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D.C. is in the midst of a Subway explosion, of the deli counter variety. There are already some 70 locations in the District, and 1,100 in the Washington area; now the company wants to add 100 more by the end of next year. And that’s just one piece of the overall picture: Subway has nearly 34,000 locations worldwide, recently outstripping MacDonalds to become the biggest franchiser on the planet.
Why is the model so successful? According to John Filipiak, Subway’s regional manager for D.C. and Virginia who spoke at a recent Washington D.C. Economic Partnership event on franchising, a few reasons. First, there’s no cooking involved, which means stores have fewer restrictions on the types of spaces they can occupy. Second, their staffing requirements are lower; an owner-operator can be the only person in the shop at low-traffic periods. Third, they pitch themselves as being a healthier alternative to other fast-food chains, going into places that don’t have many options for fresh food. Fourth, there’s a very simple formula to opening a franchise: You essentially buy a kit from Subway for $15,000, which goes down to $7,500 for the second store you open. They train you, help you find a space to lease and design the store, and then basically check out. As long as you keep paying eight percent of your profits weekly, you’re good to go.
Subway itself owns no stores, which many chains still do. Opening franchises has been a leg up for thousands of would-be businessowners who don’t have the vision for their own restaurant concepts and want the unbeatable advantage of international purchasing power for all their supplies. As long as you pick a decent location, and keep the place clean and friendly, there’s basically no way to fail.
Most neighborhoods, though, wouldn’t put Subways high on their list of desired eating establishments. Not that there’s anything wrong with them—it’s just that there’s nothing particularly exciting about them either.
What people do ask for is hardware stores, like the indie-feeling Logan Hardware on P Street NW. Except that’s a franchise too: Licensed by ACE Hardware, but not required to display corporate signage (technically it’s a cooperative, with a yearly dividend and stock when you sell a location). In fact, its owner, Gina Schaefer, owns a total of seven ACE hardware stores in or near D.C., all bearing the names of the neighborhoods they’re in. Even though she says the average small hardware store loses about 30 percent of its revenue when a big box opens nearby, ACE stores are better able to weather it, because of their purchasing agreements with big manufacturers.
All of this is worth thinking about more seriously as D.C. contemplates the prospect of having four Walmarts plop down within in the city limits in the next two years. You need local businesses in the best possible position to withstand the global purchasing power of the biggest retailer in the world, and having several locations is one of the best ways to do that.
Today, Richard Layman alerts us to the existence of a “best chains on Main” contest, which highlights some of the multi-store companies that have enriched local economies. D.C. already has a few homegrown versions: Busboys and Poets, Yes! Organic Market, Marvelous Markets, Cafe Phillips, Senor Chicken, Sweetgreen, Mayorga Coffee, the Uptowner Cafe, Taylor Gourmet and CityBikes off the top of my head. Then there are the groups of restaurants owned by the same person, like the Jose Andres cluster, Constantine Stavropolous‘ Diner/Open City/Tryst triumvirate, and Aleks Duni‘s Marx Cafe/Heller’s Bakery/Verandah collection. It’s true, most of these are food chains, rather than services—but couldn’t independent dry cleaners, stationers, bookshops, and clothing stores be encouraged as well?
Sometimes, the best defense against big things is small things getting bigger.