I have chosen to do my Multi-National profile on Subway because I am fascinated on how young people become so successful in the field I am currently in. Also in my last assignment I have chosen Subway’s number one competitor “Quizno’s” and how they failed miserably against Subway during the great recession. After acquiring a little bit of knowledge about Subway, I wanted to go into greater depth to learn more about the franchise. I will explain the history of Subway, their major competitor, their timeline, some of the unique Subway sandwiches from across the globe, Subway’s Strategy in Foreign Markets and I will discuss the entrance into, operations in and focusing on challenges faced each of the following three countries: 1. India, 2. China, 3. Vietnam
History of Subway
At the age of seventeen, Fred Deluca just graduated from high school and decided he wanted to further his education to study medicine, at the University of Bridgeport in 1965. With the advice from a longtime family friend (Dr. Peter Buck), to open a submarine sandwich shop to help pay for his tuition, Fred borrowed $1,000 from Peter to open a submarine sandwich shop. The two became business partners in this new fast food chain. They promoted their business on the radio as “Pete’s Submarines” which sounded like pizza marines, so they changed the name to “Pete’s Super Submarines”. The first store was opened in Bridgeport, Connecticut in August, 1965 and they sold 312 sandwiches the first day. The average cost of a sub was between 49 cents and 69 cents.
“The following year they formed Doctor’s Associates Inc. to oversee operations of the restaurants as the franchise expanded. The holding company derives its name from Fred DeLuca’s goal to earn enough from the business to pay tuition for medical school, as well as Peter Buck’s having a doctorate in physics. Doctor’s Associates are not affiliated with, nor endorsed by, any medical organization.” http://en.wikipedia.org/wiki/Subway_%28restaurant%29
By 1968 the name was changed to, “Petes Subway” and by 1973, Deluca and Buck had 16 locations in Connecticut, and the next year they began franchising, dropped the Pete’s name and became just “Subway,” and introduced the white, yellow and green logo that would become the company’s most familiar trait.
Deluca and Buck started to realize in order to be successful; you must be ahead of the game and watch out for your competitors. They both learned after opening their first Subway, that location is very important, in order to produce larger revenue. In 1974 Deluca and buck decided to open their first franchise in Wallingford, Connecticut.
In 1978 Subway opened their 100th store on the West Coast (The first Subway) was opened in Fresno, California in 1978. In 1983 the chain is ranked number one in the sub sandwich category for the first time by Entrepreneur magazine. A year later in December 1984 the first Subway outside of North America opened in Bahrain.
By 1987 Subway has reached their 1000th locations with opening in Anderson, Indiana. The chain opens the first locations in the state of Hawaii and in the Bahamas. Over the next 20, Subway averaged openings of a 1000 stores per year and in 2007 The 28,000th Subway restaurant opens. “At the end of 2010, Subway became the largest fast food chain worldwide, with 33,749 restaurants – 1,012 more than McDonald’s. In terms of revenue, McDonald’s still led Subway.” As of February 2014, Subway has 41,270 restaurants in 104 different countries. http://en.wikipedia.org/wiki/Subway_%28restaurant%29
Subway meats are processed in Denmark, Thailand, Uruguay, Germany and the UK. Thailand is the largest manufacturer for Subway.
Subway’s Major Competitor
Quizno’s: Subways #1 competitor in the Sub-Marine sandwich industry McDonalds: Subways #1 competitor fast food chain in the world Burger King: Subways #2 competitor fast food chain international Pizza Hut: Subways #2 competitor fast food chain in Russia
Quizno’s restaurant chain was opened for business in 1981. They had the same concept as Subway but Quizno’s subs were toasted (which became an immediate success) and sold at a premium price. Quizno’s also added soups, salads and desserts to their menu to compete against their competitors such as; Subway. Quizno’s became the third largest submarine franchise in the world in 1997, with over 270 franchises across North America and Puerto Rico and By 2007 Quizno’s has peaked by expanded over 5,000 franchises worldwide and was the number two submarine franchise in the world behind the number one franchise, Subway. During the peak of Quizno’s and right before the Great Recession, Quizno’s did not have a strategy for the future. They were too concerned about being number one and selling their franchises to expand.
