Subway Innovation Report

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Subway Innovation Report

Subway is the name of a franchise fast food restaurant that mainly sells sandwiches and salads. It was founded in 1965 by Fred De Luca and Peter Buck. The corporation that owns the trademarked name of Subway is Doctor's Associates, Inc. (DAI). The company has over 28,400 franchised units in 87 countries as of September 2007 and is the fastest growing franchise in the world. It is currently the third largest fast food chain globally after YUM! Brands (34,000 sites) and McDonalds (31,000 sites). In this Essay I will be generating my argument that Subway is an example of innovation in action through its products, processes and growth. Subways strategy for growth lends itself to the cooperative nature of innovation. Subway has no company owned outlets, they are 100% franchised. This has allowed Subway to be a very good example of diffusion of innovation with the company being placed in the model rather than the consumers. Each subway franchise acts as its own business or is part of a mini chain of franchises; nonetheless this allows a large degree of innovation to occur since individual stores will become increasingly creative to meet the needs of their individual markets. This then allows the company as a whole to fit in to the diffusion of innovation model as innovators, early adopters and early majority. Below I will provide examples to clarify my argument. In October 2007 Subway launched a Mobile/SMS back to school marketing campaign which allowed customers to receive coupons and product offers via text and redeem them at the till using codes they have been sent by subway to their mobile phones. The innovators were a group of 12 Subway stores in New York, as innovators they were part of a small group whom acted as risk takers were willing to invest early and were confident with enough financial clout to cover their prospective losses, the risk ended up being worthwhile with 13,000 SMS messages sent out 8.8% were redeemed out doing previous direct mail campaigns 200%. Over 400 franchisees across Seattle then adopted the campaign following its success, these 400 stores act as the early adopters in my interpretation of the model they launched the campaign very soon after the innovators achieved success, early adopters tend to be opinion leaders following usual trends, so with 400 more influential franchisees then taking on the new campaign it led to the early majority acting, which in subways case were the remaining majority of franchisees through out the US and became a Nationwide operation, these franchisees represent a group which are more risk averse than previous groups and want some reassurance that the product is tried and tested before they will commit themselves to it. Further examples of Subways ability to diffuse innovation can be seen with the ‘Turbo Chef Toaster' the afore mentioned device was developed by subway to beat out competition in the Australian market and gain the market share from Quizno's ( A rival sandwich fast food chain). The ‘Turbo Chef Toaster' which gave customers the option of having a toasted sub translated to all Subway outlets conducting business today. Subway's ability to innovate so freely and quickly lends to its tight-knit franchising group which allows for increased communication channels and decreases the time taken to implement new products or processes. Subways franchisees have no official power in how Subway is run and the decisions that are made. But since the company is completely franchised in effect franchisees wield enormous power, since the chain depends on their device to make decisions. Thus it is quite uncommon for Subway to mandate changes with which the franchisees are unhappy. By contrast rival food chain, KFC which is made up of both company owned stores and franchisees, uses persuasion as a tactic to be in control of major decisions over franchisees, they use this method as to not upset franchisees but at the same time contractually the KFC...
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