How to Become a Successful Franchise Owner: Subway Franchisee Chairman Bill Mathis

Bill Mathis (00:00)

So in a general sense, what I would tell people if they’re looking at getting into a franchise is ask questions. You’ve got to ask questions of the franchisor. And I think a lot of people go into this and they’re feeling like, geez, am I being interviewed? Yes, you are being interviewed by the franchisor, but you also have to interview them because just as I kind of talked about that employer-employee relationship, this isn’t an employee-employer relationship, but it is a partnership. And you have to feel good about that partnership. And if you have a franchisor that isn’t supplying you the answers that you either don’t get or don’t buy, then maybe it’s time to look somewhere else, because there’s thousands of opportunities out there.

Announcer (00:44)

Welcome to THRIVE, a Paychex Business Podcast. Your blueprint for navigating everything from people to policies to profits. And now your host, Gene Marks.

Gene Marks (00:54)

All right, everybody. So, I’m here with Bill Mathis. Bill is serving his third term as chairman of the board for the National Association of Subway Franchisees. He also owns three Subway locations. And also, Bill, you were telling me before we even started recording, Caribou Coffee locations as well. So, I want to, I want to find that, find that out about you, too. So first of all, thank you so much for joining. I’m glad that you’re here. There’s going to be a conversation about franchising. Tell us, like, how did you get to this level? First of all, where are you? Where am I talking to you from? Where are you right now?

Bill Mathis (01:29)

Well, today I’m in Florida. I do go back and forth between Florida and Minnesota. You mentioned I own three Subway restaurants, and those are in north central Minnesota, a couple hours north of Minneapolis. And then my wife and I are developing Caribou Coffee locations, which is a Midwest-based coffee concept. Very successful up there. And we had an opportunity to give this business a try down here in Florida. We’ve got two open locations and three under construction today.

Gene Marks: (01:59)

That’s really cool. How’d you get into franchising?

Bill Mathis (02:03)

Well, I’ve been in the restaurant business really kind of my whole life. I decided in my mid-20s to take a run at real estate. My dad’s super successful at that, but I found that I’m terribly miserable at selling real estate. So when I was young, I started delivering pizzas for Domino’s Pizza. Worked my way up a little bit there. Work for a concept called Steak and Ale. And you know, they say in the business, it’s kind of in your blood. And I went to work for Subway as a franchise consultant. And about nine years later, there was an opportunity to buy a Subway restaurant in northern Minnesota. And I told my boss, I said, I don’t have any money. And he was kind enough to help me out and finance it. And so, we bought one location, and then came two, three, and four. And after about 20 years, we sold the first one that we bought. So, we have three now.

Gene Marks (02:58)

That’s great. You know, I’ve always thought this about both franchisees and just small businesses that, like, if you own one location, you can maybe have a livelihood doing that, but you don’t really make money until you have multiple locations. I think about, like, there’s like, local coffee shops. I live in Philadelphia, downtown, so, like, you’ll stumble on a local coffee shop. And my wife and I always like, how are they possibly making money? And here, you know, with rent or whatever. And then, you know, when you think about it, and I’ve written about this, it’s because they own three coffee shops or four coffee shops for five. And there’s like an economy of scale. Is that right? Does that sound right for anybody looking to get into franchising? Is that like just a reality of the business?

Bill Mathis (03:38)

Well, I think it depends on the concept, you know, so if you own one McDonald’s restaurant, I think it’s quite a bit different than if you own one Subway restaurant, because the sales is much different and the economics are much different. But if you were to buy one Subway restaurant, it can be very difficult to, you know, some people would say, and I don’t mean this as a negative to anybody who owns one store, but sometimes you’re kind of buying yourself a job. So to your point, you’ve got to scale in a lot of quick service restaurants to really find those levels that some people, you know, wish and dream to be at.

Gene Marks (04:18)

It’s a good answer. So, you’ve got, let’s focus on the Subway because you own three of them. So, I can get my arms around that. How involved are you in those Subway locations? Are you visiting them frequently? What reports are you getting? How are you making sure that you know they’re running correctly?

