Atkins Bites Into Franchising - Part 1
The low-carb craze has many franchisors scrambling to retool product and menus and shift marketing towards Atkins-friendly products. In Part 1 of FranchiseHelp OnLine Newsletter, we talk to executives of Subway and Carvel about their consumer driven menu reformulations and how they keep up with customers' changing tastes. In Part 2 later this month, we look at new franchise opportunities born from the increasing demand for diet-conscious products.

Subway Kicks The Carbs
The message from customers in the 22,000 Subway restaurants is loud and clear, "GIVE US A SANDWICH LOWER IN CARBOHYDRATES THAT TASTES GOOD". Subway franchise owners have done their best to satisfy their customer's low-carb cravings by serving everything from bun-less sandwiches to salads whipped up from ingredients normally reserved for sandwiches. The introduction of Subway's Atkin's friendly wrap was the result of a painstaking effort to develop a great-tasting, low-carb solution for a restaurant chain that relies heavily on carb-rich bread.

According to Kevin Kane, Public Relations Manager for Subway and Les Winograd, Public Relations Coordinator for Subway, staying current with customer demand is very important. "At the height of the low-carb craze in 2003, we observed a lot of customers looking at the menu nutritional guides and asking what we had for a low-carb diet. We knew this wasn't just a fad, this is what the customers are asking for and it's backed up by customer driven research. Our market research showed that one third of people were dieting and thirty percent of that group were on a carbohydrate controlled regimen," states Kane.

Product and Service Under One Roof
According to Cooksey, it is difficult for those on a low-carb regimen to find a wide variety of products under one roof. “Supermarkets don’t do a very good job with low-carb. There isn’t the product selection, the pricing, and certainly not anyone in the store that can help the customer and answer questions. The low-carb customer is looking to go to one place to find a broad selection of products and have somebody there to help them and answer their questions about products and diet,” says Cooksey.

Health Express Plus is best suited to an upscale strip center with other specialty retailers. Stores are about 1,000 square feet, loaded with a variety of sugar free, gluten free, wheat free, and low-carb products. “We are different from a GNC store in that we are a grocery store first, and a supplement store second. In addition to the low-carb products, we carry lots of sugar free products for our diabetic customers,” says Cooksey.

A common complaint of anyone on a restricted diet is tasteless products. This gives customers another reason to shop at Health Express Plus. ”Offering customers a taste of different products through sampling is something that employees do all day long,” states Cooksey. Health Express Plus competes with vitamin retailers with a selection of vitamins and supplements that make up approximately forty percent of their business. The stores also offer books, beverages, and frozen goods, all for individuals with a low-carb or sugar free lifestyle.

Tortilla Wraps Up New Customers
Kane admits that historically it has been very difficult for anyone on a diet to eat outside of the home. "We wanted to develop a menu offering that would bring a new group of customers into Subway-the person on a diet that can't find what they want in restaurants," says Kane. Developing a low-carb wrap sandwich was a natural tie-in for Subway, a chain that makes 'fresh and healthy' an important part of their menu and marketing program.

Subway's task to develop a great tasting tortilla shell was not easy. "We had our bread manufacturers working overtime to come up with a product that has a taste comparable to our great tasting bread. It was a difficult item to manufacture and they had to develop new production procedures as well as figure out how to get it to 22,000 locations in the U.S. and Canada," states Kane. The tortilla is not made in the restaurant, a departure from Subway's in-store baking program. According to Kane and Winograd, the results have been great with approval even among people that are not following a low-carb diet. Initial results exceeded company expectations five-fold and even created concerns about keeping up with product supply.

New Products Pass The Test
Any new product developed at Subway has to pass the "customer and store friendly" test. "We know people are in a hurry so we can't extend the service time," reports Winograd. The new wrap fits nicely into the operation and gives customers another option to the other bread offerings. The only new item added was the tortilla shell. All the other ingredients were everyday items used by Subway sandwich makers who are referred to as sandwich artists within the organization.

Winograd reports that it generally takes over a year to develop new products and there are literally hundreds of items being developed and tested throughout the country. "There is a lot of work to launching a new product. Our Executive Chef always has new products being developed and is very much in tune with trends in dining from white tablecloth restaurants to what is new in the supermarkets. You never know where a new idea can come from," states Winograd.

