Port of Subs plans 230 new stores in three years

For most its 35-year history, Reno-based Port of Subs took a measured approach to growth of store locations, adding 10 or 12 a year.

But the company looks to step up the pace during the next three years, adding about 50 stores in 2008, another 80 stores in 2009 and about 100 in 2010, says Mike Powell, vice president for operations.

Among the key markets targeted by Port of Subs is Phoenix, where the company looks to double the 10 stores currently in operation, as well as Southern California.

"We haven't even scratched the surface in Southern California," Powell says.

The chain had 142 stores at the end of 2006, about 25 of them company-owned. By the end of this year, it projects the number to be about 164.

"It's the most we've ever grown in a single year," Powell says.

The company's growth initiative is driven, he says, by the realization that Port of Subs needs a stronger presence to maintain its competitive position in its Western markets. Along with Nevada, Arizona and California, the company operates in Idaho, Utah and Washington.

A key first step came as a Seattle design firm, M3, developed the "Sliced Fresh" interior design and branding that's been rolled out to many franchised and company-owned locations in the past two years. The company also beefed up its management staff to support the push into new markets.

But Powell acknowledges the company faces challenges, starting with the scramble for the shopping center locations that Port of Subs seeks for its new stores. The company's favored locations high visibility spots near offices or industrial neighborhoods that generate lunchtime trade are desired by other restaurant chains and retailers as well.

"It's a very, very competitive marketplace out there," Powell says. In many cases, the company locks up store locations 18 to 24 months before construction starts.

At the same time, Port of Subs faces competition for qualified franchise owners. The company estimates the cost of a new store at $193,300 to $305,300, with franchise fees of $20,000 for the first unit and $15,000 for additional units.

Franchise owners are required to put up at least 30 percent of the development cost in cash.

Even as it looks to more than double its locations within the next three years, Port of Subs expects that northern Nevada will account for a relatively small number of them. With more than 30 Port of Subs locations in the region already, Powell says growth opportunities are limited.