Bill Mathis (04:37)

Well, one thing that Subway does really well at is our reporting system. We actually have real time data that I can access. Just as we’re talking now, I could pick up my phone and see exactly who’s punched in, what our sales are, what our average check is. And I can do that throughout the day. And at the end of the day, I can get summary reports. At the end of the week, weekly reports, and I can really see what’s going on just from that perspective. And of course, you’ve got to visit the restaurants, and I do that on a somewhat frequent basis. Probably, maybe should do it more, but I think every franchisee would probably say, I wish I could do it more, but there’s so many things these days that we have to take care of as business owners, from reviewing insurance to keeping up with government regulations, to simple things as payroll. It sure is a lot different than when I got into it over 20 years ago. It seemed like the place, the only place to be was in the restaurant. And now our time is diverted away in so many different ways.

Gene Marks (05:41)

Right, right. What do you do when you visit a restaurant? Like, do you get on everybody’s nerves?

Bill Mathis (05:47)

I think I make them nervous a little bit.

Gene Marks (05:49)

Sí.

Bill Mathis (05:50)

Just because I mean, that seems to be the nature of the business and the position that I’m in. But the last thing I want to do is go in there and criticize. Otherwise, they never want to see me. I want to have conversations. What are your pain points? What can I do to help you? Those types of conversations are best. And, you know, if I see something wrong, I can’t let it slide. But there’s a certain way to approach that and do it in a conversational way rather than a critiquing way.

Gene Marks (06:21)

Fair enough. Fair enough. Are you. Do you consider yourself capable of doing pretty much anything in a location? I mean, can you serve up any sandwich if you had to get behind the counter? Can you do that?

Bill Mathis (06:30)

Absolutely.

Gene Marks (06:31)

Whatever equipment you can.

Bill Mathis (06:33)

And if I said I couldn’t, my franchisor would be like, well, why? What is he doing? But, yes, I absolutely could.

Gene Marks (06:39)

Well, actually, it’s funny because, you know, I’ve always believed that out of myself. Like, some of the more successful people I know that run businesses, I mean, they start out from scratch. You know, you run, like a roofing company. You know, at some period of time you were doing roofs. I mean, you should be able to get back up there and do that. But then sometimes you get separated from that stuff, you know, because, like you said, you’re busy running multiple locations and dealing with insurance and all. But do you ever purposely keep your hands in it? Like, did you ever push anybody out of the way and say, you know what? I’m going to serve some sandwiches for the next hour, or is that joy behind you?

Bill Mathis (07:10)

No, I don’t do that, because sometimes the sandwich artists, in the case of Subway, will feel like, geez, am I not doing something right?

Gene Marks (07:20)

Sí.

Bill Mathis (07:21)

I’ll tell you what I do is when we have busy times and I might stop in and I can see they’re behind, I do dishes because everybody hates dishes. And if my wife is with me, she can’t stand it because I’ve got water all over the place floor. I’m a complete mess. So I basically got to do the dishes and then mop the back floor as well so people aren’t slipping and falling. But it’s something that most employees dislike doing is dishes, and I’m happy to do it.

Gene Marks (07:51)

You know, it’s really funny you mentioned that. There’s something therapeutic about doing it. You know, I mean, you know, like, we’re so wrapped up in so many, like, nonsense things, you know, just bureaucratic stuff, that there’s something to be said. Like, I like doing the dishes after, like, my family has dinner. Like, there’s just something like cleaning the kitchen up afterwards and wiping it down. I’m like, I got nothing done today, but at least I got that done. And you feel like, you know, you feel better off, you know, because of it. Does each of your locations have a manager? Is that how it’s set up? And then, so you’re relying, you have a manager at each location, so you got three managers, one at each. But I’m assuming. Do you have more than one manager? I’m assuming. Right. Because depending on how long the location’s open. Is that right?

Bill Mathis (08:36)

Well, I have one manager at each location. I have.

Gene Marks (08:39)

Okay.

Bill Mathis (08:40)

Yeah. And then I would. Then I’m basically, if you want to call it, I’m the area manager, the, you know, the district manager. I’m the next-level manager, if you will.

Gene Marks (08:50)

Got it. Okay. No, that’s fair enough. I’m assuming hiring people has got to be, like, your biggest headache or one of your biggest headaches as well. Talk to me a little bit about that, like, for existing franchise owners who are all trying to, you know, find good hourly workers. I was at a, just as an aside, I was at a McAllister’s Deli. You ever heard of that chain?

Bill Mathis (09:11)

Sí.

