VF Franchise Consulting

Subway Hong Kong eyes expansion after makeover

Jun 28, 2018

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Subway Hong Kong is embarking on an expansion strategy, scouting for new locations and new franchisees as it unveils a restaurant and menu makeover.

Next month, a 900sqft Subway outlet which seats 40 will open at City University in Kowloon Tong. Not only will it be one of the chain’s largest restaurants in the territory, it will be a showcase of the brand’s future here.

“Basically it’s Subway stepping into the 21st Century,” Subway Hong Kong & Macau Development Office GM Jamie LeBrun told Inside Retail Hong Kong in an exclusive interview.

Subway Hong Kong currently has 25 outlets across the two territories. Three of those are in the process of being refurbished in the new look and style and more stores are under development or planning. Within the next 10 years, Subway Hong Kong plans 100 new outlets.

“Our franchise family is growing with four new franchisees this year and we are looking for engaged and dedicated franchisees with a team player mentality to join us,” said LeBrun.

Dubbed Fresh Forward, the new store design features light, bright colours, digital menu boards, the new generation Subway logo and graphics, and self-service beverage areas. Gone are the stained timbers and dark colour schemes, the result of a root-and-branch revamp of the brand’s positioning in the US, where Subway’s fortunes aren’t currently as buoyant as in Hong Kong. Some of the local stores may feature self-ordering kiosks in time.

Fresh produce will be on display, addressing the fact Hongkongers don’t realise vegetables like tomatoes, capsicums and cucumbers are delivered fresh and whole to be cut on site, says LeBrun.

Besides the fresh style, new stores like the one at City University will be set up to cater better to online ordering.

“With the move towards services like Deliveroo and Foodpanda, we have redesigned the back of house so where we have a prep bench, you can lift it up and you’ll have a salad bar so you can assemble orders at the back of the store for delivery. So when orders are coming in online during peak hours, someone will be out the back preparing orders and not interfering with the in-store trade.”

LeBrun says some Hong Kong Subway stores can earn up to 25 per cent of their sales online.

“That’s how big the online space is. When it’s raining, no one wants to go out and pick it up. People have got short lunchtimes too – no one wants to go stand in line.”

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Localised menu

Adapting the menu to local customers is also a focus.

“Product innovation is a cornerstone of future success. But we really were not doing a lot of that until now. So far this year we have already released six new products including a Prime Australian Beef Pastrami  and we are launching avocado products in July, with more localised options to follow.

LeBrun and his team, who have more than 50 years experience with the brand between them, took over the Subway Hong Kong development office last October after several stores were closed across the city. They adopted a back-to-basics approach focusing first on engaging franchisees, establishing a team culture in stores, fine-tuning operations, and improving the customer experience. The results are already obvious: sales have been growing steadily this calendar year with stores averaging a 10 per cent year-on-year uptick. Some have achieved as much as 22 per cent growth.

“Customers want good food and clean stores. And we’re giving them that,” said LeBrun.

“If you walk into a Louis Vuitton or a Gucci you expect the same service, anywhere in the world. It has to be similar. Subway is the same.”

Coffee and innovation

LeBrun says the chain will continue to expand the menu with both short-term promotions and long-term offers.

“Hongkongers love product innovation. Look at McDonald’s – every month they have new promotions. That’s where we need to be.”

Coffee will soon be added to Subway Hong Kong menus so customers who want a hot or iced drink can buy it at the same place as their sandwich, salad or cookies.

“Coffee is growing in Hong Kong. So we are looking for a way to feature high quality beans and fresh milk. We will offer high-grade coffee at affordable prices.”

The final part in the Subway Hong Kong renaissance is marketing, and LeBrun says the company has that in hand as well.

“There hasn’t been enough advertising until now and it hasn’t been in the right channels. We will be doing more targeted marketing via social media and digital channels which appeal to our core demographics.

“We also want to better communicate the sustainability practices Subway adheres to regarding animal welfare and our environmental impact. There are many positive stories of Subway doing the right thing that we want to share.”

“It’s good news,” LeBrun says of the transformation. “Because we’ve been talking about how it is going to happen. Now it is happening.”

By Robert Stockdill – Inside Retail Aisa

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