t Gourmet Pizza franchises, before recently joining Subway as the country director of Australia and New Zealand. Here, Cockerill explains why Subway is making significant changes to its menu and restaurants, and how the company is weathering the storm in the franchise sector. Inside Retail Weekly: You’ve spent a lot of your career working with global brands. How important is it to localise the offering and experience of a brand like Subway to the Australian market? Geoff Cockerill: The key part is that the global world is a smaller world than it probably was 10 years ago, and different trends, ideas and products move around the world more quickly today than they did 10 years ago. Subway is 53 years old and has a product range that has been very successful around the world, and we’re honouring that past. But now we’re focusing on making it a better Subway based on the Australian and New Zealand guest requirements, which are different to the American requirements. What’s similar is that we all love a great sandwich, but the flavour profiles are slightly different, so we adapt those to the local market. 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 tomatoes, all our capiscums, 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 third-party 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.