The FINANCIAL -- McDonald’s will soon lose a chunk of its share of the Georgian market, predicts the owner of the newly-opened American fast food restaurant franchise Subway. The total number of Subways in the country will reach ten in two years’ time. However, in addition to the fast food restaurant’s boom in 2013, McDonald’s Georgia has had a 21% increase in turnover this year.
Giorgi Jinchelashvili, 30, along with his two partners, brought the American brand to Georgia with investments of USD 300,000. “Subway is one of the largest and most famous brands in the world by number of restaurants as well as the quality of its food. So we decided to bring it to Georgia. We were thinking of implementing this idea for two years, and in March 2013 we started taking specific steps to carry it out. With very hard effort on our part we were able to convince the group that we could meet their expectations,” he said.
“Another advantage of Subway is that it does not require huge investments unlike other world franchise chains. They are very convenient conditions for startup entrepreneurs like us,” Jinchelashvili told The FINANCIAL.
Subway plans to carry out aggressive annexation of the market. “We know exactly what share of the market we are targeting and we plan to gain that in a two year term. We will be number two on the market after McDonald’s,” said Jinchelashvili.
Subway is located on Chavchavadze Avenue. The site was selected due to the popularity of the area. According to Jinchelashvili, business has already exceeded their expectations. We host over 600-650 customers daily. We are already working at maximum capacity.
In September 2013, another American quick-service hamburger company - Wendy’s - was opened in Georgia, by Wissol Group. Wissol Group plans to develop 25 restaurants in Georgia and the Republic of Azerbaijan over the next 10 years. Before then, Turkish company Tab Gida introduced Burger King, the global chain of hamburger fast food restaurants. It is currently represented by two branches. In terms of McDonald’s Georgia, 15 restaurants in a three-four year term is their projection, with their number of employees set to reach 1,500.
“McDonald’s is well known for the high quality of its service, products and distinctive interior. We do not compromise on quality. After the opening of Wendy’s we have seen no decline of realization in our restaurant on Rustaveli Avenue,” said Tengiz Kapanadze, Director General at McDonald’s Georgia.
“Our restaurants on Rustaveli and in Sports Palace are the largest in terms of number of transactions. On average each restaurant serves over 7,000 customers, checks show. That means that the total number of guests is larger,” said Kapanadze.
“With over EUR 6 million of investments, two new McDonald’s restaurants will be opened in Georgia in 2014. One of them will be in Temka and the second in the Gldani district. Both of them will have a very high standard of style,” Temur Chkonia, Georgian businessman, owner of McDonald’s Georgia, told The FINANCIAL.
“Despite the currently pessimistic outlook our business did not face any difficulties. That is actually a standard feature of famous brand companies. We had a 21% increase of turnover this year in comparison with the same period of last year. Turnover amounted to GEL 40 million,” said Chkonia.
“McDonald's is such a large industry that it will not feel the blow from the newly-opened fast food restaurants. However in 2 years’ time, the market shares will be more evenly distributed. McDonald’s has so far held 100 percent of the market and of course, these shares will soon be distributed differently. We will capture a significant portion of the market and will be the second biggest on the market,” said Jinchelashvili, Subway Georgia.
“Any fast food retailer is our competitor. Wendy’s and McDonald’s are unambiguous competitors because they are both selling burgers. However, we have a qualitatively different product. This is what makes Subway exceptional. There are only a few companies in the world that produce sandwiches on such scales. We are a sandwich production line restaurant. There is no product in Georgia that is in any way similar,” said Jinchelashvili.
“We have very competitive prices. Considering that it is an American standard restaurant we have quite affordable prices. We decided from the very beginning to offer prices that would be accessible to those of any segment. We have three menu groups, prices start from GEL 4.70. The fact that the menu is so diversified permits us to serve all customer segments,” he said.
Subway Georgia uses locally produced vegetables. Overall the restaurant offers 15 kinds of sandwiches, 15 sorts of wraps and 15 sorts of salads. This is standard, but everyone can customise their own sandwich.
“Every week we host a representative from our head office that comes to monitor the standards. We carry out tests four times every day, even testing refrigerator temperatures. We rigorously adhere to all the rules. As a result each customer remains delighted with our products,” said Jinchelashvili.
A large storage facility is another huge upcoming project from Chkonia. “We will serve the whole Caucasus region. It will be a logistics hub for all McDonald’s restaurants. We might manage to encourage young entrepreneurs to start producing high quality products that we currently import from abroad. They would have to meet the standards of our brand though.”
In his words, he as founder does not have the right to open any such business as it may cause a conflict of interest. “If these entrepreneurs offer good quality and reasonable prices then they can manage to integrate with the world system of McDonald’s restaurants,” he added.
Chkonia pays GEL 47 million in to the country’s budget every year. Next year the sum will increase by an additional GEL 5 million.