Mike Haggerty, Thundercloud Subs

Episode 30 | January 15, 2019

Thundercloud Subs is an iconic local business known for its “fresh, fast and healthy” food and its deep Austin roots, including the company’s signature Turkey Trot event on Thanksgiving Day. Co-owner Mike Haggerty has been with the company for almost 30 years, and he is as passionate now about the sandwiches (which he eats for lunch every day he’s in the office), the company’s culture, and its support for the community and the environment.

Running a Successful “Business of Pennies”

Mike had eaten plenty of Thundercloud Subs sandwiches as a University of Texas at Austin student, but it wasn’t until 1981 until he got into the sandwich business after running into co-founders John Meddaugh and Andy Cotton, who had started the company in 1975 with a single store at 1608 Lavaca St. They were looking to expand, and Mike became their first franchise owner with a building on Lake Austin Blvd that he was already renovating. He expanded the number of stores over the years, and eventually they brought all 30 locations back in-house. Today, Mike owns 16 of those locations while John and Andy own the other 14.

The key to Thundercloud’s success is continuing to live by the founding principles established by the founders. “Just make everything fresh every day,” says Mike.

That philosophy of freshness means that any food leftover at the end of the day must be thrown away, giving Thundercloud an edge in operational efficiency. Having a deep understanding of its customers and products gives the company the ability to better predict – and therefore manage – its costs by reducing waste.

That all starts with knowing the customers, who are loyal and surprisingly devoted to their favorite sandwich and often their preferred sandwich maker.

Also important is a consistent preparation process reinforced by a strong team of store managers. Mike has trained the team to view bread, avocados, and each sandwich wrapper as currency. “A bun is the same as a dollar,” Mike tells them.

The team is bought in to the company’s success in part because of the strong culture. “One thing we’ve been really successful doing,” says Mike, “is creating community, attracting community in our stores, with our employees.”

The combination of customer insights, the right processes, a committed team, and ongoing tracking enable the company to be better prepared and thereby create less waste. Mike notes that too many companies count dollars, but “a penny here and a penny there makes a difference. We’re a business of pennies, and we count every penny very closely.”

How Solar Power Saves Pennies (and the Earth)

In 2012, Thundercloud installed solar panels on several of the shops where they owned the property, including at the shop in Georgetown. The city just north of Austin is now 100 percent powered by renewable energy, primarily through wind and solar power farms in West Texas.

Mike was always interested in solar power but waited until it made sense from a financial as well as an environmental perspective. “I like to think of myself as an environmentalist,” he explains, “but the reality is I’m also a numbers nerd and a business guy.”

About seven years ago, solar power reached a tipping point. With the local rebates, the federal investment tax credit, and accelerated depreciation, Mike says, “the out-of-pocket investment just made sense – a 15-17 percent rate of return.”

Meeting the City of Austin’s Zero Waste Goals

The City of Austin has established aggressive zero waste goals, committing to reduce the amount of trash sent to landfill by 90 percent by 2040 through initiatives including extensive recycling and composting efforts. Their Universal Recycling Ordinance (URO) went into effect in October, and local restaurants are required to submit their plans for reducing food waste to the city by February 1st, 2019.

The URO includes a checklist of methods to divert organic material from landfills, such as donating extra food to the hungry or composting, which Thundercloud Subs already complies with through maintaining their signature promise of freshness through their regular operations. Mike says, “We want to eliminate what we throw away. We did it for dollars and sense. The city did it because they want to reduce what’s going into the landfill.”

Food waste is a serious problem in the United States, estimated at 30 to 40 percent of the food supply by the USDA’s Economic Research Service.. However, it is just one example of the importance – to both the bottom line and to the environment – of managing resources efficiently.

When you are running a business, Mike says, “all resources have a cost. Whether it’s the gallons of water you use or how many kilowatt hours of electricity or how much food you pay for – it all has to be managed.”

Building Community Through the Turkey Trot

The Turkey Trot started as an idea brought to Mike, John, and Andy, all of whom are runners, in the 1990s by a promoter. Here’s a little before and after to show you how it has grown:

Mike acknowledges the massive amount of work required to manage the Turkey Trot but says that it’s a labor of love, and being able to deliver a donation to Caritas of Austin each year makes it all worthwhile. “We probably create as much money for charity as any other race in Austin,” he says. “I think it’s an average of $15 per participant goes to the charity.”

The event is truly a community effort, with strong participation and support from Thundercloud employees, event sponsors (many of whom are Thundercloud business partners), and the Austin community as a whole. “It’s a ton of fun, it’s great to bring everybody together, it’s become a Thanksgiving Day tradition, and it is to me the quintessential Austin,” says Mike. “When you’re out there on that day, and to see the city in its splendor right in front of you from the Long Center with the sun rising behind you, it still blows my mind.”

What the Future Holds for Thundercloud Subs

What keeps Mike up at night are occupancy costs, because those are out of the company’s control. This includes energy, rent, triple net leases (in which tenants are responsible for property expenses beyond rent and utilities, such as taxes, insurance, and maintenance), real estate costs, and property taxes.

As Thundercloud Subs evolves, Mike expects the company to continue its past success in managing controllable costs such as labor and food and in stemming competition. “If we run our business right,” he says, “I don’t worry about competition. I worry about our customers.” That means listening to customers, amplifying their voice throughout the entire organization, and taking care of each customer every day.

For folks around Austin and San Antonio, you probably already know first-hand how well Thundercloud does exactly that. If not, there’s no need to miss out any longer! Go find the closest shop and pick up your favorite sandwich for lunch or dinner today. [Editor’s Note: My fave is the egg salad with jalapenos –Sherren]

LINKS AND RESOURCES

• Thundercloud Subs
• City of Georgetown Chooses 100 Percent Renewable Energy
• City of Austin Zero Waste Goals
• City of Austin Universal Recycling Ordinance
• USDA Food Waste Resources
• Imperfect Produce
• The story of baby carrots
• Thundercloud Subs Turkey Trot
• Caritas of Austin

For more great interviews with Texas business leaders who are using 21st century tools to reduce their environmental footprint and improve their profitability make sure to check tune in Texas Energy Lab Radio each week!

Tun in for our next episode with Dr. Joshua Rhodes, Ph.D., is a Research Analyst at the Webber Energy Group and The University of Texas at Austin Energy Institute. We’ll discuss how electricity supply and demand can be better controlled to bring more wind and solar power onto the grid.