THE IMPACT OF GLOBALIZATION ON FAST-FOOD RESTAURANT FRANCHISE – SUBWAY

BABU RAM ARYAL

INTRODUCTION

Increasing interdependence, interaction and integration of people and businesses all over the

world has led to a huge change in the nature of business from the way it was in the past. This

change is called globalisation. “The world has become a global village and business has

become global in character. Organizations are venturing beyond national boundaries in the

pursuit of business opportunities.” (Krishnan, 2009) This macro-economic phenomenon does

not just affect a particular business or specific industry but can be seen in all major

corporations and businesses of every industry worldwide whether they sell products or

services. Fast food restaurant chain industry is among the fastest growing industries in the

world and the impact of globalization can be seen clearly among fast food restaurant chain

franchises such as Subway, which specializes in selling submarine sandwiches and salads.

Subway was founded in the year 1965, as Pete’s Super Submarines by Fred DeLuca and

Peter Buck, and later renamed as Subway in 1968. It is currently a privately held company

owned by Doctor’s Associates, Inc. Subway is among the largest and fastest growing fast

food restaurant chains in the world, competing with the likes of McDonald’s and KFC. The

first international Subway was opened in 1984 in Bahrain. “Now there are more than 30,000

Subway restaurants in 88 countries worldwide and it is the world & 39th fastest growing franchise chain.” (Essays, 2015)

IMPACT OF GLOBALIZATION ON SUBWAY

Globalization of Subway

Subway has seen an accelerated growth rate in the number of stores it has opened all over the

world beating even the fast food chain giant McDonald’s now. It currently has franchises in

North and South America, parts of Africa, Australia and New Zealand, Europe, Asia as well

as the Middle East.

SWOT Analysis of Subway

It is important to conduct a SWOT Analysis of Subway in order to understand how

globalisation has had an impact on Subway based on its strengths and opportunities, and

weaknesses and threats it faces.

Strengths

1.  Franchisee fees are low it is easy for new ones to open and this can be seen by the continuously increasing number of outlets globally.
2.  Fresh and healthy fast food image has helped Subway to gain the popularity it enjoys today.
3. Customized sandwiches made according to customers’ individual tastes keep customers happy and also add a unique experience as compared to other restaurants.

Weaknesses

1. 1. Low cost of franchisees can mean that there can be a lot of competition from other franchisees in the market.
2. Competition is very high due to other international and local fast food outlets.

Opportunities

1. 1. Subway’s new eco-stores that it plans to open in 2017 may help attract new customers. (Subway Inc., n.d.)
2.  Global expansion opportunities in Asian Markets can increase sales greatly.

Threats

1. The economic crisis that has affected the world also had a huge impact on many multinational companies with Subway being one of them.
2. Many foreign countries as well as the home country USA may have food and safety policies which are always a threat to any business in the food industry.

There are a number of factors due to which Subway has become highly popular within a short

span of a little over a decade:

 Ease of Access

It is easy to open a Subway restaurant as compared to a McDonald’s restaurant

because it has a more compact model which is not only efficient to build but also

requires less area as compared to the likes of McDonald’s or KFC enabling.

Healthy choice of fast food

“Obesity is a challenging public health problem that affects millions of Americans.

Increasingly policy makers are seeking environmental and policy-based solutions to

combat and prevent its serious health effects.” (Elbel, 2014) Fast food usually has a

high calorie intake and is a major cause for obesity and various other health problems.

Having a healthy option like Subway sandwiches would definitely attract many

health-conscious customers.

Simple model of franchising

Because of the ease of access for locations for Subway stores as well as the fact that

they are economical and easy to open, franchisees are increasing in number.

Being adaptable

Subway has always been original and different in what it offers its customers and how

by allowing customers to choose their own fillings according to individual tastes and

offering a wide range of choices in the sandwich or salad menu. Customers like the

flexibility and this has always been one of the major reasons Subway has gained so

much popularity.

Barriers to Globalization

Businesses that want to operate on an international level usually have to face some obstacles

in foreign countries. Subway operates its franchises internationally through regional offices.

The main issues it can face are:

• There can be trade and investment barriers such as possible legal restrictions on access such as in Dubai where “onshore professional licenses are available for activities such as consulting and other services, and may be owned 100 per cent by a suitably qualified foreign national, although he or she must appoint a Local Service Agent (LSA).” (Arora, 2015)
• Cultural differences in different countries around the world means that people have varied tastes in different parts of the world and sometimes companies cannot adapt or appeal to local customers in foreign countries easily.
• Lack of brand awareness can create an initial problem for businesses and may even lead to closure if it fails to make a mark in the market. Kotler and Armstrong (2004) define the meaning of brand equity as “the positive outcome that the customers show to the product or service.” (Kotler, 2004)

Problems Faced by Subway

The major problem faced by Subway has been living up to its ‘healthy sandwiches’ image.

There have been many controversies as well as studies that show that the sandwiches may not

be as healthy as promoted. “A recent study indicates that the average Subway diner has been

misled by the restaurant’s commercials, even if this is unintentional on Subway’s part.”

(Lundgren, 2007)

Apart from this other fast food chains competitors like McDonald’s have also started

advertising healthier options in their menus. McDonald’s for instance has “added an array of

salads, apple slices, grilled sandwiches and other low-calorie fare.” (Robert Wood Johnson

Foundation, 2013)

Recommendations

In order to survive, Subway would not only have to focus on mitigating or avoiding risks but

also develop strategies to take advantage of strengths and opportunities. Subway can adopt

certain policies and strategies which can help expand the business to new areas as well as

increase market share within the existing areas.

• First of all, if Subway desires to expand its number of franchises globally, it needs to focus on product/menu diversity.
• Small details like ensuring that the displayed meat, sauces and vegetables are fresh looking is very important especially for the reputation of Subway which is known to be healthy.
• The old look of Subway outlets really needs to be revamped in order to pique the interest of customers.
• Employees who make the Submarine sandwiches really need to be trained as there are times that they are not skilled enough to make perfect sandwiches and this may irritate customers.

CONCLUSION

While globalisation does have a major impact on Subway, it can also prove to be very risky.

It does provide opportunities to grow the business and reach as many customers as possible

globally, but it also carries the risk of uncertainties of conducting a business in foreign

countries and overcoming the cultural gap as well as trade barriers. Subway has grown as a

well-known and trusted brand very fast in the recent years and this also requires being able to

handle the expansion of the business. “Globalization rests on the premise that a universal

concept must change to fit and function in a local culture. Blending the local and the global, it

provides a passage to empowerment where modifications to a particular commodity can

make it prosper in various traditions.” (Demi Simi, 2015)

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