Sub shop grows behind marijuana theme

Every Cheba Hut location in the company's 14-unit system is purposefully distinctive with assorted décor, a regional menu and beer offerings, as well as an occasional performance by a local band.

As the company accelerates its growth with the ultimate goal of hitting 300 units in the next few years, that unit diversity isn't expected change.

"We started with mom and pop roots and we want to stay true to that. To differentiate ourselves, we will continue to look like a locally-owned business, not a national concept. We don't want it to be polished – that's very intentional. Customers really gravitate toward that," said Matt Trethaway, the chain's chief operating officer.

Cheba Hut is not an "overnight success," as Trethaway explains. The company has been plugging away for 14 years at a slow pace. The past five years, however, have yielded results that have inspired an ambitious expansion plan.

Cheba Hut recorded a 17.83 percent revenue increase from 2010 to 2011, the strongest year in its 14-year history. The franchise also reported a 12.07 percent same-store sales growth, as well as a 3.56 percent increase in average unit volume over 2010.

Now with restaurants across Arizona, Colorado, New Mexico, Oregon and California, the counter-culture themed restaurant is poised for further expansion with six stores currently in various stages of development.

Drivers of growth

The sandwich category has grown steadily in recent years, including through the recession years. During that time, Darren Tristano, executive vice president at market research firm Technomic, said sandwich chains benefitted from having memorable menu offerings.

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Trethaway said that's exactly what makes Cheba Hut standout. Cheba Hut's toasted subs – all of which play on the marijuana theme either overtly or subtly – are available in three sizes: nugs (4 inch), pinners (8 inch) and blunts (12 inch). They're topped with lettuce, onions, tomatoes, pickles and a special house dressing, and come in either white, wheat or garlic herb bread.

As for that theme, sandwiches include the Majic Mushroom, The Kind, Kush, AK-47, Train Wreck, Dank, Acapulco Gold, Jamaican Red and White Widow. There's even a "munchies" menu, with Sticky Icky (peanut butter and jelly), Rice Krispie bars, toasted brownies, hemp brownies (they are legal), and garlic cheese bread with marinara.

"Hands down, we truly have best product out there. We have flavor profiles nobody else is even playing with and about 10 sandwiches unique to us," Trethaway said.

The White Widow is the top seller – with grilled chicken, bacon, a homemade ranch sauce, mushrooms and provolone cheese. The "secret stash" menu, which is a local regional specialty, also does well across the system. For example, San Diego units sell a California Club with chipotle mayonnaise and turkey, while "everything in Albuquerque (N.M.) has to have green chiles on it," Trethaway said.

Cheba Hut locations also sell regional or local craft beers, in addition to Pepsi products and homemade iced tea.

Another way the chain tries to differentiate itself from other sandwich shops is by overstaffing its stores.

"This keeps a premium on our service. We want to give customers that extra step of attention you're not going to get if there are only two people working," Trethaway said.

He calls the chain a hybrid of quick and fast casual, with an order at the register set up, and an opportunity for guests to further customize/warm their sandwiches. The price point for combo meals – drink, chips and a sandwich – is around $10.

Growth plan

Cheba Hut's franchising model began in 2002, but Trethaway said it was created simply as a way for founder Scott Jennings to open a few new stores. It wasn't until 2007 when the chain got serious about franchising. The company tapped Trethaway to head the development plans, which call for a long-term system of 300 units nationwide.

"We don't want to be much more than that. We want to keep it relatively small and focus on our service and I think that is a number we can do well with for an end-game goal," he said.

The company is currently in construction in Oregon for its 15th store. By the end of this year, Trethaway hopes 18 are open, with an additional 20 agreements signed. As it continues to grow, Cheba Hut will plant flags in metropolitan and college campus areas.

"These are the areas where we fit in. We started on a campus (Arizona State University) and initially stuck around colleges," he said.

Cheba Hut more recently began looking at downtown regions because that tends to be where the college population gravitates after they graduate.

The final piece to the Cheba Hut expansion puzzle will come this year when the company hires a new marketing group to help get the word out about the brand -- controversial theme and all. Trethaway said that theme, by the way, doesn't (and will not) affect Cheba Hut's business strategy, since it's all done tongue-in-cheek.

"Hooters is doing really well and you can make the same argument for them for having a controversial idea. This theme is a risk we're willing to take. We don't want people to think we're pushing some agenda. We're not," he said. "We're just having fun and being playful. And once you taste our food and experience our service, you'll realize we're more serious than our theme suggests."

Check out some Cheba Hut locations and menu items here.

Read more about franchising and growth.

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