When Charley Shin started making Philly cheese steaks as an Ohio State University junior in the 1980s, he probably did not envision one day opening more than 500 stores to sell them.

August 16, 2013

When Charley Shin started making Philly cheese steaks as an Ohio State University junior in the 1980s, he probably did not envision one day opening more than 500 stores to sell them.

But in June, Shin's Columbus franchising company, Gosh Enterprises, opened its 500th Charleys store, in Fort Belvoir, Va., the U.S. Army installation, said Bob Wright, the company's interim CEO. There are plans to open 25 more locations this year and at least 50 next year in the United States, the Middle East, South America, Russia and Poland.

"It is an honor to reach this milestone achievement," said Shin, who immigrated to the United States from Korea when he was 13, in a statement. "Our premium, quality products and partnerships with franchisees who share the same belief in our mission - providing a great experience to every customer on every visit - have given us the opportunity for growth."

The restaurant chain that Shin started in 1986 as Charleys Grilled Subs is slowly transitioning to the name Charleys Philly Steaks. The emergence of several sub sandwich chains including Subway have redefined the category so Charleys no longer fits, said Wright, who also is president and chief operating officer.

His company is using the name change to re-emphasize what it has always done: pair freshly grilled USDA Choice steak, and now, white-meat chicken and deli meats, with real dairy cheese and customers' choice of toppings on sub buns, Wright said.

For more than a year, all new Charleys restaurants have opened with the new name, said Allison Short, marketing and public-relations manager for Gosh Enterprises. In the next few years, all of the company's existing restaurants - 90 percent of which are owned by franchisees - will adopt the new name.

The fresh preparation, choice of toppings and open kitchen mark Charleys as a fast-casual chain. At some of its free-standing stores, Charleys has installed glass windows that show cooking operations to drive-through customers, Wright said.

The fast-casual segment has been an area of growth in the otherwise flat restaurant market.

Charleys is "on trend" with today's consumer, said Tim Powell, a Dublin-based principal of Chicago-based Technomic, in an email. "Made-to-order foods give consumers the perception of fresh and made only for me, and Charleys does that very well."

Charleys introduced a new menu this year, which has been adopted by more than 130 locations.

"We will have 285 (menus) converted by the end of the year," Wright said.

"We are converting from our standard two sizes of sandwiches to three sizes of sandwiches," he said. The new sizes are 6, 9 and 12 inches.

"That seems like a simple thing," but by adding a smaller (6-inch) sandwich to its previous two-size menu, "we can drastically reduce the price and create an entry point . . . for a lot of people."

Charleys also is stretching its brand beyond stores in mall food courts, strip centers and military bases - what Wright calls "captive audience" locations - to a handful of freestanding stores, such as the one at 1836 W. Henderson Rd. in Columbus. But the company is not abandoning malls.

"This is a big part of our base. We work very well in these environments, so we have no desire to do anything but continue to expand in those captive-audience locations as much as possible," Wright said.

Charleys also is growing internationally, where mall development is "exploding," Wright said.

"At the end of the day, the growth is coming from the growing middle class and the financial freedom that affords," he said. "We have a product that is almost universally applicable around the world," Wright said. "It's the authenticity that really comes through with our food."

Early last year, Charleys struck a master franchisee agreement with Al Madani Group, a business conglomerate in Dubai, which is licensing the company's franchisees in the United Arab Emirates. This year, Charleys signed franchising deals for restaurants in Russia, Poland, Egypt, the Bahamas and Guyana.

"The U.S. market isn't growing that fast," said Bob O'Brien, a senior vice president for restaurant consulting firm NPD Group. "But these other markets, regardless of how big they are, are all growing pretty well.

"If you can find the right partners - that's not just one partner, you need suppliers, franchisees, all kinds of people - it can be a great opportunity for growth," O'Brien said.

The company's growth and fast-casual concept has put the Dublin-based chain on the "fast track" list at Technomic.

"The formula for their growth is probably not anything earth-shattering," Powell said. "From our experience (and my own visits), they deliver on the basics - quality food, team-approach service and attractive store/unit appearance. These are the fundamentals."

Charleys also has grown at a steady and sustainable pace, "which means they have not tried to expand too quickly, which could dilute the brand," Powell said. "Since 2008, they've grown sales by nearly 11 percent, but unit growth has been closer to 7 percent."

That means Charleys is focusing on excelling with its existing stores. Before the recession, many restaurants kept growing by opening new units, rather than improving unit economics, Powell said.

When the recession pinched customers' pockets in 2008, Charleys emphasized its quality ingredients and abundance of choices to grow sales at stores open at least a year, Wright said.

"Our vision for the company is to honor God and strengthen our neighbor," he said. "Sandwiches have everything to do with strengthening people."