Deli Delicious takes a bigger bite of sandwich market [The Fresno Bee :: ]
(Fresno Bee, The (CA) Via Acquire Media NewsEdge) July 12--It's better than the American dream: An immigrant couple brings their three young sons to the U.S. and buys a restaurant. Fast forward a couple of decades and now that restaurant -- Deli Delicious -- has 21 locations, 14 more on the way and a growth plan that has it following in the footsteps of Denny's and Five Guys Burgers.
The Fresno-based company run by the Hobab family is poised to rapidly expand in a way not seen very often by local companies in Fresno -- through franchising. Much like KFC or Subway, the franchising works by outside people paying the company for the right to open and run a Deli Delicious location.
"I'm getting calls from all over the world," said Deli Delicious franchise sales representative Nate Gilbert. "I've got calls coming in from Dubai. The interest is really overwhelming."
The company, which now has restaurants from Bakersfield to Sacramento, plans to expand throughout California and neighboring states over the next five years, and nationally after that. It's a strategy for growth that allows a company to expand quickly because it puts much of the cost -- and the elbow grease of opening a new location -- on the shoulders of franchisees.
The model comes with risks, particularly as the restaurants open far from home. But the Hobab family has been preparing for those risks since 2009 when it started franchising. It has steadily beefed up its corporate headquarters to handle the growth.
The back story
Mohammad Hobab ran his own textiles factory and his wife, Zohreh, had studied archaeology when the pair decided to leave war-torn Iran in 1988. The highly educated couple didn't feel there was much of a future for them or educational opportunities for their children amid the country's turmoil at the time.
"They just wanted a better life for us," said their oldest son, Hadi, who was 12 when he came to the U.S. and is now the chief operating officer of the company. One younger brother was 8 and the other was a toddler when they moved here.
Hadi's father doesn't speak English, but that hasn't slowed him down. The couple bought the first Deli Delicious at Blackstone and Bullard avenues when its owner retired in the early 1990s. The restaurant is still there.
The Hobabs made sandwiches and mopped the floors and repeatedly tested bread recipes. All three sons grew up working at the restaurants.
"Deli D," as it's often called by Fresnans, has 45 sandwiches on its menu now. One of the most popular is No. 21, the turkey, avocado, sprouts and cream cheese. The sandwiches cost more than Subway sandwiches, but Yelp.com reviewers give predominately positive reviews on the site and note the sandwiches come with plenty of filling.
Over the years, the Hobabs opened up more Deli Delicious locations and began offering catering -- trays of 4-inch mini subs -- and french fries. They had seven restaurants when they decided to go into franchising.
The change allows the company to grow quicker than it could if it were shelling out money for each new location itself and overseeing all the new ones at once.
So the Hobab family sold off its existing restaurants to franchisees and began signing agreements with others to open more locations.
Franchisees pay a one-time fee of $20,000 to open a Deli Delicious, or $15,000 for an express model. The company prefers its franchisees to have restaurant experience and have ready access to $75,000 to $100,000 in cash to get the restaurant off the ground and pay for all or part of the construction or remodeling of new locations.
Franchisees also pay 6% of their monthly sales back to Deli Delicious corporate and a 2% fee that goes toward advertising the brand.
The first downtown Fresno Deli Delicious is scheduled to open next week; next up are restaurants at Herndon and Milburn avenues, Walnut Avenue in Visalia and Hageman Road in Bakersfield. In another first, Deli Delicious is testing a shared restaurant space with Fresno-based Colorado Grill in Roseville and will do more if it's successful.
The brand's reputation in the Valley is at first what attracts franchisees such as Simon Hakimi. He owns the Fig Garden Village location, but keeps his day job as a physician's assistant at Community Regional Medical Center.
"You see foods come and go, but Deli D has always been around," he said.
The sandwich shop is an investment for Hakimi, who said he didn't look at other sandwich franchises but went straight to Deli Delicious. He said he likes how someone from the corporate office shows up at the restaurant weekly.
"They're very hands-on and they're very involved," he said. "They care about the quality, even though they're growing."
Skin in the game
Having franchisees invest the money, instead of companies digging into their own pockets, allows the chain to grow much faster than it normally could, said International Franchise Association spokesman Matthew Haller.
"You've got other people's skin in the game," he said. "A lot of companies that start regionally may not have the capital to grow and become the next Starbucks, which is not a franchise."
It's a method that many household names have used, including Five Guys, which was started by a couple and their four sons and has a location in River Park.
Banks are also more likely to loan money to a franchisee opening a restaurant that's an established brand, compared to an unproven concept.
Although the Valley is rife with franchisees who own everything from Wendy's to 7-Eleven, it's not that common for locally based restaurants to grow this way.
Bobby Salazar also franchised a few locations of his counters inside mini marts and one restaurant of the same name when he was young and wanted to expand, but owns most of his locations.
About 20 of Me-N-Ed's Pizza's 70 locations are franchises. The company that owns it is planning to expand its Blast 825 Pizza brand by franchising. The first Blast restaurant opened in Sierra Vista Mall last summer.
Tom Ferdinandi, chief operations officer of Fresno-based Milano Restaurants International, which owns both brands, explained why franchising works better for some locations: When companies add restaurants that are close to their corporate headquarters, they're easy to keep tabs on. But when the goal is to expand in far-flung locations -- Blast has corporate-owned locations about to open in Roseville and Rocklin and plans more restaurants -- the need to have an owner-operator manage day-to-day operations increases, he said.
Franchising comes with risks, of course.
Even with an owner-operator, Haller said, it's more difficult to manage the brand and make sure that the food meets the company's standards, for example.
Conscious of this, Deli Delicious has hired several new people for its operations team. What started as a corporate headquarters employing five now has 11 workers.
"These folks have a massive amount of experience in the field so the infrastructure is there to provide the support for the franchisees," said executive vice president Ali Nekumanesh.
The company could grow faster, but is holding off until it works all the kinks out, he said.
For Fresno, having a corporate headquarters in town brings added benefits of more jobs, more income flowing into Fresno, more donations to local charities and the ripple effect of using Fresno-based suppliers such as J&D Meats and Saladino's distribution.
Deli Delicious has changed a lot since the days the Hobabs made every sandwich at the first restaurant. The company the couple built for their children now provides all three of them with jobs -- Hesam is now the chief financial officer and Sahab is the director of marketing.
Though they are the driving force behind the company, Mohammad and Zohreh Hobab often prefer to be behind the scenes and declined to have their photo taken for this story. But through it all, said eldest brother Hadi, the COO, his father has maintained his same philosophy on business.
"His main thing is to be good to people," he said. "He wanted to really take care of their employees, make sure they're getting what they need. All that has to happen and then comes making money at the end."
The reporter can be reached at (559) 441-6431, email@example.com or @BethanyClough on Twitter.
(c)2014 The Fresno Bee (Fresno, Calif.)
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