Fast Food Market Forecast - The Subway Example of Strategic Product Positioning

The United States fast food market has seen a healthy rise in growth within the last three years which forecasts can be sustained. The fast food market is forecast to maintain its current growth expectations, with an anticipated Compound Annual Growth Rate (CAGR) of 2.3% for the five-year period 2005-2010. This is expected to drive the market to a value of $57.6 billion by the end of 2010. Drivers of growth include increasing numbers of Americans in the workplace, which reduces the amount of time spent on preparing meals at home. In 2010, the United States fast food market is forecast to have a value of $57.6 billion, an increase of 12.1% since 2005.

Forecast Volume

In 2010, the United States fast food market is forecast to have a volume of 37 billion transactions (Figure 1). This represents an increase of 5.3% since 2005. The CAGR of the market volume in the period 2005-2010 is predicted to be 1%.

Success Factors

Success factors for fast food franchisees will include products and marketing targeted to healthier menu selections, brand consistency, low start-up costs, franchisee support, and consumer convenience. Subway ® represents a poignant example of a fast food franchisee ready for success in the future fast food market. Their strategies transcend the fast food market and apply to many other markets and products.
SWOT Analysis

Subway sandwich shops are well positioned to leverage their strengths and address reasonable threats, weaknesses, and opportunities. The table below highlights these Strengths, Weaknesses, Opportunities, and Threats.

Strengths

Size and number stores and channels

Menu reflects demand for fresh, healthy and fast.

Use of non-traditional channels.

Partnering with the American Heart Association.

Worldwide brand recognition.

Customizable menu offerings.

Low franchisee start up costs.

Franchisee training is structured, brief and designed to assure rapid start-up and success.

Weaknesses

Décor is outdated.

Some franchisees are unhappy.

Service delivery is inconsistent from store to store.

Employee turnover is high.

No control over franchise saturation in given market areas.

Opportunities

Continue to Grow Global Business.

Update décor to encourage more dine-in business.

Improve Customer Service Model.

Continue to expand channel opportunities to include event wagons.

Improve franchisee relations.

Experiment with drive-through business.

Expand packaged dessert offerings.

Continue to revise and refresh menu offerings.

Develop more partnerships with movie producers and toy manufacturers to promote new movie releases through children's menu packaging and co-branding opportunities.

Threats

Franchisee unrest or litigation.

Food contamination (spinach).

Competition.

Interest Costs.

Economic downturn.

Sabotage.

Law Suits.

Competitive Analysis

Subway is not without competitive pressures. Chief competitors include Yum! Brands, McDonalds, Wendy's, and Jack in the Box. Yum! Brands are the world's largest, with 33,000 restaurants in over 100 countries. Four of the company's highly recognizable brands, KFC, Pizza Hut, Long John Silver's and Taco Bell, are global leaders of the Mexican, chicken, pizza, quick-service seafood categories. Yum! has a workforce of 272,000 employees and is headquartered in Louisville, Kentucky.

McDonald's Corporation (McDonald's) is the world's largest foodservice retailing chain with 31,000 fast-food restaurants in 119 countries. The company also operates restaurants under the brand names 'The Boston Market' and 'Chipotle Mexican Grill'. McDonalds operates largely in the US and the UK and is headquartered in Oak Brook, Illinois employing 447,000 people.

Wendy's International (Wendy's) operates three chains of fast food restaurants: Wendy's (the third largest burger chain in the world), Tim Horton's, and Baja Fresh. Wendy's operates over 9700 restaurants in 20 countries, has been included in Fortune magazine's list of top 500 US companies, is headquartered in Dublin, Ohio, and employs about 57,000 people.

Jack in the Box owns, operates, and franchises Jack in the Box quick-service hamburger restaurants and Qdoba Mexican Grill fast-casual restaurants and is headquartered in San Diego, California.

Target Markets

The increase in sales of the sandwiches has been a result of decreases in consumer interest in hamburgers and fries and increases in demand for healthier options. Sales of sandwiches are growing 15 percent annually, outpacing the 3 percent sales growth rate for burgers and steaks.

Current Marketing Program

A new breed of restaurant is making big gains against the market-saturated hamburger establishments. Termed "fast-casual," these restaurants are dominated by Mexican chains, and sandwich restaurants offering fresh-baked breads and specialty sandwiches.

Responding to evolving consumer expectations for health, fresh, custom-made sandwiches; Subway's marketing program addresses these expectations through a number of approaches. The most notable were the television commercials featuring Jared. These commercials emphasize the healthy aspects of a Subway sandwich by highlighting the 245 pounds Jared lost by eating a Subway sandwich diet. Subway also markets through a national sponsorship in events such as American Heart Association Heart Walks and local events such as triathlons, and children's sports teams.