Gene Marks (09:12)

Right. I was at this McAllister’s Deli in Kentucky just this week. And I got to tell you, Bill, there was a guy behind the counter there. It’s like a young guy. You would, you would love this guy. Like, cheery, friendly, helpful. I was in line behind three other people, and he had the whole routine down, asking for the order, super friendly, competent, the whole kind of thing. And I’m like, oh, my God, that is a guy you gotta pay him almost double because you don’t want to lose this guy, you know. I’m like, I’m just curious, like, how, what advice do you have for other franchise owners about finding and retaining employees in your place? How do you, how do you get them, and how do you keep them?

Bill Mathis (09:52)

Well, that’s a really great question. That’s a podcast in itself. But yeah, but to be brief, you know, it’s very tricky. And I think the most important thing is in the interview process because you really want to find out if it’s a match. And I think where people get in to get themselves into trouble is they just hire. To hire, I need three people, and I’ve got two applicants here. They seem okay, and they hire them. And it actually sometimes can create more problems than it can solve them. While it might be nice to put that name on a schedule and fill in some hours and such, if it doesn’t feel like the right fit in the interview, it probably isn’t. And that in turn can create some other issues with frustrations with your really good employees who you absolutely do not want to lose. So, I have a, I have, I wouldn’t call it a policy, but something I tell my managers. If it doesn’t feel right, then don’t hire them. Hire only people that you feel like are going to be a good part of the team because otherwise it just becomes counterproductive. And we haven’t even talked about the wasted time of training and the dollars that go into that.

Gene Marks (11:06)

Yeah, yeah, it’s a big issue. And you do realize that people steal your employees all the time, right? I mean, you go to the effort to find those good people. And I can give you a number of my own clients and other business owners I know they literally go into Subway franchises and other fast food place service places, and when they come across somebody that’s got attitude and energy and, you know, smarts or whatever, I know they take them. And I guess that’s kind of a compliment, you know, like, you were the ones that hired him first. Although, you know, it’s a little mixed feelings, I’m sure around that.

Bill Mathis (11:41)

You were talking about retention as well. And just to be brief on that, you’ve got to treat your employees how you would want to be treated. So, I pay pretty, a pretty high scale, especially for northern Minnesota. I’m well over three or four dollars above minimum wage. I honestly can, I don’t even remember what minimum wage is in Minnesota because I’m exceeding it. I start people at $16 an hour. I have bonus programs for all the employees. I have different incentives that they can achieve each week and each month. So I try to do different things to keep them engaged where it’s just not a job. What’s my paycheck look like? Make it a more fun atmosphere. Try to differentiate myself from maybe the competitor down the road.

Gene Marks (12:28)

You know, you are right. This is like a whole other podcast episode. But I can’t, I can’t resist. You mentioned you’ve got some bonus and incentives for your employees. Can you give me like an example or two of like what, you know, how you incentivize them?

Bill Mathis (12:40)

Yeah. So we use a system called Glimpse. And what that does is it, it tracks whether the employees actually ring up all the sandwiches or not. So there’s an incentive there. We base some bonuses based upon that. It also determines what they ring up, how well they did suggestive selling. So in other words, kind of a what, what’s your average ticket? Like what was the opportunity that was missed or and what was the opportunities that were gained? And that comes out in that, in that kind of report. And I use that to share with them. And I’ve developed a bonus program off of that.

Gene Marks (13:17)

How do you know that? When you say like, you know, whether they rang up all the sandwiches they made, like, how do you know that? You know as well as you also just said, like, you know, are they making suggestions for, you know, to upsell? How do you know that?

Bill Mathis (13:31)

Well, there’s metrics in this system. So essentially the, there’s one camera that picks up when they first take a loaf of bread, and let’s say it’s a foot long. The camera says, okay, that’s a foot long sandwich. It follows it all the way down the sandwich unit to the point of sale. And then the point of sale communicates with the camera to say that was rung up as a foot-long or that sandwich left the counter and nobody rang up anything. And then in terms of the other metrics, it’ll take the data from the point of sale to say, well, that person bought a footlong, it was rung incorrectly. They bought a drink, but they didn’t buy a chip. So we lost an opportunity there. We gained an opportunity on drinks, but we lost an opportunity on chips. It’s really a pretty, it’s really kind of a pretty cool system. I’m one of the few that use it in Subway.

