Growth | February 2013 | By Sam Oches

The World Traveler

Ken Cutshaw has covered the globe throughout his impressive career. Now he’s tasked with translating that experience into success at Quiznos International.

Ken Cutshaw is growing Quiznos International globally a few months into the job.
John West Photography LLC
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Ken Cutshaw has worn many hats in his illustrious career. The native Tennessean and lawyer by trade was an executive for the 1982 World Exposition; acted as a campaign manager for a 1984 U.S. Senate campaign; served in the U.S. government with the Reagan and Bush administrations; and cofounded a private university in the nation of Georgia.

He’s also shared his expertise with the restaurant industry. Cutshaw cofounded Cheers Funeatery, a casual-dining restaurant group in Tennessee, and was a founding partner with Red, Hot & Blue, a 30-plus-unit casual barbecue chain. He also served as executive vice president for international and chief legal officer for Cajun Operating Company, parent of Church’s Chicken.

Today, Cutshaw is president of Denver-based Quiznos International, tasked with expanding a system that earned more than $230 million at nearly 700 units in 30 countries around the world in 2012—all while its domestic counterpart was resetting much of its menu and management team in an attempt to reverse falling sales and store counts.

Cutshaw joined the Quiznos team in September and, in November, sat down with editor Sam Oches to discuss his early results and long-term vision for the brand.

You’ve been on the job two months now. What’s the direction you’ve been trying to set? When I joined, there was a significant presence of Quiznos in the world. We aspire to increase that presence significantly over the next few years. But I also have been able to build a team pretty much internally to support international, because there may not have been a proper focus on the operational aspects of the international franchisee. And that’s my goal: to support the international master franchisees and provide them the skills and proven techniques to run great restaurants.

How long do you think that takes? I feel like, within the last two months, we’ve built a pretty good team. We’ve had a real opportunity to identify good talent in Denver, but we also have a very large operation in Toronto that supports more than 400 restaurants in Canada. So we’re using talent in Toronto and Denver and building a core team that will support our masters.

These are people with previous global franchise experience? Oh yeah. It’s amazing when you really look at the talent you have and then try to identify the needs of how it all meshes together. We had a grand opening in Brazil just a few weeks ago, and one of our franchise consultants in Canada, who’s worked in Brazil for years and won awards doing support work and speaking Portuguese, helped us in that opening. We have an excellent chef in Denver, but also, one of our franchise consultants in Canada trained under Jamie Oliver, who’s one of the well-known chefs in the U.K. He’s going to pitch in and help us from an international perspective on quality of product and menu.

With the right team in place, where do you hope to see the international strategy go in the future? I think any U.S. brand at this stage has to have a very significant international strategy. This new ownership of Quiznos and the new management team, including myself, are very focused on not only building the U.S. domestic system, but also giving the tools and the assets to international to grow it. We have 100 percent support from ownership and management to do whatever we need to do to support our masters and grow the brand.

You say that every U.S. brand should have an international strategy. In your mind, for a quick-service brand, what should the balance be between domestic and international? We obviously have more stores in the U.S. than we do internationally. But the potential for growth is much greater internationally. The runway may be a little bit longer, because opening in a new country, you do it in a structured manner and you do it in a way that will set the foundation for accelerated growth after you build the supply chain; you build the support system and the personnel assets to allow the system to grow. I think the strategies can complement each other, both international and domestic.

At the same time, international has to have its own strategy for growth, and often times, the global brands coming out of the U.S. will permit their franchisees in international markets to localize. As long as you stick to the core value of the brand and the delivery system and the consumer experience of the brand—as long as you hold very close to that—it’s appropriate to allow the franchisee to localize and support his local consumer with local-store marketing and also unique products.

We’re very much supportive of keeping certain core products on each menu, but then to see the local franchisee create a Mesquite Chicken or, in India, a Spicy Tikka Sandwich. We support it and we encourage it.

Who develops those menu items? We provide support in developing unique products for the market. Our chef was just in India two weeks ago looking at that menu offering and seeing how we could enhance it or provide not only what we sell in the U.S. and around the world, but also what can be added to the menu to satisfy the local palate. But as the master franchisees see growth, they can develop their own products.