The Subway example represents marketing and product strategies that are classic examples of focusing on market demand, consumer trends, product leveraging, and innovation. The marketing strategies of creating clear brand recognition, brand and product association, and market demands, have strategically positioned Subway to advance market share into the near future. These marketing strategies are also repeatable fundamental marketing strategies transcending the fast food market. Does your marketing strategy bind brand recognition to products that support your market's future direction?

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Subway Surpasses McDonald's: Clever Marketing Eludes Ethical Questions

The Wall Street Journal recently reported that Subway Restaurants has surpassed McDonald's in the total number of restaurants operated under a single brand-name. The article, written by Julie Jargon, credits Subway's strategic move of locating its restaurants in non-traditional locations for part of its expansion success. However, I believe that it has been the company's ability to market itself as a healthy alternative to traditional fast food offerings that has primarily facilitated its growth. While McDonald's has been a lightning rod for ethical questions about its unhealthy products, Subway has escaped such scrutiny. However, a comparison of the two firm's key menu items suggests that Subway's healthy reputation may not be warranted.

As America became more health conscious, Subway successfully modified its image by portraying itself as a fast food chain for waistline watchers. This marketing approach culminated in "The Subway Diet" campaign that featured Jared Fogle, a customer who had lost 245 pounds in less than a year purportedly due to a diet consisting primarily of Subway sandwiches. He ate a six-inch turkey sub plus a bag of chips for lunch each day, and then consumed a foot-long vegetable sub for dinner. As part of Subway's promotional program, it emphasized its menu that contained seven six-inch sandwiches with under six grams of fat each. The sandwiches on this menu did not did not contain any cheese or sauces, which limited the fat content.

I have eaten at Subway frequently and I cannot remember ever seeing a customer order a sub without cheese or condiments. As well, most customers appear to order sandwiches that are not part of the low-fat menu. Despite straying from the low-fat menu, I think that most of these customers believe that they are consuming a healthier meal than they would receive at McDonald's or other traditional fast food restaurants. They have simply accepted Subway's marketing message regarding its healthy product offerings and have failed to examine the calorie and fat content of their most popular subs.

Many of Subway's six-inch sandwiches contain over 500 calories and have over 20 grams of fat, including in excess of ten grams of saturated fat. Consider the following six-inch subs:

Meatball marinara with cheese: 570 calories; 22 grams of fat; and 9 grams of saturated fat.

Tuna sub with cheese: 530 calories; 30 grams of fat; and six grams of saturated fat.

Spicy Italian with cheese: 520 calories; 28 grams of fat; and eleven grams of saturated fat.

Subway Melt with cheese (one of the lower calorie offerings): 370 calories; 10 grams of fat; and four grams of saturated fat.

Keep in mind that the above menu items do not include any sauces, which most customers order. The addition of the most popular condiments can add an additional hundred calories and ten grams of fat and turn a seemingly healthy sub into a calorie laden lunch. For example, one of Subway's six-inch sandwiches from its low-fat menu is the turkey breast sub with 290 calories, five grams of fat, and one gram of saturated fat. However, if a customer adds ranch sauce and Monterey Jack cheese, the resulting sandwich contains 440 calories, 19.5 grams of fat, and 5.5 grams of saturated fat.

This makes a McDonald's cheeseburger, with its 300 calories, 12 grams of fat, and six grams of saturated fat seem like diet food. Other McDonald's menu items have nutritional profiles that are not much different than the Subway sandwiches with cheese and condiments:

Quarter Pounder with cheese: 510 calories; 26 grams of fat; and 12 grams of saturated fat

McChicken: 360 calories; 16 grams of fat; and 3 grams of saturated fat

10-piece McNuggets: 460 calories; 29 grams of fat; and 5 grams of saturated fat

So a customer who decides to eat a foot-long turkey sub with cheese and ranch dressing believing that he or she is eating a healthy meal is consuming the caloric and fat equivalent of a Quarter Pounder with cheese and a McChicken sandwich.

I am not suggesting that Subway has done anything ethically improper by emphasizing its low-fat menu items. The company clearly states in its advertising that these sandwiches do not include cheese or condiments. It also provides detailed nutritional information regarding all of its subs on its website. What is notable is that Subway's marketing approach has allowed it to escape the ethical scrutiny that has plagued McDonald's and other fast food restaurants. By marketing its products to children through its Happy Meal promotions and advertisements, and by sourcing some of its ingredients from factory farms, McDonald's has received the negative attention of consumer watchdog and animal rights groups that question the company's moral compass.

It remains to be seen whether or not Subway's rapid expansion will result in greater examination of its products and business practices, or whether the continued success of its marketing message will allow Subway to maintain its reputation as the healthy fast food.

