So you don’t have any stores in China right now? No.
And you haven’t ever? No.
What does that strategy look like? I imagine that has to be intimidating. Everyone gets excited about it, because everyone sees the success of KFC and McDonald’s. Then you look at Auntie Anne’s and you see that it’s not an easy market to tackle. I believe our new ownership and management would like to go into China, but the strategy is unclear right now. In our follow-up interview, I’ll give you a clearer definition of that (laughs).
In my two months at Quiznos, my focus has been to identify the team to support the franchisees and to allow them to grow in an accelerated fashion. We have two countries that we’re in negotiations with—I can’t name the countries, because you never know until you sign an agreement—we’re just negotiating the final terms of the master franchise agreement. But there are three countries that we have initiated fairly extensive discussions with. So if we close those five countries alone, that will keep us very busy in 2013.
They’re all new markets for you? Those are all new markets.
The China question brings up another issue with international growth, which is interesting from a domestic perspective. What are the barriers and challenges that you face internationally? Some things we might take for granted here: governments, real estate, supply chain. 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 council 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 consumer testing, or 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 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 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. It could be a big success, but three months later, it could turn around.
You’ve mentioned the love of Western products in China and the demand for Quiznos’ product. Why do you think Quiznos’ menu resonates with international consumers? I think when an international consumer looks at a U.S. product, they want to feel a uniqueness of that product. Quiznos, from its very beginning, has been known as a flavorful, spicy, zesty [product] with a lot of flavor, and known for its gourmet sauces. So I think a consumer gets that it’s not a typical sandwich that you pick up from the local grocery store or even a local deli, and that Quiznos has this very unique, flavorful sandwich with a lot of unique sauces. If we do it right in a market—and we’ve done so in a number of markets—then we resonate with those customers based on the flavorful sandwiches, but also the choices. We also have some very unique soups that are designed for our menu, and salads too, but that’s a lesser item. We really want to focus on our core product, and that’s our premium sandwiches.
Let’s talk a little about some of the shifts Quiznos domestic has made, and how it might affect international. Quiznos has been through a lot the last couple of years. There have been a lot of store closures in the U.S., they just overhauled the menu. How much do you think some of the struggles domestically might have played into more of a commitment internationally? Did it affect the strategy at all? I’m new to the brand, so what I know about domestic is history, and this new management team is really focused on supporting the core values of Quiznos and bringing it back to its day where it was a premium product and consumers loved the product—and I think they still do globally. We’ve seen a true passion for the brand in many of the countries that we’re in now, like Brazil, which we just opened up.
What’s occurred in the U.S. has had no impact on the rapid growth in Brazil. Saudi Arabia is just a tremendous success; we’ve opened close to 40 stores in approximately 18 months. They developed a consumer following in their market. Each country is different, and our approach is to work closely with the people we have identified and selected to be our franchisees and to be totally supportive of how they build the Quiznos brand in their market, to give them core products, but also the localization and local-store marketing and everything. I think you have to look at each market differently. I think only the good parts of the domestic system are what we’re transferring to our international partners.
The overhaul that did happen here, that went to menus in international stores as well? Not completely. Portions of it. Often times, although we work closely with each of our master franchisees to build the menu—and we do what we try to do best, and that is the chicken and the steak sandwiches—some of what’s been popular here, we try to transfer them to the international franchisee. But we work closely with them to build their own menu. Some of our franchisees have a lot of restaurant experience, so they have their own ideas. As long as our chef signs off on it; he’s a culinary expert and he’s been with the brand for many, many years, so we trust what he’s going to do and work with the local franchisee to build their menu.
When we spoke earlier, did you say it’s an 80/20 balance between local and Quiznos corporate menus? Yes. That’s generally the percentage that I’ve picked up. That may vary from country to country, but I’ve been told now that India, because it’s a unique market and obviously one of the most spicy markets in the world for food, their menu is really … around 60/40. So it can be blended from a 60/40 to an 80/20.
You’ll see in our Latin America markets that, while most of our stores around the world will have sandwiches and chips as a compliment to the sandwich, our Latin America franchisee has really pushed the french fries. So a large percentage of sandwiches sold throughout Latin America are complimented by French fries.
Which are not available anywhere in the U.S., right? No.