Sandwiches Get 'Hot'

(Saturday, May 01, 2004) - Fresh from selling a Mongolian barbecue concept, Jeff Sinelli is back with a more prosaic restaurant idea Dallas restaurant entrepreneur Jeff Sinelli is betting that the next red-hot franchise concept will involve something that's familiarly down-home: sandwiches. Sinelli's new quick-casual establishment, Which Wich (as in, "Which sandwich?"), serves up 50 different combinations of toasted sandwiches, a snappy interactive ordering system and a hip-casual atmosphere. Sinelli first found success in 1995 with a Dallas nightclub, Main Street Asylum, which he financed with savings and credit cards. Since then his entrepreneurial projects "have been perpetually self-funded through various ventures," he says. In his decade on the area's restaurant and bar scene, he's launched various concepts in downtown and Deep Ellum including Deep Drinks, Gold Bar and Biker's Dream & Bar, with differing levels of success. His French restaurant concept, Champagne, floundered in its first year. Then he caught the attention of the restaurant industry with Genghis Grill, a Mongolian barbecue restaurant he founded in 1998. Sinelli sold the national chain to Dallas-based Consilient Restaurants L.P. last year for an undisclosed amount. The restaurant's sale gave him $100,000 to open Which Wich. "After I sold Genghis, I looked around at different sandwich chains and saw that these were all burned-out brands," said Sinelli, CEO of Sinelli Concepts Inc. "I felt the customer was ready for something new and different." Small differences in taste and dining experience help distinguish Which Wich from the lunch pack, says Antonio Swad, founder of Garland-based Pizza Patron. Offering a toasted sandwich is one point of difference, he said. In contrast to the plastic look of major chains, Sinelli's new concept fills an untapped demand for "adult-themed" sandwich shops with modern decor and edgy, piped-in music, Swad said. With just one location open so far, Sinelli is moving forward with a franchise program that will roll out locations in Texas, California, Florida and Illinois. If all goes as planned, he'll bring in 10 franchise groups, each of which will open at least one shop. Sales at the first shop, which opened four months ago at 1410 Main St. in downtown Dallas, are better than expected, Sinelli says. During its busiest hour, 11 a.m. to noon, the shop sells a couple of hundred sandwiches per hour. The shop has 10 employees. Growth potential From the get-go, Sinelli developed Which Wich with an eye toward franchising, he said. He created the concept with low-cost design elements and a small footprint -- 1,500 square feet -- to keep real estate costs low. Which Wich franchise start-up costs range from $150,000 to $230,000, Sinelli said. By comparison, experts say a Subway location can require an initial investment ranging from about $86,000 to more than $210,000, depending on the shop's size. Sinelli believes Which Wich's revenue potential is slightly greater than that for a typical Subway. Projected annual revenue for the downtown Which Wich is $500,000, Sinelli said. Individual chain shops typically generate revenue ranging from $200,000 to more than $1 million per year, experts say. The pared-down approach to Which Wich extends to its menu and pricing structure. The shop only sells sandwiches, chips and beverages. The sandwiches are all $4, except for the best selling "Wicked" sandwich, which sells for $5. Buzz about the franchise has already begun, Sinelli said. "In 2006 we will hit our stride and have hundreds of units," Sinelli said. The timing is right for a new chain to enter the market, according to Swad. The sandwich product "cuts across cultural and geographic boundaries," he said. "I think the concept has the potential for many, many units." Branding challenge The overall sandwich segment is performing well, with only minor business losses stemming from the popular low-carb trend that's already showing signs of fading, said Ron Paul, president of Chicago-based Technomic Inc., a restaurant research and consulting firm. Paul adds that a strong lunchtime market is supporting the expansion of chains like Quiznos Sub and Subway, both of which will grow by thousands of units this year. Locally, Quiznos has more than 35 locations. Subway has more than 380. But entering the sandwich segment of the restaurant industry isn't a slam dunk by any means, Paul said. He points to struggles by Austin-based Schlotzsky's Inc. (Nasdaq: BUNZ), which closed some of its restaurants and posted a fourth-quarter net loss of $5.6 million, compared with a loss of $1.2 million for the same period in 2002. Schlotzsky's attributed the latest loss to an increase in competition. Sinelli said branding will be his new concept's toughest challenge. He's foregoing traditional advertising for "guerilla marketing" comprised of event sponsorship, free food samples and business lunch drawings. Within 12 months, Sinelli is looking to open a second Which Wich location in either Las Colinas or Addison, pointing to their high levels of daytime traffic. Eventually, he'd like to spin out the Which brand into sister concepts, Which Salads and Which Coffee, which he believes would do well in hospitals and airports. Meantime, he's says he's committed to the sandwich endeavor for the long haul. "I am not looking to sell this concept," Sinelli said. " I want to see this concept's growth for the next 20 years."

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