Christopher Adams

The Business Herald’s markets and banking reporter.

Subway chain hits 250 stores

North Island development manager Mark Hawes says NZ is capable of at least 400 stores. Photo / Sarah Ivey
North Island development manager Mark Hawes says NZ is capable of at least 400 stores. Photo / Sarah Ivey

American sandwich brand Subway has just opened its 250th New Zealand store and has bullish plans for local expansion, with 20 restaurants set to open this year.

The chain has grown rapidly in this country since its arrival in 1995 and is now the biggest quick service food operator in terms of store numbers, ahead of McDonald's, which has 161 locations.

And Mark Hawes, the chain's North Island development manager, says there's plenty of scope for growth.

"I would think New Zealand's capable of having at least 400 (Subway) stores," Hawes said.

"As long as the brand's in good health and you've got fabulous franchisees, and they're profitable, that's achievable."

Asked what the point of saturation for Subway might be in this country, he said: "I don't think there is one."

He pointed out that in some areas of the United States there was one Subway outlet for every 7000 people and those stores had just reported their highest sales so far.

Hawes said there was roughly one store to every 17,000 people in the North Island.

Securing sites was one of the biggest challenges the brand faced as it expanded and competition over who would operate new sites was resulting in some conflict at franchisee meetings, he said.

Hawes, who owns a number of Subway stores in Auckland, said the brand's franchisees were extremely passionate about the business, with many of them owning more than one store. Deven Maharaj - owner of the new Mt Roskill store, which was the brand's 250th New Zealand site - owns seven other Subway outlets.

"You've got to live and breathe the business if you want to be part of it," said Hawes.

He said it cost about $260,000, on average, to establish a franchise.

Franchisees pay a royalty fee of 8 per cent of sales, which goes to the parent company in the United States, and also contribute to an advertising fund.

"One of the best things about Subway is how flexible we can be - some of our stores are less than 40sq m," said Hawes, adding that the chain was one of the few fast food brands that health boards allowed to operate in New Zealand hospitals. "We can go into many different environments."

Subway faced consumer criticism this year over its Footlong sandwiches after customers found they were in some cases less than the advertised length.

Hawes said the row had not had an impact on sales, but the company was now placing more focus on bread-baking training.

"Ultimately it's about store operations and doing that right."

Subway was founded in Bridgeport, Connecticut, in 1965.

The brand now has more than 38,500 stores in 100 countries.


Subway

• Founded in Connecticut, US in 1965.

• Brand has more than 38,500 stores in 100 countries.

• Arrived in New Zealand in 1995.

• 250 stores here, with 20 more opening this year.

- NZ Herald

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