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Big Mac's rival Subway plans local foray

Parul Gupta & Partha Ghosh in New Delhi

Subway, the $5 billion American fast food major, is setting up an independent arm in the country with an aim of setting up 200 outlets in seven years.

The privately held chain of sandwich shops recently beat the Big Mac in terms of number of outlets in the US to become the leading fast food chain.

The investments required to set up 200 outlets is estimated around Rs 125 crore (Rs 1.25 billion), which will primarily be borne by the company's franchisees in India.

The seriousness with which the company, which is now operating in India through four franchisee-owned outlets, can be gauged from the fact that this wholly-owned subsidiary will be manned by an all-American board.

The subsidiary will explore possibilities for expansion in the country through only franchisee outlets which is the pattern it follows internationally, said sources.

The new company has sought necessary regulatory approvals for setting up this subsidiary, Subway Systems India Pvt Ltd, which will be located in Mumbai.

Sources close to the company in India said of the 200 outlets being planned by 2007, at least 20 are expected to be operational by the end of the current fiscal.

The source explained that the rationale behind setting up a wholly owned subsidiary was to avoid regulatory hurdles.

Each and every franchisee in the existing system has to take a clearance from various government bodies including the Reserve Bank of India.

"By setting up a separate company, we will have to take a one-time clearance from the RBI as well as the Foreign Investment Promotion Board (FIPB)," he said.

According to him, this company will then take care of all the franchisee fees and repatriation at a later stage.

The company has already sought approval from the FIPB for setting up this company. On an average, each restaurant will need an investment of $100,000-125,000.

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