Demand for Subway restaurants in markets around the world is strong, at least according to its CEO John Chidsey.
“The demand for Subway restaurants is unprecedented in many markets around the world, including Indonesia,” Chidsey said in a statement on the chain’s newest franchise agreement, with a major food and beverage retailer in the Asian nation.
But any “unprecedented” demand for Subway locations has yet to translate into actual restaurants. While Subway’s declining unit count in the U.S. has been a major source of consternation inside and outside of the chain, its international unit count is under nearly as much pressure.
At the end of 2020, the chain had 15,472 locations outside the U.S. That was down some 9.4% from the year before, according to data from Restaurant Business sister company Technomic. But it is also down more than 14% from the number of locations it operated internationally in 2017, when the chain peaked at 18,004.
That decline globally has been accentuated by Subway’s domestic weakness-unit count in the U.S. has declined 18% over the past five years, for instance, or about 5,000 restaurants.
International development can often offset chains’ domestic weakness, providing some cover for a few years as companies work to reverse their fortunes. Companies like Burger King and Krispy Kreme have been able to boast about overall growth largely from strength internationally, which have hidden weaker domestic results.
But Subway has been struggling with unit closures everywhere, a likely result of the chain’s focus on small-scale operators with low unit volumes. Those operators have been closing at a remarkable pace in recent years. Total unit count for the chain is down nearly 16% since 2015, to less than 38,000 from a peak of nearly 45,000.
The company still has a lot of restaurants, more than McDonald’s or Starbucks or KFC. But Subway remains more dependent on restaurant count than those others for its revenues, given that the typical location makes only about $400,000 a year in sales.
All of which makes its deal with PT Mitra Adiperkasa Tbk, or MAP, all the more important. Subway has inked an agreement in Indonesia with the company’s food and beverage subsidiary to develop locations starting in the latter part of this year in the Greater Jakarta region.
MAP operates more than 590 locations in 33 Indonesian cities, including chains like Starbucks and Krispy Kreme.
The franchisee will also be the first to implement Subway’s new global development strategy, including franchisees get exclusive rights to develop locations in a single country. The goal will be to establish “strong and steady annual restaurant growth.”
The deal will also mark what the company says is its first step to grow its presence in the Asia Pacific region. The company says its sales “have seen significant success” in countries like South Korea, Australia, Thailand and Singapore. The company says it expects “similar results” in Indonesia.
“Map, Indonesia’s leading lifestyle retailer, is the ideal partner to kick off our expansion in the Asia Pacific region, where we know convenient, better-for-you options are in demand,” Chidsey said. “This is just the start of our global expansion plans.”