Company News

UPDATE 1-Subway eyes 1,000 Russian outlets by 2015

* To expand sandwich restaurant chain from 78 outlets now

* Sees recovery in sales, huge market potential

* Burger King to open first Russian outlet in 2009

(Adds details, quotes, background)

By Maria Plis

MOSCOW, Nov 18 (Reuters) - Subway, the world’s No. 2 fast food restaurant chain by sales, plans to expand its Russian network to 1,000 outlets by 2015 from 78 now and make Russia its fourth-biggest European market next year.

Russia is considered underpenetrated by fast food chains, with McDonald's MCD.N, the world's biggest, having opened about 300 outlets in Russia since 1990.

Smaller rival Burger King BKC.N plans to open its first Russian restaurant in Moscow this year. [ID:nLD728056]

“By next year, the Russian market will become the fourth-largest for us in Europe,” Kevin Graham, President of Subway Russia, told Adam Smith Conferences’ Russian Agri-Food business forum.

“Our strategic goal is to have opened 1,000 restaurants in Russia before 2015.”

Subway’s biggest European market, the UK, has 1,359 outlets, according to the company’s website, followed by Germany, with 785, France, with 168, and Ireland, with 110.

Fast food restaurants have been more resilient to the global economic crisis than other segments of the restaurant industry due to relatively low prices.

Privately held Subway is developing through franchise partners in Russia. It currently has 78 outlets in Russia, rising to 100 by February next year, Graham said, adding that the chain would add 75 new restaurants in 2010 alone.

“The crisis has obviously affected the fast food industry’s performance in Russia,” he said, estimating sales at fast food restaurants in Russia fell 2 percent in the first half of 2009.

Subway does not disclose its own sales figures, but Graham said the company’s Russian same-store sales fell by 4 percent in January-June, and customer traffic declined 10 percent.

“We are now seeing a recovery in sales. We have seen clear signs of recovery over the past 13 weeks. Despite difficulties in the economy, we are very happy with growth rates of the Russian consumer market and see it has huge potential.”

The company has 32,000 restaurants worldwide, most of them in North America. (Writing by Maria Kiselyova, editing by Will Waterman)