Organisational Analysis

Company History• 1965 - Fred Deluca opened submarine sandwich shop

Goal to open 32 stores in 10 years

• 1974 - With only 16 stores opened he changed the strategy

Business Expansion

• 1974 - The Subway brand was launched

Overview

Business Success would to be achieved by:

Serving a high quality & healthy products

Providing excellent customer service

Keeping investment & operating costs low

Finding good store locations

Continuously recruiting new franchisees

Overview

“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” (www.subway.com).

Subway’s Mission Statement

The Mission

“Subway’s Business is” :

To serve their ‘Franchisees’ worldwide

To offer their Franchisers “support systems”

(The tools, products and knowledge)

“Subway offers one of the most reasonable, well-structured franchise programs on the market” . (The franchise magazine 2009)

The Business

Constant

Subway’s core mission “to serve the franchiser”

Continuous ChangeThe tools, products and knowledge provided by Subway continually change due the cultural norms, customer expectations of the territory.

** Product Development**

“ the core mission re-mains fixed with operating practices, cultural norms, strategies, tactics, processes, structures and methods continually change in response to changing realities” (Ducker- 5 most important questions).

The Business Operates

The Business

Established Criteria for being a Customer (Franchisee)

Specifying Investment capital minimums Specifying City populations & Income Per capita minimums

“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” (5 Most Important Questions –Drucker)

Who is your customer?

Who is the Subway Customer?

Who is the Customer

Subway has chosen the Franchisee (investor) to be their Customer

Customers Value the Support they Receive

Subway support customers through providing the Tools, Products and Knowledge which in turn allows them to offer their consumers (secondary customers) the consistent standard and value for money

What does the customer value?

Subway Customers (Franchisee) Value the Support: (Tools , Product and Knowledge)

Customers Value

Business start up - Low franchise and set up

fees

Benefits of lower prices - Franchiser volume

purchasing (value)

Tested processes - Recipes and the systems

Consistency - Support systems

Higher Odds of business success - experience

& tested systems

Mentoring and training programs

Marketing opportunities

Cultural and Regional Diversity

Subway offers Cultural variety to the menu: Subway allows for religious and cultural differences to

the standard menus Hallal (Hindu and Muslim communities )

Trinidad – Shaddow benny and Tamarind sauce India – Curry sandwich options Scotland - deep fried fish with vinegar

“Customers value an organisation that seeks their feedback and is capable of solving their problems and meeting their needs” he goes on to say that they value “change the ‘business as usual’ enviroment all in the interest of teh customer” (Drucker, 2008)

What does the customer value?

“Subway is now the world's fastest growing franchise, with over 33,611 units in 92 countries” (http://www.thefranchisemagazine.net/page

“To satisfy the customer is the mission and purpose of the business, and can therefore be answered only by looking at the business from the outside, from the point of view of the business and the market” (pg 24, The Essential Drucker)

What are the results ?

What are our results

Subway is a private Company no financial data available

We therefore reviewed Subway Corporation’s overall performance results by looking at five main areas

What are our results?

“Results are the key to our survival, if results are our goal they must also be our test” (Drucker, 2008). Performance can only be evaluated by the company’s continuous expansion and effects on its stakeholders.

Performance Evaluation

Subway corporation’s growth and awards Subway community service & social projects Performance of the franchisees themselves Performance of Subway compared to other

comparatively priced QSR’s * Negative feedback

What are our results?

“Results are the key to our survival, if results are our goal they must also be our test” (Drucker, 2008). Performance can only be evaluated by the company’s continuous expansion and effects on its stakeholders.

** QSR –Quick Service Restaurant

Evaluation on:Subway corporation’s growth and awards

33,611 franchise restaurants located in 92 Countries ( in 36 years - aprox. 77 stores per month)

Voted “Global Franchise opportunity”, 2010” by Entrepreneur magazine, the 17th time this has been awarded to Subway in 21 years

Selected as “number one” by consumers on “Most Popular,” “Top Service” and “Healthy Options” Zagat Survey 2010

What are our results?

Evaluation on: Community service and Social projects

“going green” utilizing natural and recyclable products in their restaurants, (the 1st Subway Eco-Store opened 2007 in Florida)

Sponsors the American Heart Association’s start program, engages students in physical activity while raising funds for cause

In Grenada Subway sponsors local Charities and schools and makes contributions to individuals for medical assistance.

What are our results?

