Market structure and brand power in franchise firms

Market Structure of Subway Sandwiches

At the national level, Subway operates in a nearly perfectly competitive market: there are a number of franchise competitors (Blimpee, Quiznos), regional chains, and independent establishments, and supermarkets Market barriers are reasonably low (a food truck can offer sandwiches and compete with a local Subway), consumers have a high degree of buying power (there is a low commitment level when buying a sandwich) and there are many available substitute goods. However, in some areas, competition may be less 'perfect' depending on the availability of other establishments where people on a quick lunch break can eat. Although there still may be many possible options, such as bringing lunch, the location and lack of competitors can make it easier for a Subway to thrive within a certain area.

Q2. What type of competition does your firm face? Who are some competitors? (Even if you said your firm is a monopoly, think of some substitutes)

The Quiznos chain is the most notable rival for Subway. Quiznos has openly taken on Subway in a number of its advertisements, contrasting its allegedly more generous fillings with that of Subway's. While Subway promotes itself as a healthier option to standard fast food, Quiznos tends to emphasize the decadence of its hot sandwiches in its promotional activities, although it also has a diet menu. "In the fall of 2006 Quiznos fired the first shot in what quickly became dubbed 'the Sandwich War.' To support the launch of its Prime Rib Cheesesteak sandwich, Quiznos created aggressive ads that played up the macho content of its offering juxtaposed against a scrawnier Subway cheesesteak" (Weiss 2011). Blimpie is another franchise sandwich rival.

Consumers can also purchase other types of sandwiches from fast food competitors such as McDonald's and Wendy's. Additionally, independent sub, pizza, and sandwich shops can also offer similar offerings as Subway, although there is less likely to be calorie information on independent stores' sandwiches. Purchasing 'to go' sandwiches from a supermarket or deli is a final option. Of course, the healthiest and most cost-efficient substitute is to bring one's own sandwiches from home.

Q3. How do you think your firm can increase its market power?

Subway is ideally positioned to take advantage of certain industry trends within the fast and convenience food industry. People are working longer hours, and have even less time to cook. They want inexpensive food, fast. However, there is also a trend favoring healthier eating, given the growing concern about America's obesity epidemic. Fast food chains are required to publicize the calorie counts of all of their menu items. This has drawn the rancor of many establishments that have highly caloric sandwich options that contain as many calories as an individual is supposed to eat for two full meals (Zajac 2010).