Subway SWOT Analysis

An American company, Subway was founded in 1965 and has seen grown to having stores in over 44,000 locations in 113 countries around the world making it the world's largest submarine sandwich chain (Subway 2017a; IBIS World 2017). Subway's strategy includes finding busy locations, keeping costs low, offering great customer service and operating a franchise system (Subway 2017a; 2017b). This franchising system means that the company owners do not directly own a single location but collect 8% of revenue from each of these (Forbes 2017). In the USA, Subway controls 60% of the quick service sandwich market in the US and has a strong social media following with more than 25million Facebook followers (Forbes 2017).

The size and number of locations of Subway give it a considerable advantage in terms of its visibility and access to its customers. Its franchisees are required to source all the raw ingredients from suppliers certified by Subway. This certification ensures that suppliers are meeting the quality standards specified by Subway and ensures that franchisees are supplying the appropriate standard required by Subway (Subway 2017d). For the UK, this sourcing is overseen by the European Independent Purchasing Company Ltd which helps support the Subway franchisees by providing a supply chain for both the ingredients, but also the store equipment and services (Subway 2017d).

One of the weaknesses of operating a franchise system for the whole business can be in the different levels of customer service and income which may be generated across the different locations. Furthermore, the growth of outlets has seen a reduction in the sales volume for outlets as competitors offering a lower price point and a higher level of convenience such as a drive through have been able to take some of Subway's market share (Brandau 2015). A further weakness has been in the menu itself, which has been criticised for its lack of innovation and use of antibiotics by increasingly health conscious consumers (Peterson 2016). The rapid growth of franchises has also seen some stores start to look tired which may discourage consumers from using the stores.

The opportunities for Subway include improving the customer experience by offering higher levels of convenience through a delivery service, online ordering and payment system and greater variety in the menu choices. Subway also provides considerable opportunities for franchisees by providing a low-cost investment and by operating a variety of locations of varying sizes (Subway 2017b). The franchise system is also an effective way of utilising the local knowledge of the franchisee and to enter new markets. Furthermore, Subway should use the feedback from its customers to improve the business model as other competitors have been able to financially benefit from these changing consumer tastes (Brandau 2015).

Subway faces threats from other fast food industry players and this has been seen by its fall from being the world's second largest fast food retailer to third behind Starbucks, despite Subway's having more outlets (Peterson 2016). This fall has been attributed to its rapid growth and changing customer tastes. This growth has led to 911 outlets being opened in the USA in 2015, but with 877 closing, this growth in outlets is not delivering the volume of sales required (down 4.3% in 2015 and down 2.6% in 2014) (Peterson 2016). This threat may be indicating a downward trend in sales and suggests that there is a saturation of outlets in certain markets. This is a considerable threat to Subway as the failure to address this may result in a further loss of market share to its competitors.