Gene Marks (14:21)

Yeah, it’s like AI in action. You know, I wrote about, you know, Taco Bell. They’re testing out their, like, AI system where it’s listening in to employees as they’re, as they’re taking the orders and engaging with customers. And when their AI system senses that they’re trying to upsell them, even if they’re trying to upsell them, it’s able to track that and then give incentives to the employees. Well, good try for doing it, and here’s extra for actually upselling them, you know. So, yeah, I think those kind of things are going to have an enormous impact on your business. Okay, so you’re in the business of, you’re running the National Association of Subway Franchisees. So I want to get to some of your advice that you have for people that want to get into the franchise business. But even before I do, I got to first ask you, why are you doing this? Aren’t you busy enough running your own restaurants? You know, and then your Caribou Coffee. I mean, are you so masochistic that you have to take the job of being chairman of this board for three years as well? Why’d you choose to do this?

Bill Mathis (15:25)

You know, I was, I had to look at your picture as I’m talking to you and wonder if it was my wife or is Gene Marks asking me, why do you keep doing this? She always says to me, can you ever say no? And here’s the answer to this. I want to help franchisees. And I’ve got, Subway’s just in my blood. I’ve been in it since ’92. And I know that some franchisees have a difficult time speaking out because they may be afraid of retribution. Whether that exists or it doesn’t exist, it just in somebody’s mind, if it exists, then they see it as it does. And I want to be somebody that speaks for the common person or even the person that owns 100 units or 200 units. We all have the same issues. They’re just on a different scale. And, you know, I didn’t get on the association board to become chair. I was on the board for two years, and then the idea was floated that I should probably be chair, and I accepted it. I’m honored to be it. And yeah, it does take some time for me, but I feel good about what I’m doing. The association has made a difference in franchisees’ lives. And, you know, when I get an email, or I see somebody in person and they say, thank you for what you’re doing. You know, paychecks are nice, but, boy, does that feel good coming home. And I do have to tell my wife, so she says, okay, I understand. And she understands that I just. I want to do good for people and be representative of their voice.

Gene Marks (17:04)

Okay, fair enough. It’s a great answer. All right, let’s give me some advice, man. Like say I’m, you know, I want to open up a, you know, a Subway franchise. And by the way, we don’t have to limit this to just Subway. I mean, I think a lot of the concepts are the same. But talk to me. What do you tell people that want to get in this business? What are the mistakes you’ve made and what’s the advice that you have?

Bill Mathis (17:24)

Well, geez, I’d hate to air out the mistakes I’ve made.

Gene Marks (17:28)

We don’t have enough time for that. We only have a few more minutes.

Bill Mathis (17:30)

Yeah, right. Subway has changed quite a bit since I first started in ’92 and since I first opened my, or bought my first restaurant, in 2001. So in a general sense, what I would tell people if they’re looking at getting into a franchise is ask questions. You’ve got to ask questions of the franchisor. And I think a lot of people go into this, and they’re feeling like, geez, am I being interviewed? Yes, you are being interviewed by the franchisor, but you also have to interview them because just as I kind of talked about that employer-employee relationship, this isn’t an employee-employer relationship, but it is a partnership, and you have to feel good about that partnership. And if you have a franchisor that isn’t supplying you the answers that you either don’t get or don’t like, then maybe it’s time to look somewhere else, because there’s thousands of opportunities out there. And that isn’t dismissive of any of the brands that I’m in. It just means that you’ve got to ask questions. The other thing that is alarming is franchisees will finally get to their franchise disclosure document. They’ll sign off on it, and in turn, they’ll later get a franchise agreement. And they don’t even send it to a competent attorney to review it. Some don’t even send it to an attorney at all. And that’s really troubling because it’s important to understand what the ramifications are if things don’t go well. Of course, everybody thinks everything’s going to go great. And you have the right mindset going into it because you are you, and you’re going to make this successful. But again, it’s a partnership, and you have to understand the implications that are out there if that partnership seems to fail for whatever reason.

Gene Marks (19:24)

Great advice. I usually accentuate I’m a human being and I’m a certified public accountant, so I always accentuate the negative. So when you’re talking about getting into the business, talk to me about the failures. I mean, talk to me about the people that you’ve seen in this industry that did not succeed. And why? Because I know you’ve got your opinions and obviously you don’t have to name names, but I’m just, you know, again, you know, give me that warning. Say, hey, Gene, unless you’re expecting to do, you know, you’re going to be doing this, this and this, you’re going to fail at this business. You know, what are some of those expectations?

