- The Washington Times - Thursday, October 10, 2002

Jerry's Subs and Pizza started as a true "mom-and-pop" shop: A local couple opened a restaurant in 1954 in Wheaton and named it after their son. Now it's a big business. Jerry's Systems Inc. is a Gaithersburg-based chain of 130 restaurants in nine countries, with 30 more on the way.
The new restaurants, operated by franchisees, will be mainly in Maryland and Northern Virginia. Seventy shops will get face-lifts.
The jump in store openings is in part a result of the recession and the economy's sluggish recovery,said Dave Terzian, operating partner and executive vice president for Jerry's Systems.
"Investors generally get more into franchising during difficult economic times, because the rate of return is better than the stock market right now," Mr. Terzian said. "People also take comfort in the fact that we've been around for nearly half a century, and while we're not totally recession-proof, we are remaining strong and expanding from our Montgomery County base."
Sales at stores open at least a year grew 3 percent to $53 million for the first six months of this year, compared with $51.5 million for 2001.
Abe and Leiah Suls opened the first Jerry's restaurant in 1954. They later sold the store to Max and Evelyn Levine, who popularized the name in the Washington area, Mr. Terzian said.
"Max ended up just going by 'Jerry' because customers in the community assumed that was his name," he said.
Mr. Terzian and three other investors bought Jerry's from Mr. and Mrs. Levine in the late 1970s and formed Jerry's Systems. They started franchising in the early 1980s, growing mainly in the Baltimore and Washington areas.
Today, the company itself owns three of the shops, one of which opened recently in the Aspen Hill Shopping Center in Silver Spring near the original store, which has closed.
The rest are run by franchisees, individuals who invest in Jerry's Systems to own and operate a Jerry's restaurant.
Patricia Carr and her husband, Chris Markwood, said they decided to invest in a Jerry's store set to open in Ashburn, Va., by spring because they wanted to capitalize on the growth explosion in Loudoun County.
"We have no experience in the fast-food industry, but this area is growing and opening up all sorts of restaurants," said Ms. Carr, former owner of a real estate brokerage firm.
First-time owners generally have a 98 percent success rate, averaging 4 percent to 5 percent same-store sales growth each year, Mr. Terzian said.
The couple was drawn to Jerry's new design, featuring pale-blue lighting with stainless steel tables, wall-to-wall mirrors and photos of landmarks with images of Jerry's items superimposed on them, Ms. Carr said. They also were impressed with the company's radio-advertising campaign, in which "Jerry" does a different celebrity impersonation each week.
"The new store design, with all its stainless steel and photos and mirrors inside, and the diversity in the food menu really sold us on the idea," she said. "Plus, I've loved the radio ads for 10 years, and Jerry's is really known in and outside the Beltway."
The couple plans to add a shop every year in Loudoun County, mainly to lessen competition in the area from other Jerry's franchise owners, Ms. Carr said. The couple are the sole owners of Jerry's shops in the area. They don't have exclusive rights to the county.
Bill Wallerstedt, the owner of a Jerry's restaurant on Quince Orchard Road in Gaithersburg, said low interest rates for real estate and higher sales growth made it the right time to expand beyond his one shop.
"One thing that has made the business profitable to be able to expand is the sort of co-branding Jerry's does with having both subs and pizza to offer to customers," said Mr. Wallerstedt, who will open an eatery on Falls Grove Road in Gaithersburg next year.
"Having that daytime item with the subs, especially the Philly cheese-steak subs, and the nighttime item with the New York-style pizza gives consumers a better selection and draws them in to our stores," he said.
While other fast-food chains usually see an increase in franchise business during a recession, Jerry's smaller franchise investment, $250,000 total, gave the company an edge over its competitors in attracting new owners, said Jeff Rosenfeld, franchising-industry analyst.
Investors franchising with McDonald's pay from $455,000 to $768,500 for one restaurant.
"New franchisees coming into the market are apt to buy three or five stores at most, and they generally seek inexpensive restaurants with good return rates," said Mr. Rosenfeld, the managing partner of Kessev Finances Inc. in Minneapolis. "That's why we've seen more of these small investment franchises infiltrate the market than larger ones like Subway."
Subway, which has 17,000 locations worldwide, will add 250 in the Washington area in 2003. Alan Warmund, president of Subway's Development Corp. of Washington, said all its sub shops will get face-lifts in the next four years to look more like Starbucks cafes than fast-food joints.
"There is more interest in franchising, but we aren't opening stores at the rate Jerry's is because Subway is already well-positioned in the fast-food market in the D.C. area," Mr. Warmund said.
Sales growth of 2 percent this year helped Jerry's invest in its new interior, Mr. Terzian said.
"Some of our stores are 20-plus years old and need to re-emerge with a newer, fresher look to keep up with other trendy fast-food restaurants," he said.
Mr. Terzian said he expects Jerry's Subs and Pizza restaurants to continue to grow in the area for the next three years.
"This market really has a strong economy, and it has grown astronomically in the last 10 years to the point that Jerry's stores are opening up in areas now where a decade ago the idea wouldn't be feasible."


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