Growth | February 2013 | By Sam Oches

The World Traveler (Full Transcript)

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Ken Cutshaw is growing Quiznos International globally a few months into the job.
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We had also spoken about a lot of menu sensitivities you have to pay attention to. In India, you probably don’t have much steak on the menu. Does that come up very often in many of your markets? In the three Middle East countries we’re in, they’re all halal. Our franchisees are very aware of the local customs. And we see the Middle East as a tremendous market for us. We’re not in Dubai yet, we’re not in UAE and Dubai and Abu Dhabi. So I think that’s certainly a targeted market for us. Many of the U.S. brands are in Dubai Mall, Mall of Emirates, and other places. But we’re in Saudi [Arabia], Kuwait, and we’re in Qatar. I’m going there in a couple weeks, I’m going to see those three franchisees to talk to them about the new management team and the significant focus on international and how we see the great opportunities for them to grow their stores and maybe hold up Saudi as the great example of rapid growth. Forty stores in less than two years is a pretty significant undertaking.

Speaking of American brands in the Middle East, you’ve mentioned how much saturation there is there. What do you consider your competition internationally? Are you still competing with the likes of Subway and folks over here, or are there homegrown brands in other countries? When you get outside the U.S., you’re generally competing against most of the [U.S. quick serves] and fast casuals. We’re all bringing a unique Americano experience. Who can entertain the guest to allow them to have a great food experience, but also allow them to be part of a global chain. We naturally compete against the Subways and the Arby’s of the world because we’re sandwiches, but I also think we compete against the McDonald’s and the larger players, too, that have that presence there.

Again, we deliver an Americano experience, and we want people to come here for that; not only for the great sandwiches and the food, but also just having a tangent or some sort of connection to the American experience.

Do they have many domestic brands in other nations? Not a lot. I’m trying to think of the brand in the Philippines… Jolly Bee. Jolly Bee in the Philippines has a tremendous presence. They’ve now franchised into other parts of Asia. But I think they’re an exception. Nando’s out of Africa, which is a roasted rotisserie chicken, piri piri, I think has a very good concept, and it’s out of South Africa and it’s doing well in Canada, and I believe they’re opening up in Washington, D.C. So we’re seeing a few brands coming this way. But the dominant participation in international franchising in the food space would still be U.S. brands.

The demand is America. Yeah, I think so.

In the last few years, I’ve felt like we can’t talk about anything without talking about the recession, because everything was affected by the recession and everything in many ways was reset by the recession. How much do you think that impacted international growth? In some ways it seems, if you’re struggling domestically, maybe it makes more sense to go international. Did it change the game on international growth? I think it had an impact. “Changing the game” is probably too far to go. But I do think that it gave brands a moment to pause and look at their opportunities in the U.S. The consumer was being more selective with their dollars and there are emerging markets that weren’t impacted as much as the U.S. during that period of time. So I think it certainly allowed the thinking among the management of many U.S. brands to reset itself and to look at the opportunities.

I know I’ve read some of your stories about small brands with two or three stores, and all of a sudden they’re in Dubai. That I find hard to understand. But still, I think every U.S. brand of any size should develop an international strategy, but should not do it in a way that they take the first person that comes in the door that shows an interest in their brand. It takes strategic thinking, as well as getting excited and then pausing for a period of time to reflect on the excitement, and then launch into global expansion, whether it’s your first time or whether it’s going to more countries than you’re already in.

What kind rate do you hope to open international Quiznos stores? You’ve mentioned the word accelerate—do you hope you accelerate the growth of Quiznos’ international presence? Do you have any numbers in mind in terms of goals for how many stores you want to have? In my short two months, what I’ve learned is we’ve never opened more than 100 stores in one year outside the U.S. We will open more than 100 stores next year outside the U.S. I think that’s only going to grow year over year. We’re at a modest 700 stores internationally, but I think we will hit the 1,000 mark very soon. I won’t put on a date on it, but I think we’ll hit that mark in the near term, and then from there, I hope we’ll accelerate more.

Do you think there’s some kind of ceiling, some sort of limit at which you can’t sustain anymore? I don’t think there’s any ceiling based upon what one of our competitors has done, and reaches 38,000 stores. So I think there’s no ceiling, but we also have to have educated growth in the sense that we have to support the growth and make sure we’re maintaining the brand image and maintaining the customer experience. When they go to a Quiznos in New Delhi or Singapore or Manila, it all has to be the same. Or back this way, in London, or Ireland, or, we have stores in Iceland. I think we’ll grow in the Middle East in the next few years. We want to make sure there’s a consistent customer experience, which includes the tasty sandwiches.

We’ve talked before about some of the markets that you’re shooting for, some of the markets you think might be hot. What are the markets that you’re looking into now, and what do you think will be the hot markets of the future? I think most people will answer in a similar way. I think the emerging markets of Asia—Southeast Asia is certainly an excellent market for us. We’ve only touched that opportunity with Singapore, and now with India. We’ve opened up in Manila, in September; it was my first grand opening and I was just incredibly impressed by not only the franchisee that we have, but also his passion and his commitment to growing the brand rapidly in the Philippines. So we have the rest of the markets—we have Indonesia, and Malaysia, and the other emerging markets of Thailand and Vietnam. Obviously we’re going to develop a China strategy; not sure what that is yet after two months, but if we do a follow-up six months from now, hopefully we can make that a focus on the China strategy.

And then I think the Middle East. It’s proven that the consumer loves the American experience and American brands and we want to touch the surface with Saudi Arabia and Kuwait and Qatar; [our franchisees] only started their operations, so they have a lot of room to grow there. But again, we’re not in UAE, we’re not in the Maghreb countries, which still would be a challenging market: Algeria, Tunisia, Morocco. That market also has its challenges from certain political consequences that have been going on right now. That has to be factored in.

We’re not in Europe, other than what would be considered the U.K. and Russia, but we’re going to open up in St. Petersburg early in 2013. We’re very excited about that group and their real commitment to grow the brand rapidly in the two major cities, St. Petersburg and Moscow. So I think that will be a good market for us.

Mainland Europe is not the highest priority for us now, but obviously it will factor in to our strategy in the future. Most of Latin America is already committed to franchisees, so it’s just a matter of structured growth over the next few years. In Brazil, we have close to 500 commitments over the next 10 years. So we expect Brazil to be a tremendous market for us over the next decade.

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