QSR Magazine Issue 72 January 2005

Lessons from the Little Guys

Competitive Advantage: The Spicy Pickle Sub Shop, 10 units

Five years ago, the Spicy Pickle Sub Shop opened in a tiny space with no heat, no air conditioning, and the world’s spiciest pickle. By 2004, the nine-unit chain decided it wasn’t a sub shop any more, and that boasting a pickle spear marinated in a three-chili blend for several days wasn’t exactly the world’s strongest marketing message.

The Denver-based chain learned quickly that to get people to drive past Blimpie and Subway, Spicy Pickle needed to offer upscale sandwiches with exotic ingredients. “To stand out in today’s competitive marketplace, you have to build what we call brand charisma,” says Tony Walker, whose business cards read: Co-founder and Head of Office Supplies. “Our passion is rooted in our culinary-inspired approach to our menu.”

Walker worked as a chef at Barolo Grill, a full-service Denver eatery that takes its employees to Italy for a month every year. In 1999, Walker and Kevin Morrison, who also worked at Barolo, decided life was more than free trips to Tuscany. They opened the first Spicy Pickle Sub Shop in an urban spot surrounded by office worker traffic. Marketing the expensive ingredients worked: Spicy Pickle grew from $700,000 in sales in 1999 to $4.5 million in 2004. The chain is a Denver favorite—named “Top Sandwich” by the local magazine 5280—and recently opened a unit in Lexington, Kentucky.

Spicy Pickle uses recipes that “explore the full culinary potential of panini, salads, and subs,” as Walker explains it. That means customers choose from the usual lettuce and tomato toppings as well as chipotle mayo spread, corn relish, artichoke hearts, portabella mushrooms, and other atypical sandwich items.

The check average is $7.75. “We’re not a sub shop really,” says Morrison. “We don’t really price ourselves, nor offer the same food, that sub shops offer.”

What Spicy Pickle spends on food it saves on rent. Newer units are as small as the original place, which is still open but now has better utilities. The intimate spaces make the place seem friendly, and help the chain compete for commercial real estate. While other growing chains elbow each other to snatch 2,500 to 3,000 square-foot spaces, Spicy Pickle only needs about 1,500 square feet, usually in strip malls that also lease to Noodles, Chipotle, Starbucks, or Jamba Juice.

The newest location, in San Diego, is the tenth for the all-franchise chain. “It took us a year to get a lease on the location in San Diego,” says managing partner Marc Geman.

The chain also tries to maintain a culture of empowerment. Employees can give regular customers free lunches. “The cashiers make the call themselves,” Morrison says. “It’s a good way to get employees involved. The system has not been abused or it wouldn’t be around.”

Geman, who sold his Pretzelmaker chain to Mrs. Fields in 1998, declines to say how many more locations Spicy Pickle wants to open. “We open our stores just like we make our sandwiches…one at a time,” he says.