1. History, activities, and the franchising characteristics of Subway Bulgaria Ltd Entering the business
The experience, which Subway has on various markets around the world, proved that the master-franchise methodology is not beneficial for the brand. Master franchise means that when one person or company receives the rights for a franchise, he can operate on the territory of the whole country – to organize all training and marketing activities. On the contrary – Subway is using the development-agent method. The agent doesn’t organize the trainings but sends the future franchisee in specialized training centers. The course is obligatory for each franchisee and lasts 2 weeks. All expenses are to be covered by the franchisee. Subway Bulgaria Ltd. was established as in November 2008, its executive manager, Ivan Todorov, was appointed at the position of development agent of Subway for Bulgaria. To receive the franchise Todorov’s restaurant in a mall in the city of Varna had to compete with just one other restaurant. He won the franchise and Subway opened its first outlet in Varna. The goal of Subway was to have at least 10 000 restaurants in Europe and at least 27 of them to start operating on the territory of Bulgaria in the next 7 years - by 2015. Before setting up Subway Bulgaria, Todorov has been working as manager of clubs, restaurants, immovable property. Franchising conditions, and development of Subway Bulgaria Ltd. The procedure to obtain franchising rights for Subway is simple. Subway Bulgaria gives franchise rights to other individuals. The application is online and right after that Subway sends a detailed package with information on the contracts and everything that should be known about the way the system works. After 10 days the contract can be signed, in order the franchisee to have enough time to review all conditions. Subway requires a proof of stable finances in order to give the rights for a franchise. The company doesn’t cover any part of the investment for a new outlet. According to the conditions of the franchise the initial fee is 10 000$, but half of this amount goes back to the franchisee, if the restaurant starts working within a year after signing the contract. For each additional outlet, the initial fee amounts to 5000 $. Subway also pays 50% of the costs for the marketing campaign before the opening of each restaurant. In addition the franchisee has to pay each week 8% of its turnover to the parent company. The additional investment necessary to run a restaurant is estimated to be between 80 000 and 120 000 EUR. The franchisees receive a discount on the equipment. The equipment for all restaurants is produced by the Duke Company. The company also has to approve the suppliers and the quality of their products. All ingredients for the sandwiches sold in Bulgaria are produced in Germany. In order to get the position of development agent Todorov had to prove to Subway that he can chose the right suppliers, to train the personnel and to successfully plan the marketing campaigns. The development agent is responsible for the training of the personnel. Before and right after the opening of a new outlet Subway is evaluating very intensively whether the personnel can perform all tasks according to its standards. The price for an average restaurant (30-35 sq.m) is around 70 000 EUR. Each restaurant deposits 4.5% of its turnover to a special advertisement fund – Franchise Advertise Fund. When in one city there is more than one outlet, the owners establish a board, which develops and adopts a common marketing strategy and the expenses are covered by the fund. As of November 2012 Subway had 30 restaurants in Bulgaria, the last of them opened in Sofia. Subway Bulgaria also won Forbes Bulgaria’s prize for Best starting business in 2012. Apart from being development agent for Bulgaria, Subway Bulgaria Ltd. also has the rights to contract franchisees in Romania.
2. PEST Analysis of Bulgaria
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