SUBWAY AND THE FRANCHISING CONCEPT

41531047Asif Mahmood Abbas

Summary Subway is a leading sandwich chain, which operates through a wholly

owned subsidiary, Subway Systems India.

The caselet provides an overview of the product strategy followed by Subway that involved customization of its recipes and preparation to match the tastes and sensibilities of Indian consumers.

The caselet also illustrates the franchising method adopted by Subway in India.

Finally, it provides a brief description of the company's pricing and advertising strategy.

INTRODUCTION

Introduction

The Indian fast food industry is pegged at Rs 20bn with an expected annual growth rate of 40%.

Several multinationals like McDonald's, Dominos and Pizza Hut have established their presence in India.

A new entrant is Subway, a leading sandwich chain, which, with 16,900 outlets in Canada and the US, has surpassed McDonald's branch strength in these two countries.

Worldwide, it has a total of 22,361 restaurants, spread across 78 countries.

Subway operates in India through a wholly owned subsidiary, Subway Systems India (Subway)

41530004Aminul Islam

SUBWAY AND THE FRANCHISING CONCEPT

SUBWAY AND THE

FRANCHISING CONCEPT

Subway, the world’s largest restaurant chain, was founded in 1965.

A friend of DeLuca’s, Peter Buck, suggested him to open a small submarine sandwich shop so he could earn some money.

At first Deluca was not excited about the idea, but after thinking about it for a while, he became more interested.

Buck promised to invest 1000$.

SUBWAY AND THE

FRANCHISING CONCEPT

In the summer of 1965, Pete’s Super Submarines opened in Connecticut, USA.

Ten years later, in 1974, DeLuca and Buck decided to turn

their business into a franchise.

The first international Subway restaurant was opened in Bahrain three years later in 1977.

During the last 44 years, Subway has expanded rapidly.

SUBWAY AND THE

FRANCHISING CONCEPT Nowadays there are more than 30,000 Subway restaurants

in 90 countries.

Approximately 150,000 people worldwide work for Subway.

In 2006 Subway’s revenue jumped to 9.05 billion dollars

41428092Abu Reza Manzuriar Chowdhury

STRATEGY & STRUCTURE

Strategy

The main goal of the Subway chain is to be ranked the number one restaurant by consumers and in every market that Subway serves.

Furthermore, Subway does not specifically select the new countries it enters.

All Subway restaurants are owned and operated by local business people, who choose the place for their Subway restaurant.

The franchisee buys the right to run a Subway franchise

A development team will work with the new entrepreneur to provide assistance in opening and running a Subway restaurant within a new market.

Subway will continuously provide assistance to make sure that the franchisee gets all the basic information

Structure

The Subway chain is the biggest franchise chain in the world

It employs about 150.000 people in more than 30,000 locations in 90 countries around the world.

Subway has more than 700 development and support people employed at the chains world headquarters in Milford, Connecticut.

Subway is a registered trademark of Doctor’s Associates Inc. (DAI).

41531029 Nani Gopal Kar

FRANCHISE ANALYSIS

Franchise Analysis

Training. Before opening the Subway restaurant the franchisee has to take part in an intensive two-week training.

Site selection. Subway will help the franchisee to secure a location for the new Subway restaurant.

Restaurant design. Subway provides the franchisee floor plans for the specific location.

Equipment ordering. Subway provides the equipment that the franchisee will need running the business.

Access to product formulas & operational systems. Subway offers training courses and information resources.

41530077 Khan Mohammad Rezwan-ul-Akbar

PARTNERSHIP ANALYSIS

Partnership Analysis

If the value of the brand decreases, the franchisee loses some of his competitiveness.

Another disadvantage is that the franchisee is highly dependent on the franchisor.

It is Subway’s way or the highway, meaning that a franchisee only has limited influence on strategic matters.

The franchisee carries most of the risk in the cooperation, as he is the one investing most money in it.

Franchisee will have ongoing costs as he has to continuously pay royalties and advertising fees to Subway.

The low income levels in India which would make McDonald’s unaffordable to most.

Food habits in India that would take years to transform to western tastes.

41428082 Rehnuva Kawsar Nisha

KEY FEATURES

Key Features Target population Marketing is paramount at subway.

Promotions can change weekly, even daily

Almost all of the ingredients exactly right and used are fresh

It requires no cooking in the store, aside from the baking of the bread and cookies

41222075 Md. Sharafat Hossain

STRENGTHS & WEAKNESSES

SWOT ANALYSIS

Strengths

Size and number of stores and channels.

Menu reflects demand for fresh, healthy and fast.

Use of nontraditional channels.

Partnering with the American Health Association.

Worldwide brand recognition.

Customizable menu offerings.

Low franchisee start up cost.

Franchisee training is structured, brief and designed to assure rapid start up and success.

SWOT ANALYSIS

Weaknesses Décor is outdated.

Some franchisees are unhappy.

Service delivery is consistent from store to store.

Employee turnover is high.

No control over franchise situation in given market area.

41531007Md. Farukul Alam Patwary

OPPORTUNITIES & THREATS

SWOT ANALYSIS

Opportunities

Continue to grow global business.

Update décor to encourage more drive in business.

Improve customer service model.

Continue to expand channel opportunities to include event wagons.

Improve franchisee relations.

Experiment with drive-through business.

Expand packaged dessert offerings.

Continue to revise and refresh menu offerings.

Develop more partnerships with more producers and toy manufactures to promote

SWOT ANALYSIS

Threats

Franchisee unrest or litigation.

Food contamination (Spinach).

Competition.

Interest costs.

Economic downturn.

Sabotage.

Law suits.

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