Subway: sandwich franchise celebrates 20 years in Oz
Back in the days of great Aussie foods (think Chiko rolls, meat pies and Vegemite sandwiches) an American style sandwich gave Australians an alternative — and one which was to capture the idea of a fresh and customised sandwich. Subway was born in Australia thanks to an entrepreneurial dream of a local franchisee who opened the first Subway store in Perth in 1988.
It might not have gone off with a bang due to early consumer scepticism but the Subway sandwich soon attracted a core base of loyal supporters, “meeting their needs for a healthier lifestyle”, says Brian Tap, the regional director responsible for the Australian and New Zealand business.
Like any brand establishment it was a slow process. But there was explosive growth in the early 2000s, “once we had opened over 130 stores” he says. It was around this time that a shift in market perception saw the fresh and healthy offering enter the mainstream. And because Subway had achieved a higher level of visibility with more stores, purchasing a healthier sandwich just became more convenient. It took 10 years to get people aware,” says Tap. “More stores support growth.”
How times have changed
Australia was the first to hit 1000 stores outside of North America. “WeÍll open 80 stores this year and that growth rate is our target for a few years,” Tap reveals. I started in 1998 in operations in Queensland and there was no regional office for 10 years. We set them up here first when the Queensland territory was taken back by the company, and they needed an office.
As regional director he reports to the international director and the Australian business is conducted in a license agreement. Now the distinctive brand accounts for 14 per cent of visits by Australians to a quick service restaurant (QSR) and is the third highest and growing, behind McDonalds and KFC, according to the Sydney Morning Herald, 17th September, 2008.
It is the product that has been the key business driver over the past 20 years, distinguishing itself in its field as the healthy choice on the go. A Research International study conducted in October 2007 confirmed this positioning, with Subway found to be the number one healthy QSR in the minds of Australian consumers.
Tap acknowledges that the obesity epidemic and the increasing demand for health and wellbeing products has partly contributed to the growth of Subway — with its popular ïeight Subs with six grams of fat or lessÍ range and sides such as low fat Vaalia yoghurt. “As a group, consumers have all moved into the health space — Subway fulfils these needs with our offerings of fresh salads and protein [sandwiches] made in front of you, exactly as you like it,” says Tap.
Getting in on the deal
While the appeal of a healthy lunch or snack option seems to grow daily, and Tap is confident the Australian market has plenty of room to take more Subway outlets, it isnÍt that easy to get into a brand new or greenfield site. Particularly in New South Wales and Victoria, he reveals, where existing franchisees are out looking for new sites all the time. “The only way to get in is to buy an established store.
It speaks volumes for the brand that multi-unit franchising is almost a byword at this business with some franchisees counting up to 20 stores in their portfolio and 70 per cent of franchisees reinvesting by opening up another store. This suits the mantra of “build stores, build sales, and build profits”.
The company has appointed development agents who are contracted to a territory to find fresh sites and help franchisees through the business.
What is the profile of a typical Subway franchisee? Unsurprisingly, Tap admits, there is not one age, ethnic background or geographical location that fits a Subway franchisee profile. What is important is that the franchisee is someone who wants to be independent, to be hands-on and to work within the business, and who can understand the customer.
So what will a franchisee pay for a Subway outlet? A spend of $250,000 gives a franchisee a turnkey operation. The company has a flat management structure and entrepreneurial model, providing prospective franchisees with a low cost entry, simple and flexible system with extensive training support and development. This includes a specific application process and several initial meetings with a potential franchisee. Franchisees are also encouraged to do 40 hours of practical experience at another store to arm them with tools and knowledge in their own environment prior to any purchase.
Another training tool available online to all Subway franchisees and their staff is the University of Subway — which provides them with courses on everything they need to know, from how to make a Subway sandwich to business courses on running a franchise.
Local marketing boards made up of franchisees follow the company adage that money given in one area serves that area. For the last 18 months a country board has been pulling together marketing plans with the 43 local boards so there are, in TapÍs words: “More strategic actions, growth in TV and radios. WeÍre leveraging the size of our accounts and looking for localised support with the same TV ads etc.
In tough economic times the sandwich business is experiencing the same problems associated with rising costs as their counterparts. However, Tap asserts that its franchise model combats labour problems other companies may be experiencing. This category performs well in tough economic times,” he says. “But there is pressure with rising wheat and protein costs. Subway is the right product, the franchise concept is right, the owners are in-store and dealing with the vagaries of trading every day, theyÍre fixing the problem. This flexibility makes it well-suited to the current climate.”
Despite the companyÍs phenomenal growth, Tap acknowledges that for most of its 20 year history, the ïSubÍ product has led the brand with little or no marketing assistance; but the store that has reached 86 countries isnÍt standing still.
Plans on improving the menu to give a simplified option on the in-store panels are underway and Tap promises there will be some new concepts early in 2009. Yet with all the choice, there are five big winning sandwich combinations that account for 60 per cent of the turnover; and teriyaki chicken and chicken fillet are the two biggest sellers. The customer is persistent,” explains Tap.
* Subway is the world’s largest submarine sandwich franchise, with more than 29,640 locations in 87 countries.
* Established in 1965 in Connecticut, its Australian headquarters are in Brisbane. It has an annual turnover of $600m
* First Australian Subway store opens in Perth 1988; opening of 1000th store in Tarneit, Victoria: February 2007
* Franchise training centre in Brisbane launched in October 2000; regional head office opened in July 1999 in Brisbane with only a couple of staff. Today 40 staff are employed in the office.
* Subway brings on Adro, AustraliaÍs original biggest loser, as a brand ambassador in 2007 — to promote the ï8 under 6g of fat or lessÍ Sub range and the Fresh Fit menu launch
* There are about 10,000 different Subway sandwich combinations
* More than 12,000 staff work in 1060 stores in Australia
* Subway® was found to be the number one healthy QSR in the minds of Australian consumers — Research International study, October 2007
* The Subway franchise was named the top Global Franchising Opportunity by Entrepreneur Magazine in 2008