The Crunch: The Cincinnati-based restaurant franchise, Penn Station East Coast Subs, started in 1985 with a simple formula for success — quick-service dining, fresh ingredients, and display cooking to showcase its sizzling sandwiches. For over 30 years, Penn Station’s commitment to quality menu items and customer experiences has helped it expand to 317 locations across 15 Midwestern states. The successful business model carefully balances profitability with customer satisfaction. And, while most sub shops depend almost exclusively on the lunchtime rush, Penn Station attracts dinner and weekend visits to its growing footprint of locations, including newer additions in cities like Pittsburgh.
Jeff Osterfeld was fresh out of college in 1983 when he decided to open a deli in a Dayton, Ohio, mall. When Jeff saw a Philly cheesesteak sub on the menu at a rival deli, he was intrigued by the iconic sandwich. And the journey from Jeffrey’s Delicatessen to the booming franchise, Penn Station East Coast Subs, was underway.
“Jeff at the time didn’t even really know what a cheesesteak was,” Penn Station President Craig Dunaway said. “But he’s a visionary and very intuitive when it comes to what people want. He knew the cheesesteak was born out of Philadelphia. He said, ‘All right, I’m going to go see what this is about.’ He made a bunch of trips up to Philly, tried the product and said, ‘You know what, if I get the right bread, I can do this.’ That’s how the idea of Penn Station really came about.”
Jeff opened his first Penn Station restaurant in Cincinnati in 1985. The original menu included four sandwiches and featured the grilled cheesesteak, fresh-cut French fries, and hand-squeezed lemonade. In 1988, Jeff franchised his concept for a quick-service dining experience that focused on fresh, premium ingredients and display cooking to showcase the preparation of every sandwich.
Over the next three decades, Penn Station grew by exacting a commitment to quality control and consistency through a business model that balanced each franchisee’s profitability with customer satisfaction. Today, Penn Station has 315 franchise locations across 15 states in the Midwest.
“We strongly believe that the smartest growth play is to expand in concentric circles outside of Cincinnati,” said Craig, who purchased his first franchise in 1997. “When we grow into a new market, there are three things we need: logistics, which is getting the food there, brand recognition, and then our oversight.”
Penn Station takes that same measured approach to its menu, which has expanded to 14 sandwiches since 1985.
“We try to assess what’s going on in the industry and decide if it’s a fad or a trend,” Craig said. “Low carb, for example, was a fad. When franchisees in ’07 and ’08 were clamoring and saying ’We’ve got to add three or four salads to the menu,’ we said, ‘Come on guys sit tight.’ And it kind of died out.”
Likewise, Penn Station moved deliberately before introducing online ordering and a mobile app until it was clear that was what modern restaurant customers wanted.
“When we looked at online ordering and the app, we wanted to set something up that wasn’t horribly expensive for the franchisees while adding convenience for the consumer,” Craig said. “We weren’t on the forefront of that, but we know people’s time is more valuable than ever before so now you can see the trend in our restaurants.”
Whether it’s a new location, a new menu item, or new technology, every change is evaluated on whether it will have a positive impact for the brand as a whole.
“We don’t want to do things that only benefit a handful of franchisees,” Craig said. “We want to make sure we’re doing it for the masses.”
An Unyielding Commitment to Quality and Consistency
Penn Station prides itself on quality and consistency. The ingredients are freshly sliced every day, with sales volume and sales mix determining the amount each restaurant prepares. Every restaurant must follow the same recipe for sandwiches — right down to the exact amount of meat, cheese, and even mayo. The lemonade has to be fresh-squeezed, and the fries have to be dropped with each new order and served piping hot.
This way, a Reuben a guest loved in Detroit will taste exactly like a Reuben he or she orders in Dallas.
“We are hypersensitive to the quality of our product,” Craig said. “We came up with a menu that’s supposed to be made a certain way, and we evaluate very critically if you are not following those standards. Everything we sell has to be quality, especially with the evolution of fast casual. Maybe consumers’ palates got more sophisticated, or, maybe with the evolution of fast casual, people are just demanding more, but you have to have a great product to compete today.”
A team of 16 field representatives travel throughout the Midwest to check up on every restaurant in a role Craig described as “part consultant, part cop.” They help ensure restaurant cleanliness, sandwich and fry preparation, customer service, and whether restaurants meet the Penn Station goal of getting sandwiches to customers in six minutes or less.
Above the field reps, franchise consultants also travel to evaluate restaurants and monitor consistency across the brand.
And that commitment to quality control has paid off: Penn Station has earned accolades, including recognition as the Nation’s Restaurant News Consumer Pick for best sandwich and Best Reuben in St. Louis.
Balancing Franchisees’ Profitability with Customer Satisfaction
The business model balances franchise profitability with customer service and satisfaction. The menu is a prime example of the care that goes into every business decision at Penn Station. The customer gets the variety of choosing from among 14 subs, while the restaurant owner gets the operational simplicity of a menu that lets him or her use many of the same ingredients for other sandwiches.
“Other than the sausage sub and the artichoke, basically all of the menu items are interchangeable,” Craig said. “For example, the chicken on the chicken parmesan is the same chicken we put on the teriyaki, and the pizza sauce we put on the parmesan is the same sauce on the pizza sub.”
When Jeff was developing the menu, he aimed to offer a variety for customers, but approached it from an operational perspective. He knew it was just as important to consider what the customers want as it was to keep it simple for the guys who are going to be making the food all day, every day.
One of the more obvious ways Penn Station caters to the customer experience and overall satisfaction is its pledge to get sandwiches served within six minutes of placing an order.
“We know people are starved for time during the workday and only have 30 or 40 minutes for lunch,” Craig said. “You need to get in and out.”
At the same time, Penn Station has a few unique features that set the restaurant apart from the typical lunch pit stop. While some shops only serve cold subs, every sub at Penn Station is served hot and grilled. Even the cold-cut subs are served on toasted bread.
“The typical sandwich shop is 85% lunch, but our mix between lunch and dinner is 50/50,” Craig said. “People view us as more of a meal, so we get families Saturdays and Sundays.”
Penn Station’s Quick Service Dining Experience Continues to Grow
Thirty years after the doors opened at the first Penn Station, the restaurant franchise continues to expand its footprint.
By prudently balancing profitability and customer demand without sacrificing quality, Penn Station is able to bring its iconic subs to more markets. A recently opened location in a suburb of Dayton, not far from Jeff’s original delicatessen, started out well above daily company average sales.
Penn Station is also tripling its Pittsburgh locations from six to 18 to meet the demand of customers and franchise owners in the area.
“Ultimately what we’re selling to franchisees is return on investment,” Craig said “We’re selling sandwiches, and we have to be able to help our franchisees do that in a profitable way.