Blimpie International, Inc. - Company Profile, Information, Business Description, History, Background Information on Blimpie International, Inc.

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History of Blimpie International, Inc.

Blimpie International, Inc. is the franchisor for Blimpie restaurants, the second-largest submarine sandwich chain in the world. By autumn of 1995, there were about 1,100 Blimpie outlets in operation--one in Stockholm, Sweden, the rest in the United States--and the chain was growing at a rate of about 45 units per month. Of the 44 states in which Blimpie franchises are located, Georgia and Texas lead the way, with more than 100 outlets each. Unlike many restaurant chains, Blimpie does not generally operate "company stores." Virtually all of its income is derived from the various fees associated with franchise arrangements. In addition to free-standing outlets and locations in malls and store clusters, Blimpies can be found in a variety of nontraditional sites, such as inside convenience stores, schools, and hospitals. These nontraditional outlets represent one of the company's fastest growing segments.

The first Blimpie sub shop was opened in Hoboken, New Jersey, in 1964 by Tony Conza, Peter DeCarlo, and Angelo Bandassare, a trio of former high school buddies. Inspired by a successful Point Pleasant, New Jersey, operation called Mike's Submarines, Conza, DeCarlo, and Bandassare speculated that a similar restaurant would do well in Hoboken. They raised $2,500 in seed capital by borrowing from friends and began serving essentially the same sandwich for which people were lining up at Mike's. The original Blimpie was an instant hit, and, before long, customers began asking about starting up franchises. The first franchise was sold to a friend in western New York for $600 during the company's first year of operation.

In 1965 Bandassare left the company to start his own food service supply firm. Conza and DeCarlo decided to expand into New York City, beginning with a store on 55th Street in Manhattan, near Carnegie Hall. By 1967 there were ten Blimpies in the chain, four of which were owned by the company's two remaining founders. Unfortunately, Conza and DeCarlo were not experienced businessmen, and, in spite of the chain's rapid growth and good sales volume, profits were difficult to make. To keep the company afloat, the partners sold the four stores they owned and began to concentrate primarily on franchising.

By the mid-1970s, Conza felt the time was ripe to introduce Blimpie subs to the South. Partner DeCarlo, however, was against the move. This disagreement eventually led to a split between the two men. In 1976 Blimpie was divided into two separate entities, with both retaining rights to the Blimpie trademark. DeCarlo became head of a new, completely independent company, Metropolitan Blimpie (later renamed Blimpie's of New York, Inc.), which controlled franchising rights in New York, New Jersey, and other parts of the East Coast. Conza retained control of the original company, which was incorporated in 1977 as International Blimpie Corporation. Conza, a college dropout with no business credentials other than his experience with Blimpie, remained chairman and CEO of Blimpie into the 1990s.

During the late 1970s, Conza was willing to sell franchises anywhere there was an interested franchisee. Blimpie began selling franchises both for individual stores and for whole territories. Unfortunately, many of these new franchises were rather isolated from the rest of the chain, and some of the benefits of franchise arrangements--chainwide advertising, for example--had little effect in those locations. Although the chain was growing rapidly, several of the newer stores failed. By 1983, International Blimpie's annual revenues were approaching $1 million, and Blimpie's franchises totaled 150. Conza took the company public that year, with a modest initial over-the-counter offering of 90 cents per share.

Over the next few years, Blimpie embarked on a diversification program that failed miserably. Conza began to feel that there was no future in submarine sandwiches. At the same time, he longed for the kind of respect that only comes to real restaurateurs, not fast food moguls. In 1984, Conza opened the Border Cafe, a tablecloth restaurant serving southwestern cuisine on Manhattan's swanky Upper East Side. Although the Border Cafe did reasonably well at first, this shift in focus proved to be a major blunder. While Conza was turning his attention away from the subs that had gotten him where he was, competitor Subway--which was founded in 1965, just a year after the first Blimpie's was opened--was beginning an expansion drive that would push it far ahead of Blimpie as the world's foremost submarine sandwich chain.

