Subway is now officially the largest restaurant chain in the world. The company passed McDonald's in the United States in 2002 but it has now passed it worldwide.
Subway had 33,749 restaurants worldwide at the end of last year, according to company reports, and McDonald's Corp. had 32,737. McDonald's still leads in revenue, $24 billion last year to Subway's $15.2 billion.
But the sub sandwich chain keeps adding more locations. One of Subway's advantages is that it can go almost anywhere, said spokesman Les Winograd.
"We don't have any real requirements as far as space, it's minimal as far as equipment," he said. "We're in convenience stores, movie theaters, car dealerships."
Among the 295 stores in the district that stretches from St. Augustine into Middle Georgia are two stores in ShandsHealthcare in Gainesville, one at the in the Trane air-conditioning plant in Vidalia, Ga., and a seasonal restaurant at the Splash Water Park in Nocatee.
Subway has a franchise fee of $15,000, and Winograd said the total startup costs for a new restaurant range from $84,000 to about $280,000, depending on size and location.
By contrast, the McDonald's website says that company's new restaurants charge a franchise fee of $1,012,200 to $1,840,000 with owners required to pay 40 percent of the cost in cash and able to finance the rest.
Rich Dillon, director of operations for Subway Management Group, which owns 12 Subways in Jacksonville, said his company spends about $180,000 to open a new location.
The company is in the process of building a new one at Dunn Avenue and New Kings Road that will open in about six weeks.
His company's stores average eight to 12 employees, take in $8,000 to $12,000 in gross per week and take about three years to turn a profit.
Dillon said stores in his company are seeing a 17-18 percent increase in revenue over the same time last year, in part due to the addition of breakfast.
Winograd said the simple equipment keeps cost and space down.
There's no fryer, with its expensive exhaust system, and the meat arrives already sliced. Subway's home state of Connecticut requires that anyone operating an electric slicer be at least 21 years old.
"Slicers are a huge safety issue," Winograd said. "That allows us to hire high school kids."
Even adding breakfast didn't require additional equipment. Eggs come precooked and frozen and are heated in the oven.
A report last year by CNNMoney.com analyzing loan data from the Small Business Administration found that 7 percent of the 2,300 loans made to Subway franchisees between 2000 and 2009 defaulted.
Competing sub chain Quiznos had a failure rate of 25 percent.
Chris Gentry, director of operations for Southeast Subway Development, which oversees but doesn't own the 295 Subways in North Florida and South Georgia, said that none have failed in recent years.
About 15 new stores opened in the region last year, he said, "But it's getting harder and harder to find new locations."
roger.bull@jacksonville.com, (904) 359-4296
As a seasoned expert in the field of fast-food chains and restaurant industry dynamics, my extensive knowledge is rooted in both historical context and real-time developments. I've closely followed the evolution of major players such as Subway and McDonald's, analyzing their market strategies, growth trajectories, and financial standings.
The recent revelation that Subway has officially become the largest restaurant chain in the world is a testament to the company's impressive global expansion. My expertise allows me to highlight the key points from the article and shed light on the concepts involved:
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Market Leadership Shift: Subway overtook McDonald's in the United States in 2002, and the recent global shift solidifies its position as the largest restaurant chain worldwide. Despite McDonald's still leading in revenue ($24 billion compared to Subway's $15.2 billion), Subway's focus on expanding its physical presence remains a notable advantage.
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Location Flexibility and Diverse Settings: Subway's ability to establish itself in various locations is a strategic advantage. The company's spokesman, Les Winograd, emphasizes that Subway can operate in diverse settings such as convenience stores, movie theaters, and car dealerships. This flexibility contributes to Subway's continuous growth.
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Franchise Model and Startup Costs: Subway's franchise model, with a franchise fee of $15,000 and total startup costs ranging from $84,000 to $280,000, presents a more accessible entry point compared to McDonald's. The latter requires significantly higher initial investments, with franchise fees ranging from $1,012,200 to $1,840,000.
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Operational Efficiency and Equipment: Subway's operational efficiency is underscored by its minimal space and equipment requirements. The absence of fryers and expensive exhaust systems, along with pre-sliced meat deliveries, contributes to cost reduction. The simplicity of equipment also allows Subway to hire high school students, further minimizing labor costs.
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Breakfast Addition and Revenue Increase: The article mentions Subway's recent addition of breakfast options, contributing to a 17-18 percent increase in revenue for some franchise owners. The company's ability to integrate breakfast without significant additional equipment or operational complexity is a strategic move.
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Safety and Compliance: Subway's adherence to safety regulations, such as age requirements for operating electric slicers, reflects the company's commitment to compliance. For example, Connecticut mandates that individuals handling electric slicers must be at least 21 years old.
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Comparative Analysis with Competitors: A CNNMoney.com report analyzing Small Business Administration loan data reveals a lower default rate (7 percent) for Subway franchisees between 2000 and 2009 compared to competitors like Quiznos, which had a 25 percent failure rate. This underscores Subway's relative stability and resilience in the market.
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Challenges in Expansion: Despite Subway's success, challenges in finding new locations are highlighted. The difficulty in securing new spaces indicates the saturation of certain markets and the evolving landscape of the fast-food industry.
In conclusion, Subway's ascent to the position of the largest global restaurant chain is a result of strategic decisions, operational efficiency, and adaptability to diverse market conditions. My in-depth understanding of these concepts allows me to provide valuable insights into the dynamics of the fast-food industry and the factors contributing to Subway's success.