“ the results of social sector organizations are always measured outside the organization in changed lives and changed conditions – in people’s behaviour, circumstances, health, hopes, and above all, their competence and capacity” Peter Drucker

“The first responsibility of a leader is to define reality. The last is to say thank you. In between the two the leader must become a servant and a debtor” Max DePree

Qualitative results

Evaluating on:Performance of the Subway Franchisees

Confidence in the brand 70% of franchisees are multiple store owners.

Store profits range from 16% - 20% of gross sales, investor

High percentage of repeat customers to stores(secondary customers)

What are our results?

Evaluation of:Performance of Average Subway Store

What are our results?

Percent of Sales ($365 K per Annum)

Royalty and food 40% ($146,000)

Rent 13.2% ($48,000)

Power and Insurance 4.6% ($16,800)

Garbage, tel, office expenses 1.6% ($6,000)

Salaries 16.4% ($60,000)

Sales tax 8 % ($29,200)

Net profit (before tax) 16.2% ($59,000)

Evaluation:Performance compared to other priced QSR

What are our results?Quantitative Results

US Fast Food Franchise Industry Report - Comparison of investments 2010

Name of franchise Initial franchise fee Royalty on Gross sales

Total Initial Investment Minimum

Arbys and Wendys $37,500 4% $180,700

Burger Hut $35,000 5% $424,084

Burger King $50,000 4.50% $1,408,000

Chick-fil-A $5,000 $267,890

Church’s Chicken $15,000 5% $609,800

Hardee’s $35,000 4% $1,095,800

KFC $25,000 4% $1,142,300

McDonalds $45,000 4% $182,375

Taco Bell $45,000 5.50% $242,800

Subway $15,000 8% $100,000

http://www.franchisedirect.com/foodfranchises/fastfoodfranchiseindustrystudy/14/262

Evaluation:Performance compared to other priced QSR

QSR industry dominates the ‘Top 5 Global Franchises’, and Subway Franchise is number two overall.

What are our results?

Top Five Global Franchises based on quantity of stores

Franchise Name Business Description Country of Origin

McDonald’s QSR Hamburgers, Milkshakes USA

Subway QSR Submarine sandwiches USA

Pizza Hut QSR, Pizza, pasta, wings USA

KFC QSR, Chicken USA

Burger King QSR, Fast food, Hamburgers USA

http://www.franchisedirect.com/top100globalfranchises/the2009report/158/767/

Quantitative Results

Evaluation of:Negative feedback on Subway

"Development sales agents" coerce franchisees to open additional stores,

No exclusivity on territories, new stores open close by.

Brand recently criticized for, undermining its “eat healthy tagline”

management systems are costly to franchisees.

Subway stipulates that the Franchisers purchase all supplies and food products from Subway Corp.

 Possibility that Subway overinflates the potential profits to new investors

What are our results?

What is the Plan? Subway Corporation’s overall goal is to continue expansion

globally

(a) To be the number one franchiser of the world (qty and value)

(b) To develop their “go green” environmental principles globally.

(c) Creating a micro-lending movement issueing small loans to disadvantaged people

What is the Plan?

Objective to meet the overall ‘Goal’: Subway sales division continually recruits, hires and

trains “Development Agents” to ensure that they maintain the average growth of 77 new stores per month.

A Subway sales school has been implemented for this purpose

Research and Development: - Flexability in menu products (cultural & Religious) - Global Marketing

We recommend Subway Franchise Investment :

For Investors having limited capital ($90 -$100,000 of less) However, they must be aware that because the profits are between 16 – 20% and they will eventually need to open additional stores if they want to increase profits

For locations in larger territories and economies since they have the ability to expand and open additional stores.

Recommendation

We do not recommend Subway Franchise Investment :

For investors in smaller economies (populations of 100,000 or less), as it would be difficult to maximize profits by continual expansion due to the limitation of smaller populations.

For investors investing in their initial store who are not willing to work in the store themselves as hiring a manager will decrease your profits by 4% - 5% average.

For investors with more than $200,000 capital to invest, they may be better off investing in another franchise where the Royalties fees are less and profits more, (rather than opening two Subway stores)

Recommendation

Recommendation for “Subway Corporation”

Despite the absence of financial information from this privately held company we have analysed their overall performance based on statistics, business reviews and customers comments.

We are of the opinion that their strategy has paid off and will continue to do so in the future

We recommend ‘Subway Corporation’ for investment

Recommendation

Organisational Analysis

Dawn WilliamsJeffrey Bonaparte

Henson GittensBrigitte Assing

Presented by:

We recommend Subway Franchise Investment :

Recommendation

We recommend Subway Franchise Investment :

Recommendation

We recommend Subway Franchise Investment :

Recommendation

We recommend Subway Franchise Investment :

Recommendation