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Sandwich store chain Subway is a proven success story

Written by Martin Morris on Tuesday, 08 December 2020. Posted in Interviews

Mike Kehoe, President for Subway in the EMEA region, serves up a number of reasons why it should be on your menu.

Sandwich store chain Subway is a proven success story

Cutting his academic teeth at Texas Tech University, majoring in marketing; Mike Kehoe later earned an MBA at the University of Chile - in a dual degree, bi-lingual MBA for the Americas programme in conjunction with Tulane University, New Orleans, Louisiana. 

The corporate world beckoned - Kehoe eventually ending up working across a number of companies/brands - including Procter & Gamble (P&G), start-up adverting agency Perrocartón, Bain and Company, Coca-Cola, Bloomin’ Brands and FOCUS Brands - before becoming Subway’s President for the EMEA region in May 2020.

Joining Team Subway wasn’t a difficult decision for Kehoe to make, having been a Subway store consumer since childhood and always associating the company with “great tasting food I felt good about eating.” Yet it was always more than that. “I was amazed by the opportunity the brand has in the region and in the UK with unit level economics being very competitive and the CAPEX low.” Also playing a major role in Kehoe’s decision was CEO, John Chidsey’s vision for the company.

Just as Subway has significantly broadened its footprint since inception in 1965 (when Fred DeLuca and family friend Peter Buck started the company) into the major global brand it is today, so the company has stayed ahead of the game by investing in digital advancements.

“We are guest obsessed and want to deliver a streamlined digital experience that is convenient. This includes the Subway® App, which offers our guests access to greater value offers and an enhanced user experience,” says Kehoe. Subway also has third-party delivery partnerships with Just Eat, Uber Eats and Deliveroo.

He adds: “Our focus on convenience through digital platforms has been vital to the business during the global pandemic and enabled many franchisees to continue to safely serve guests, even if stores were physically closed,”…though many re-opened in June.

Today there are 40,000+ Subway locations in more than 100 countries across the world - the UK & Ireland portion of its ‘estate’ alone comprising 2,500+ stores, with nearly 1,000 franchisees. “But there is still a lot of growth potential in both traditional high street/retail park and non-traditional locations,” Kehoe is quick to point out. 

Describing the company’s franchising model as offering one of the lower-cost opportunities, especially when compared to other QSR (quick-service restaurant) brands, business ownership is more attainable in Subway’s case, according to Kehoe. 

Meanwhile, 99% brand awareness in the UK - resulting from years of strong marketing, “including national media, but also local marketing, product innovation and point of sale materials” - has helped franchisees become successful.

“Subway stores have a flexible footprint making it easy to open a store just about anywhere - from high streets to universities and colleges; to hospitals; to transport hubs, petrol forecourts and to convenience stores,” Kehoe further notes. 

“Nearly 60% of Subway stores are located on British and Irish high streets and in retail parks, providing employment for more than 25,000 local people.

“(And) with more than 40 years’ of franchising history, Subway franchisees benefit from operating in a tried-and-tested system, with excellent training and a solid support structure.”

The company has numerous Business Development Offices in the UK and Ireland, along with teams of Business Development Agents on hand to assist and mentor franchisees with site selection, leasing, design, construction, purchasing, operations, advertising and local store marketing, as well as providing ongoing support, according to Kehoe.  

But he cautions: “Focus on the numbers when you’re evaluating different franchise opportunities.  Make sure you understand what a store level P&L (profit/loss) looks like and what the up-front capital costs are to open the store.”  

He also recommends would be franchisees spending time in a store observing its operations and talking with the owner, if possible.  

Assuming the would be franchisee fits the bill, to the satisfaction of both parties, all new franchisees attend a comprehensive two-week training course providing a combination of classroom and store-based training, which provides franchisees with all the necessary knowledge and skills to run a successful store.

In addition to face-to-face training, franchisees are also encouraged to use the University of Subway - a well-established online training programme maintained by the Global Subway Support Centre, providing over 700 online courses for franchisees and their teams. “The University of Subway has delivered training for over 5.5 million franchisees across the world,” says Kehoe.

Once training has been successfully completed, franchisees are equipped with what they need to open their store. This includes the Business Development Office, which will work closely with the franchisee to find the right location for their store.  When the store location has been confirmed and an opening date agreed Business Consultants from the Business Development Office will work with the franchisee to ensure they have everything in place to open their store, including training store staff and ingredient orders. The Business Development Office will continue to provide ongoing support to franchisees and help them build successful businesses.  

An initial franchise fee of £8,500 applies, with total investment ranging from an estimated £85,570 - £221,240, depending on store location, size and rent required. The franchise agreement is for 20 years and renewable for 20 years (subject to terms and conditions).

