Subway: the corporatisation of lunch time?
The rise of Subway restaurants has been nothing short of meteoric; the sandwich spots have gone from being relatively obscure and rare to being a mainstay in the Australian fast food industry. The first store was opened in Connecticut, USA, in 1965 by Frank DeLuca – this would be the first store of what is now over 24,000 restaurants in over 82 countries.
Courtesy of: www.subway.com.au
The first Subway store opened in Australia was in Perth, in 1988. There are currently 1135 stores in Australia, which is the largest Subway market outside of North America. Subway has done what was previously unthinkable in the fast food world – Subway stores now outnumber MacDonald’s stores in Australia (and in other countries around the world, including USA), although Mickey D’s still has a higher turnover.
Subway has, effectively, transformed the way people think about fast food.
So how did this come to be? I sat down with Blake Poynting, a rising business consultant at Subway, over a customised foot long to try and figure it out. Poynting’s sector is one of three development territories in NSW, looking after over 120 stores.
In our fast-paced, frantic modern society, the fast-food sector has always been well positioned to fulfil the needs of hungry consumers. For this reason, the fast food industry is poised to remain relatively buoyant in the face of a global economic downturn.
“We set our targets based on the specific demographics and population density of a particular area within my territory. We are targeting to accommodate a store for every 11,500 people” says Poynting, when asked about strategies for growth.
Subway particularly has capitalised on the wider shift within the fast food industry towards healthier, nutritious options. From its beginnings, Subway has always gone to great lengths to distinguish itself as the healthy option for fast food, even if some of the options on the menu aren’t as healthy as they’d have you believe.
Courtesy of: http://maseehmoradi.blogspot.com
Another attraction of Subway is that it provides an option of choice; consumers can customise their own sandwich roll down to a tee – this is something that was previously unseen in fast food restaurants.
I ask Poynting why he thinks the sandwich chain has flourished in Australia: “Subway has seen enormous growth due to three basic facts: we offer customization, quality products served fresh and unbeatable satisfaction. Putting these three strong basic facts forward, its enables the brand to set its self up with strong foundations.”
Unlike MacDonald’s or KFC restaurants (yes, I do realise that is a liberal interpretation of the word restaurant), Subway stores are franchised. The majority of Subway franchisees are not what you’d call foodies; they’re business people with an entrepreneurial spirit. This obviously works well from a business perspective?
“Most definitely” says Poynting.
Unlike MacDonald’s or Hungry Jacks, Subway stores don’t require a lot of space, they can fit within smaller premises that other chains cannot. The Sydney CBD is littered with Subway stores; and during the lunch time rush in the city, office workers can be seen en masse, scurrying throughout the bustling streets clutching a six-inch or footlong.
But is Subway essentially corporatising lunchtime? Where does the influx of Subway franchises leave the smaller sandwich shops? Are they able to compete?
Poynting acknowledges the advantages that large QSR (Quick Service Restaurants)chains have in relation to their buying power and economies of scale, but is reluctant to admit that smaller restaurants are being squeezed out.
“The QSR industry has enormous buying power for its disposable products, which in turn has a huge effect on the store’s food cost, which for most small business is a huge overhead. But if the product is great and released into the marketplace correctly, then regardless of the senior companies who already hold large portions in the industry, it still can be really successful, even on a small business level. I don’t foresee Subway taking anything away from any small business as the market is naturally so competitive,” says Poynting.
In coming posts we’ll be looking at some smaller sandwich restaurants and gauging their performance in the wake of Subway’s market dominance, as well as profiling some of the best customised Subway sandwiches.
