Having overtaken McDonald’s as the world’s largest fast food chain, Subway has stores in 96 countries. GCC development agent, Marwan Al Hamar, speaks about its regional plan.
The US-based Subway brand has swept across the globe with torpedo-like stealth using its successful franchised business model, which emphasises small, low-cost outlets.
Unlike the burger and fries staples of the traditional fast food chains, Subway’s focus on fresh food, prepared to order, has benefitted from the growing zeitgeist for healthy and nutritious F&B.
Combining the conveyor belt convenience of the fast food chain with the customised preparation model of the delicatessen, the sandwich brand’s expansion in the GCC shows no signs of abating, says Subway development agent, Marwan Al Hamar: “Our target is to finish 125 stores across the GCC by the end of 2011, and then to increase at a rate of 25 stores per year,” he says.
Al Hamar acquired the main concession for operating Subway restaurants in the Middle East in 1998, when he opened the first Subway restaurant at Deira City Centre in Dubai.
As development agent, he is the “eyes and ears” for Subway in the Middle East, identifying new areas for growth and monitoring the quality and consistency of food across all of the GCC outlets.
As matchmaker between Subway and new franchisees, Al Hamar owns less than 10% of the actual stores himself: “The rest are owned and operated by other individuals. All contracts are directly between the franchisee and Subway itself; I have my own separate contract with Subway.”
It costs an average of AED 70,000 (US $19,000) to set up a new Subway franchise, inclusive of all fees and legal costs, according to Al Hamar, who then takes an eight per cent cut of each store’s sales on a weekly basis.
As well as the right to use the Subway trademark, each franchisee receives assistance from Al Hamar with anything from finding a location and negotiating leases, to looking over store designs and working with contractors.
Al Hamar has rocketed ahead of the target for store openings set for him by Subway, having arranged for 40 more stores to open in the Middle East than his contract requires.
“The payback per store varies very much on the store’s location,” says Al Hamar. “It’s hard to suggest an average ROI as the rent costs for stores in some locations are five to seven times more than in others.”