Change Agent: Eric Werner continues to evolve with new brands

• Name: Eric Werner
• Title: CEO/President 
• Company: Texas Subs (Subway), Beverly Hills Rejuvenation Center, Little Caesars Pizza, The Catch Seafood, Rhino Removal Waste Disposal
• Units: 40 Subway, 8 Beverly Hills Rejuvenation Center, 3 The Catch, 1 Little Caesars, Rhino Removal Waste Disposal
• Age: 57
• Family: Wife Shaelyn, 9 children: Hillary, Preston, Taylor, Tyler, RyLeigh, Blake, Skylor, Bryce, and Shaylee
• Years in franchising: 34
• Years in current position: 34

Eric Werner has had a long and successful career in franchising. We’ve been tracking the Texas-based multi-brand operator for years now, and every time we catch up with him he seems to have new brands and new business strategies. This time was no different.

“I’ve changed my business dramatically,” says the 57-year-old. Of course he has. And in more ways than one.

When we last spoke in 2012 (MUF, Q2) he was still rocking and rolling with dozens of Subways, a brand that has been his bread and butter since 1991. He had also recently opened locations with LA Sunset Tan and Mooyah Burger. Today, he’s divested those two brands, sold 16 Subways in a deal he says he “just couldn’t turn down.” He’s also signed on with Little Caesars, The Catch (a seafood brand where he’s part of the franchisor group), Rhino Removal, and Beverly Hills Rejuvenation—which has been a significant move for him.

“Beverly Hills Rejuvenation just gives me a great feeling to be a part of that brand,” he says. “We change peoples’ lives and help them feel better about their health.” Though he did have to shut the med spas down for 6 weeks last spring because of Covid, he kept his employees on the payroll.

Beyond his business acquisitions and divestures, Werner has made a significant change to his operating style. He’s begun selling a percentage of ownership in his business ventures, typically around 20 percent, to his key long-term employees.

“They have become my operating partners, they have skin in the game, and honestly I don’t have to worry as much about the day-to-day of my business. I found that giving up 20 percent ownership and having 80 percent ownership actually profits more than having 100 percent ownership. By having a key operating partner specifically working in my business, they are able to manage it better than me overseeing <all> the business. I now can work on my business, not in my business,” he says.

Werner has also been investing in more real estate where it makes sense for his units, and which provides an additional income stream when he leases to other businesses. “I realized that I had paid rent on some of my locations for 30 years. I could have purchased that property by now instead.”

The father of nine recently bought a farm north of Fort Worth and spends his time between the farm, where his office is, and his home. “I’m enjoying spending more time with my family and feeling less stressed now that I have operating partners minding the business.”

He’s not out of the franchise business, he’s just working on new ways of doing it better.

PERSONAL

First job: I worked as a waiter at Vista Hills Country Club, then at the golf course there. It was back in 1980 in El Paso.

Formative influences: When I graduated from Texas Tech University I started working as a manager at Walmart. During this time, I completed their entire training program, which helped shape my style and approach to business. My two years of working for Walmart was like getting another business degree as it helped my success with franchising. I thought that I should work for a very successful company to see what makes them successful and really admired Sam Walton at that time.

Key accomplishments: Franchisee of the Year with Precision Tune Auto Care. Our company has made the “Inc. 5000” list of the Fastest-Growing Private Companies in America for 6 years now; and we were recognized by <Inc.> magazine for the Hire Power Award for creating jobs. We have won the Subway worldwide contest for the fastest sandwich maker in the world several times. We were awarded the President’s Cup in Subway. We have been awarded Subway franchisee of the year five times and the Mega MUO Franchisee of the Year one time in 2015. And we’ve been recognized as one of the largest QSRs in the country by Restaurant Finance Monitor several times. 

Biggest current challenge: Every day there is something, but the biggest challenge is adapting to the ever-changing world with the pandemic.

Next big goal: Grow Rhino Removal to be attractive enough for a partnership with private equity, then go public on the stock market.

First turning point in your career: Purchasing the Waco Subway market in 2001 with capital partners since I was not big enough at the time to do it myself.

Best business decision: Selling 20 percent ownership in my businesses to a loyal high-end operating partner. This concept was a game changer for me in business and in my personal life.

Hardest lesson learned: I tried to develop Wingstop stores in the Kansas City market and it was a hard lesson. I learned how challenging it can be to run brands in other states when they are not nationally recognized (at that time). Not everything you do is successful and you can learn from your mistakes. It’s how you respond to the mistakes that makes a difference. Not trying is the biggest mistake because you never know what can happen.

