Saturday, November 3, 2012

Can I Please Get a Turkey Sandwich???

I hate Subway.  The thought of low grade by products ground into a mash then cooked and sliced in a factory 500 miles away troubles me.  Add to the fact that sliced meat spoils quicker than unsliced meat and that to combat the chance that the meat might arrive spoiled at the local restaurant it has to be sprayed with a Chernobyl cocktail of chemicals.  Ick.

It is also true that left to my own devices, I might subsist on Turkey sandwiches without variation.  OK so maybe not for breakfast or dinner, but I would be lost for lunch if there were no turkey sandwiches to be had.  BUT despite this neurotic need for white meat and wheaten bread, I NEVER eat at subway.  You may ponder how I survive…

Most the time there have been alternatives.  20 years ago when I was in grad school, the Blimpie on Crawfordsville road saw me at least three times a week.  Everybody knew who I was, was happy to see me when I walked in – it was that whole “Cheers” deal.  But then after being there for five years, the place closed up shop and was no more.  Fortunately by that time Schlotsky’s had migrated north from the Southwest and I began to get my fix there, but then after a while they too disappeared back into the southwest.  Never fear, for on the horizon appeared Quizno’s.  TOASTY!  But guess what … nationally over the last 5 years they too have shrunk and now have 30% fewer stores than they did in their heyday.

This strange disappearance of tasty turkey sandwich shops puzzled me.  At first I thought that my taste in turkey sandwiches was different than everyone else’s.  But all threeof these places always seemed busy. Over the years, in the day job I have seen syndicated satisfaction research for the quick servive restaurant industry. Each of these chains regularly topped subway in satisfying their customers until they fell into oblivion.  SO why can’t these places stick around?
I got some insight to this at the Local Quizno’s during it’s lifecycle.  As I became a cherished patron,  got to know the owner pretty well.  Notice the store owner wasn’t some dude at Quizno’s corporate in Denver, it was Clay, down the street in small town Indiana.  Make note of that, it will be important later. 
One day I walked in and asked Clay, “How are those singing Chinchillas?”  In reference to a new ad campaign that was running nationally.  He shot me a look that could kill.  After other customers had wandered away he told me, and I am paraphrasing, “Can you believe those?  What sort of idiot thinks singing rodents with Hispanic accents are good spokes-critters for a sub shop?  I have customers asking me ‘what’s up with the Singing Mexican rats?’ Those idiots at corporate.”
I know I am losing some of you here… six paragraphs IndyCar free…so here’s a tidbit …What sort of idiot thought “I am Indy” would be a catchy tune to represent a racing series?  Anyway, back to my elongated analogy.
Several months later I wandered in, Clay looked grumpy.  I asked why.  He said (again paraphrasing) “We have a new CEO at corporate, completely out of touch with us.  He has decided that we need to compete with fast food restaurant dollar menus.  We have these new “bullit” sandwiches that we have to sell now for $1.50.” I asked what the problem was, he said “they piss people off, people think they are getting a meal when in reality they are getting a glorified bread stick with a thin sliver of meat.  On top of that, they take my employees every bit as long to make as a large $8 sub.  SO I lose money on every one I sell.  Add into that people have to buy two or three of them to have a meal, and in the time it takes to make them, my regulars getting the $8 subs are getting peeved.”  I ordered my usual Large sub since I saw he was in a sensitive mood.
It all boiled over a few months later.  I walked in and the shop had been…lets say … redecorated.  I ask Clay: “Wow, did you buy some delinquent teenagers cans of spray paint and tell them to creatively enjoy themselves?”  Again that look of death…”Don’t get me started, the CEO thought the shops décor were getting dated so he decided that we all had to buy new deco kits.  They look like they cost a fraction of the old kit, but they charged us twice as much to buy them and they look amateurish and cheap.”
Shortly thereafter, Clay disappeared from the shop, in his stead he hired a series of recent HS graduates and whichever could count the highest got to run the store.  After Six months went by I saw Clay one last time.  He told me he was getting out, he was selling his franchise.  He simply couldn’t make any money.  In reality, he never had been able to.  He and his wife had run out of money to sink into the shop, so he left it to someone else to run and found a full time job to stop the bleeding of cash.  Eventually he sold the shop.  He wasn’t alone, Quizno’s owners everywhere did the same.  Not all found buyers and the locations disappeared all together.  But the customers weren’t ever unhappy.  Turns out happy customers weren’t enough.
Looking back I now understand that at Blimpie, it was great they were using better meat and slicing it fresh in store.  In having to maintain comparable pricing to Subway without having the cost savings in the ingredients to fuel a profit for the local owners, it was a recipe for failure (later they cut corners to please franchisees and ingredient quality suffered, annoying customers making the whole situation worse).  Schlotzsky’s had a higher pricing structure, but their stores had bigger footprints and a bunch more machinery.  The overhead ate into margins of the local owners there as well. 
In all these cases we have a different kind of business model from what we typically think about when we talk about customers and the companies they buy from.  Most of the time, the company attempts to please the customer relative to an internal budget they manage.  But in these cases, the business model is different.  These are companies run on a Franchising Model, where they create and then market the concept to the consumers and then outsource the production and delivery of the product to a local small business person who sinks his own cash into the game.  Many chain restaurants and hotels operate this way.
A CEO of a company that operates on a franchising model has to do a more complicated thing than the average CEO…he has to create and market a product consumers like with a production model and price structure that allows his franchisees to make money as well.

