The United States fast food market has seen a healthy rise in growth within the last three years which forecasts can be sustained. 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 drive the market to a value of $57.6 billion by the end of 2010. Drivers of growth include increasing numbers of Americans in the workplace, which reduces the amount of time spent on preparing meals at home. In 2010, the United States fast food market is forecast to have a value of $57.6 billion, an increase of 12.1% since 2005.
Forecast Volume
In 2010, the United States 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 the market volume in the period 2005-2010 is predicted to be 1%.
Success Factors
Success factors for fast food franchisees will include products and marketing targeted to healthier menu selections, brand consistency, low start-up costs, franchisee support, and consumer convenience. Subway ® represents a poignant example of a fast food franchisee ready for success in the future fast food market. Their strategies transcend the fast food market and apply to many other markets and products.
SWOT Analysis
Subway sandwich shops are well positioned to leverage their strengths and address reasonable threats, weaknesses, and opportunities. The table below highlights these Strengths, Weaknesses, Opportunities, and Threats.
Strengths
- Size and number stores and channels
- Menu reflects demand for fresh, healthy and fast.
- Use of non-traditional channels.
- Partnering with the American Heart Association.
- Worldwide brand recognition.
- Customizable menu offerings.
- Low franchisee start up costs.
- Franchisee training is structured, brief and designed to assure rapid start-up and success.
Weaknesses
- Décor is outdated.
- Some franchisees are unhappy.
- Service delivery is inconsistent from store to store.
- Employee turnover is high.
- No control over franchise saturation in given market areas.
Opportunities
- Continue to Grow Global Business.
- Update décor to encourage more dine-in business.
- Improve Customer Service Model.
- Continue to expand channel opportunities to include event wagons.
- Improve franchisee relations.
- Experiment with drive-through business.
- Expand packaged dessert offerings.
- Continue to revise and refresh menu offerings.
- Develop more partnerships with movie producers and toy manufacturers to promote new movie releases through children’s menu packaging and co-branding opportunities.
Threats
- Franchisee unrest or litigation.
- Food contamination (spinach).
- Competition.
- Interest Costs.
- Economic downturn.
- Sabotage.
- Law Suits.
Competitive Analysis
Subway is not without competitive pressures. Chief competitors include Yum! Brands, McDonalds, Wendy’s, and Jack in the Box. Yum! Brands are the world’s largest, with 33,000 restaurants in over 100 countries. Four of the company’s highly recognizable brands, KFC, Pizza Hut, Long John Silver’s and Taco Bell, are global leaders of the Mexican, chicken, pizza, quick-service seafood categories. Yum! has a workforce of 272,000 employees and is headquartered in Louisville, Kentucky.
McDonald’s Corporation (McDonald’s) is the world’s largest foodservice retailing chain with 31,000 fast-food restaurants in 119 countries. The company also operates restaurants under the brand names ‘The Boston Market’ and ‘Chipotle Mexican Grill’. McDonalds operates largely in the US and the UK and is headquartered in Oak Brook, Illinois employing 447,000 people.
Wendy’s International (Wendy’s) operates three chains of fast food restaurants: Wendy’s (the third largest burger chain in the world), Tim Horton’s, and Baja Fresh. Wendy’s operates over 9700 restaurants in 20 countries, has been included in Fortune magazine’s list of top 500 US companies, is headquartered in Dublin, Ohio, and employs about 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 Markets
The increase in sales of the sandwiches has been a result of decreases in consumer interest in hamburgers and fries and increases in demand for healthier options. Sales of sandwiches are growing 15 percent annually, outpacing the 3 percent sales growth rate for burgers and steaks.
Current Marketing Program
A new breed of restaurant is making big gains against the market-saturated hamburger establishments. Termed “fast-casual,” these restaurants are dominated by Mexican chains, and sandwich restaurants offering fresh-baked breads and specialty sandwiches.
Responding to evolving consumer expectations for health, fresh, custom-made sandwiches; Subway’s marketing program addresses these expectations through a number of approaches. The most notable were the television commercials featuring 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 a national sponsorship in events such as American Heart Association Heart Walks and local events such as triathlons, and children’s sports teams.
The Subway example represents marketing and product strategies that are classic examples of focusing on market demand, consumer trends, product leveraging, and innovation. The marketing strategies of creating clear brand recognition, brand and product association, and market demands, have strategically positioned Subway to advance market share into the near future. These marketing strategies are also repeatable fundamental marketing strategies transcending the fast food market. Does your marketing strategy bind brand recognition to products that support your market’s future direction?