Work week: This has changed a lot for me since I’ve brought in operating partners. I’d say I’m probably working around 20 hours a week these days. Currently, I work at our new farm. That has allowed me to spend more time with my family. My wife is a rancher/farmer so it works out for us seeing each other all the time. But I still meet with my partners, strategize, and review opportunities in monthly meetings at my corporate office.

Exercise/workout: I work out with free weights three times each week for 45 minutes to an hour. I will do cardio two to three times a week with the HIIT method on the treadmill. It serves as a great stress reliever and makes me feel good to be taking care of myself. I have been working out for 20 years! 

Best advice you ever got? “Try to understand what people are saying by doing more listening.”

What’s your passion in business? Developing people and growing the company. Seeing people who are a part of this organization succeed is rewarding. Growing the company, efficiently, is exciting because you never know what’s next.

How do you balance life and work? It’s a juggling act and comes down to prioritizing. Each day I go through what has to be done at work, then what is most important to me in my life that day. It might be more important for me to spend time with my wife than work that day if there are no emergent issues. At work, I am very efficient and always have a plan of action in mind once I am in the office. There are some instances in which I will take “homework” with me so I am not at the office all day. This is work that I can do at my house at my own discretion. My belief is that time and what you do with it becomes very important as you age. Your time is something you can’t get back when it’s gone.

Guilty pleasure: Pizza.

Favorite book: I like to read the Bible daily. I still love <Rich Dad Poor Dad,> and <The Shack> is still one of my favorite books.

Favorite movie: There are several, but I’ll go with “The Game.”

What do most people not know about you? That I have nine amazing and wonderful children. 

Pet peeve: I shower 2 to 3 times a day—very OCD! 

What did you want to be when you grew up? Paleontologist. I loved dinosaurs and fossils. 

Last vacation: Disney World with my family 4 weeks ago! Disney can’t afford to have an incident so you know it was safe with masks all the time and cleaning stations everywhere.

Person I’d most like to have lunch with: Jesus Christ or Arnold Schwarzenegger.

MANAGEMENT

Business philosophy: Some key terms here: empowerment, open and candid, honesty, fair, and follow-up. Empowerment is an atmosphere I try to create where employees can make their own decisions and excel. I want them to have an attitude as if they were the owner. The backbone of our management philosophy is centered around being honest, open, up front, and fair with everyone. You will receive more respect from your peers. Whatever decision you make for one employee you should be willing to make for another employee. Finally, follow up on everything you have delegated to make sure it gets done! This is the weakest link for most managers. 

Management method or style: Coaching. I like to empower people to be in the game but I can help lead and direct them to carry out their tasks. My experience allows me to see the big picture while sometimes employees may only have a more narrow or myopic view of what’s going on. I provide guidance and support.

Greatest challenge: Finding good people who want to make something of themselves. Also, time management.

How do others describe you? Generous, fair, like to have fun but have boundaries.

One thing I’m looking to do better: Be a better person for myself than I was yesterday.

How I give my team room to innovate and experiment: I like new ideas so I encourage my team in meetings with an agenda that promotes strategy and growth such as a yearly SWOT analysis. This builds the framework to your operations.

How close are you to operations? I try to be around so my people know that I am out there and do exist. However, it is virtually impossible to be in all my stores. My operating partners are my eyes out in the field and we connect daily by text, email, or in person. I also schedule monthly meetings with them to discuss the past month’s performance, as well as other categories such as human resources, product, advertising, new development, etc.

What are the two most important things you rely on from your franchisor? Advertising with purchasing power and reducing costs.

What I need from vendors: Support with product or new ideas and training.

Have you changed your marketing strategy in response to the economy? How? During Covid, we advertised our curbside and delivery services at Subway. Sales increased.

How is social media affecting your business? HUGE! Facebook advertising is very effective as is the use of SEO companies to promote business.

How do you hire and fire? We have a window cling in all of our Subway stores that reads, “10 Reasons to Work for Texas Subs.” So we look to our customer base as well as our company website. We also use Indeed for finding people. When letting someone go my people handle this, unless it’s a key top position in my company. 

How do you train and retain? We have an employee training workbook that we created and each new hire sits in on a 1.5-hour new employee orientation to cover the basics and fundamentals of our company and Subway. We also emphasize Subway’s online training and reward our people financially when they complete these courses. All of our brands offer excellent employee training. We offer health insurance, employee scholarships, and flexibility in their scheduling.

