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IRW: What are some of the key ways the American and Australian flavour profile differs?
GC: The taste in the US, from what I understand, has traditionally been a little blander. That probably would have suited Australia 10 years ago, but the advent of a lot of different cooking shows and richer and denser flavours has changed that. That’s why you’ve seen us add new menu items like spicy buffalo chicken with blue cheese sauce. Our sauces would traditionally have been targeted in the middle, but now we’re boldly saying if you want a blue cheese sauce, you’re going to get a blue cheese sauce. If you want a habanero hot sauce, it’s going to be hot. And if you don’t like it, you can choose something else on the menu. That is what our guests were asking for, and we’re proud of it. What I love about Subway is if you don’t want the bold flavours, you can go to those traditional menu items. We’re tailoring our menu for a number of guests.
IRW: So is this a rebrand?
GC: We’re not calling it a rebrand; we’re saying that we’re developing a better Subway. We have 100 restaurants trialling the new menu in Australia and New Zealand and five restaurants trialling our new Fresh Forward format. They’ve been rolled out over the last three months and we’re gradually rolling more out. Our ambition is to have 60 new restaurants in the Fresh Forward design by January next year.
IRW: What are the main changes you’ve made to the menu and look and feel of Subway restaurants?
GC: We’ve worked really hard on the quality of our products. We’ve got new ham, new chicken, new premium sauces, new breads, including a rye bread. Again, it’s respecting what has always been there at Subway – ham, chicken, turkey have been in Subway for
53 years – but now we’ve dialled up the quality of the products. We took out carrots and pickles in the trial initially, but the overwhelming response we got was that people wanted the carrots and pickles back, so they’re back. We’re listening to guest feedback, and the response has been overwhelmingly positive, both from our guests and franchise owners.
The Fresh Forward format is basically our new restaurant design.
It’s a more modern design; it’s cleaner and not overwhelmed with
point of purchase. It basically features our new stainless look: our
new cambros, prep and presentation areas – we’ve actually got a
display with all our fresh produce – and a whole new menu format
with digital boards and so on. It’s a new restaurant, but not a
new Subway.
IRW: I understand you’re also embracing delivery…
GC: Yes; it’s one of the five key pillars of our strategy. The first part is
all about the food and in-store look. The second part is our extended
menu, which includes offering paninis, signature wraps and salads.
The third part is new restaurants, and the fourth key part is what
we’re calling convenience and technology. We’ll have an app next
year that will enable guests to order their meals remotely and pick
them up in-store, and we’ll put in place more formalised agreements
with third-party delivery platforms. [Third-party delivery] has only
really come about in the last few months, and it’s sporadic. We
haven’t rolled it out as a business
yet, but individual franchise
owners are using different thirdparty
delivery options.
We’ll also be dialling up our
catering opportunity. We’re
working on a corporate strategy
to show the benefits of catering
for the restaurants that aren’t
already doing it. We’re getting
a lot of interest from schools,
government departments, and a
lot of corporates that are picking
up on the freshness, product
quality and ‘better for you’
elements of Subway. When we talk
about the future for the franchise
owner, there’s some really good
momentum in some of these areas
that could result in increased sales
and profit.
IRW: Is it harder for franchise
businesses to roll out network-wide changes like this, since
they don’t have full control like non-franchise businesses do?
GC: I’m not sure if it’s harder, but it’s certainly a big process to roll
it out across 1600 restaurants across Australia and New Zealand.
The ‘why’ behind it is that we want to increase sales and profitability
for franchise owners, so increasing profitable guest count promptly
is our number one objective. It’s essential that we motivate our
franchise owners to look at all these incremental opportunities,
because if we’re going to do the same thing, we’re going to get the
same result. The current environment is challenging, it’s competitive,
and you need to be in a lot of these areas and doing well to succeed.
Our role is to help the franchise owners be successful.
IRW: Are you hand-picking particular
franchise owners to participate in the trial,
or are they coming to you?
GC: It depends. We’re suggesting the areas
we think are best suited to the changes, but
we’ve also got franchise owners coming to
us saying, ‘We want to do this. When can
we do it?’ We’re doing what we call smart
development. We’re not just telling franchise
owners to spend the money, we’re helping
them based on where they’re currently
located, what their current lease is, what the
terms of their lease are…because if they’re
going to invest money into a new restaurant
design, the longer they have their lease the
better. So we’re not pushing this out; we’re
working with franchise owners. And the
numbers I’ve seen for next year certainly
far out exceed what I thought in terms of
people’s interest in doing it. That’s because
a lot of owners are visiting these restaurants
and actually going, ‘Wow, this is pretty good’.
It’s not like we’re building a $10 million restaurant. We’re building
restaurants that are within reach for franchise owners. They’re functional and really support what Subway is about.
IRW: How do you balance the desire to update the brand with
the cost of doing so, especially since the cost is borne by the
franchise owners?
GC: There’s an impost to the franchise owners with anything we
do, but we’re looking at how we can support them with the rollout
of Fresh Now, which will see our new food, new cambros and new
flavour stations in every restaurant across the network by the end
of this year. So we’re working through the final costs of that and
working with the franchise owners to
get it done. In my experience, this has
been a really positive process.