Obviously, it’s all approved by the franchisor before it’s delivered to the market. But some of the large masters, particularly the one that covers most of Latin America, he’s got a very sophisticated R&D department, and they work on Latin American offerings that will appeal to the consumer throughout a number of countries.

There’s obviously a big trust factor here with the franchisees. How do you go about looking for those partners, knowing that you’re going to have to have that trust factor? I don’t think there’s an absolute formula for finding the right partner. I think there’s a certain number of factors you look for and identify in a partner. You look first for passion, that the person is passionate toward the restaurant industry and to build the business. In many cases, you’d like to find someone who has experience in the restaurant industry, and even multiunit restaurant experience in the industry. It’s not an absolute prerequisite, but it’s certainly preferred. And you look for someone who has the financial capabilities and assets to grow the brand.

In the case of the master franchising process we do at Quiznos, you look for someone that has business leadership skills, because they will not only build a few corporate stores to start with, but they’ll have to build a leadership team that will become a franchisor in their country or multiple countries. They will be replacing us, to some degree, as the franchisor, although they still will be a part of our global system, and Quiznos remains the franchisor.

What are the biggest challenges you face in international markets, and how do you get over those challenges? I think China is probably the best example of the most challenging market to enter. Even though I coauthored a book on doing business in China, I can’t pretend to say that I have the magic formula to enter China from a legal perspective. You certainly have to have excellent local counsel to guide you through the permitting process and everything that’s required in China and government mandates. Then also, I think you really have to do your testing on consumer preference. I think the typical Chinese consumer would like the Quiznos brand. Subway certainly has done well there.

I think in China, you have a very short fuse to be successful, and you have to really hit that consumer preference that will carry into long-term expansion. So that’s why I think every brand should be very careful and not just see China based on the numbers of consumers or the success of the other brands. The fact that several of the large global chains have been successful is no recipe for another large brand to go into China and be successful. We’ll do it very cautiously. I think when we do enter China, we’ll still have to enter under the master franchise model that we have in other countries. It will just depend upon the selection of the right master franchisee and the breadth of the territory.

Is there any way you can test a market, or when you go into a new market, do you feel like you have to go all in? I think it’s a risky proposition to go in and put up one store and then expect one or two stores to be a proper test. I think to go into a country has to be an all-in commitment, with the right franchise partner. And not only do they have the responsibility of the investment and of following the rubric of building the supply chain and building the things necessary to support a brand, but we as the franchisor have to have that same passion to support them—the training, the grand opening support, and the people.

We definitely believe we need to send people into the market to help every franchisor, not only when they open, but also before they open and then after they open. Opening day is only one day in the life of a restaurant.

You’ve mentioned how much saturation there is in some international markets, like the Middle East. What do you consider your competition internationally? 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.

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. How much do you think that impacted international growth? I think it had an impact. 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 about small brands that have two or three stores, and all of a sudden they’re in Dubai. That I find hard to understand. 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 who comes in the door who shows an interest in their brand. It takes strategic thinking.

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 it’s 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 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 to go—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.

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 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.

Is there a challenge to sustaining franchisee excitement? It’s great to get that partner who’s passionate for the brand, but you obviously have to be able to sustain that. I’m not trying to belittle your question, but as long as the sales stay up, their passion stays up (laughs). So I think whatever we can do to keep the sales up. We try to help them with a marketing calendar, with promotional items. We try to make recommendations on limited-time offerings. We send them recommendations because, as a franchisor talking to a master franchisee in his own country, we know our brand better than he does, but we don’t know the market better than he does. So we can suggest an LTO that may have done well in another market, may have done well in the Philippines, did well in Singapore, but there are different taste preferences, and we still have to rely upon the local franchisee.

I think … you keep their drive going in the right direction, and also explain to them the honeymoon of any restaurant; they’re not going to sustain those same sales levels. But as they level off, we try to build a pattern that they will maintain—a consistent level of sales—and see a little bit of growth and see that positive comp year over year. That’s going to keep the passion.