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Case study - Subway Chain

Subway sandwich chain has overtaken the Golden Arches of McDonald's as the largest restaurant operation in the world, as determined by the number of locations. Subway reported 33,749 restaurants in 95 countries, at end of 2010. McDonald's recorded 32,737 locations in 117 countries in an audit in February 2011, with more than 75% of its restaurants being franchised. Subway is entirely franchisee-owned, which has underpinned its success.

Subway has been gaining on McDonald's for years and had fewer than 30,000 locations as recently as 2008. Its smaller format cost less to open and operate than other chain restaurants and lets it squeeze into heavily trafficked locations McDonald's must bypass.

The race for global dominance is an important one for an industry that's mostly saturated in the U.S. High unemployment and economic uncertainty have battered the restaurant industry in the U.S., and chains are increasingly looking overseas for growth, particularly in Asia. Subway, which opened its first international restaurant in 1984, in Bahrain, expects its number of international restaurants to exceed its domestic ones by 2020. However, the growing number of Subway restaurant overseas does not earn enough revenue to outpace McDonalds, which still holds the top position as the world's largest restaurant chain in terms of sales.


Subway runs Past McDonald's Chain

Read the article Subway Runs Past McDonald's Chain (you can do this in the window below or follow the previous link to read the article in a separate window) and then answer the questions below.


You may wish to read this additional article to help you to answer the questions:


Question 1

Define the terms:

  • Overhead costs
  • Franchise

Question 2

Explain the role of market research in the choice of locations for Subway.

Question 3

Analyse the impact of location overseas on Subway's promotion strategy.

Question 4

Evaluate the use of franchising as an international growth strategy for Subway.