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The concept: Cheba Hut
The details: A 25-unit quick-service toasted sub concept based in Fort Collins, Colo., with a marijuana-themed, psychedelic vibe. The chain’s year-over-year sales grew 11.6% in 2018, according to Technomic data. Its average unit volume is $1.5 million, according to the company, with most of its locations in Colorado and Arizona.
The backstory: Scott Jennings founded Cheba Hut 21 years ago in Arizona, back when marijuana had more counterculture status than the mainstream, semi-legalized drug it is today. In addition to sandwiches named after strains of marijuana, most Cheba Hut units serve local beer and spirits as well as munchies such as brownies (pot-free) and crisped rice treats.
Why it’s worth watching: After growing slowly over the past two decades, Cheba Hut is plotting an aggressive expansion push. The concept recently hired Brian Loeb as its vice president of marketing. Loeb, who spent many years as head of digital marketing for Smashburger, is Cheba Hut’s first outside corporate hire. He’s tasked with expanding the brand to audiences that may not be familiar, or even comfortable, with marijuana culture. The company, which has a 50-50 corporate-franchised structure, has partnered with a franchise consultant as well as a real estate company and is selling three-unit franchises (offering, in company parlance, for franchisees to “own a joint”) in many cities.
HERE ARE FIVE GROWTH-CENTRIC QUESTIONS WITH JENNINGS AND LOEB:
After more than 20 years, why are you ramping up for growth now?
Jennings: I started Cheba Hut as a cool place to work, where you didn’t need 15 to 20 pieces of flair. I wanted people to have fun, come as you are. If you smoke weed, that’s great. If you don’t, that’s great, too. (But) we need opportunity. These are good kids. We want to have opportunity for people in our organization.
As you expand, how will you grow your audience?
Loeb: Any marketer’s job is to boost sales. The way to do to do that is to elevate the customer experience. For 21 years, we’ve had this really, really loyal customer base. We owe extreme loyalty to those people. With that said, there’s a lot of people who haven’t tried Cheba. I don’t smoke pot and there was some sort of barrier to me at the beginning. … But I was completely hooked from the first bite. We need to start with that core base and extend that to other customers as well. We’ll launch a relevant and “Cheba-fied” loyalty program, revamp social programming, optimize online ordering. We’re certainly not veering away from what we’ve done and who we are. We’re not going to be Chuck E. Cheese’s overnight … but, at the same time, let’s extend Cheba to different segments.”
How has marijuana culture changed since you opened the first location?
Jennings: When I first started 21 years ago, the cops would come in to check it out. Now, they’re customers. That’s cool to see. That’s a change in attitudes of the myth of dumb stoners who don’t do nothing. We give back to society.
Are you looking for investors to fuel Cheba Hut’s growth?
Jennings: I have not heard any good stories about investors. We’re going to grow the company stores (by) three to four a year. We can do that with loans and cash flow. And there’s the prototype for franchisees. We’re fine where we’re at. We’re on track to hit 50 stores in two years.
Where are you looking to expand?
Jennings: We’ve always been a college concept. We’re free thinkers that haven’t been beaten down yet. But now big cities are getting cooler. And there’s a lot of cool college towns that deserve a Cheba Hut.
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