That stockbroker job Kevin Osterfeld had longed for didn't turn out quite like he planned. So he made a change.
"When I was a stockbroker, I would eat at Philadelphia Steak & Subs in downtown Cincinnati. I loved the food, so I decided to buy the restaurant, which would become a Penn Station East Coast Subs restaurant," he says. "I knew nothing about the restaurant business. I knew nothing about franchising. I didn't really even know how it worked, but I was young and reckless and thought I'd figure it out."
Twenty-five years later, it's clear that Osterfeld did "figure it out." Recipient of Multi-Unit Franchisee magazine's 2012 MVP Influencer Award, he now owns 18 Penn Stations in Ohio. He also is an active participant in charitable ventures and franchise organizations and a busy family man.
Despite the positive outcome to his own story, when potential franchisees ask Osterfeld for advice about getting into franchising, he sounds a bit like that old parental maxim: "Don't do as I do--do as I say."
His road to success has not lacked in tough lessons, he says. For example, "I'll never forget that first week in the restaurant when I thought I needed to cut down on labor costs. In the afternoon in downtown Cincinnati then, it was dead slow, so I sent home everybody except myself and one employee. When a customer came in, I sent the employee to ring him up. He said, 'I don't know how,' and I said, 'Neither do I. I've never worked a register before.' That was a clear indication that I'd bitten off a lot and that it would take me some time to chew it up and swallow."
Osterfeld, a Cincinnati native and graduate of Miami University in Ohio, also recalls the sinking feeling his first major debt gave him. "I lived every day horrified that I couldn't pay back all that debt. But I was 23 years old living in an apartment with no wife or kids, so I worked all the time. That was my greatest motivation: I lived for paying off debt," he says now with a laugh.
Osterfeld also learned the hazards of growing too quickly. "I was dying to expand, so I opened another store that was actually too far on the edge of downtown Cincinnati. It almost took me under."
But Osterfeld soldiered on. And he learned. For his third restaurant, he bought an existing unit that was solid enough to enable him to keep his head above water as he grew.
In 1991, he approached then-fledgling Penn Station East Coast Subs about buying development rights for three counties of Greater Dayton, since Cincinnati was filling up with the popular sub shops. "When I bought Dayton, I didn't have any internal competition so I went in and cherry-picked the best sites. It made things a lot easier," he says today. "When you develop a market, you learn not only to pick the right sites but to do it with an eye toward developing the whole market."
Osterfeld says his life during early years in franchising consisted almost exclusively of work. Now married and father to three daughters, he sees his younger self in many potential recruits. "Twenty-five years in, it still surprises me how many people get involved having no idea what they're getting into. They're no different than I was. More often than not, they don't understand the time commitment or the capital needs."
And he notes one major shift in franchising since he bought his first store. "Twenty-five years ago, it was onesies, twosies. Now, franchisees who have been around and had success don't want to open one unit. They've got their eyes on a bigger prize," he says. "My own franchisor would prefer to sell to multiple-unit franchisees. If you're going to have a franchisee as a customer, it's easier to have one customer with five units than five customers with one unit each."
Today, Osterfeld, who views franchising as a business model that greatly enhances one's chance of success, and he offers the following general advice to newbies: (1) Don't be shy about asking every question that comes to mind; (2) Learn about leasing before you sign an agreement, because leases make or break businesses all the time; and (3) Don't just look at a three-year horizon--look five to 20 years down the road and consider whether you'll have one unit and pay off your debt or try to do multiple units or an area developer agreement.
Over the years, Osterfeld has built a strong track record of leadership and collaboration. For example, he and a few fellow franchisees started the first advertising cooperative for Penn Station in Cincinnati, and he sat on the franchise's first franchisee advisory council. He also spends time weekly talking and meeting with potential franchisees who contact him. "I'm glad to help. It's rewarding to see people succeed," he says.
"I spend a lot of time sharing. That's what franchising is all about. Look at the buying power today: we buy things so much cheaper, even with inflation, than 25 years ago. The things the franchisor doesn't provide buying power for, we work on them ourselves. For example, our area's franchisees negotiated as 44 stores with a dumpster service to get better buying power."
As for the future, Osterfeld says he doesn't see his 18 stores becoming 80. "I'm slowly phasing out. I took a partner five years ago and it is our intention for him to buy us out over the next five to eight years. As he takes over more of the daily chores, I'm able to spend more time on real estate, charitable organizations , and my family."
The Osterfelds enjoy spending time at their lakeside cottage in Northern Michigan. In addition to golfing, serving as president of his local country club, and dabbling in classic cars and real estate, Osterfeld also coaches volleyball for his daughters' teams. "I've never played a game a day in my life, but I'm learning," he says, laughing at his same-old approach to a new challenge.
Name: Kevin Osterfeld
Company: P.S. MGMT., Inc.
Brands/units: 18 Penn Station East Coast Subs