By: Kenneth BrownBy: Kenneth Brown Michael ForneyMichael Forney Michelle Michelle KordahiKordahi James O’MalleyJames O’Malley

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Company Company History:History:

• Subway prides itself in being a healthy fast food chain offering a variety of sandwiches and subs

• Founded in the summer of 1965, by Fred DeLuca and investor Dr. Buck

– Deluca was trying to make some money for college

• As a growth strategy, and in an effort to increase profits, they embarked on the idea of franchising their business

• Subway locations grew exponentially2

Strategy:Strategy:

• Formulating a unique value proposition

• Targeting an underserved customer segment

• Structuring an aggressive franchising model

• Expanding internationally

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• “Eat Fresh”– Slogan

• Higher perceived value against competition

• Custom sandwiches tailored to customer

• Appeal to young professionals

Marketing :Marketing :

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Franchising:Franchising:

• Low start up costs – Less equipment is needed

• Countertop, oven, refrigerator, and microwave

– Small Area is needed• Real-estate costs are low

• Lowered operating costs which therefore raise margins– $12,000 vs $45,000 for

McDonalds• Makes it appealing to investors

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International International Growth:Growth:

• 1st entered into world market in 1984 in the Middle East nation of Bahrain

• International expansion approach at the time was… – “If you like Subway, you think it’s a good

thing, and you think it would work in your country, then we’ll teach you the concept and how it works and you go make it work in your country.”

• Used development agents to recruit franchises and assist in growth

• Core menu was left unchanged, with exception of religious and cultural consideration– They believe the sandwiches will

catch on and overcome cultural barriers

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• “In summary, Subway’s success consisted of a strong brand based on a unique value

proposition aimed at a dissatisfied target segment. The company’s low-cost franchising strategy has allowed Subway to flourish both

domestically and overseas.”

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How important How important is Asia for is Asia for Subway?Subway?

• In Asia there are various cultures, religions and languages– This allows for a diverse,

flexible, and innovative market

• Discretionary income is rising– Major opportunity for fast-

food in the growing middle class

– Allows Subway to zone in on market niche

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Market Market Opportunity Opportunity

Facts:Facts:

• The Asia-Pacific fast food market has experienced 11.7 percent growth between 1999 and 2003.

• The market was worth $77.9 billion in 2003, an increase of 55.8 percent since 1999.

• This growth is considerably stronger than the overall global market and is driven by the large-scale expansion of the Chinese market 83 %

• In terms of value, Asia-Pacific represented 28.3 % of the global market in revenues for fast food in 2003.

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Competitors:Competitors:

• McDonalds• KFC• Burger King• Hardee’s• Wendy’s• Popeye’s

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Major Drivers of

Global Fast Food

Market Growth

• Traditional: Convenience, price, and value. Also a place for youth to socialize.

• New Drivers: Nutritional value and diversity of options

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Issues and Concerns in

the Global Fast Food Market

• Reputation as a decent place to eat

• Ethical consideration for local venues – fast food can put them out of business

• Many fast food places seen as American or Western icons –Can be dangerous in Middle East where protests and demonstrations are carried out at places like McDonalds

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Impact of Global Drivers and Concerns

on the Fast Food market in Asia

• All of the global concerns are particularly present in Asia

• Largely stratified social class makes location choice difficult

• Many Asians eat with gloves or don’t eat part of food they touch

• Majority of Asian population (83%) lives in rural areas and do not have convenient access to fast food venues

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Specific Regional Drivers and

Concerns

• Main drivers in Asia: Type of cuisine, price, convenient location, good hygiene standards, and health.

• Concerns in Asia: Hygiene and nutrition are two of the largest concerns in Asia– Massive social stratification

means many cannot afford even fast food

– In some poor areas, family-owned restaurants are the only way people can make a living

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Market Trends and Consumption Behavior Towards Fast Food in Asia

• Reception to fast food is large in many developed Asian economies and growing in others

• Trends favor places that offer a “whole package” which includes all of the regional drivers (Type of cuisine, price, convenient location, good hygiene standards, and health)

• Obesity in Asia is causing a push toward healthy low-calorie, low-fat alternatives to typical fast food (burgers)

• Eating at Western style places perceived as high class

• Fast food venues provide a place for many people to conveniently sit down and eat together. Eating together is very popular in Asia.

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Asia Important as a Market of Interest for

Fast Food

• Yes, absolutely• The Asian-Pacific region

represented 28.3% of global revenue for fast food industry

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Market Opportunities in Asia

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Questions?

• What countries do you believe to be the best

opportunity for Subway?

• In terms of demographics who do you believe

Subway should target?

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Best Countries in Particular in

Asia

• China, India, and South Korea

• Each country is not yet a large consumer of fast food

• Subway can still capitalize on first mover approach in these areas as economic growth is starting to become rapid– In the coming years, many people will

be able to access and afford fast food in these currently lagging countries.

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CHINA• Third largest economy at $10 trillion

dollars• 97 % of the population eat at fast

food restaurants • The demand for fast food increases

with the economy, more disposable income

• Drive-thru’s are increasingly popular, as well as eat-in restaurants

• Chinese people don’t like to eat with their hands; introduce a subway salad bread bowl

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INDIA• Exponentially increasing middle class• Fast food market growing between

15 and 20% annually • Indian food is very specific, needs

adaptation between chicken, lamb, and fish

• Very high competition, but no real competitors in terms of sandwiches

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KOREA• Fast Food market is growing 30%

annually• Increasing demand for healthy

options• Sandwich sales doubled in 2003• Young professionals and students

are interested in healthy options and low calories

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Recommendations:Recommendations:• Take advice from

franchisees• Continue healthy eating

strategy• Tailor menu to different

national markets (localize)

• Offer new items for local tastes

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Recommendations:Recommendations:• Increase seating to be in

line with Asian culture• Add breakfast items• Promote as customizable,

healthy sandwich• Stick with core

competencies for now• Price according to

country’s discretionary income

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• Additional Questions?Additional Questions?

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•Thank you!

•The End…

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