Global Communication Gap Analysis

Subway

Introduction

Subway is the largest restaurant franchise in the United States. The Subway chain has been established for about 38 years and it has reached number one in increased percent sales and consumer awareness over time. Subway's accomplishments are mainly due to its brand awareness, product image and diversity in the fast food industry. However, in the presence of strong competitive pressure from its rivals, Subway has to make some strategic changes in order to prosper in the market place. This paper is aimed to give a thorough situational and SWOT analysis based on the facts presented in the case as well as internet updates. Additionally, some recommendations on Subway's marketing strategies that are specifically on product, price, promotion and competition will also be discussed.

Situational Analysis

History

In 1965 Fred DeLuca and his partner Dr. Peter Buck, founded Pete's Super Submarines restaurant in Bridgeport Connecticut, mainly with the intent of making enough money to fund Fred's college education (History, 2003 para. 8). With the success of the first operation, came visions of expansion and growth. With that vision, Fred DeLuca and his partner Peter Buck began what would be later known as one of the top franchises in North America. The duo changed the name to Subway and started to franchise in 1974. Since then Subway has experienced steady growth over the years. It has topped Entrepreneur Magazines Franchise 500 list for top franchises for 11 years now. Subway strives to offer a healthy alternative to fast food restaurants, boasting a count of 20023 restaurants in 73 countries (FAQS, 2003 para.1), making it the undisputed market leader for sub shops.

Review of Organization and Product

Subway is a franchise specializing in the submarine sandwich market segment with emphasis on providing its customers healthy choices, fresh ingredients, and value. Subway provides consistent national advertising and shares the cost of advertising with its franchisees through Subway Franchisee Advertising Fund Trust, SFAFT, (McDonald, 1998 para. 30). As part of the franchisee training, operators are trained in proper food handling techniques. Food is to be prepared fresh daily and temperatures monitored regularly (FAQS, 2003 para. 19). Subway offers seven menu categories each with five to seven different choices of subs. The categories include: subway classics, subway 7 under 6 (7 choices of subs that are under 6 grams of fat), subway selects, salads, kids pak, fresh value meals 1 and fresh value meals 2. All subway sandwiches are individually made to customer specification of toppings, cheese, and condiments. In international locations, special attention is given to dietary restrictions for example in Muslim countries, pork would be substituted with chicken, lamb or turkey (FAQS, 2003 para. 32).

Relevant Facts

In 1990 at least 5000 Subways were opened, by 1993 when it reached 8400 stores, Subway became the No. 2 franchiser with McDonald's being No. 1(McDonald, 1998 para. 1). However in sales Subway is ranked 12th among nationwide chains (McDonald, 1998 para.1). As of 2002,worldwide sales totalled $5.7 billion (FAQS, 2003 para.11). Subway has expanded internationally to 73 countries including Australia, Japan, Israel, Ireland, Mexico, and Portugal just to name a few. With growth and profits comes competition. With low set up costs and small capital investment it is easy to enter the submarine sandwich industry. To gain their share of the profits from subs, traditional hamburger establishments such as Burger King have started to offer subs as part of their menu further increasing competition.

Current Situation

Currently Subway is going through growing pains. On one side we have dissatisfied franchisees, who claim they were sold unrealistic financial projections for sales and profit. Adding to their poor return on investment is the fact that new store openings are cannibalizing sales in existing stores. DeLuca's objective is to increase average sales volume per location and decrease operating costs in order to increase profitability for the franchisees. There have been attempts to build store volume by experimenting with a breakfast menu at some stores. Other thoughts to increase volume consist of targeting consumers for the dinner and late meals as well as increased marketing to children. Growth is still a priority for Subway, one it hopes to achieve by expanding its non-traditional sites.

Updated Information

Subway is a leader in its industry with many accolades. Subway has been rated the number one franchise opportunity by Entrepreneur Magazine for 11th time in the past 15 years. It is ranked the number one franchise by Franchise 500, ranked number two as the fastest growing franchise, and ranked number one as America's top global franchise. Currently with 13,247 locations in the United States and 1,800 restaurants in Canada, Subway has surpassed McDonald's by 148 in number of locations and now is the world's largest submarine sandwich chain. Besides the United States, Canada and Australia are the two largest markets for the Subway brand and the Benelux countries are also considered to be an area with tremendous growth potential. Appendix one, table one shows the number of Subway locations opened over the years.

In August 2003, Subway was presented with the Customer Loyalty Award in the Quick-Serve Food category. Subway's customer retention is due to its healthy menu options and menu variety (Kane, para 2). According to research, Subway chain remains the leader by a large margin in the sandwich segment. It outpaces other competitors such as Arby's, Panera Bread/St. Louis Bread Co., Schlotsky's Deli, and Einstein/Noah's Bagels. Given the current growth trends, Subway is expected to move from the 7th largest to the 4th largest quick-service restaurant (QSR) chain in the next couple years (Smith, para. 1).

One of Subway's goals is to target children. Over the years, Subway has been trying to lure children into their stores by partnering with various companies such as Warner Home Video and Cartoon Network, Guinness World Records, and cartoon network. The joint venture allows Subway to use characters that are recognizable by children as part of their toy promotion.

At Subway's 35th anniversary, Men's Health magazine reported the story of Jared Fogel, a young man who lost 245lbs. by eating nothing but Subway sandwiches for a year (Winograd, para 3). In order to increase