Value Added: Being The Boss
Here's Tom Heath's latest column on Washington's entrepreneurial set:
Farhat Elmohtaseb doesn't want to answer to a boss, or punch a clock or work his way up some corporate ladder. He is right where he wants to be: the owner and operator of four Subway sandwich shops in downtown Washington.
It's a nice life. The 43-year-old lives in Fairfax County and -- when he is not training sandwich makers -- follows a few small investments. Thanks to his Subway success, he has some investments in office buildings, and in Time Warner and Tyco stock.
The entrepreneur loves being his own boss for a lot of simple reasons. "The income is not limited. You aren't working for somebody and waiting for your next promotion. Your income depends on how hard you want to work."
Ah yes, the income. Elmohtaseb is a partner in the Subway franchises with his brother. He won't say how much he makes, but I estimated his annual take is comfortably in the six figures.
Each store grosses somewhere around $70,000 per month. His expenses are a little more than $50,000 a month, including around $25,000 for food and $10,000 in rent. There's salaries, utilities and insurance, as well. Take out another $5,000 or so in royalties to Subway's headquarters. He has almost zero debt, so Elmohtaseb and his brother split, by my estimation, somewhere around $10,000 a month profit -- per store. He pays himself a salary.
Elmohtaseb arrived in Washington in 1989 to start a banking career after graduating from the University of Toledo with an MBA. Before that, he earned a bachelor's degree in financial management from Bowling Green State University in Ohio. It didn't take him long to realize he wasn't meant for finance.
"I wanted more of a challenge," he said. "When you own a business, you put your degree and all the knowledge you have into effect. Either you make it or you don't."
Elmohtaseb started his first Subway franchise in 1992 under Larry Feldman, the Subway Sandwich King of the Mid-Atlantic. I wrote about Larry a few days ago. Feldman has the rights to Subway's territory in Maryland, Virginia, Delaware and D.C., which means he oversees 1,019 stores -- at last count. Subway franchisees have to go through Feldman to get a store. Feldman and his top assistant, Alan Warmund, helps franchisees pick locations, train staff, operate the stores, market, maintain quality control and build a customer base. In return, Feldman gets a cut of the Subway headquarter's franchise royalties.
Elmohtaseb considers himself an operator of Subway stores, not a passive investor.
"I didn't invest and walk away. You have go to have commitment. I started at 14 hours a day. Now I am down to eight hours a day, five days a week. My vision is to be a successful person. Not for money, but for the goals I set to own my own business and to see it on top."
He rarely makes sandwiches any more. Elmohtaseb spends most of his time shuttling between his stores, making sure they open on time, have all the food and accessories they need, and ensuring every customer gets what they want.
He is constantly interviewing job applicants and training them. His Subways employ between them and 10 people each. Turnover is high when you make sandwiches for around $8.50 an hour.
Elmohtaseb is zealous about keeping prices low and making sure customers do not have to wait longer than six minutes to get their sandwich. Although Subway headquarters sets guidelines for prices, different markets can increase or lower those prices based on costs.
Keeping costs low has increased the customer base, helping Elmohtaseb make more money even though rising food costs have squeezed the margin on his sandwiches. Store traffic this year is up between 15 and 20 percent.
"You have to provide customer service," he said. "With a lot of highly educated people, it's not easy to fool everybody. The speed is all important. The majority of people have half an hour to eat. They don't want to waste 20 minutes in line."
The stores are around 2,000 square feet, which is the size of a spacious living room. He has about 20 tables on average. There are some leather armchairs for quick business meetings or for someone to spread out with their laptop. Depending on location, startup costs can run between $200,000 and $300,000, including renovating the space and installing equipment, buying furniture.
Elmohtaseb at one time had six Subway stores, but he sold two in Georgetown to concentrate on the ones clustered near Connecticut Avenue. They all do a brisk business. One store was located in a food court off the Farragut North Metro stop, but it was in a basement with no light. When a landlord a few yards away at L Street and Connecticut Avenue urged him to move into his ground floor, Elmohtaseb jumped and the store took off.
He keeps an eye on the competition, which includes a Pot Belly Sandwiches down the street and a Quiznos Sub shop across L Street. There's even a local health food startup called On the Fly that is biting at his heels.
"I am confident, but everybody concerns me," he said. "I don't even want my customers to try anything else. Even if they do, I want them back. I have had people who have been coming to my stores for the last 10 years, on a daily basis, Monday through Friday."
As a reward, Elmohtaseb occasionally shows up at his customers' offices with platters of sandwiches.
He even offered to deliver a platter to my office at The Washington Post. I passed.
Just what I need.
July 8, 2008; 2:52 PM ET
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