Reliance retail did some stake last year to go debt-free. Many foreign investors bought a stake in the company and the company now has enough cash to expand its business. Mukesh Ambani in Reliance Annual General Meeting has already said that we will be looking beyond Oil & Gas business and therefore the company is going all out aggressively to acquire some of the leading retail franchises. This time around the company has decided to buy Subway India who is looking for a local partner to streamline their business.
Subway is the world’s single largest restaurant chain. Subway too has gone aggressively and now has enough outlets not just in the metro but in 2-tier cities as well. The chain is currently restructuring as they have incurred some operational losses in the last few years. Sales have taken a hit and that’s the reason the company is in search of a local partner. Also, the company has made it clear that they want to reduce the headcounts as not just India but global sales have taken a hit.
Reliance Retail off late has acquired businesses from a range of niches like payments, fashion, e-pharmacy, grocery, and furniture among others. The company is yet to have a restaurant and this is the reason the company has decided to go all-out and have a restaurant business in its arsenal. Subway has around 600 outlets in India and if the talks are fruitful, Subway India will have an Indian owner then. This deal would give stiff competition to its peers like KFC, Dominos, Burger King, Pizza Hut, and Star Bucks among others.
In the past too Subway tried to find a local partner for them but talks didn’t implement and the company has continued on its individual and regional master franchisees. Devyani International shown interest last time around but couldn’t strike the right deal. Subway’s model is they made regional franchisees owners who take care of individual outlets but the model needs restricting as the company’s some outlets have closed after the Covid and sales have taken some serious beating. The model of developing agents who run their cluster of outlets in a region was working for them until 2017 but once the company went beyond metros the company’s revenue has taken some hard-hitting. The model was successful as Dabur’s Lite Bite has followed the same model and has been quite successful.
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Reliance Retail have made a fair offer considering the company’s current situation and they are not in a mood to partner but buy the entire stake of Subway India. With Reliance being super aggressive in their deals this is one of their chances to have a different business in their portfolio. Subway was doing well before the Covid and needs some restructuring both in the model and menu as the company hasn’t launched any new food item for a while now. If Reliance acquires Subway India one can expect a lot of changes.