To reflect his increasing concentration on non-Blimpie activities, Conza changed the name of the company to Astor Restaurant Group, Inc. in 1985. Meanwhile, the Blimpie's chain was stagnating. The number of outlets was stalled at about 200. In Manhattan, the company's birthplace, the Blimpie name suffered severe image problems. In the early days, the company had not been particularly selective as to who could get a franchise. In addition, its early franchise contracts allowed operators quite a bit of latitude in how the restaurants were to be run. This led to a degree of uniformity among stores far below that of other national fast food chains, not to mention a reputation for questionable sanitation standards.

After the Border Cafe's initial success, Conza opened two more of them in 1986, one in Woodstock, New York, and the other--with New York Yankee Dave Winfield as a partner--on the Upper West Side of Manhattan. Unfortunately, the Border Cafe idea turned out to be a big money loser. Although Astor brought in $4.5 million in revenues for 1987 (its largest total yet), the company showed a net loss of $347,800 for the year. That year, only 30 new Blimpie restaurants were opened, and company stock was in free fall, bottoming out as low as 15 cents per share. Gradually, Conza's interest in his core business began to return. Over the next couple of years, Atlanta became the company's biggest target for new Blimpie's franchises. In 1987, the company celebrated the opening of the 50th Blimpie's store in the Atlanta area by giving away 25,000 free sandwiches to customers there.

By 1988 Conza had realized the error of his ways, and he quickly got out of the Tex-Mex business. Seeing the tremendous success of Subway, Conza decided to redouble his efforts in the hoagie arena. He began to address the Blimpie problem with renewed vigor and a more systematic approach than he had used before. The first step in Conza's revitalization program was to identify four fundamental problems plaguing the business: a lack of goals, poor use of financial resources, low employee morale, and procrastination. He then got together with a group of managers and drew up a list of "101 Small Improvements." Delegating to his senior staff much of the day-to-day managing he had always done himself, Conza went on the road in an attempt to open up the long-closed channels of communication between Blimpie and its franchisees.

Next, Blimpie launched a quality control program aimed at cleaning up its 140 New York restaurants, which had long been sources of embarrassment to the chain. At the same time, Conza continued in his efforts to improve relations with franchisees, many of whom had become disgruntled over the last decade. In addition to flying to dozens of cities to meet restaurant owners, Conza formed a franchisee advisory council to keep him apprised of important issues; he launched a newsletter called No Baloney News and a toll-free hotline to get important information out to franchisees; and he gave franchisees more control over advertising through the formation of regional advertising co-ops.

In 1989 Blimpie began testing a new low-calorie menu in the hope of attracting a bigger share of the increasingly fat-conscious American public. The new menu, called Blimpie Lite, included a variety of tuna-, crab-, chicken-, and turkey-based items, in both salad and pita-bread sandwich form. The following year, the company launched another test: gourmet salads sold under the name Blimpie Fresherie. Blimpie also began tinkering with its prototype restaurant design around this time, incorporating the company's signature lime-green and yellow colors into a sleeker look for new outlets. By 1990 the Blimpie turnaround was well underway, with systemwide sales reaching $120 million per year.

The Blimpie chain continued to grow steadily through the early 1990s. Much of this growth was fueled by the company's area developer program, in which franchise rights were sold for an entire area to a developer, who then subfranchised those rights to individual operators. The company continued testing new products throughout this period. In 1991 Blimpie unveiled its Quick Bite menu in response to the appearance of value menus in many fast food establishments, including arch-rival Subway. Items on the Quick Bite menu included 3-inch hero sandwiches for 99 cents, a 6-inch bacon, lettuce, and tomato sandwich for $1.59, and a veggie pocket pita sandwich, also priced at $1.59. The company also began testing pizza at a handful of locations in an effort to breathe some life into its dinner business. Conza's attempts to improve franchisee relations continued as well. The company's first annual franchisee convention was held in 1991.

By the beginning of 1992, there were Blimpie restaurants in 27 states. That year, the chain passed the 500-unit mark. In the spring of 1993, Blimpie began trading its stock on the up-and-coming NASDAQ exchange. Around this time, the company began to sink more resources into advertising than it had in the past, doubling its marketing budget to about $2 million per year. A new advertising campaign was launched, encompassing just about every medium available, including television, radio, print, and point-of-purchase. This campaign marked the introduction of the chain's new tag line: "Simply Blimpie for fresh-sliced subs." Some of the television spots featured people on the street struggling to repeat the tongue-twisting phrase, "Simply Blimpie."

