All this talk about menu, how do you maintain a secure supply chain around the globe? We get economies of scale when we go into some place like Europe and we can deal with all the European Union countries where it’s easier to get product from border to border. In those cases we can have one or two sources for a number of countries.
In other situations, if we can’t get something locally and we need to import either from another country or from the United States, it gets a little bit more pricey, but that way we can maintain our standards.
And who brokers those deals? Here in the United States and Canada and in Europe and Latin America we have a purchasing co-op that works with the vendors. In countries where we don’t have a purchasing co-op, then usually the regional office works on that.
Do potential international franchisees have to be a master franchisee and open an entire territory or can they open just a few stores? Honestly, we tried the master franchise route and that didn’t work too well for us. We still have a couple of master franchise units left and Japan is one of them. Russia is one of them. Another one is Saudi Arabia and I think that’s about it right now. We no longer do the master franchise agreements because we ended up giving up too much control, which is why the situation existed in Japan that I mentioned.
What we look for is local developers, local entrepreneurs. We like to have people from the country who are going to be either hands-on owner/operators for the franchise business or development agents, where that is their only business and they have the focus on the Subway business as opposed to a larger corporation.
Do international entrepreneurs seek you out to open new international units, or is Subway going to them? It’s a little bit of both. Our original plan was if you’re interested we’ll go there. And we got calls from everywhere from Afghanistan to Zimbabwe. In more recent years we’ve started determining which markets would be appropriate for entry by looking at a number of factors: the GDP, the cost of doing business, fast-food development, and such.
We still get calls from those countries and what we do with those folks is we kind of put them on hold. We have them on a list and if it gets to the point where it’s appropriate to do business in that country, we’ll contact them because those tend to be very entrepreneurial folks.
Even though Subway is in 90 countries, does the company still need to educate consumers about the brand when it opens a new territory? They don’t necessarily know about us. We arrive and sometimes they think we have something to do with an underground train. So it does take some education.
In some markets, we have to train people or educate people on the benefits of eating sandwiches, why they’re tasty, why they’re healthy, why they’re fresh, why we have them on fresh-baked bread. It’s kind of starting from the ground up to provide the idea of putting meat between two pieces of bread and making a meal out of it.