Penn Station’s P&L-Focused Operations

Fast-casual franchise Penn Station East Coast Subs has expanded consistently in its more than three decades of franchising, introducing its version of East Coast-style grilled subs to markets throughout 15 states.

Many of the brand’s hundreds of locations are owned by large multi-unit franchisees, some of whom run entire markets. According to Penn Station’s VP of operations, Lance Vaught, that’s by design. The franchise was built specifically to foster multi-unit ownership by emphasizing store-level success so that owners can scale their operations quickly and effectively.

Vaught says Penn Station’s operations team is uniquely store-focused, closely analyzing profit-and-loss sheets and working with owners and managers apply the brand’s operational with maximum financial upside. We talked to Vaught to learn more about how Penn Stations operations team works.

1851: In a nutshell, what does Penn Station’s operations team do?

Vaught: We design, implement and follow up on all restaurant policies and procedures. We are the keepers of the operations manual, the architects of the training programs, and the support system for the franchisee community. We are helping our owners with anything and everything that relates to performance and profitability.

1851: How do franchisees typically interact with the operations team?

Vaught: The first interaction is an intensive, hands-on training program. Then our field personnel will go out to the restaurant to help with everything leading up to and throughout the launch. After that, owners receive no less than eight post-launch visits and they are evaluated on a thousand-point survey to identify areas where they can improve.

All franchisees submit P&L sheets on a monthly basis so we can analyze that and hone in on areas where we can help them. We also look at balance sheets for every restaurant on a semi-annual basis.

1851:  How big is your operations team?

Vaught: 70 percent of our personnel is in operations. Other brands are much more focused on marketing and legal, but we are an operations company. The calculation has always been that Penn Station would be set apart from competitors by prioritizing quality of food and service. There are many ways to be successful; ours is to stay close to the counter and make sure everything is running perfectly for the franchisee and for the customer.

We have 16 area reps — more people with that title than any other title in the corporate office — and two regional consultants, who the reps report to.

People are blown away by how focused we are on operations. Other brands have one rep for every 75 restaurants, we have one for every 20 or 25, so we spend a lot more one-on-one time with franchisees. We’ve always felt its important that franchisees have a personal connection with their area reps, which in turn gives them a personal connection to the corporate office.

1851: How has Penn Station’s prioritization of store-level operations supported the growth of the franchise at large?

Vaught: Our only revenue is royalties and new store openings, so our bottom line is entirely dependent on our franchisees doing well. By supporting the success of each restaurant, we’re helping our owners scale up and open new stores.

We know when anyone is hired at any franchise location. Not many other brands can say that. When we see a new name at a restaurant, we’ll reach out and help the franchisee make sure the new person is trained properly and that everyone is set up for success. That kind of dedication assures that every link in the chain that is our franchise is strong