Economic analysis of Subway Corporation's franchise success

Subway Economic Analysis

Subway Corporation:

Economic Business Analysis

Subway Corporation: Economic Business Analysis

Why Subway?

Microeconomics centers on the study of the economic makeup of individual households, firms, and government. As franchise firms fall into this category, it is clear that small business owners, such as franchise owners, face the day-to-day task of dealing with many economic decisions in order to keep their businesses both functional and successful in order to turn a profit. One such example of this type of franchise is Subway. As the world's largest restaurant chain, Subway franchise owners make decisions every day that contribute to the bigger picture, helping keep Subway one of the world's most recognizable and successful franchises.

In understanding why an economic business analysis of the Subway Corporation is one worth completing, one can ask: what makes Subway interesting? Subway's success story is seemingly unparalleled in terms of growth and global acceptance. Subway is one of the fastest growing franchises in the world with "34,751 restaurants in 98 countries and territories as of June 15, 2011" (Subway Locations, 2011, p. 1). It's offering of healthy sandwich, salad and soup options as well as other items on its menu, Subway is able to cater to a far broader customer demographic than many fast food chains. In essence, Subway is fast food without being fast food. It is just as quick and affordable as a chain such as McDonald's, but Subway allows customers to pick and choose fresh ingredients and watch their order be created in front of them eliminating the question: "What am I really eating?"

Subway has further become a name that is commonplace in conversation. With its successful campaigns becoming instantly recognizable to so many people, it is clear that Subway knows what it is doing in terms of advertising. So many people can associate Jared Fogle as the "Subway Guy," or sing along with the jingles for many of the company's promotions or advertising campaigns, and that is because everyone knows Subway. In a nation where the economy is essentially still failing, business owners and economists must look to those corporations and operations that have remained successful throughout it all. Subway is one such company. Clearly the Subway Corporation is doing something right, and other companies may be able to take a cue from its operation.

Facts and Figures of Franchise Operation

According to Subway's Franchise Owner Frequently Asked Questions website, the initial franchise fee for opening a Subway is $15,000 (Subway FAQ, 2011, p. 1). Further, a franchise owner pays "12.5% every week for royalty and advertising fees" (Subway FAQ, 2011, p. 1). With start-up fees, maintenance fees, and fees paid to the corporation itself, opening a Subway franchise proves to be a costly endeavor, so one may have difficult decisions to make in terms of tradeoffs. It must be remembered that "there are different things you can do, but whatever you do means that you can't do something else" (TUI, 2011, p. 21). In other words, "in order to get something, you must give something up" (Mohanty, 2011, p. 4). Perhaps the initial staff must be kept small in order to finance startup costs and advertising fees. Maybe a franchise owner doesn't take home a pay check for the first week or two. However, these tradeoffs are not in vain. In starting slow and acquiring knowledge and profits, the revenue will continue to come in, strengthening the overall operation and ensuring long-term stability and market presence.