A franchisee supply model that delivers: Independent Purchasing Co.

Dale Benton
|Jun 3|magazine16 min read

In 1967, the first ever Subway sandwich store was opened in Connecticut in the United States of America. Fast forward 51 years and Subway is the world’s largest QSR chain by shop count; with more than 44,000 locations around the world. Of those 44,000 stores, close to 700 are in the Middle East and Africa region, and this is where the regional Independent Purchasing Co. (IPC) comes in.

Formed in 2010, IPC (MEA) is a non-profit making organisation owned by Subway Franchisees in the Middle East and Africa. Through a unique business model, the company strives to deliver financial and service benefits through volume purchasing and supply chain operations.  The first IPC was set up as a cooperative in the US in 1996 and over the past 20 years a total of 5 IPCs now manage the global supply chains needs of Subway franchisees; handling collectively $5B+ worth of procurement.

But the IPC/Subway Franchisee relationship goes deeper than simply supporting the procurement and supply chain.

“IPC acts in an advisory capacity to franchisees in the fact that it is neither transacting nor executing,” says Ramzi Baroudy, CEO of IPC (MEA).

“It is about looking for the best interests of the franchisees and is therefore in a position to objectively evaluate how can we get the best out of suppliers.”

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“It is about looking for the best interests of the franchisees and is in a position to objectively evaluate how can we get the best out of suppliers.”

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Ramzi has been with IPC (MEA) since 2015, having spent a large part of his career with Fast Moving Consumer Goods (FMCG) across Nestle, Kraft Foods, General Mills and PepsiCo spanning the sales and marketing spectrum as well as some experience in an operations and manufacturing capacity.

It is this atypical experience that he feels places him in a good position with IPC as it allows him to come into the business with fresh eyes and to “see the bigger picture”.

“My experience provided me with an understanding of the end to end supply chain and procurement and how it affects overall costs as well as how a product gets to market,” he says.

IPC(MEA) works with and supports Subway franchisees across the Middle East and Africa regions by ensuring that suppliers comply with the Subway Gold Standard product specifications, while delivering the same level of high standard services as is expected from Subway the world over.

 “Ultimately, as a business we only have one customer and that is Subway,” he says.

“Subway as a brand receives the benefit from the fact that it can depend on a qualified organisation that is implementing its standards, ensuring it is working with the best suppliers and harmonising the business models across multiple markets.”

Diverse Markets.

When IPC (MEA) was first formed it only operated in the UAE, over the past few years IPC (MEA)’s footprint has expanded to include Saudi Arabia, and more recently Turkey with plans to expand into Pakistan and South Africa. In order to achieve this growth, IPC (MEA) works on the sustainability associated with the relationship with Subway.

 

Naturally, the success of IPC (MEA) and any Subway franchisee lays in the overall growth in consumption and sales. IPC (MEA) operates in a number of diverse markets, each presenting different challenges that can factor into the success and growth of a franchisee. Naturally, diverse markets present diverse challenges.

“With such varied markets, you have to ask yourself, how do you support them remotely? If not, then how do you build towards that? Is there a creative way to ensure that every single franchisee, regardless of location, is getting the service they deserve?”

This isn’t a challenge unique to IPC (MEA) however, with IPC’s all across the world each within a different market.

Recognising the challenges, and acknowledging the importance of overcoming said challenges, is key in progressing as a business.

“By virtue of the diversity of those markets, it would be very naive not to think of it as a challenge to try and respond to trends, be it a growth or a drop and managing that,” he says.

Ramzi strives to mitigate these challenges, be it in fact the fluctuating market or the remoteness of a franchisee in Mauritius, by leveraging the flow of the operations in the larger markets to support the servicing of smaller markets.

Building Synergies.

The upside of diversity is that it presents certain challenges that forces an organization to work holistically as well as pragmatically.

“What we have tried to do is build a clustering of markets ideally through a single service provider trying to standardise the quality of service, managing recalls and similar issues all through one point of contact,” he says.

“This will help us manage the region easier and maintain control to ensure that everyone is following a consistent high quality standard.”

This consistent high quality standard across all operations worldwide is achieved through Unaterra. Unaterra pools together similar organisations to IPC in North America, Europe, Australia, Latin America and the Caribbean to work in unison and deliver consistent standardised benefits at a global level.

“The various different IPC’s are unified through Unaterra which leverages global best practice and ensure that, through a global procurement project, there is a single voice with suppliers,” Ramzi says.

“Unaterra is almost two tier, there are regional IPCs managing regions and areas of global management supported through Unaterra, which leverages the collective muscles of all the IPC’s together.”

A Growing World.

One of the biggest challenges for IPC (MEA) is, despite its mix of challenges and successes, the fact is it is still a young company. This brings with it the additional need of raising awareness of what the company does and the significant role it can play.

“Given our size, it’s been a natural challenge from the beginning because people aren’t clear as to how the business model works and the fact that we had a small footprint in the region.”

Looking to the future, IPC (MEA) aligns itself with Subway’s aggressive target with regards to growth within the Middle East. Currently, IPC (MEA) stands at around half a dozen members of staff, but Ramzi expects that IPC (MEA) headcount will continue to grow over the next three to five years.

“IPC is an innovative business model and there is ample room for growth in the Middle East,” he says.

“Beyond the headcount, I see us really beginning to have better expertise and becoming a very robust organisation in every area, whether that’s procurement, supply chain, business intelligence or even HR and Finance.”

The UAE represents what Ramzi describes as a showcase market, with IPC (MEA) looking to better develop its capacities and provide services beyond procurement and supply chain; and where technology will play a major role in this future growth development.

“This ties very well with how Subway is looking at technology in terms of improving customer experience as its the name of the game now with millennials looking for more digitally enabled experiences,” he says

  But when all is said and done, the ultimate mission we live by will continue to be that “Subway franchisees are profitable and competitive today and into the future.”

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