The Subway Research and Development Department operates a test store that is ready to try new items at the drop of a hat. One of the final testing stages occurs in select franchise locations. "Since all of our stores are franchised, we always have a good group of people constantly volunteering to test new items," states Kane. "We try to use at least six different cities in a test. Our headquarters are here in Milford, Connecticut so it is important that we test in other parts of the country to get regional tastes from other cities," says Kane.

Franchisees Pick Turkey As New Product
Using franchise owners in tests is an important element in testing new products at Subway. "We come up with the ideas, but it's the franchisee and their sandwich artists that are right there in the store that see the customer's reaction. It is crucial that we work closely with them to get a good test and get good feedback from them," states Kane.

Franchisees have played an important role and are credited with some of the most notable menu additions at Subway (as well as other major franchise organizations). "Our original menu did not include turkey or even lettuce. It was a franchisee that suggested these additions. At the time, these suggestions were widely questioned but now turkey is one of our best sellers. That's why working with franchisees is so important. We have over 700 people in our headquarters and our primary job is to support and work with franchisees. They see first hand, day in and day out, what the customers want," states Kane.

Contact Information: Les Winograd, Public Relations Coordinator; Kevin Kane,Public Relations Manager; (203) 877-4281, kane_k@subway.com, http://www.subway.com

‘Thinny Thin’ Is In At Carvel
Tom Carvel was always ahead of his time, even in 1934, when he opened the first Carvel store in Hartsdale, NY. In the 1970's, he introduced an ice cream line that was more friendly to the customer's waistline. He called it the "Thinny Thin". Gary Bales, Vice President Marketing and Product Development for FOCUS Brands, Inc., reports the name was used to describe Carvel's original No Fat ice cream. "Today, we are bringing back this fun and sassy name as an umbrella for Carvel's entire healthier line that features No Fat and No Sugar Added ice creams in our fountain, novelty, and cake menu items," says Bales.

FOCUS Brands, Inc. operates over 1,200 stores in the United States and 37 foreign countries under the Carvel, Cinnabon and Seattle's Best Coffee brands. Carvel currently operates more than 450 franchised and food service locations and sells its famous ice cream cakes through over 6,100 supermarkets outlets.

Low-Carb Ice Cream Test Have Unappealing Results
With demand booming for low carbohydrate products, Carvel worked with outside suppliers to whip up a new low-carb ice cream. "We had a very high quality product but it was not successful. It was comparable in taste to our other healthier products but it had very little consumer interest in market tests. What we heard from consumers was that for those that were looking for a low-carb ice cream, the product was excellent but the demand was not there. What we determined was that ice cream is an indulgence and that people want to have fun and treat themselves with ice cream," reports Bales.

Bales is a strong believer that franchisees are critical for new product development and testing. "I have been in franchising thirty years and I can say probably nine of ten great ideas come from franchisees. The franchisees were pushing us to try a low-carb product. I'm not saying in hindsight that this was wrong. In fact, I was also in that camp. Franchisees are the eyes and ears of the company and are in a unique position to gauge customer interest," states Bales.

High Hopes For Low-Carb Ice Cream Melt
By testing a low-carb ice cream, Carvel learned that the customer interest in low-carb ice cream was significantly different than low fat and low sugar ice cream. "Low fat has been around a long time and low sugar ice cream is well established among sugar-controlled individuals. Low-carb falls more into the fad category," says Bales. "I don't think the franchisees were disappointed about the test results as much as they were surprised by it. They supported the test, the quality was there, and the marketing and packaging were good. When the results came in far below expectations we concluded that maybe the timing wasn't right and low-carb was more of a fad," says Bales.

In spite of the dismal results of low-carb ice cream, Carvel is always in search of the next new product that customers will crave. "We believe the longer term demand will be in nutritionally fortified ice cream, for instance, ice cream with added calcium or fiber," declares Bales. "This trend is already in Europe and we are keeping a close eye on it. Also, the organic ice cream trend is being monitored. We watch the trade magazines for these items and of course the franchisees are a great source of information because they see what is happening with the smaller chains and other competitors," states Bales. A healthier product line is part of Carvel's overall strategy to support a healthy lifestyle. The challenge of new product development is to be able to combine indulgence, fun, and health to make a product that will ignite sales.

Contact Information: Gary Bales, Vice President Marketing and Product Development, FOCUS Brands, Inc. (404) 705-2048, http://www.carvel.com/