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QSR Feature
Subway, Unscripted

“We might be a lot smarter now about when we develop and where we develop,” Forbes says.

That savvier group has come to understand “it’s a lot better to own a Subway down the road from your store than to have it be a Jimmy John’s or a Quiznos,” says Bob Horner, a Houston-based partner in five franchisees and an area developer with oversight of 375 stores operated by others.

And breakfast appears to be winning over at least some of the skeptics. “I thought I’d lose money on it for six months, but I’ve been pleasantly surprised,” Forbes says. “Forty-five days out, I’m breaking even, so things are pretty good at the moment.” He even says the morning meal is the chain’s greatest opportunity.

“It all depends on consumer demand—if a lot of people want to buy your product, then you need more stores to satisfy them,” DeLuca says. “Right now, we have on average about one store for every 13,000 people in the United States. I’m confident one store per 10,000 people is achievable and beneficial.”

The key, he says during an exclusive interview with QSR, is keeping that demand stoked. Breakfast is the first phase of a long-range initiative to boost traffic outside of lunch, Subway’s stronghold. “We’ll do the same with snacking, the same with dinner,” DeLuca says. “There’s big opportunity there in daypart expansion,” but “we’ll probably need a couple of years to get it right.”

He also cites the benefits waiting to be reaped with new technologies. “There’s huge opportunity to marketing to customers more effectively and more efficiently,” he says. “There’s a lot to be done there.”

DeLuca cites the phone app that’s being tried by a franchisee in Los Angeles. “It’s this silly, quirky texting system—I say ‘silly’ because it’s so simple and easy,” he says. “You can stand outside the restaurant and use it to order just the way you’d order a sandwich inside—‘I want this bread, I’ll have cheese, some lettuce.’ This unsophisticated device is really working. It’s a great little thing.”

Many of Subway’s most successful demand-builders have been copied in recent years by other quick-service brands. Cutting the price of the Subway Footlong to $5, an idea hatched by a franchisee, was “huge” and a major reason “we’re way up over last year,” Goodridge says. Recently, $5 deals were hawked by Quiznos and Arby’s, among other direct competitors.

Subway also feels a lot of hands grabbing at its claim to fame: being fast food’s healthful alternative. “We have a lot of credibility on the nutrition and fresh-food fronts,” DeLuca says. “Now we have a lot of competitors who are doing a lot on that front. We need to maintain our lead.”

The new breakfast menu fits that attempt. Subway, a latecomer to the morning market, offers egg-white-only versions of the new sandwiches, which can be made with whole-wheat breads. Selections can also be garnished to order with any of the fresh vegetables the chain uses on its Footlongs, like peppers and tomatoes.

The chain is also looking at the composition of the foods on its menu. “We’ve been working for the last two years on sodium reduction,” DeLuca says.

The breakfast initiative, he says, “is doing OK” and “our owners are very happy with it.” Like all of the franchisees who spoke with QSR, DeLuca stresses that the venture didn’t require much of a ramp-up. Managers and some crew already arrived early to bake bread for lunch. “It’s just a matter of coming in an hour or two earlier,” DeLuca says.

The program was apparently not expected to light a rocket under sales, at least initially. Projections called for an increase of just $265 per unit per week, franchisees say. But that was against a labor investment of just five to seven additional man hours per week.

Meanwhile, the program is paying dividends that have nothing to do with egg sandwich or coffee sales.

Licensees say a noticeable number of breakfast patrons also buy a cold sub they can store in the fridge at work and eat for lunch at their desk, boosting sandwich sales without lengthening the midday lines that can discourage would-be customers.

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