Bill Mathis (20:04)

I think people fail because of some of the reasons I just mentioned is, you know, they didn’t get the questions answered. Another thing that I would suggest is say it’s a larger chain that you’re thinking about getting into, visit some of the locations, and just have small talk with the employees. Don’t interview with them, but just say, hey, how are things going? You having a good day? And you’d be surprised what the employees might tell you some days, like, oh, I can’t stand this point of sale system, or we’re really struggling with this today, or we can’t find any help. And those might indicate some things that you may need to ask. So, I think when people fail, sometimes it is the franchisor that fails the franchisee in the communication, and some of the restrictions they put on them, additional fees, and such. But I think many times it’s because we as franchisees don’t ask the right questions and get the right advice from competent people.

Gene Marks (21:00)

Okay, that’s great. Obvious question, but I feel this has to be asked. You’re chairman of the board for the National Association of Subway Franchises. You own three Subway locations, But you said at the beginning of this conversation that you have two Caribou Coffee locations as well. So, my question is, why? Why not more Subway locations? What moved you into Caribou coffee and what was the opportunity that you saw there?

Bill Mathis (21:28)

Well, with Caribou Coffee, we’re from the Midwest, as I said. You know, I go back and forth between Minnesota and Florida, but I was born and raised in Minnesota, and Caribou Coffee started as a one store chain, or not a chain, but a one store location, and turned into a chain that was finally bought out by a larger company. And I was on the regional advertising board for Subway in Minneapolis. And through that I got to meet some contacts at events. And one of them was some people with Caribou Coffee who also sponsored the Minnesota Twins, as did Subway. And so I got to know some people, and one day I got a phone call that said, hey, would you be interested in talking to us about what we should and shouldn’t do if we consider franchising? And at the end of conversation, I said, if you ever want to franchise in Florida, we also have a place down in Florida that we have part-time. Let me know. A year later, I get a phone call that says, we’re going to go to Florida. Are you interested?

Gene Marks (22:28)

Okay.

Bill Mathis (22:28)

And I said to my wife, I can’t do this. I can’t do the subway, I can’t do the rest of this and the Caribou Coffee on my own. She said, you get the deal done. I’ve got it. So, I help her, but she is the face of Caribou Coffee down here. So, if I was doing it by myself, I certainly would need to hire support because I couldn’t do it.

Gene Marks (22:55)

Got it. I have so many more questions for you. And by the way, your wife, with all that wagging her finger because you can’t say no, and here she’s not saying no, either. She got involved. You dragged her into it. I do have more questions. But we have limited time, so let me. Let me end on this, Bill. So, you’ve been doing this. I mean, I’m looking at you now. I peg you for somewhere like 22, 24 years old. Is that about right? How old you are?

Bill Mathis (23:20)

Great, Gene. Yes, thank you.

Gene Marks (23:22)

Let’s just say you’ve been in the business for a bit, okay? The business has changed a lot since you opened up your first franchise. You’re gonna be around for a bit. You’re gonna be running these things for, you know, a bit longer. What do you think, like, how do you think your Subway franchise will focus on that? How do you think they’ll be different five years, ten years from now? Do you think they’ll look very much the same, or how do you think they’ll change?

Bill Mathis (23:42)

Well, that’s an interesting question, because private equity has become such a big deal in these franchise chains. You know, we were bought by Roark a little over a year ago, if memory serves me correct, but it hasn’t been a long time. Jersey Mike’s was been bought out by a private equity company. And so private equity has made things a little bit different. They have investors and they need a return on their investment. And that can be good or bad. It depends on the situation. So how that looks five or 10 years from now? I think that some of my good friends who are really smart saw this coming five years ago. I can’t predict the future in five or 10 years. I wish I could, but I think it’s going to get balanced out where private equity is going to have to come back and find that partnership level, whereas right now it’s not quite an equal partnership. And I think in order for both parties to be successful and for the investors to be happy, I think they’re going to have to find that balance.

Gene Marks (24:48)

Okay, that’s great. Bill, you know, I’ve scratched the surface on the questions I have for you. I gotta have you back at some point. I hope you’ll come back.

Bill Mathis (24:54)

Would love to.

Gene Marks (24:55)

Yeah. You’ve got a lot more knowledge and advice that you can share with our audience about just being in the industry. But I want to thank you very much for joining. It was a great conversation.

Bill Mathis (25:03)

Well, thank you, Gene. I was honored. Thank you.

Gene Marks (25:05)

Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/ThriveTopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/worx. That’s W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I’m your host, Gene Marks, and thanks for joining us. Till next time, take care.

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