Subway Case Analysis

Case Study #1 - Subway Sandwich Shop Analysis

Case Study One - Subway Sandwich Shop

Situation Analysis

A situation analysis is an honest valuation of the opportunities and potential problems facing a prospective or existing company. Through analysis a deeper understanding of an industry, competitor and possible options can be examined. Subway Sandwich shops early history roots can be traced back to the summer of 1965, with a $1,000 investment a new venture was born. Fred DeLuca and Dr. Peter Buck worked hard to expand their business by 1974; the duo owned and operated 16 units throughout the state of Connecticut. (Subway History, 2006). A turning point for the partners was 1974, at this juncture the duo decided to take the business to a new level, franchising. Fast forward to 2006 Subway franchises now total more than 25,000 restaurants in 83 countries.

Market Summary

In a crowded US fast food market, the Subway brand risen to fill a key niche amongst consumers who were driven by panicked media coverage of the rapid rise in obesity. Subway marketing has been marketing its ability to offer fresh produce and tasty low-fat options that are just as quick and convenient as high-fat menu staples such as burgers and fries.

Subway began serving up eight sub sandwiches that contain less than 6 g of fat - six times less than a McDonald's Big Mac] ( Parker, A Healthy Taste, 2006). Subway menu includes; subs that cold, hot and toasted, salads and wraps. In addition to core menu items Subway offers additional items to complement a consumer's selection like soda, chips and cookies.

Demographics

Subway has become in the U.S the number one franchise in a relatively short time span by positioning itself in multiple locations like churches, hospitals, schools, retail stores like Wal-Mart and Home Depot. Positioning the company; along with categorizing the subs sandwich as a healthier alternative to fast-food chains like McDonald's, has been a key ingredient to the success of Subway. A typical Subway customer ranges from age 18 - 49.

Market Needs

American appetites are constantly changing just like its population. We have become a wealthier, older, more educated society along with being more ethnically diverse. Along the way traditions have changed what was uncommon is now common when it comes to dining out. Places like Subway appeal to time crunched consumers looking for a healthy low cost meal.

Market Trends

The sub sandwich franchise Subway, has been trail blazing the sandwich the market for year's coming up on the tails of Subway is Quizno's. "Consumers are noticing what restaurant industry analysts have seen for years. By making toasted sandwiches a hot item, Denver-based Quiznos has become the fastest-growing restaurant chain in the country, trailing only Subway as the nation's No. 2 sandwich shop -- not counting hamburgers" ( Apuzzo, Quiznos vs. Subway, 2005). Quiznos menu offers slightly more expensive food in larger more open retail locations. The sandwich wars continue between Subway and Quizno's but smaller local competitors want to give the submarine sandwich king's a run for their money. "Submarina Inc., the San Marcos-based fast-casual chain with 45 stores in the West, is looking to take its cutting board nationwide against the ubiquitous sandwich kings Subway and Quiznos." Submarina, Inc. believes the sandwich market is still underserved according to one restaurateur. Subway appeals more to lower-income, price-weary folk while we have a little more costly, higher-end product," Warfield said" (Green, 2005, Bread for Battle).

"The fast food companies are running in a panic over the obesity epidemic," Ruskin said. "They are striving to do something to make it seem that they are not responsible for it or part of it (Mokhiber and Weissman, n.d., Subway: The New King). Subway Restaurants has been smart capitalizing on being a healthier alternative to burgers.

Subway was smart throughout the low carb craze they continued to introduce products which would appeal to health conscious consumers. [U.S. sales at the top 25 sandwiches and bakery concepts were $16.7 billion in 2005. That is up 13% from 2004, according to a new report from Chicago-based Technomic Information Services. By comparison, sales grew 8.8 percent in 2003.

Restaurant industry experts say the major chains were able to avoid big fallout from the carb craze because they were quick to respond with wraps, salads and other low-carb options] (Dallas Morning News, 2006).

According to a Time Magazine article, "heightened competition from the likes of Subway, which has dethroned McDonald's as nationwide champ in total stores with 13,101, has added to the McWoes. Subs and other custom-made sandwiches are growing 12% a year as a fast-food category vs. a paltry 2% to 3% for burgers" (Eisenberg, 2006, Can McDonald's Shape).

Market Growth

[By 2020, the U.S. population will add between 50 and 80 million people--all becoming part of the food system. Based on an increase of 50 million food customers, U.S. food expenditures are projected to rise 26 percent between 2000 and 2020.With food spending already approaching $800 billion in 2001, the projected increase will boost food sales of supermarkets, restaurants, fast food outlets, and other retail food establishments by $208 billion]