IRW: Do you have a plan to convert
every restaurant to the Fresh
Forward format?
GC: As with any major change, when
you’ve got 1600 restaurants across
Australia and New Zealand changing
to that Fresh Forward format, that’s
a multi-year process. But the key
component is what we’re doing at the
moment, which is the new food and
extended menus.
In addition, we’re running a major
support program called Restaurant
Excellence, which is about the look
and feel and service element of the
restaurant. You can’t change the food
and not be getting the service to the
standard that you deserve. We’ve put
a lot of programs in place supporting
the franchise owner around what great
service looks like, what a great restaurant looks like and those key
things. They are basic things, from a greet to a smile to a ‘thank
you’ to – where possible – an acknowledgement by name. Those
key service elements will let the whole program down if they’re not
delivered on. That is actually the fifth pillar of the strategy I was
going through before.
IRW: What was the rationale behind the changes? Was it just
time to do a brand refresh, or were you thinking you needed to
make some changes from a commercial perspective?
GC: The changes were based on guest feedback. We’ve got an
enormous base of loyal Subway consumers, and they were saying
that they love the brand, but they wanted more freshness and more
variety. They were looking for the brand to move with the times. We
had to ask ourselves whether we were meeting the current trends.
Was our bread on trend with the current varieties? Were we using
artificial colours?
IRW: Food trends seem to change at warp speed. What is it like
trying to keep up with that?
GC: At the moment, on-trend food is
better for you and prepared in-restaurant.
We just released a new ad where the
focus is on the fact that we slice all our
onions every day in-restaurant. A lot of
guests didn’t know that. The other thing
we focus on in the ad is local sourcing
for our sauces and no artificial colours or
flavouring. People didn’t understand that
Subway is produced in-store, cut in-store
and consumed in-store. That led to our
caption around ‘my kind of fresh’.
IRW: There have been some troubling
revelations of franchise businesses
not doing enough to support franchise
owners. Subway hasn’t been the
subject of any of these stories so far,
but has the negative press impacted
the business?
GC: We’re certainly doing our best to
make sure it doesn’t, but we recognise
that it’s a tough environment out there,
and if you stand still at the moment, you’re going to go backwards.
That’s a big piece of what we’re doing now. We’re moving forward
and putting these initiatives in place so our franchise owners can sell
more and make more. If they do that, everyone’s a winner.
We’re also staying focused on the sustained support model that
we’ve had in place for a number of years. We have a motivator group
of business development agents that run each territory with a group
of business consultants, who work very closely with the restaurants.
If a restaurant is deemed to be able to do better, our teams need
to be there to show them how, from food wastage to rostering to their service levels and quality and just their general restaurant
excellence. We need to continue to drive these support systems
home in a positive way.
IRW: What are some of the biggest challenges the sector faces
at the moment?
GC: Some of the bigger issues are the rising rents and rising
labour costs. We can’t control that, but the thing we can control
and what we focus on is operational excellence. How are you
running the restaurant, where is your food wastage, what is your
local area marketing, how are you
capitalising on areas like thirdparty
delivery, catering and so
on? These are the areas where
we’re laser focused on helping
franchise owners succeed. There
will always be corporate strategies
around that, but we understand
that we also need to support the
franchise owners based on their
local conditions, because a local
issue in a regional NSW area may
be very different to one in
North Sydney.
IRW: Do you see third-party
delivery platforms as a win for
restaurants, or more of a mixed
bag, given the fees involved?
GC: It’s definitely a win. There is a cost to it, but you can price your
menu items accordingly. People purchasing products on third-party
delivery apps are prepared to pay more than they are for normal
menu items. Our role is to demonstrate that to the franchise owner
and help them do it.
If a menu item costs $10 and the delivery platform charges [the
restaurant] a fee of 30 per cent – I’m making up these numbers –
you would price your product somewhere in between. If you price
it at $13, you’re probably going to lose your guest, but if you price
it somewhere in the middle of $10 and $13, you’re likely to drive a
profit because you’re utilising the resources you already have in
the restaurant.
What you’ve also got to remember is that it doesn’t matter if we’re
a firm believer in this or if the restaurant is, it’s what the guests want.
They want it now, so either you’re in it, or you’re not, and our view is
you need to be in it.
IRW: Subway has also taken steps
to reduce packaging waste. What
do you make of this recent focus on
sustainability?
GC: I think companies do it in two ways –
they’re either reactive to it or proactive.
They either advertise that they do it, or they
just get on with it and do it. At Subway,
we’ve been doing a lot of initiatives behind
the scenes to reduce waste and to reduce
cost, including simple things like reducing
the size of the napkins, which saves 75
tonnes of paper a year. But they’re not in
the press, so you don’t know about it. We’re
always looking at where we can reduce
waste, but there’s always a caveat on it and
that is the question of whether it’s going
to cost the franchise owner or the guest
more? There’s no right answer because in the current world, guests
are prepared to pay for sustainability programs, but they’re not
prepared to pay a lot for them. With anything we do, the priority
is the environmental impact, but we don’t want to pass the cost
[of that] onto the franchise owner or the guest.