  • If the customers don’t like the product, it doesn’t take college to know that they will stop being customers and the local franchisees will go out of business, with franchisees going out of business so does corporate. 
  • But it is also the case that even if customers adore a product, if the economics of producing that product don’t add up for the local franchises, they will go out of business, locations will close and corporate suffers as well. 
In most cases, when the CEO of a franchise based company is canned, it is at the behest of the local franchisees who can't make money from what corporate is offering customers.
Which brings us to IndyCar.  I have chronicled before how essentially IndyCar is a two tiered franchise model.  One set of franchisees are the Team owners and the other are track operators. 
As the Randy Bernard saga has unfolded it has become fairly clear as to what the underlying dynamic tensions were.   Randy was operating full bore in "satisfy the customer mode" without concerning himself much with his franchisee’s financial well being. 
I still have the opinion that Randy was a revelation for a league that had long since settled into a mode where product decisions were made with only team owner concerns being addressed.  For example, the IR5 made for a sustainable business for teams even though fans had long since clamored for its replacement. 

Randy put an end to all that.  He was the customer’s voice.  On more than one occasion I have gotten into discussions via e-mail with Randy about stuff I have written here, most notably concerning the rebirth of Milwaukee.  Until then it was incomprehensible to me that a CEO of anything bigger than a local subshop might care what I had to say about their business (unless I was one of 1000 respondents in a survey crosstab).  I appreciate the sense of involvement that I and other fans had with Randy at the helm.  I am also smart enough to know you cannot show a disreguard for the concerns and financial well being of your business partners and hope to succeed. 
Satisfying customers by spending someone else’s money will never be a successful long term strategy for success. 
Similarly, inciting a mob of rioting fans to cuss and spit at those same business partners when they confront you with their concerns should bring the expectation that the keys to the company car will be taken away sooner or later.  That’s all on Randy and it is also on us for falling prey to allow ourselves to be used as political pawns (I hereby apologize to John Barnes for a tweet or two).  The scheming and hit mob mentality is on the owners as is an ingrained, self focussed, sense of conservatism about the sport.  The fact that no one at IMS (named Belskus) could bring these people and their egos together to find a solution is perhaps the biggest disappointing failure. 
Plenty of blame to go around, but who do I blame most?  Robin Miller.  Primarily because its like catching fish in a barrel and secondarily because I thought you might chuckle as you read it.  My Hallucination of the Truth goes something like this:  Over a beer Robin gave Randy one too many pep talks about how the owners were evil leeches that needed to be shown their place and kicked in the balls by a real cowboy. 
At the end of they day, Team Owners are not some sort of evil opposition.  They are compatriots in the joint effort that is IndyCar and their needs must be addressed or they will close shop or go elsewhere (Newman Haas anyone…Conquest perhaps...).  Too many teams leave  or close shop and there is no series.  Likewise, fewer promoters wanting races means there is no series - Even if the fans love the racing, Even if the Fans Love Randy. 
Some have suggested that IndyCar has a Cancer.  I disagree.  What Indy Car has is a very difficult fundamental business problem.  In an environment with formidable competitors, It must provide fans a product they wish to consume, while at the same time ensuring that its partner teams and promoters are able to make a return which allows them to participate in the creation of that product.  Randy marked a break from a focus on the latter to a focus on the former, and he should be commended for that.  IndyCar's savior, if it is ever found, will need to find a ballance  between the two.

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