If the deal materialises, RIL will acquire a network of approximately 600 Subway stores nationwide.
It is being reported that Reliance Retail is going to buy the Subway Inc India franchise for $200-250 million (Rs 1,488-1,860 crore).
Contents
Reliance Retail’s Omnipresence
Reliance Retail is the retail arm of Reliance Industries Ltd (RIL).
It operates retail chains across verticals such as grocery, consumer electronics, e-pharmacy, payments, fashion, lifestyle and luxury.
Some of its brands include Reliance Fresh, SMART, Reliance Digital, Trends, Reliance Jewels, Project Eve, and Hamleys.
What The Deal Means For RIL
If the deal materialises, RIL will acquire a network of approximately 600 Subway stores nationwide.
It will also mark RIL’s entry into the quick service restaurant (QSR) business which would once again diversify the group’s omnichannel efforts to more segments.
The deal would also intensify competition in India’s organised QSR sector.
Rivals include major global brands such as Domino’s Pizza, McDonald’s, Burger King, Pizza Hut, Starbucks, and their local partners such as the Tata Group and the Jubilant Group.
Subway has a QSR market share of approx 6% whereas Domino’s leads with 21% share followed by McDonald’s with 11%.
Business Model Overhaul
Subway, which is the world’s largest single brand restaurant chain, is presently going through a global restructuring process under chief executive John Chidsey.
As part of the process, it is looking to cut costs and reduce headcount due to declining sales.
Coming to its India business, it wants to streamline it through collaboration with local partners.
The American QSR chain has been looking to revamp its India operations by bringing in a single dominant local partner.
In doing so, it will discontinue the current model of regional master franchisees and their specific networks.
Presently, Subway takes on a master franchise of ‘development agents’ who run but do not directly own these clusters of stores.
Subway’s Indian Promoters
One such development agent is Dabur promoter Amit Burman’s food retail company Lite Bite Foods.
Other prominent names include Delhi-based Chetan Arora, Sachin Arora, Manpreet Gulri, Rishi Bajoria Gulprit Gulri, and Rahul Bhalla.
Back in 2017, several Indian franchises of Subway had attempted to set up a platform and enter negotiations with financial investors like TA Associates and ChrysCapital for acquisition.
But the talks failed to bear results.
Reliance Buys 40.95% Stake In Just Dial For Rs 3497 Crore; Becomes Majority Stake Holder!