Sales throughout the Blimpie system reached $132 million by 1993, and Blimpie International earned $1 million on $12 million in revenue. By autumn of that year, the chain had grown to 670 outlets. Improved marketing support from the parent company helped reduce the rate of franchise failures from ten percent to three percent. In some cases, such as in the brutally competitive Chicago market, Conza allowed franchisees to divert their six percent annual franchise fee to advertising.

As the 1990s continued, Blimpie came up with a new concept that accelerated the chain's growth even further. Blimpie's franchises began appearing in a variety of nontraditional locations. First it was convenience stores. As convenience store proprietors began to seek out new ways to compensate for declining cigarette sales, they started turning to fast food. Blimpie's was the natural choice for many, for two main reasons: a real kitchen was not required, and start-up costs were relatively low (as little as $35,000) compared with other fast food operations. Among the early nontraditional sites for Blimpie's outlets were the Des Moines, Iowa-based Kum & Go convenience store chain; Texaco Food Marts in Mississippi; and the food court at the University of Texas. Blimpie's also became part of the first Home Depot superstore restaurant section, located in Atlanta.

In 1994, the 800th Blimpie, in Iron City, Michigan, was opened. That year, the company launched several new concepts to further its drive for nontraditional venues. The Blimpie kiosk is a movable, condensed restaurant that can be fit into a 100-square-foot area. The kiosk, which can serve four types of sandwiches, drinks, and side orders, is designed for use at stadiums, fairs, and other special events. Another new idea was the movable display cart, suitable for high-traffic areas such as airports, college campuses, and concerts. Other new wrinkles included a special refrigerated case for convenience stores (Blimpie's fastest-growing market), and the Blimpie Bakery, offering a variety of baked goods aimed at boosting early morning business.

Blimpie reached two major milestones in 1995. Largely on the strength of its nontraditional location push, the chain passed the 1,000-outlet mark that year. Blimpie International also lived up to the second word in its name for the first time in company history, with the opening of a location in Stockholm, Sweden. As the 1990s continued, the company continued to look for more new ways to sell Blimpie sandwiches, including vending machines, outlets in supermarkets, and new types of carts and other mobile product delivery systems. Although Blimpie remained far behind Subway in the battle for hoagie supremacy, the renewed faith of founder and chairman Conza in the future of the submarine sandwich was helping the company realize gains in popularity and sales.

Additional Details

Further Reference

Bird, Laura, "Building a Lighter, Fresher Blimpie," Adweek's Marketing Week, August 6, 1990, p. 23."Blimpie's Starts Quality Drive in Manhattan," Nation's Restaurant News, April 4, 1988, p. 63.Cohen, Andrew, "'Blimpie' and 'Lite' May No Longer Be Contradictory Terms," Wall Street Journal, April 27, 1989, p. B5.Edwards, Joe, "Astor Puts Blimpie in a Growth Mode," Nation's Restaurant News, November 9, 1987, p. F25.Grimm, Matthew, "Blimpie Plans Winter Image Push," Adweek's Marketing Week, September 2, 1991, p. 7.Howard, Theresa, "Now on Deck for Blimpie: NASDAQ, New Ad Campaign," Nation's Restaurant News, February 22, 1993, p. 16.Keegan, Peter O., "Under New VP, Blimpie Int'l. Eyes Nontraditional Growth," Nation's Restaurant News, September 5, 1994, p. 7.Kleinfield, N.R., "Trying To Build a Bigger Blimpie," New York Times, December 13, 1987, p. F4.Richman, Louis S., "Rekindling the Entrepreneurial Fire," Fortune, February 21, 1994, p. 112.Rigg, Cynthia, "Blimpie's Cuts Mustard With Convenience Stores," Crain's New York Business, October 11, 1993, p. 3.Touby, Laurel, "Blimpie Is Trying To Be a Hero to Franchisees Again," Business Week, March 22, 1993, p. 70.

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