During the Great Recession Subway franchises started to mimic Quizno’s by offering toasted subs and while Subway robbed Quizno’s out of their unique idea of toasted subs, they pulverized them even more by selling $5 foot-long sandwiches. Of course Quizno’s retaliated back by selling $4 torpedo sandwich. It didn’t take customers long to figure out that the foot-long was a better deal than the torpedo. Quizno’s sales went down because everyone was buying the $5 foot-long at Subway. Quizno’s started to drift away and in 2009 the chain attempted to offer deals and discounts such as; the million-sandwich giveaway, but many franchises did not honor the coupon because of the fear of not making a profit. The chain started to fine Franchisees’ who did not honor the coupon. Over 2,000 franchises have closed during the Great Recession. To get sales up, Quiznos discounted and couponed, which only made profit matters worse, and store closures accelerated.
1965: The first store was opened in Bridgeport, Connecticut
1968: The SUBWAY® name is used for the first time.
1974: The first franchised SUBWAY® restaurant opens in Wallingford, Connecticut. 1975: Biggest, Meatiest and Tastiest
1977: The “Snack” sub sandwich is introduced. The name is later changed to the “6-inch.” 1982: The development of the SUBWAY® chain picks up, with the 200th restaurant opening in Renton, Washington. 1983: SUBWAY® restaurants
introduce freshly baked bread at U.S. locations. 1984: Expanded overseas
1985: The SUBWAY® restaurant chain celebrates the opening of the 500th unit, and the opening of the first restaurant in Puerto Rico. Steak and Cheese and wheat bread are added to the menu. 1987: Continuing to grow at a rapid rate, 1,000 SUBWAY® restaurants are now open. 1989: Subway is now present in all 50 states
1990: The SUBWAY® restaurant chain reaches its goal of 5,000 restaurants with an opening in Texas. The first SUBWAY® restaurant opens in Mexico. 1992: Students begin to enjoy SUBWAY® lunches in school cafeterias 2000: Subway introduces their new slogan “Eat Fresh” with Jared Fogle, a young man who lost 245 lbs. by eating SUBWAY® sandwiches for a year. 2005: Toasted subs are introduced.
2008: The SUBWAY® brand introduces its long running $5 Dollar Footlong promotion. The 30,000th SUBWAY® restaurant opens. 2012: SUBWAY® restaurants is the first quick service restaurant to receive the American Heart Association’s Heart Check Certification on a number of menu items and meals. 2014: Subway has 41,270 restaurants in 104 different countries. http://www.subway.com/subwayroot/About_Us/Timeline/default.aspx “Some of the unique Subway sandwiches from across the globe include:” Australia: Wagyu Beef, a lightly seasoned, premium-quality beef patty that’s known for its marbled appearance and served with home-style tomato relish.
Brazil: Smoked Chicken and Cream Cheese that’s similar to chicken salad but made with cream cheese instead of mayo. India: Paneer Tikka, made with marinated cottage cheese slices cooked in a traditional Indian clay oven. Japan: Ice Plant Veggie, which is hydroponically grown at participating restaurants. The ice plant is known for its crispy and naturally salty-tasting leaves. Mexico: Pierna Habanera, a spicy ham served with hot habanera sauce and Mexican-style cream. South Africa: Peri Peri Chicken, which is made of chicken strips with an African-inspired sauce and seasoned with chili peppers. Sweden: Skagenrora, a mix of shrimp, crab, mayo, lemon, herbs, and spices. Saudi Arabia: Halloumi, a soft white cheese made from sheep and goat milk, which has a high melting point and is typically grilled or fried. http://www.subwaypt.com/en/news/151-subway-goes-global-with-tastes-from-around-the-world.html
Subway’s Strategy in Foreign Markets
“When Subway enters a new market, the first issues it faces are building brand awareness and learning about potential customers’ eating preferences and customs. Rather than second-guessing cultural differences, Subway attempts to adapt quickly to a new restaurant’s immediate service area.
In Israel, for example, the company omits pork items from its menu to avoid violating religious dietary customs. In countries where people are not used to eating sandwiches, Subway has had to educate consumers about this uniquely American product.”
