Tuesday, September 27, 2011

Kosher Subways Don't Cut It 

The Subway sandwich shop in a largely Jewish neighborhood of Los Angeles looks much like any other, except for a large green sign that proclaims the outlet "Glatt Kosher."
Inside, there are other differences. Customers on a recent afternoon included three men in the black and white attire of Orthodox Jews. There was no ham and cheese sub on the menu and the "Five-Dollar Footlong" was replaced by an "$8 and under deal" for a 12-inch sub.
Five years ago, Subway hailed the kosher consumer as a potentially huge new market. Entrepreneurs teamed up with the company to open more than a dozen kosher outlets from coast to coast.
But the shops remained isolated, unable to participate in Subway's national promotions. Expensive ingredients also pushed prices higher, scaring away diners who don't keep kosher, the laws that govern Jewish eating habits. Of the 15 kosher Subways that opened in the U.S., just five remain today.
Franchisees say Subway's parent company, closely held Doctor's Associates Inc. of Milford, Conn., didn't provide the support they needed to make the shops viable and that they fell through the cracks amid Subway's rapid growth. With more than 35,000 sandwich shops globally, Subway recently surpassed McDonald's Corp. as the world's biggest restaurant chain in terms of units.
During the 2006 grand opening of the first kosher Subway, located in a Jewish community center near Cleveland, Subway pitchman Jared Fogle led a Hebrew blessing in a white yarmulke emblazoned with the store's green and yellow "Subway@theJ" logo.
Charles Zuchowski, who helped open that first Subway, is tangled in litigation with Doctor's Associates, claiming that Doctor's kept business information from him. Doctor's Associates declined to comment for this article, citing the litigation.
Kosher restaurants can't serve pork or offer dairy products, as meat and dairy can't mingle. Kosher meat can cost twice as much as non-kosher meat due to strict preparation requirements. And it's often hard to find suppliers, said proprietors of now-closed kosher Subways in Kansas and Brooklyn.
In addition, an Orthodox Jewish employee must turn the oven on and off each day and the restaurants have to pay to be certified by a rabbinical organization that sends a rabbi over at random times to supervise operations. They are also closed at what are peak dining times—the Jewish Sabbath, which begins on sundown Friday and ends at sundown Saturday.
In all, kosher Subways cost about 30% more to operate than non-kosher shops, franchisees say. And the complexity of running kosher restaurants was at odds with Subway's business model of simplicity.
On a recent afternoon inside the small, clean shop in Los Angeles, one customer attempted to order a turkey and cheese sandwich, prompting the sandwich maker to announce: "This is a kosher Subway. We have no cheese, we have no pork. If you're looking for a regular Subway, there's one two blocks away." The customer shrugged and skipped the cheese.
Although Subway allows the kosher shops to set higher prices for their sandwiches—kosher foot-longs can cost more than $9— the parent company doesn't give them a break on royalty fees. Subway collects 12.5% of every store's weekly sales. More than 4% of that fee goes toward national advertising that the kosher franchisees say doesn't benefit them, because Subway doesn't advertise the kosher stores.
The higher prices mean kosher Subways have a harder time as a fast-food chain competing against nearby neighborhood Jewish eateries.
Michael Zarrabi, a plastic surgeon, was disappointed after paying $8.70 for a kosher Subway pastrami sandwich in L.A. "If I wanted to pay that much for a pastrami sandwich, I'd go to a deli," he says.
Liron Shamsiav closed his kosher Subway in the New York borough of Queens in July because he says he lacked money to advertise. He also ran afoul of the rabbi supervisor because he didn't have enough money to buy his own napkins and relied on the ones Subway supplied, which featured non-kosher sandwiches. He says he also tried to get customized flyers and coupons from Subway but was denied. "It was always, 'No, no, no,'" Mr. Shamsiav says.
And the "$5 footlong" promotion that powered Subway in the recession is largely out of reach.
Jason Zuchowski, son of Charles and owner of a kosher Subway in Baltimore, thought he could fix that by using Tofurky, an inexpensive kosher meat substitute. Last year, Subway said no, he said.
Harry Kozlovsky, an investor in the Baltimore store who oversees its daily operations, says that even though Tofurkey didn't make it on the menu, "Subway has bent over backwards" to accommodate his requests for other unique items such as shawarma and French fries.
Not all kosher franchisees have struggled. Maurice Lichy, who owns a kosher Subway located inside the Michael-Ann Russell Jewish Community Center in North Miami Beach, says his store is profitable, although sales have dropped off because of the economy. "I can't complain," he says, "We have a captive audience."

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