New Togo’s owners pledge to refocus on West Coast, halt co-branding of Dunkin’

New Togo’s owners pledge to refocus on West Coast, halt co-branding of Dunkin’

SAN JOSE CALIF. Togo’s [3] Eateries sandwich chain are celebrating their “independence day” and the brand’s plan to refocus on Western core markets following last month’s acquisition of the quick-service brand by the private-equity firm Mainsail Partners and industry veteran Tony Gioia. —Leading franchisees of the 261-unit

Terms were not disclosed, but the Nov. 30 completion of the deal severed Togo’s from Canton, Mass.-based Dunkin’ Brands, parent of Dunkin’ Donuts [4] and Baskin-Robbins [5]. —Leading franchisees of the 261-unit

San Francisco-based Mainsail Partners teamed with former Baskin-Robbins president Gioia to acquire Togo’s, and he will be chairman and chief executive of the newly formed franchisor Togo’s Holdings LLC, based here. —Leading franchisees of the 261-unit

The new owners pledged to revive the sandwich chain as a regional brand focused exclusively on the West Coast and to do no more of the co-branding Dunkin’ Brands had emphasized. Gioia said about 70 Togo’s units are still co-branded with Baskin-Robbins, and Togo’s intends to support those dual-concept franchisees. —Leading franchisees of the 261-unit

“I strongly believe Togo’s is a wonderful brand with a unique consumer proposition and service model,” said Gioia, whose résumé includes stints as chief executive of Tully’s Coffee [6] and co-founder of Wolfgang Puck’s packaged-food operation. —Leading franchisees of the 261-unit

Last year, Gioia led the investment by private-equity firm Emigrant Capital in the Manhattan Beach, Calif.-based Robeks smoothie chain, and he remains an investor. —Leading franchisees of the 261-unit

Describing himself as a long-time fan of the Togo’s concept, Gioia said he is intimately familiar with the brand from his stint as Baskin-Robbins’ leader during the 1990s, when Dunkin’ Brands was owned by London-based Allied Domecq PLC. Gioia also served on the Allied Domecq executive team that bought Togo’s from the concept’s founder in 1997. —Leading franchisees of the 261-unit

Jason Payne, Mainsail’s managing partner, said Gioia is “an important part of the equation” in the company’s plan to operate Togo’s as its first foodservice investment. The firm is an owner of five other companies in such sectors as software and management training services. —Leading franchisees of the 261-unit

“In Tony, we see a CEO with a great ability to build community within a franchise base and aggressively grow a franchise system,” Payne said. —Leading franchisees of the 261-unit

Under the new owners, Togo’s will retain members of its management team, including brand officer Lisa McLean, director of purchasing Bob Fulks, and co-directors of operations Jeff Sweetman and Keith Maeda. —Leading franchisees of the 261-unit

Togo’s was founded in 1971 as Togo’s Eateries Inc. after Mike Cobler bought a mom-and-pop sandwich shop in San Jose called Togo’s Submarines. —Leading franchisees of the 261-unit

Cobler, who remains Togo’s largest franchisee with 13 units in the San Jose area, recreated the concept as Togo’s Eatery, redesigning the menu to focus on fresh, made-to-order sandwiches, wraps, soups and salads. The chain grew to more than 200 units before it was acquired by Allied Domecq in 1997 and placed under the Dunkin’ Brands umbrella. —Leading franchisees of the 261-unit

Allied’s strategic plan was to co-brand Togo’s with Dunkin’ Donuts and Baskin-Robbins, bundling all three brands in some stores as a way to extend franchisees’ daypart potential, Gioia said. —Leading franchisees of the 261-unit

Under Allied Domecq’s ownership, Togo’s expanded into the Eastern United States, at one point reaching about 400 units. —Leading franchisees of the 261-unit

“I always questioned the viability of that,” Cobler said. “They went too fast, too far. They didn’t really understand the business.” —Leading franchisees of the 261-unit

Mainsail’s Payne agreed, saying, “It would be a bad idea to try to move into the East Coast again.” —Leading franchisees of the 261-unit

In 2005, Allied Domecq was acquired by French distiller Pernod Ricard, which sold Dunkin’ Brands the following year to a consortium of American private-equity firms for $2.43 billion. Dunkin’ in October 2006 announced plans to spin off Togo’s while taking the chain “back to its roots” and retrenching to its core West Coast markets, Gioia said. Many Togo’s units in the East were reflagged as Dunkin’ Deli and other brands. —Leading franchisees of the 261-unit

Dunkin’ had not sold any new Togo’s franchises for at least two years, Payne said. —Leading franchisees of the 261-unit

Dunkin’ Brands declined to comment on Togo’s downsizing or abandonment of co-branding, though chairman and chief executive Jon Luther issued a statement saying that Gioia and Mainsail Partners “have tremendous passion for the Togo’s brand. I feel gratified knowing that the company is in great hands, with people who love it and are committed to helping it flourish.” —Leading franchisees of the 261-unit

Togo’s systemwide sales for 2006 were $157 million, according to Dunkin’ Brands. —Leading franchisees of the 261-unit

Known for its signature pastrami sandwiches, Togo’s custom-ordering format, large portions and fresh ingredients offer a unique value proposition, Gioia contends. He estimated that annual sales are around $625,000 at the chain’s units, which typically range from 1,300 to 1,500 square feet and seat 25 to 30. Franchisees, who own all but one of the chain’s 261 branches, pay a 5-percent-of-sales royalty to the franchisor. —Leading franchisees of the 261-unit

“Comp sales have been positive for the past couple years,” Gioia said. “Our big focus will be to work with franchisees on improving their unit economics.” —Leading franchisees of the 261-unit

Chain founder Cobler said his stores generate average annual sales closer to $800,000, despite competition from sandwich giants such as Subway [7] and Quiznos. —Leading franchisees of the 261-unit

Challenges for the chain now include skyrocketing real estate costs in the West, said Cobler, who hopes to see Togo’s new owners focus on improving operations and attracting high-quality franchisees. —Leading franchisees of the 261-unit

“I’m very optimistic,” he said. “This is a very positive event for this chain.” —Leading franchisees of the 261-unit

Franchisee Vincent Shepherd, who owns one unit in Monterey Park, Calif., said he was thrilled by the chain’s new independence. —Leading franchisees of the 261-unit

“This will give us more freedom,” he said. “Decisions will be made faster. It won’t take as long to get things done.” —Leading franchisees of the 261-unit