How do you deal with problem employees? First, we let them know there’s a problem and provide an opportunity for them to correct the problem and a timeline to do it by. If the offense is repeated then the employee is generally suspended, and a third time would be grounds for termination. If an employee is let go we want them to know that we have no other choice after trying everything we could to help that employee be successful. Always document any incident or counseling as well.

Fastest way into my doghouse: Not getting something I ask of you done.

COVID-19

What are the biggest impacts of Covid-19 on your business? It actually increased sales at our Subways, maybe because of other restaurants closing. Delivery orders became a whole new business as delivery sales went through the roof. However, the Beverly Hills Rejuvenation Centers were forced to shut down and close for 6 weeks. 

How have you responded? We reevaluated how customers perceive convenience, cleanliness, and social distancing. We are in the process of remodeling all our Subway stores to reflect a new crisp, clean look, some with new drive-up windows or automatic door openers so customers do not have to use their hands to open the door when entering. We also do the obvious, like adding hand sanitizers everywhere, signage, and taking temperatures at BHRC.

What changes do you think will be permanent? Delivery is here to stay, from restaurants to grocery stores and more. Customers are going to expect ongoing delivery, takeout service, and, of course, continued enhanced cleanliness. I believe the trend will continue toward convenience, so takeout windows or drive-thrus are a great addition to a restaurant. It may be several years before some customers get comfortable with dining in.

BOTTOM LINE

Annual revenue: $40 million-plus.

2021 goals: Remodeling all of our Subway locations; add 2 more Beverly Hills Rejuvenation Centers; add 2 more The Catch restaurants in 2 years; grow to 25,000 households for our Rhino business; and invest in more real estate and the stock market.

Growth meter: How do you measure your growth? Three ways: sales, customer traffic, and profitability. You have to factor in all of these. We analyze these numbers weekly instead of waiting for monthly P&Ls. We know exactly whether food or labor is trending in the wrong direction weekly.

Vision meter: Where do you want to be in 5 years? Continuing to grow my owner-operator/part-owner strategy with more of my units or new brands. There could be another brand to add. I’m always looking at opportunities. I’d like to really grow The Catch and Rhino Removal businesses.

Do you have brands in different segments? Why/why not? Yes, for diversification and to spread the risk.

How is the economy in your regions affecting you, your employees, your customers? Our takeout and delivery business at Subway has grown as people look for safe ways to eat. We have continued to support our employees and offer ownership opportunities, which I think encourages them to stay on. We are looking at possibly getting back to a 401(k).

Are you experiencing economic growth/recovery in your market? Texas has not been hit as hard as other parts of the country. We did see our turnover rate decrease because people were content to have a job, especially during the pandemic.

How do changes in the economy affect the way you do business? We slowed down our unit growth to level out the balance sheet. 

How do you forecast for your business in this economy? It’s difficult, but that’s why we review our financials weekly and monthly. We try to make adjustments and keep doing what’s working. Every year we do a SWOT analysis of our company to know where we stand in our business environment and create a new plan for each business for the year and the future.

What are the best sources for capital expansion? We’ve used five local banks to fund growth. Liquidity is extremely important to banks these days. I try to be very open and up front with the banks we use so that they feel very comfortable with our business. We will provide updated financials upon request quickly.

Experience with private equity, local banks, national banks, other institutions? Why/why not? We work exclusively with five area banks. It has just been the best solution for us. National banks and SBA loans just wouldn’t work for us because we like to build a personal relationship with our lenders. With a local bank you can get approval instantly or receive a line of credit. 

What are you doing to take care of your employees? I’m now offering my top employees a chance at partial ownership. We try to treat every employee with respect and trust and provide an environment where they can excel. Beyond that, we’ve been known to help employees who are short on cash with advances that they pay back. 

How are you handling rising employee costs (payroll, healthcare, etc.)? Eventually, you have to raise prices to overcome the increasing costs of food and labor. I will focus on sales more than anything because as sales increase fixed costs usually decrease. We do source out or negotiate the best prices for other expenses like equipment, supplies, or even health insurance.

What laws and regulations are affecting your business and how are you dealing with it? The increase in minimum wage is inevitable. We are planning now by looking at what others are doing in states that are already at $15/hour.

How do you reward/recognize top-performing employees? I leave that up to my operating partners now. Each one operates with a different perspective, but I do know we still have Christmas parties and monthly performance bonuses.

What kind of exit strategy do you have in place? I have begun setting up business partners with part ownership of my locations. That way if something were to happen to me tomorrow, the business would continue on since I am not as active in the day-to-day operations. It builds loyalty and provides all kinds of continued opportunities for my employees/partners. My kids are getting older and it’s possible some of them will want to be in the business or open up their own business.