Entered in 2001 in New Delhi
Headquarters in New Delhi
Global brand with a menu that is relativity the same around the world Respected local traditions
Expanded vegetarian options
415 restaurants in 35 cities
Religion: India is known as the land of spirituality and the population is predominantly by two major religions, 80.5% Hinduism and 13.4% Islam. Even though Christianity, Sikhism, Buddhism and other religions make up 5.7% of religion in India and Jainism only makes up .4% of population, dietary habits are significantly influenced by religion.
About one-third of Indian population are lacto-vegetarianism, which means “a vegetarian who does not eat eggs, but does eat dairy products. Many Hindu vegetarians are lacto-vegetarians who avoid eggs for religious reasons while continuing to eat dairy.”
Vegetarianism is much less common amongst Christianity, Sikhism, Buddhism and other religions. Islam (whilst Islam bars pork), Hinduism (bars beef consumption) “Jainism requires monks and laity, from all its sects and traditions, to be vegetarian. Furthermore, the religion also bars Jains from eating any vegetable that involves digging it from the ground (fear of insects or worms dying in the process). This rule, therefore, excludes potatoes, sweet potatoes, carrots, garlic, peanuts, radish etc. from Jain diet.”
History in India: The first Subway restaurant opened in December of 2001 in the area of New Delhi and on September 4th, 2011 Subway opened and operated the first ever all-vegetarian restaurant at a university in Jalandhar, a city in Jalandhar District in the state of Punjab, India and plan to open up two more all-vegetarian restaurants by 2015. As off of February 2014 there are 415 Subways across India. Subway said it plans to operate 1,000 plus stores in India by 2015. Prior to opening their first ever all-vegetarian restaurant, (Subway, which currently had only two vegetarian options on their menus in the United States and Europe)
Subway has tested vegan sandwiches (which would only be used on the menu in India) in the United States and sold out quickly. The tested vegan subs was a huge success and came in three versions: The Malibu Greek, the Italian Black Bean, and the Sweet Riblet and the sandwiches sold out quickly. The vegan subs were never permanently introduced on the menu other than in India. Other “Local flavors” include Chicken Tikka, Chicken Seekh, Chicken Tandoori and Chicken Achari.
Challenges: Subway focuses more on the religion of Hinduism, Islam and Jainism. To allow for cultural and religious preferences, there are no pork or beef products used in any of their sandwiches, which are substituted with lamb, chicken, chicken ham and turkey. Subways in India altered their recipes, which has dairy or egg products, accommodated vegan diners as well as vegetarians by using egg-free mayonnaise and bake their breads without any dairy products. Jainism was Subways biggest challenge yet. “Typical vegetarians in India can already choose from several vegetarian Subway sandwiches, including the Aloo Patty, the Veg Shammi, a lentil-based kebab and the Paneer Tikka.
Also on offer are a regular Veggie Delight, the only vegetarian option at most American Subway restaurants, and a Veggie Patty, similar to a sub-sized Garden Burger.” http://www.examiner.com/article/subway-restaurants-expand-india-offer-many-more-vegetarian-options Subway realized by using meat in their sandwiches was unsuccessful for the Jain’s (which is about 5 million abroad) and on September 4th, 2011 Subway opened and operated the first ever all-vegetarian restaurant which gained a huge demand for the Jain’s and the rest of the world.
Competitor: McDonald’s, the world’s second biggest food outlet in the world; trailing behind Subway, is Subway’s number one competitor in India. Even though the first McDonald’s restaurant opened on Oct. 13, 1996 (5 years before Subway) and it was also the first fast food restaurant in the world not serving beef on its menu, that is when Subway recognized that India was and still is a very small market in fast food.
The first Subway restaurant opened in December of 2001. Ten years later on September 4th, 2011 Subway opened and operated the first ever all-vegetarian restaurant. As of 2014 McDonalds has only 293 outlets compared to 415 Subways across India. Subway said it plans to operate 1,000 plus stores in India by 2015.
