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Subway closing in on surpassing McDonald's in number of units
September 21, 2009
Subway's focus on non-traditional locations and international growthis propelling the company to pass McDonald's in total number of locations, although the burger giant continues to dominate in sales.
In the first half of 2009, Subway added1,014 new locations.Among the openings, 28 locations were in Walmart stores and six in Lowe's stores. Over the first six months of the year, the company added a total of 138 locations in the United Kingdom, Germany and Brazil alone. The company also met a number of development milestones, including reaching 22,000 U.S. locations, 2,400 in Canada and 1,300 in the United Kingdom. In the United States, Subway also reached its goal of 1,700 Texas locations.
"With one of the lowest start-up costs in the industry and a product that fits everyone's tastes and budgets, the Subway chain is still able to buck the current economic trend and provide opportunities for entrepreneurs looking to open and operate their own businesses," said Don Fertman, the brand's director of development.
Subway expects to pass the 31,800 mark this week, putting it within less than 400 stores of McDonald's 32,158 total restaurants, according to a story by Advertising Age. The chain adds about 40 locations a day and has benefitted from its made-to-order offerings as well as its $5 footlong promotion.
Subway remains unconcerned about reaching a saturation point and is instead focusing on areas where it has lower penetration, including Boston, home of Dunkin' Donuts.
From Advertising Age:
Subway development director Don Fertman said that the milestone reflects not only the importance of convenience, but of fresh alternatives and custom-made food. "Our customer wants quality products, not pure convenience, and [our customer also wants] customization -- more or less vegetables on the sandwich, cucumbers or no peppers --[a sandwich] made exactly the way [he or she] wants it," he said....Last year's key growth driver was the chain's $5 footlong promotion, now a staple of the menu. Tony Pace, CMO of the Subway Franchise Advertising Fund Trust, said that not only was the promotion dramatically accretive to same-store sales, "we jumped in front of the pack," by taking the lead in the value category others then had to chase. Mr. Pace said that last year's promotion resulted in double-digit same-store sales gains in the U.S. ...
The $5 barrier
Subway's $5 footlong promotion has been the sweet spot for the company during the economy, but analysts are wondering if consumers are now trained to expect that price point, according to a story by Reuters.Jeff Moody, chief executive of the Subway Franchise Advertising Fund Trust, said same-store sales have been impacted by unemployment but the $5 price point is helping the company overall.
From Reuters:
Analysts expect future gains would not come as easily. Subway is lapping year-ago figures that benefited from the $5 deal. Beyond that, joblessness is forecast to continue climbing and rivals like Yum Brands Inc. and Wendy's/Arby's Group Inc. have stepped up competition.
KFC, for example, began offering its $5 Fill-Up Box earlier this summer, pointing out that it offers a full meal for the fiver, while Subway only offers a sandwich. Subway's latest promotion includes its six-inch sub of the day for $2.99 or as a combo for $4.99.
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