Essay About Subway Chain And Sub Sandwiches

Marketing
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CSubAway SSandwEich Sh op1s
Success in the sandwich segment requires operators to work significantly harder
than they did just a few years ago. There was a noticeable slowdown in the opening
of new submarine sandwich shops in 1992, although the growth rate still
exceeds most other restaurant segments. Competition has intensified, with hamburger
chains such as Hardees and Burger King experimenting with sub sandwiches
as menu additions. Subs seem to be a category anyone can participate in.
Subs offer easy entry into the foodservice business and a simple, low-cost route to
menu expansion, plus health appeal. Market data indicates that the sandwich is
firmly established as a nationwide food item and there is plenty of room for growth
in all areas. Many operators also see opportunities for sub-like concepts. For example,
one variety of sandwich shop that continues to expand specializes in Philadelphia-
style cheese-steak subs.
For sub shops, the Subway chain is the undisputed market leader, with 10
times more locations than any other competitor and more than 75 percent of all
United States sub chain outlets. As of mid-1993, Subway operated 7,825 units
worldwide, with about 7,750 units in North America. When it reached 8,400
stores in 1993, Subway was the No. 2 fast-food chain in the United States. By
opening its small sandwich shops at breakneck speed, Subway grew from $360
million in sales in 1987 to $2.2 billion in sales in 1992 (Figure 1-1), while income
increased substantially (Fig. 1-2). The former No. 2 was Pizza Hut, which operated
7,929 units in North America and expected to have 8,355 by the end of 1992,
However, in terms of sales, Subway ranks 12th among chains nationwide. Sales are
about 15 percent of McDonalds.
Subway is also looking to expand its nontraditional sites. The chain has about
150 outlets in colleges, convenience stores, hospitals, bus terminals, railway stations,
and convention centers. Other future areas of emphasis include improving business
during the dinner hour and late night and more marketing to children. About 4,000
“Subway Sub Shops,” by William J. McDonald, reprinted from Cases in Strategic Marketing
Management, 1998, Prentice-Hall, Inc.
FIGURE 1-1 Worldwide Sales of Subway Sandwich Shops
Source: Estimated from various sources
FIGURE 1-2 Worldwide Income from Subway Sandwich Shops
Source: Estimated from various sources
Millions
1987 1988 1989 1990 1991 1992
Millions
1987 1988 1989 1990 1991 1992
outlets now feature kids packs, which include food items and a premium gift. In
1994 Subway also made a concerted effort to spend marketing dollars against
teens and pre-teens.
However, Subways rapid expansion has brought with it some problems. Franchises
are upset about the location of many new stores, claiming that these additions
are cannibalizing sales at existing units. Some disgruntled franchises have
also charged the chain with making unrealistic financial projections during sales
pitches. The Federal Trade Commission is looking into the complaints.
Among sub operators, Blimpie is running second to Subway in both unit totals
and expansion plans. The New York-based firm opened about 100 restaurants in
1992, for a total of 575. It planned to reach 1,000 units by 1995. Blimpie has broken
out of the Northeast over the past three years, with stores now open in 32
states, and it has begun to focus on international development.
Virtually all of Subways competitors agree that the chains main vulnerability
is its product quality. Whether their version is an upscale, quasi-deli restaurant
operation, or a more traditional, basic sub shop such as Blimpie, these other operators
stress quality advantages over Subway in their efforts to attract customers and
prospective franchises.
THE SANDWICH RESTAURANT INDUSTRY
Although sub and sandwich shops offer some of the best growth opportunities in
fast food today, there are signs that the category is not what it used to be. Subways
rapid