Entry strategy: “In term of the selection of entry strategy in the China market, the company continued to use the franchising mode which refer to the system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system. And as the franchisor, SUBWAY will provide a range of rights and resources in term of serious production system, training and other kind of support and help to the franchisee to maintain the same way that it is operated in other parts of the world.” http://www.chinaabout.net/business-expanding-plan-subway-china/
History in China: China has the largest population and second largest economy in the world and due to the increasing numbers of foreign franchises, long time growth potential and relatively new market, Subway decided to do business in China. “It’s not unusual for Western food chains to have trouble selling in China. McDonald’s, aware that the Chinese consume more chicken than beef, offered a spicy chicken burger. KFC got rid of coleslaw in favor of seasonal dishes such as shredded carrots, fungus, or bamboo shoots.” http://money.cnn.com/magazines/fsb/fsb_archive/2005/03/01/8253829/
Subway entered the Chinese market in 1995 with their first franchise in Beijing China. At the time, Subway stores targeted foreigners and students. Subway did not respect the local culture because they had very little knowledge about sandwiches in the Chinese culture and did very little to alter their menus. Subway was immediately popular among Americans in Beijing, but did not blend in with the local market.
The locals did not know what Subway was about. They would walk outside of the restaurant for days and look in the windows, just to see what was going on. The ones who actually went inside were confused because they did not know how to order or even eat the sandwiches. They also could not believe that the tuna Subway used was actually fish because they could not see the head or tail. The tuna salad did not do so well from the beginning.
Subway attempted to add local variations to their menu such as; pork-rib patty with Chinese sauce (which did not do well with the locals), and as time went on more and more variations were added to the core menu such as; roast duck sandwiches and sauces like a hot and spicy Sichuan sauce, which the locals enjoyed. Tuna has become the number one selling item on Subways core menu (in recent years Subway could not even give tuna away).
Bian Jiang, vice-general secretary of the China Cuisine Association, who is in charge of the organization’s fast food department said, “Fast food has become the first choice for 85 percent of Chinese city dwellers when they want to eat out” http://goldsea.com/Text/index.php?id=11269
Deluca said “Subway’s emphasis on fresh eating and lots of vegetables will help the franchise chain grow as Chinese consumers become more aware of healthier eating.”
Subways growth in China begun in 2004, nine years after entering the Chinese market. China started to become more aware of the rising of obesity in the western world and fast food nation. While Subway began catching on with Beijing office workers and with the help of (Subway slogan “Eat Fresh” with Jared Fogle, a young man who lost 245 pounds, by eating Subway sandwiches for a year.) sales started to increase and were highest during lunchtime, most of Subway’s Beijing stores are located near office buildings.
As of January 1, 2014 Subway has 439 outlets in China, and plans to have 900 sandwich restaurants in China by the end of 2015.
Challenges: “Since Subway is a privately owned company, they have more freedom and flexibility in adjusting their strategies, which is another advantage for their successful expansion,” Deluca said. Made in China ( fake subway stores )
Chinese could not distinguish between the fake or real Subway The imitation even accepted Subway coupons
Quick fix: Acquire patent rights in China for their logo’s and trademarks
Lack of researching
Developing menu items to fit Chinese culture
Sandwiches are too big to eat
Prices too expensive
Quick fix: Instead of teaching Chinese, it could adapt its product to suit the culture taste by using local ingredients and add more items to the core menu. Also make smaller sandwiches which means prices will deflate.
Competitor: Subways number one competitor and the number one fast food chain in China, is by far KFC. They were the first fast food franchise in China and now have over 3,500 outlets because KFC has adapted its menu to suit local tastes. The number two competitor is McDonalds with over 1,400 outlets across China, which is the number two fast food chain in China. Subway is ranked third followed by Quizno’s, Wendy’s, and Chipolte Mexican Grill
entered Vietnam in August 2011
currently operates 5 franchises in Vietnam
50 shops throughout the country by 2015
Vietnam is the tenth Asian country which the company has chosen to invest in Subway decided to enter Vietnam in August 2011after “Vietnam had averaged economic growth of 6.6 percent this century quadrupling its per-capita income to $1,896 last year from $402 in 2010, according to International Monetary Fund estimates. The gain has given the country middle-income status, according to the World Bank.” http://www.bloomberg.com/news/2014-02-05/mcdonald-s-enters-vietnam-in-burger-king-contest-southeast-asia.html
Also the Vietnamese culture was well aware of Subways global brand and it gave the culture confidence of eating healthy. In contrast; people in Vietnam love big, impressive brands and with a country as big as Vietnam with 86 million people (according to the General Statistics Office in Hanoi) Subway wanted to make people aware of franchising opportunities. Vietnam is the tenth Asian country which the company has chosen to invest in. Currently Subway operates 5 franchises in Vietnam and expects to open 50 more by 2015 throughout the region. By targeting Vietnam’s dominant young generation, white-collar workers, and women, Subway modified its core menu by adding popularly favorable drinks, local vegetables and sandwiches to meet Vietnamese tastes.