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Fast Food Market Forecast - The Subway example of Strategic Product Positioning

The U.S. fast food market has a healthy increase in growth in the last three years, the projections can be maintained in view. The fast-food market is forecast to maintain its current growth expectations, with an expected compound annual growth rate (CAGR) of 2.3% for the five-year period 2005-2010. This is expected to go on the market at a value of $ 57.6 billion by end 2010. Drivers of growth are a growing number of Americans in the workplace, which reduces the amountTime spent preparing meals at home. In 2010, the United States are fast-food market is expected to be worth $ 57.6 billion, an increase of 12.1% since 2005.

Forecast Volume

In 2010, the United States are fast-food market expected a volume of 37 billion transactions (Figure 1). This represents an increase of 5.3% since 2005. The CAGR of the market volume in the period 2005-2010 is forecast at 1%.

Success

Success factors for rapidFood franchisees are the products and marketing to healthier menu choices, brand consistency, low start-up costs, franchise targeted support and convenience for consumers. SUBWAY ® is a poignant example of a fast food franchise ready for success in the future, fast-food market. Their strategies beyond the fast-food market and for many other markets and products.
SWOT analysis

Subway sandwich shops are well positioned to capitalize on their strengths and addressreasonable threats, weaknesses and opportunities. The following table highlights these strengths, weaknesses, opportunities and risks.

Strengths

Size and number of stores and channels
Menu reflects the demand for fresh, healthy and fast.
To use non-traditional channels.
The partnership with the American Heart Association.
Worldwide popularity.
Customizable menu offerings.
Low franchise start-up costs.
Franchisee training is structured, concise and designed to assure rapidStart-up and success.

Weaknesses

The decor is outdated.
Some franchisees are unhappy.
Service delivery from the warehouse store in protest.
Turnover is high.
No control over the franchise market saturation in certain areas.

Opportunities

Continue to Grow Global Business.
Update facility to encourage more to dine in the economy.
Improve customer service model.
Continue to expand global partnerships with Event wagon.
Increase franchiseeRelations.
Try experimenting with drive-through business.
Expand Desserts packed.
To continue to revise and update the menu offerings.
Develop more partnerships with film producers and manufacturers for the new film released through the menu for kids packing and promote co-branding opportunities.

Threats

Franchisee unrest or disputes.
Food contamination (spinach).
Competition.
Interest costs.
Due to the economic downturn.
Sabotage.
Law Suits.

Competitive Analysis

Subway is not without competition. Chief competitors include Yum! Brands, McDonalds, Wendy's and Jack in the Box. Yum! Trademarks are the world's largest, with 33,000 restaurants in over 100 countries. Four of the highly recognizable brands of the company, KFC, Pizza Hut, Long John Silver's and Taco Bell are the global leader of the Mexican, chicken, pizza, quick-service seafood categories. Yum! has a workforce of 272,000 employees and is headquartered in Louisville,Kentucky.

McDonald's Corporation (McDonald's) is the world's largest foodservice retailing chain with 31,000 fast-food restaurants in 119 countries. The company also operates restaurants under Chipotle Mexican Grill "brand name" The Boston Market 'and'. McDonald's is working mainly in the U.S. and the UK and is in Oak Brook, Illinois, employs 447,000 people make their headquarters.

Wendy's International (Wendy's) operates three chains of fast-food restaurant: Wendy's (the thirdlargest burger chain in the world), Tim Horton's and Baja Fresh. Wendy's operates more than 9700 restaurants in 20 countries, has been in Fortune magazine's list of top 500 U.S. companies have been included, is in Dublin, Ohio, and employs approximately 57,000 people.

Jack in the Box owns, operates and franchises Jack in the Box quick-service hamburger restaurants and Qdoba Mexican Grill fast-casual dining and is located in San Diego, California.

Target markets

TheSales of the sandwich has been a result of declines in consumer interest in hamburgers and fries and an increase in the demand for healthier options. The sale of sandwiches are growing 15 percent annually, well above the 3 percent sales growth for burgers and steaks.

Current Marketing Program

A new kind of restaurant makes big gains against the market-saturated Hamburger establishments. As a "fast casual" restaurants, which are dominated by Mexican chains,and sandwich restaurants with freshly baked bread and sandwiches.

In response to changing consumer expectations for health, fresh, custom-made sandwiches, Subway-Marketing program addresses these expectations through a series of approaches. The most important were the TV commercials with Jared. These spots highlight the health benefits of a Subway sandwich, by the 245 pounds by eating one Jared Subway sandwich diet lost. Subway also markets througha national sponsorship of events such as the American Heart Association Heart Walks and local events such as triathlon, sports and children's teams.

The metro sample represents marketing and product strategies, the classic examples of focusing on market demand, consumer trends, product will use, and innovation. The marketing strategies of establishing clear brand awareness, brand and product association, and requirements of the market, are strategically positioned to Subway to advance market shareIn the near future. These marketing strategies are also repeatable basic marketing strategies to overcome the fast-food market. Does your marketing strategy, brand recognition to bind with products that support the future direction of your market?

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