By EMILY BRYSON YORK
A Los Angeles entrepreneur is looking to Orange County to make him the king of Subway restaurants in Southern California.
Last week, Hardeep “Hardy” Grewal picked up the OC district territory for Subway shops. He already owns the district area for Los Angeles County Subway restaurants, which he bought in October.
His Subway empire is far from small. Grewal just picked up 190 OC restaurants. He already counts 468 from the L.A. territory,he started with 446 when he bought it,and expects 490 by year’s end.
Grewal, who had been a district agent,one person for a specific territory rather than several hundred franchisees,for Subway, was ready for the next step. OC was a natural choice.
OC Potential
“I realized there’s a lot of potential in Orange County and I knew the owners of the company and we made a deal,” he said.
His brother, Gurcharan, and nephew, Harpaul, will run things for him in OC, along with about 12 employees who worked for the previous owner, a company called Kenlar. It will be rechristened Grewal Foods Orange County LLC.
“I wish everyone could do this,” said Grewal, an Indian immigrant. “It’s the American dream.”
In his post, Grewal is set to select and train the franchisees, scout out real estate for locations and supervise the existing shops in both counties. Grewal’s Oh Cal Foods LLC, the company he bought along with the Los Angeles territory, has 40 workers.
Grewal said his first priority in OC will be to bring up sales at the current locations. He plans to expand here, too.
One question remains: Has Grewal made his bet at the top of the market? Some industry observers think the chain is near its limit in terms of the number of restaurants.
“It’s going be like the bagel craze was,” according to Darren Tristano of Technomic Inc. a food-industry research and consulting firm. “You could get retail bagels in supermarkets, bagel sandwiches were brought in at McDonald’s and specialty bagel stores closed all over.”
Plus, a number of other fast-food restaurants have added subs or other sandwiches to their menus, Tristano said. McDonald’s now has a chicken club sandwich and Wendy’s has a line of Frescata sandwiches, a variety of meats on ciabatta-style sandwich rolls.
This is not a great climate for much expansion for Subway, he said.
Grewal disagrees.
“Every time we’re opening a restaurant, it’s to strong sales,” he said. “I evaluate each location as a franchisee. I know if it’s a good location or a bad location.”
Subway has historically added about 30 to 35 restaurants per year in L.A. County, Grewal said. The chain has to keep growing to accommodate the area’s huge population growth, according to Grewal.
He’s said he’s hardly the only one that thinks more Subways can fly. He gets about 1,600 franchisee applications every month.
Moreover, Subway does have one big advantage, Tristano said. Through its branding and marketing, Subway has established itself as the healthy alternative on the fast-food front. The company’s campaigns touting its sandwiches with six or fewer grams of fat have been extremely successful.
“The perception by consumers is that they’re the healthy player,” he said.
What’s more, at least during the workweek, convenience is the most important thing on consumer’s minds, he said.
“Five out of seven days people want convenience and Subway provides that,” Tristano said.
Grewal runs one of the company’s top performing districts, according to Subway.
“Since Hardeep has become our development agent for L.A. County, his operational excellence and ability to understand the big picture, along with his communications skills, have already begun moving this top-performing market beyond its previous heights,” said Don Fertman, Subway’s director of franchise sales.
Subway currently has 200 district agents for its more than 20,000 locations in the U.S. The district agent model is the way many big chains are going since it’s easier to deal with one person in a given territory than several hundred franchisees, Tristano said.
Grewal was born in Punjab, India, and attended school in Montreal. He and his wife Patwant moved to Los Angeles in 1986, when Grewal got a job as controller at a Mitsubishi subsidiary.
By 1989, his wife was bored and Grewal bought her a Subway franchise so she could have something to do. Then the money started rolling in.
“I saw what my wife was making in those days from this one little store and I decided if I could multiply that by 15 or 20 times, that would be really great,” he said.
District Prize
Grewal got into the franchise business full time in 1993. He opened some shops and took over some that were underperforming, until he had a total of 24 locations. Eventually, he realized the real prize was the district license.
He sold all but three locations to buy the L.A. territory. Keeping a few enabled him to keep a hand in day-to-day operations and provided convenient places to train new franchisees.
He now makes money based on royalties paid to the parent company from each franchisee. Grewal said he could not disclose his percentage, as each district agent negotiates his own rates.
At Grewal’s company headquarters, franchisees can take various classes or seek advice. Many of them have never owned a business or run a franchise and need some advice about operational and personnel issues.
Although Grewal wouldn’t disclose the amounts that the districts cost him, he said it was in the millions of dollars in each case. Not so long ago, having money like that was unthinkable for him.
Bryson York is a staff writer with Los Angeles Business Journal.
