Subway, an American restaurant franchise that primarily sells submarine sandwiches and salads, opened operations in the UK in 1996. In 2001, the company reached the 50th store mark and by 2010 it had become UK's most successful seller overtaking its chief fast food rival McDonalds in the number of outlets. The company now has 1,500 franchises in the UK and is targeting to double this number in the next 3 years.
Market Analysis: Ever since recession set-in consumers with less disposable income have moved away from conventional restaurants to fast food eateries and takeaways. With the UK's economy still struggling from the aftermath of recession, the following trends in the foodservice sector are likely:
- Innovative value offerings to wean away customers from discount vouchers
- Affordable ethnic food options such as Middle-Eastern food chains and 100% home-delivery/takeaway chains will continue to thrive
- Consumers are increasingly demanding healthier food options
- British consumers are now choosing seasonal, local produce over imported organic foods
- Rising rents and utility costs have affected both chained and independent operators
- Fast food industry is forecasted to see a flat growth through 2014 with bigger chained brands and fast casual dining expected to perform better than independent fast food operators.
Subway's Operations in the UK: Subway's phenomenal growth in the UK can be attributed to its ‘low-cost franchise' model that has proved attractive for local players. Its restaurants require little or no cooking apparatus, have limited seating capacity and give the franchise-owners full control over recruitment strategies, local promotions and opening hours.
The company's simple yet powerful slogan ‘Eat Fresh' has resonated well with the growing consumer awareness for healthy fast food options. Their salads and sandwiches also appeal to Brits' looking for inexpensive fast food options and the variety it offers in its choice of breads, meat, cheeses, sauces and salads is an additional lure.To meet the UK government's norms, Subway reduced salt content across its entire range by 33% and its range of Low Fat Subs is fully endorsed by the charity Heart Research UK.
In an attempt to draw on the large Muslim population based in the UK, Subway has opened over a hundred restaurants offering halal menu and plans to open more of these.
The company recently lost a high court appeal in the UK because of which a toasted sub attracts VAT, whereas its chief competitors such as Greggs, Quiznos and McDonalds do not pay VAT on similar food.
In the face of growing competition from the ethnic food sector, rise in cost of raw materials and rent coupled with fierce price competition, making it tough to pass it on to the consumers, the question is how Subway will reach its 3,000 outlets in 3 years target and overtake its competitors in terms of revenue generated as well.
[...] Future Research Scope The future research scope involves the following: ➢ Global foodservice market outlook with focus across UK and European fast food segment. Benchmarking study on Subway, Burger King, Greggs, McDonalds etc. ➢ China and India the emerging foodservice marketspace with special emphasis on distribution and macroeconomic challenges and unique value propositions for global franchised brands such as Subway. References ➢ Subway Sustainability Section http://www.subway.com/subwayroot/about_us/Social_Responsibility/ ➢ N. Craig Smith, “Corporate Social Responsibility: Whether or How?” California Management Review, 45/4 (Summer 2003): 52-76. [...]
[...] Corporate Social Responsibility-Environment friendly branding The three basic pillars of corporate social responsibility stood as (Smith, 2003): ➢ Financial: The traditional pillar of businesses was to enhance profitability for its shareholders on long-term basis. Subway's parent corporation “Doctor Associates Inc” is privately held corporation. It is slightly low shareholder value focused due to private ownership structure. ➢ Society: Majority of companies post scientific management has reduced emphasis on in-house and outside human capital as machines. The company has negligible trans fat across majority of product portfolio on worldwide basis. [...]
[...] Strong franchise based model is enhancing early mover advantage and penetration across fragmented emerging markets such as India. ➢ Weaknesses: United States is the biggest market for Doctor Associates Inc constituting 69% of total group revenues. The economic turmoil in United States might hamper long-term competitive advantage. Niche customer population aged between 25-32 years of age across advanced economies perceive Subway's foot long highly priced and low value for money reducing regional customer acquisition. ➢ Opportunities: Global foodservice market is stipulated to reach US$ 2.2 trillion, with CAGR of (2012-2015). [...]
[...] On global basis, it has reduced salt content in product portfolio by 15% (United Kingdom and Ireland particularly reduced by to improve health conscious based brand positioning and penetration on long-term basis. In United Kingdom, low fat centric Subway products accounted for 40% of group's regional volume sales. In 2011, it has focused on reducing salt content and trans fat from majority of its product portfolio aligned with UK Government's Responsibility Deal pledges. ➢ Promotional: In 2011, Subway UK operations advertising spend increased to £18 million (Kantar Media, 2011). The company has sharply reduced its promotional campaign spending in United Kingdom by 2/3rd in past 2-3 years. [...]
[...] Subway is owned by privately held corporation Doctor Associates Inc. It has an employee base of 0.15 million incepted in 1965 by Fred De Luca. Doctor Associates Inc: Global Financial Performance (2007-2011) US$ in million 2007 April 2012 Salad bowls and lids manufactured with ninety five percent of recyclable raw material April 2012 Proposed local retail expansion investment worth US$58 million in India January 2012 Subway increased employee base by 21,000 in 2011 January 2012 Proposed inception of 600 new retail outlets in UK and Ireland in next 2-3 years (2015) January 2012 Proposed inception of 2,500 new retail outlets worldwide in 2011 November 2011 New concept based “ Subway Café” launched in California (United States) Oct 2011 Majority of domestic Subway retail outlet will be MasterCard's NFC payment platform enabled in May 2012 August 2011 Green brand centric five new retail outlets launched in core marketspace i.e. [...]
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