US-based restaurant chain Subway is set to open its first Kenyan outlet at The Junction Mall in August to tap into growing demand for eating joints by an expanding middle class.
The company, which has franchised about 39,000 stores worldwide, is seeking additional locations in the central business district, Westlands, Kilimani, Gigiri and Upperhill.
Subway fashions itself as a restaurant for working-class consumers seeking fresh, healthy quick foods.
CJ Bak, director of Liberty Eagle — the franchise holder for Subway restaurants in Kenya — said they were planning to open at least two outlets by the end of this year.
“The first restaurant is expected to open by August of this year. Our first location in Nairobi will be at the Junction. We then expect to open at least two more this year with a goal of 20 stores over seven years,” said Mr Bak in an email response to the Business Daily inquiries.
Mr Bak is partnering with an American entrepreneur, Alden Edmonds. Liberty Eagle already has six Subway restaurants in Tanzania. The penetration model is to have finance managers ultimately own and operate the Subway stores.
The US chain’s entry comes a few months after yet another; Kentucky Fried Chicken (KFC), opened its Nairobi central business district outlet along Kimathi Street, almost one-and-a-half years after its first outlet opened at the Junction Shopping Mall.
Kenya’s hotel and restaurants sector has grown at an average rate of 5.9 per cent in the past three years to a total value of Sh20.79 billion in 2011, from Sh18.99 billion in 2009, as per the latest Economic Survey data.
In 2008, when the economy was hit by post-election violence, the sector contracted by 38.6 per cent, Kenya National Bureau of Statistics data shows.
Mr Bak said Subway’s business strategy would be to offer food at a pocket-friendly price for Kenya’s emerging middle class.
He said that the company recently launched a promotional campaign in Dar es Salaam, where the restaurants are selling a different sandwich each day of the week for less than an equivalent of Sh250. The chain opened its sixth Tanzania outlet last weekend.
Subway will have to contend with competition from local sandwich shops such as Subzone, which has outlets at Westgate Mall and Lavington.
Other global fast food brands such as Galitos, Chicken Inn, Steers, and Debonairs Pizza also have a presence in the country.
Mr Bak said that food prices of international restaurant operators in the country were often higher here than in their home markets of the US or South Africa due to expensive raw materials. He added that Tanzania has some of the highest food costs “anywhere in the world, particularly for meats.”
Describing Subway as one of the largest buyers of turkey and tuna globally, Mr Bak said it would not be cost-effective to use their global suppliers for the East Africa market, adding that they would have to sign partnership deals with local farmers.
He said Kenya has limited food processing capacity, making it more expensive to source for supplies locally. Mr Edmonds, his partner, in a Bloomberg Television interview last month said that East Africa’s population and per capita income were growing making the middle class stronger.
“I think competition is going to increase with KFC leading the way and Subway now following, there will be a stampede of American brands,” said Mr Edmonds.