Invest KOREA

Subway International Korea is all about staying true to its roots

In a time when big companies are choosing to follow the latest trends, Subway has been sticking to what it does best for over 50 years. Since founder Fred DeLuca opened up the first Subway sandwich shop in 1965, the company continues to offer a unique dining experience by making submarine sandwiches to the exact specifications of the customer. As a result, Subway has become one of the fastest growing food companies in the world with over 44,000 stores in 112 countries, with Korea being home to almost 200 of these stores.

“Subway is all about being true to its brand,” says Colin Clark, Country Manager of Subway International Korea, who has been with the company since 2007. “Changing your brand and forgetting about what you do best is sometimes what causes a lot of foreign companies in Korea to lose popularity. Korean customers are like customers everywhere and they want what everyone else wants. They want variety, quick service, and healthier options.”

According to Clark, Korea was Subway’s fourth overseas market, following Bahrain, Canada and the United Kingdom. Because Korean consumers focus heavily on well-being and eating healthy, it provided the optimal market for a company which has built its brand on fresh ingredients. With 179 stores in the country, Korea is now the fastest growing market for Subway in all of Asia for the last three years. When asked why Subway chose Korea to expand its business, Clark points out the country’s business-friendly environment and strong purchasing power of consumers as the main reasons. He says that unlike other countries in Asia, the process for foreign companies to expand their business in Korea is quick, easy and transparent. “Korea also does a great job in promoting foreign-invested companies and there aren’t a lot of barriers when it comes to obtaining business licenses,” he adds.

Despite the global economic slowdown, Clark emphasizes that Korea’s economy is still going strong, especially thanks to its extensive free trade agreement (FTA) network. The Korea-U.S. FTA, in particular, has opened more doors for American companies. He mentions that most of Subway’s ingredients would have been almost impossible to import due to tariffs and other regulations, but it’s been a different story since the implementation of the FTA. As Korea has inked trade agreements with 53 countries, including the U.S., China and the EU, the country has become an even more attractive destination for companies like Subway.

Working closely with Korean companies and actively supporting the local business environment have been crucial to the success of Subway International Korea. Most of Subway’s business is set up to work alongside local distributors, suppliers and importers, giving way to stronger synergy and partnerships. It also plans on sourcing more of its products and equipment from the country. “Korea has a fantastic manufacturing industry that is very technology advanced so we plan on purchasing our heavy equipment from Korean companies in the future,” says Clark.

But not everything has been smooth sailing for Subway International Korea, as it faced a number of challenges when it first launched its brand in Korea. Clark cites that some food regulations have made it difficult for Subway to do business in the country early on. Although the Korean government has revised its policies in a bid to resolve grievances for foreign companies, he notes that a number of regulations are still outdated and should be changed to meet the current reality. He adds that along with food-related regulations, revisions to the current labor and tax laws would make things less complicated for foreign companies. “For Korea as a country, it should allow foreign businesses to complete on a level playing field and create more efficient and straightforward policies; these changes would make Korea an even better place for investment,” he says.

As both foreign and local restaurant chains grow in Korea, Subway faces heavier competition but Clark confidently welcomes it, noting that competition always makes things better for the customer. How? “With more competition, companies can’t stay complacent and instead must focus on improving their products to provide better options for Korean consumers.” On this note, he says Subway is working even harder to improve its ingredients to provide the best experience possible, especially for customers here in the country.

Subway is one of the world’s most successful restaurant chains, but Clark emphasizes that the company is still in the early stages of growth in Korea. By developing its brand and focusing on other cities outside of Seoul, Subway hopes to open up its 200th store by the end of the year. And by opening up more stores in the country, it expects stronger cooperation and shared success between foreign and Korean companies to take place in the future.

By Esther Oh (estheroh@kotra.or.kr)
Executive Consultant/Invest Korea