Dive Brief:
- Subway has signed its largest master franchise agreement in its history, the company said Tuesday in a press release.
- Master franchisee Shanghai Fu-Rui-Shi Corporate Development Co. will open 4,000 units across Mainland China during the next 20 years. FRS will also acquire the exclusive rights to manage and develop all Subway units in the country.
- This deal marks the company’s 13th master franchise and development agreement in the past two years, all of which add up to over 9,000 future restaurants across the world.
Dive Insight:
This agreement is part of the Subway’s multi-year transformation and increased focus on international growth. Subway is seeking to continue its growth in Asia Pacific with local partners in the market, as it plans grow its regional unit count from about 3,500 to 6,000 over the next five years.
Its newest agreement is funded by a consortium of private investors, including Asia Investment Capital. This group of investors has decades of experience managing large global QSR chains in Asia, the press release said. The group plans to appoint a CEO with experience in managing QSRs in the country.
Subway, which is in the process of selling itself, is also focused on attracting more experienced multi-unit operators to its U.S. system, rather than single-unit franchisees. In April, the company said it signed five new multi-unit owner agreements that would transfer over 230 stores previously owned by single- and multi-unit operators.
While the company was successful in signing these new deals, the QSR is reportedly having trouble attracting new multi-unit operators, according to Reuters. Potential franchisees told Reuters they didn’t anticipate much return on investment, and there remains a lot of uncertainty over the direction the Subway will take once it’s sold.
Operators are particularly concerned about the chain’s store-level margins, and some experts told Reuters that estimated average unit volumes are below $500,000. This concern comes even as Subway boasted 11.7% same-store sales growth in North America last quarter and its ninth consecutive quarter of global same-store sales growth.
