Subway Café provides a different franchising option

May 26, 2011 | by Alicia Kelso

As Subway Restaurants moved past McDonald's this year to take over the global unit count top spot, a much smaller concept under the brand's umbrella has continued to grow at a much slower pace.

Subway Café, the brainchild of franchisee Larry Feldman, who has one of the most extensive portfolios in the industry, first opened in 2008 in Alexandria, Va.

Since then it has only spread to 15 units and counting, including one in Canada and the latest opening recently in the Mount Vernon Triangle neighborhood in Washington, D.C. Another D.C. Subway Café is expected to open downtown by the end of the summer.

The concept

There are few, but marked, differences between a signature Subway outlet and a Subway Café.

Cindy Kopazna, who oversees tests and special projects as part of Subway's research and development department, said the biggest distinctions come with the décor, the layout and the beverage offerings.

Subway Cafés leverage the chain's partnership with Seattle's Best to embrace more of a coffeehouse ambiance.

"The set up is essentially the same (as a regular Subway) – customers can still come in and order their sandwich the way they're used to. But Subway Cafés include some baked goods and dessert items and a full line of espresso-based creations," Kopazna said.

While any given Subway Café may include the $5 Footlong deal, premium beverages – including espressos, lattes, mochas, cappuccinos, teas, chai options, hot cocoa, and a handful of frozen options – are Subway Café's signature menu items.

"Instead of going to a Subway to get a sandwich, and then later going somewhere else to get a coffee, now they can do it all in one spot. It's nontraditional for us and it helps create a captive audience," Kopazna said.

Subway Café also boasts a bakery case with a variety of desserts and other goods not typically available in a Subway sandwich unit. Some café operators may even offer a wider variety of salads and sandwiches. The menu choices vary from location to location.

Space differences drove the original café

In this case, more variety means more space is necessary. Kopazna explained that the café concept requires more square footage than a traditional Subway for the bakery case, espresso equipment and for the customer set up; a different line and POS exist, one for sandwich-only customers and for coffee/bakery customers.

The idea behind Subway Café stems from trying to fit an ideal real estate option. At the time of the concept's inception, Feldman had more than 1,000 units in his portfolio but came across a road bump while opening a new store. It didn't fulfill the landlord's ideal dimensions and was likely to not be approved.

Coincidentally at that time, Subway was getting ready to introduce drip coffee options with its breakfast line up. Feldman put two and two together and approached Subway with the larger coffeehouse-inspired idea.

"Larry needed something to meet a development need at that time. He needed to have something to get his foot in the door in some locations in the D.C. area that he wasn't able to get into before (with the traditional Subways)," said Les Winograd, public relations specialist for Subway. "This idea came entirely from a business location standpoint."

Consequently, while an average Subway is about 1,200 square feet, Subway Cafés, according to Winograd, are "significantly larger and require larger investments."

Most also exist in nontraditional spaces – office buildings, hospitals, campuses, etc. Only two thus far are brick-and-mortar.

These options allow the company to assure the concept makes as much financial sense as possible, according to Kopazna. "If we gain locations we wouldn't have been able to gain otherwise, then it helps us consider testing a success," she said.

Not only are Subway Cafés a bit larger, the overall ambiance is different. The units include wireless Internet, exposed brick walls, fireplaces, armchairs, dimmer lighting, and various other "upscale" components.

Slow, steady expansion

These design elements, along with the real estate specifics, provide more financing challenges for potential franchisees. That's why Subway has been deliberate in growing the café model.

Even though the first café unit opened almost three years ago and there are about 40 in the pipeline – whether in bidding or development – the company anticipates keeping Subway Café in test phase for quite some time.

"We're always cautious whenever you're looking at something that will cost franchisees additional investments. I think we want 25 to 50 locations open before we're able to assess where we are; before we're able to make a full financial analysis so we can recommend it to franchisees that it's a viable option," Kopazna said. "This idea is more development driven than product driven, but with the combination of our brand strength and having an upscale décor and more offerings, it's very attractive for many."

See examples of the Subway Café here.

Current Subway Café locations include:

  • Traditional location in Gainesville, Fla.
  • Birmingham Southern University in Alabama
  • Alliance Center (office building) in Tallahassee, Fla.
  • Denver Financial Tower in Colorado
  • Office building in Annapolis Junction, Md.
  • Office building in Regina, Saskatchewan
  • Office building in Washington D.C.
  • Office building in Alexandria, Va.
  • Office building in Milwaukee, Wisc.
  • University of Maryland in Catonsville, Md.
  • Grand Junction Airport in Colorado
  • Food Mart C-Store in Queens, N.Y.
  • Chaska Medical Center in Chaska, Minn.
  • Loewenberg Medical Building in Nashville, Tenn.
  • Altoona Hospital in Altoona, Penn

Topics: Business Strategy and Profitability , Coffee/Bakery/Donut , Food & Beverage , Franchising & Growth , Furniture and Fixtures , Marketing / Branding / Promotion , Operations Management , Restaurant Design / Layout

Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with, and has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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