The ‘elephant in the room’ of course remains the COVID-19 global pandemic and Subway, like other businesses, has been forced to invoke contingency plans - the safety and wellbeing of guests/store employees unsurprisingly being at the top of the list of priorities.

“While stores had to temporarily shut due to the lockdown earlier this year, we heavily invested in measures to ensure we were able to reopen locations safely; from enhanced cleaning protocols, updates to our usual operations, changes to shop layouts and further investment in convenience,” says Kehoe. 

Several Subway stores in hospital locations did remain open though with teams of committed Sandwich Artists™ providing hospital workers with access to a variety of freshly prepared subs, salads and wraps throughout the peak of the pandemic. 

“Subway continues to work hard to support its franchisees to keep their businesses going during the pandemic. The investment in digital platforms to provide contactless convenience, such as the Subway® App, third-party delivery and remote ordering order and pay platform, as well as national marketing campaigns highlighting Subway delivery and limited-time offers (have) all worked to drive sales for our franchisees and keep guests safe,” says Kehoe.  

Case in point is that during the most recent lockdowns Subway continued pushing its take-away and delivery business, while rolling out new menu boards and menu items, such as the Tiger Pig Sub. “The vast majority of our stores are open today with more than 50% of the locations seeing positive same store sales,” says Kehoe.

Community spirit has also played its part - many franchisees (throughout the height of the pandemic) having donated subs and snacks to local hospitals and key workers. “Worldwide, Subway and its franchisees have donated nearly 17 million meals and subs to those in need and those working the frontline during the pandemic,” notes Kehoe. 

One major casualty (so far) of the pandemic has been Prêt A Manger and while Subway had been competing with it Kehoe is quick to point out that Subway competes on a number of fronts. Unfazed by the competition though, he argues the company not only has loyal customers, but also new ones prepared to try something different.

“Thanks to our strong brand heritage and innovative product offering, I think our competition spans the gamut of traditional QSR (ex: burgers, pizza and chicken) to bakeries (like Prêt) and cafes, as well as supermarkets and drugstores.” 

It also means the company is constantly investing in R+D, looking at ways to improve the business for franchisees and guests alike, by rolling out new product innovations, revamping stores and utilising new technologies.

New product development is key to keeping Subway’s guests coming back, according to Kehoe. Indeed, several new products have been launched this year, the latest being Subway’s Christmas Sub, the previously mentioned Tiger Pig Sub - served on the company’s new Tiger Bread launched earlier this year - and the Mega Meat Sub, combining two of Subway’s fan favourites, the Meatball Marinara and the Italian B.M.T.

“In the end, we believe that ‘not all sandwiches are created equal’ and no two palates are alike, so the ability to customise your sandwich with fresh and innovative ingredients is always going to be a step ahead of the competition,” says Kehoe.

If there’s one thing Kehoe has taken on board during his corporate career though - especially from his time at P&G - it’s that the consumer ‘is the boss’. “I firmly believe that and always try to put myself in the ‘guests’ shoes”, asking what they want next from Subway,” says Kehoe.  

Having been an entrepreneur and owning his own business for nearly five years, Kehoe also believes he genuinely understands and appreciates what Subway franchisees do every day.

Being open to change and new ideas is also important - Kehoe believing this is critical in business, especially in a post Covid-19 world where agility will be a critical skill to winning. It also means having a vision about where to go and the ability to bring the right people along with you.

“A successful leader,” says Kehoe: “is someone who wakes up every morning with a passion for what they’re doing, who constantly challenges themselves and is happy with the multiple facets of their life.  Success for me is an interesting life-story full of strong personal relationships.”

Looking ahead, Kehoe envisages Subway’s international footprint eventually doubling in size, with significant store growth across all of EMEA, but especially in the UK, Germany, India, France, Spain, Italy, Poland, Russia, Saudi Arabia, Egypt and Turkey. 

“It isn’t unreasonable to think we could add nearly 2,000 stores over the next five years.  In addition to store growth, I think we will significantly grow our unit level sales via “off-premise” channels like delivery, take-away and catering that are a perfect fit for the Subway menu,” concludes Kehoe.

A successful formula, assuming an ongoing ability to respond to changing consumer needs, means future success is assured and Subway will continue to do what it (already) does well.

About the Author

Martin Morris

Martin Morris has more than 30 years of experience writing about topics for national and trade papers, ranging from banking and investment through to energy and computer security. Technology is transforming the financial landscape and it is my job, I believe, to both engage with and inform readers about the rapid changes that are underway there and elsewhere.

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