Subway Franchise Case Study

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Subway Restaurant

Overview
Our organisational analysis focuses on Subway Corporation, a submarine sandwich Franchise which is the fastest growing fast food franchise in the world. The Subway headquarters is registered and operates in Connecticut USA. In 1965 Subway a private company owned by Fred Deluca set a goal of having 32 stores in 10 years. With only16 submarine sandwich shops operating in 1974, Mr. Delica realized that his goals were unachievable and decided to Franchise his stores. That year the SUBWAY® brand was launched. It was decided that further growth would be achieved through serving high quality products, providing excellent customer service, keeping operating costs low, finding good store locations and continually recruiting new franchisees. Subway gradually became the “largest submarine sandwich chain in the world” (The Franchise Magazine.net, 2009), located in 92 Countries with more than 33,611 franchise restaurants to date. (Subway Restaurant Website, 2010) This document reviews performance and operations of the company and their strategies for becoming the largest submarine sandwich chain.

The Business
In 1974 Subway identified their business and fundamental purpose to serve their franchisers worldwide, and to offer them the support systems required to carry out their business. We were unable to locate any past mission statements, however, out of these principles the current Subway mission exists: Subway’s mission statement is “To provide the tools and knowledge to allow entrepreneurs to successfully compete in the Quick Service Restaurant (QSR) industry worldwide by consistently offering value to consumers through providing great tasting food that is good for them and made the way they like it” (Subway, 2010)

Subway maintains its business concepts of keeping the investment low, keeping the operation simple and offering customers healthy, delicious fast food options. The expansion drive is supported by the Company continuously recruiting new franchise owners and assisting in site selection, lease negotiation, construction and ongoing operations. While the purpose of the business is to serve the franchiser, the tools, products and knowledge provided by Subway to the numerous international franchisees need to be continually changed due to their cultural uniqueness, customer expectations and business climate. This idea is supported in Drucker (2008) who suggests that a Company’s “core mission remains fixed with operating practices, cultural norms, strategies, tactics, processes, structures and methods continually change in response to changing realities” (p.17) Subway carries out its ‘Business’ by satisfying their franchisees’ (primary customers) demands though their business concepts thus allowing these franchisees to offer products that will in turn satisfy their customers (secondary customers).

The Customer
In the Five Most Important Questions, Drucker (2008) suggests that “the first job is to define your target customers, this definition will effect everything, the choice of our distribution outlet, crafting of our messages, choice of the media and the setting of prices” (p. 32) he goes on to explain that “The new thinking is that we, the company choose our customers” (p. 32) By establishing criteria (minimum investment, populations and income per capita) for potential investors Subway targets their customers. The Subway customer is therefore ‘chosen’ once the requirements are met. The entrepreneur /franchisee are the customers of Subway. These customers have gained confidence in the Subway brand through the established support system provided by their franchiser.

What Does the Customer Value?
Having identified Subway‘s customer as being the investor ‘franchisee’, these customers value the very strong structured support they receive from Subway which allow them to in turn offer their...
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