Franchise business has been in existence for a long time despite the challenges that exist in this kind of venture. However, some of the franchise have stood against the odds and remain dominant in the market. Subway franchise is one of them; the franchise remains dominant in the food industry offering quality food with less fat. The outstanding franchise has earned its position through adherence to factors that I considered such as quality service delivery, suitable location choice, good management, reputation, and its aggressiveness to expand and be the market leader globally. Additionally, other factors I considered include start-up cost, initial capital, support offered, franchise fee, and royalty fee (Rich, 2007).
Subway franchise has an interesting background. It was started in 1965 by Fred Deluca an ambitious high school graduate at the age of 17 years. Together with Dr. Peter Buck, they formed a partnership to sell sandwich which proved to be a success. They opened several outlets and later on decided to shorten its name for Pete’s super submarine to Subway (“Start een SUBWAY® Franchise! | SUBWAY® franchise”, 2016). The subway started operating as a franchise in 1974. It is popularly known and identified by its bright yellow logo. However as time went by, the franchise grew and became more popular. Based on the recent ranking of the top 500 franchise, it was ranked number 5. The ranking is one position higher than McDonalds, which is a big company in the food industry.
The initial capital is often a critical factor to consider, as it determines the franchise starting strength. Subway franchise began with a low initial capital than other food franchises. However, this did not limit its growth. Its initial capital ranges from $117,000 to $263,000 and the recorded change in the unit of 768 units in 1 year and 4149 units in 3years. For instance, the McDonalds is an initial capital ranges from $1M top $2.2M almost five times that of the subway. Despite that, the subways are doing much better than the McDonalds in the food industry (“SUBWAY® – Eat Fresh”, 2016).
Investors always consider financial factors before making a decision to invest. For franchise business, one has to consider financial factors such as the ongoing fee (Randall & Randall, 2011). The ongoing fee includes the initial franchise fee and the advertising royalty fee. The subway franchise charges an initial fee of $15,000 and an advertising royalty of 4.5% for every franchise. Based on the ongoing fee the subway franchise remains attractive to investors than McDonalds which charges an initial franchise fee of $45,000.
The subway franchise has consistently grown in the recent past despite the challenges in the market that have pooled down some of its competitors like Quiznos. Subway took advantage of Quiznos failure to boost its market share thus taking up to more than 62% of the market. Over time the franchise has taken over the market spreading to over 110 countries. Currently, it has more than 43,000 shops in the 110 countries. Moreover, the franchise human resource receives a large number of applications from individuals who want the franchise rights. It is estimated that more than 48% of the subway franchise has more than 1 unit. Aforementioned is an improvement from that of 2012 where it only had 33000 shops across the globe (Parker, 2012). However, based on the current ranking on the top 500 franchise, the subway has slightly dropped from the previous second position to the fifth position.
As a fast food selling franchise, Subway offers products such as wraps, salads, cookies, doughnuts, and muffins. However, its main product is the submarine sandwich, which was its core product during its establishment. In addition, their product varies with market, country, and culture of the people in which the unit is located. The different test and preference of customers from different countries have led to the introduction of varieties such as chicken pizza, chicken teriyaki, chicken tikka, Italian B.M.T, spicy Italian, and veggie patty. In 2009, subway introduced the Seattle’s best coffee as part of their menu. The variety and flexibility of its choices have played a great role in uplifting its performance in the global marker (Jakle & Sculle, 2006).
Subway franchise recognizes the importance of continuous quality improvement; therefore, it offers supportive assistance to its operators. The franchise offers financial support that helps their operators to cater for requirements such as the franchise fee and the acquisition of equipments. Apart from offering finance to acquire equipment’s it rents equipment’s at a lower fee. Also, it gives incentives such as fee waiver for the opening of a franchise in government locations such as a military camp. A 50% waiver is also given for opening their shop in a non-government location that received government funding with such help; it has been able to attract more investors and also maintain its quality and standard that has made it outsmart the others (McKnew & Beyer, 2008).
The franchise also offers training to its operators. The operators are offered a 14 days’ training at their headquarters. This training is meant to equip them with knowledge and skills to enable them to offer quality service as per the policy and quality standards of subways franchise. The 14 days training is also followed up by a ten day on-site training that is meant to ensure that the trainees are well equipped and able to apply the acquired skills (Saks & Haccoun, 2010). In addition to the training, the franchise takes the role of advertising the product on behalf of the operators who pay an advertising fee of 4.5% percent of the total gross sales.
In conclusion, Subway franchise has strengths that work to its advantage. Subway is the largest food restaurant with a large number of outlets globally. The large number of outlets works for its advantage in defeating its competitors since their service becomes more accessible and reliable to its customers. Choice of healthier meals is a factor that makes it vibrant in the market. With increased number of diseases associated with unhealthy foods, there has been a need to observe healthy eating habits. Subway has been able to ensure it offers its customers healthy food with less fat. Another competitive factor is low startup cost. Subway offers low startup cost for its operators. The low startup cost has enabled it to increase its number of outlets globally, thus, making it more competitive, accessible and a market leader. The last competitive advantage is its certification by both the British and American hearts association. The two associations certified the franchise as healthy meals providers. Such an endorsement helps it win public confidences in as far as healthy diet is concerned (Hitt & Hoskisson, 2007). These factors have enabled the subway franchise to stand tall in the fast food industry also create a bright and prosperous future for the franchise.
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- Jakle, J. A., & Sculle, K. A. (2006). Fast food: Roadside restaurants in the automobile age. Baltimore, Md: Johns Hopkins University Press.
- McKnew, N. M., & Beyer, D. A. (2008). Annual franchise and distribution law developments, 2008. Chicago, Ill: ABA Forum on Franchising.
- Parker, D. W. (2012). Service operations management: The total experience. Cheltenham: Edward Elgar.
- Randall, D., & Randall, S. (2011). So you want to own a Subway franchise?: A decade in the restaurant business / c by Dylan Randall and Shayne Randall. Durham, CT: Strategic Book Group.
- Rich, J. (2007). The unofficial guide to opening a franchise. Hoboken, N.J: Wiley.
- Saks, A. M., Haccoun, R. R., Belcourt, M., & Belcourt, M. (2010). Managing performance through training and development. Toronto: Nelson Education.
- SUBWAY® – Eat Fresh. (2016). Subway.ie. Retrieved 30 October 2016, from http://www.subway.ie/business/franchise/facts_and_history.aspx
- SUBWAY® – Eat Fresh. (2016). Subway.ie. Retrieved 30 October 2016, from http://www.subway.ie/business/franchise/financial_information.aspx