Subway’s competitors such as Yum’s Kentucky Fried Chicken, Jollibee Foods Corp., the largest Philippine fast-food company, Lotteria and Pizza Hut have already had stores in Vietnam. McDonalds plans to add their presence in summer 2014.
“In 2011 the SUBWAY chain became the largest submarine sandwich franchise in the Arab world with more than 250 restaurants in some of the most important locations. It currently boasts more than 110 stores in the UAE, 50 in Kuwait, 47 in Saudi Arabia, 15 in Qatar, 11 in Bahrain, 9 in Oman, 8 in Jordan, four in Egypt and five in Lebanon” http://www.albawaba.com/business/pr/subway-bahrain-review-2011-performance-and-outline-plans-2012-media-roundtable-398796
“In 1993 looking to fit into spaces anywhere and everywhere, the SUBWAY® chain ventures into “non-traditional” locations such as gas stations, convenience stores, truck stops, and rest areas. The popularity of the chain continues and is featured in more movie scenes- this year in “The Coneheads” and “The Beverly Hillbillies.” http://www.subway.com/subwayroot/About_Us/Timeline/default.aspx
“In 2005 Going’ to the Chapel SUBWAY restaurants can fit just about anywhere, from airports to zoos. This year, the True Bethel Baptist Church in Buffalo, NY opened a SUBWAY® restaurant. The franchisee, who is also the pastor of the church, uses the restaurant to teach job and professional skills to underprivileged youth in the community.” http://www.subway.com/subwayroot/About_Us/Timeline/default.aspx
Subway reached a milestone when it surpassed McDonald’s in number of locations in the world at the end of 2010. Since Subway is a privately owned company, they have more freedom and flexibility in adjusting their strategies, which is another advantage for their successful expansion. When Subway enters a new market, the first issues it faces are building brand awareness and learning about potential customers’ eating preferences and customs. Rather than second-guessing cultural differences, Subway attempts to adapt quickly to a new restaurant’s immediate service area. In India, Subway focuses more on the religion of Hinduism, Islam and Jainism. To allow for cultural and religious preferences, there are no pork or beef products used in any of their sandwiches, which are substituted with lamb, chicken, chicken ham and turkey.
They even catered to the Jain’s, on September 4th, 2011 Subway opened and operated the first ever all-vegetarian restaurant which gained a huge demand for the Jain’s and the rest of the world. In China Subway overcame all their challenges and accommodated the Chinese culture to the taste that they are customed to. Subway’s emphasis on fresh eating and lots of vegetables will help the franchise chain grow as Chinese consumers become more aware of healthier eating. China started to become more aware of the rising of obesity in the western world and fast food nation.
While Subway began catching on with Beijing office workers and with the help of (Subway slogan “Eat Fresh” with Jared Fogle, a young man who lost 245 pounds, by eating Subway sandwiches for a year.) sales started to increase and Subways global brand expanded through-out the Chinese culture. In Vietnam, by targeting Vietnam’s dominant young generation, white-collar workers, and women, Subway modified its core menu by adding popularly favorable drinks, local vegetables and sandwiches to meet Vietnamese tastes. Vietnam is the tenth Asian country which the company has chosen to invest in. Currently Subway operates 5 franchises in Vietnam and expects to open 50 more by 2015 throughout the region.
http://online.wsj.com/news/articles/SB10001424052702304567604576454284093198552 (Subway History)
http://franchises.about.com/od/mostpopularfranchises/a/Fred-Deluca-Biography-The-Subway-Franchise-Story.htm https://cunyonline.digication.com/VJ_SUBWAY/The_Global_Expansion_of_Subway_Sandwich_Shops/edit http://www.subwaypt.com/en/news/151-subway-goes-global-with-tastes-from-around-the-world.html (India)