

Rhodes College has formed a new division of external programs, to be headed by Beverly Bond. The new division will help develop programs that will attract and retain students who will have a life-long involvement with the school. Bond comes to Rhodes from George Washington University, where she was vice president for advancement. Prior to that, she spent 20 years at Vanderbilt, leaving as vice chancellor for alumni and development.

A federal program will give $483,000 to St. Jude Children’s Research Hospital in Memphis for new MRI research equipment. The equipment will help researchers who are focusing on ways to treat after-effects of childhood cancer and brain radiation.

A corrugated packaging plant closing will mean the loss of 95 jobs for Memphis. International Paper Co. acquired the plant as part of an acquisition of Box USA in July and decided in September that other nearby IP plants could serve the market more cost effectively. The plant began operation in the 1960s as part of St. Joe Paper Co.