Bigger market bite for Subway

It has become the largest food chain on the planet, now Subway is planning on building on its success in the UAE.

The sandwich chain Subway expects to double the number of outlets in the UAE within the next four years with plans to move away from malls and into petrol stations, universities, airports and hospitals.

The expansion is part of the group's wider plans to grow globally after recently surpassing McDonald's as the food chain with the most outlets globally. Subway now has 33,749 outlets worldwide.

In the UAE, the chain operates 104 stores and aims to have 125 by the end of the year, with 25 to be added each year thereafter for four years.

Marwan al Hamar, the UAE development agent for Subway, said the biggest factor affecting sales was the location of the stores.

"It's not about having the most amount of stores, it's about finding the right concentration of people and convenient locations for everybody to get the product," Mr al Hamar said. "Abu Dhabi has great stores, Dubai has great stores, it's the location that dictates the sales."

Mr al Hamar said the most profitable outlets were those in stand-alone locations, with outlets in malls the second most profitable, and petrol stations third.

"We have [the most] locations in the malls. We're practically in every mall out there," Mr al Hamar said. "We want to be more diverse."

Subway will increase the number of outlets at petrol stations by at least 10 per cent this year and aims to increase its non-mall outlets as a proportion of the total.

The chain already has outlets in a number of education establishments in the country, including the Higher Colleges of Technology, and hopes to open an outlet at the American School of Dubai this year.

The group's diversification strategy is dependent on strong predictions of economic growth for the UAE.

Mr al Hamar said he expected the UAE economy to be "booming" in the next three to five years because Abu Dhabi was investing the highest amount per capita on infrastructure of any city globally, followed by Dubai.

"The future is going to be very, very bright," he said.

The group's strategy is also being driven by the cost of renting retail space in the Emirates.

Many Subway stores are on fixed contracts, meaning rents are still high relative to the market average, which has dropped since the financial crisis.

Mr al Hamar said new stores would be able to take advantage of lower rents and be more profitable.

"Rents have come down, but not really come down for the old contracts," he said. "That's one of the reasons we have gone out to get more stores because it's more economically feasible."

Subway outlets in the UAE were struggling to manage the increasing price of commodities worldwide but would not be affected by a Federal warning to restaurants last week against raising prices, Mr al Hamar said.

Each restaurant must submit an application for an increase in price, which will be reviewed by the Ministry of the Economy, with approved increases capped at 20 per cent.

But abiding by the mandate could prove difficult for many restaurants as their input prices continue to rise.

The UN's food price index hit a record peak last month at 236 points, up 34 per cent from a year earlier.