The US fast food market has seen a healthy surge in growth over the last three years, and the forecasts may hold. The fast food market is forecast to maintain its current growth expectations, with an anticipated Compound Annual Growth Rate (CAGR) of 2.3% for the five-year period 2005-2010. This is expected to bring the market to a value of $57.6 billion by the end of 2010. Growth drivers include an increasing number of Americans in the workplace, reducing the amount of time spent preparing meals at home . In 2010, the United States fast food market is forecast to be worth $57.6 billion, an increase of 12.1% from 2005.

forecast volume

In 2010, the US fast food market is forecast to have a volume of 37 billion transactions (Figure 1). This represents an increase of 5.3% since 2005. The CAGR of market volume in the period 2005-2010 is projected to be 1%.

Success factors

Success factors for fast food franchisees will include products and marketing aimed at healthier menu selections, brand consistency, low start-up costs, franchisee support and consumer convenience. Subway® represents a compelling example of a fast food franchisee poised for success in the future fast food market. His strategies transcend the fast food market and apply to many other markets and products.

SWOT Analysis

Subway sandwich shops are well positioned to build on their strengths and address reasonable threats, weaknesses and opportunities. The following table highlights these Strengths, Weaknesses, Opportunities and Threats.

Strengths

• Size and number of stores and channels
• The menu reflects the demand for fresh, healthy and fast food.
• Use of non-traditional channels.
• Association with the American Heart Association.
• Worldwide brand recognition.
• Customizable menu offers.
• Low franchise start-up costs.
• Franchisee training is structured, brief, and designed to ensure quick start-up and success.

weaknesses

• Decor is dated.
• Some franchisees are not happy.
• Service delivery is inconsistent from store to store.
• Employee turnover is high.
• There is no control over the saturation of franchises in certain market areas.

opportunities

• Continue to grow the global business.
• Update the decor to encourage more business for dining.
• Improve the Customer Service Model.
• Continue to expand canal opportunities to include event cars.
• Improve franchise relationships.
• Experiment with the self-service business.
• Expand the offers of packaged desserts.
• Please continue to review and update menu offerings.
• Develop further partnerships with movie producers and toy manufacturers to promote new movie releases through kids’ menu packaging and co-branding opportunities.

threats

• Disturbances or litigation of the franchisee.
• Food contamination (spinach).
• Competence.
• Interest costs.
• Economic fall.
• Sabotage.
• Law suits.

competitive analysis

Subway is not exempt from competitive pressures. Major competitors include Yum! Brands, McDonalds, Wendy’s and Jack in the Box. mmm! The brands are the largest in the world, with 33,000 restaurants in more than 100 countries. Four of the company’s highly recognized brands – KFC, Pizza Hut, Long John Silver’s and Taco Bell – are global leaders in the quick-service Mexican food, chicken, pizza and seafood categories. mmm! has a workforce of 272,000 employees and is headquartered in Louisville, Kentucky.

McDonald’s Corporation (McDonald’s) is the world’s largest foodservice retail chain with 31,000 fast food restaurants in 119 countries. The company also operates restaurants under the ‘The Boston Market’ and ‘Chipotle Mexican Grill’ brands. McDonalds operates primarily in the US and UK and is headquartered in Oak Brook, Illinois, employing 447,000 people.

Wendy’s International (Wendy’s) operates three fast food restaurant chains: Wendy’s (the third largest hamburger chain in the world), Tim Horton’s and Baja Fresh. Wendy’s operates more than 9,700 restaurants in 20 countries, has been named to Fortune magazine’s Top 500 American Companies, is headquartered in Dublin, Ohio, and employs approximately 57,000 people.

Jack in the Box owns, operates and franchises Jack in the Box quick-service hamburger restaurants and Qdoba Mexican Grill fast-casual restaurants and is headquartered in San Diego, California.

Target market

The increase in sandwich sales has been the result of declining consumer interest in burgers and fries and increased demand for healthier options. Sandwich sales are growing 15 percent annually, outpacing the 3 percent sales growth rate for burgers and steaks.

Current marketing program

A new generation of restaurants is making big profits against the market’s saturated burger joints. Dubbed “fast casual,” these restaurants are dominated by Mexican chains and sandwich joints that offer freshly baked breads and specialty sandwiches.

Respond to changing consumer expectations for healthy, fresh, custom-made sandwiches; Subway’s marketing program addresses these expectations through a number of approaches. The most notable were the television commercials with Jared. These commercials emphasize the healthy aspects of a Subway sandwich by highlighting the 245 pounds Jared lost by eating a Subway sandwich diet. Subway also markets through national sponsorship at events such as the American Heart Association’s Heart Walks and local events such as triathlons and children’s sports teams.

The Subway example represents product and marketing strategies that are classic examples of focusing on market demand, consumer trends, product utilization, and innovation. Marketing strategies of creating clear brand recognition, brand and product association, and market demands have strategically positioned Subway to increase market share in the near future. These marketing strategies are also fundamental repeatable marketing strategies that transcend the fast food market. Does your marketing strategy tie brand recognition to products that support the future direction of your market?