Subway is a fast-food franchise that has quickly conquered the world in the last 56 years. The goal set by Subway in every market it comes to is to become a leader in terms of the number of establishments and the preferences of local consumers. The concept of the Subway restaurant chain is a franchise with local entrepreneurs who have received specific training in the franchise business management program (Pitta, 2010).
Thus, the company contributes to developing the regional economies of many countries because investments in the real business allow entrepreneurs to place their income in their regions securely. Waters (2019, p. 3) states that “today, Subway is the largest food franchise in Australia.” According to popularity studies, Subway is only ahead of McDonald’s and KFC, with Hungry Jack’s, Domino’s Pizza, Red Rooster, and Grilled (Morgan, 2018).
Entrepreneurs are provided with information support based on more than fifty years of experience, which gives them the ability to advertise their restaurants in all countries according to a single advertising and marketing plan. However, there is a significant problem associated with the relationship between the franchisee and the owners of the company, who earn from royalties and themselves control all the standards and rules of franchising. Recently, the company released a new version of their franchise contract agreement that many franchisees had called “draconian.”
The new contract provides Subway with the right to control operation hours, places the franchisees the requirement to participate in all promotions, and bans any negative feedback on the company. This contract lasts 20 years, and if the franchisees do not want to accept it, they will be required to increase their royalty payments from 8% to 10% percent. Although stores are closing, the cost of opening new stores is increasing (Luna, 2021).
In Australia itself, the situation became more complicated in 2019, when, thanks to a lawsuit, the fact of non-payment of wages for hours worked by a vast number of Australian Subway employees was revealed (Ryan, 2019). The company has responded by introducing ongoing employment and payroll controls at Australian Subway restaurants, adding new responsibilities to the franchisee.
The situation has angered the franchisees, as they are now forced to operate their businesses by much stricter rules. Ji and Yoon (2021) also suggest that organizational competitiveness comes from utilizing strategic human resources nowadays, which the company seems to operate poorly. It poses a significant problem to Subway both in Australia and other countries, especially regarding the company’s steady decline in shop count and profits in the last five years.
One of the marketing theories that exemplifies the company’s problems is Maslow’s Hierarchy. Since employees are an essential part of any business, analyzing their needs before implementing certain changes is vital. As mentioned before, workers have been revealed to be underpaid, and the organization is not particularly successful in operating the workforce.
Since the theory is based on needs, denying employees of their wages is a direct minimization of their safety and motivation on a certain level. The theory specifies that individuals who are denied of their basic needs are by definition unsatisfied with the current situation. Moreover, such negative aspects can lead to low employee morale, which is caused by the owners of the company who are not efficient in managing human resources.
Active SWOT Analysis
SWOT analysis remains one of the most effective theories in strategic management. The essence of the SWOT analysis is to assess the internal and external factors of the company and evaluate the risks and competitiveness of the product in the industry. Gürel (2017, p. 994) claims that “while external analysis focuses on the environmental threats and opportunities facing an organization, internal analysis helps an organization identify its organizational strengths and weaknesses.” However, one needs to prioritize the most critical analysis factors, giving them more focus to avoid data dispersion.
Subway’s Strengths
Subway’s brand awareness can be credited to the company as an advantage over local brands such as Gill. On the one hand, the company in Australia, like in most other countries, loses to the leading giants of the industry McDonald’s and KFC, but on the other hand, with more equal competitors, it is successful, for example, Hungry Jack’s. Subway focuses on healthy eating even though most of the product line is still high-fat fast food. As this issue is one of the most important in Australia, the relative availability of high-quality products is Subway’s strength in this context (Whelan et al., 2018).
The number of stores speaks for itself – Subway ranks among the top of the most extensive franchises in the country and even globally. Moreover, this strategy also allowed Subway to achieve a global level of operations quickly: according to the official Subway website (Subway, 2021), there are 21,000 franchises with 43,600 stores of Subway worldwide.
Subway’s Weaknesses
Franchising has both pros and cons. The above news shows that local self-government can lead to highly unacceptable consequences due to inexperience and deliberate misconduct (Ryan, 2019). While Subway consistently uses all communication channels for its marketing campaigns, standalone activities within certain restaurants are entirely on the shoulders of franchisees, who often do not. As a result, flexibility in the management of each specific point decreases, which can affect the brand’s reputation, which has already suffered many times for various reasons (Olito, 2019; Chung, 2019).
Subway is still positioned as fast-food, and in this industry, since its success and development in Australia, competition has grown in various directions: Grill positions its products as healthy food, Hungry Jack’s with a similar franchise device has recently only been gaining momentum and increasing profit (Macrotrends, 2021). As a result, the course toward quantitative development of the franchise, which turned out to be successful, resulted in a qualitative crisis.
The recent changes in the contract rules also prompted many of the company’s franchisees to sell their stores at a low price and raised heated discussions in the media. For example, Waters (2019, p. 13) states that “the website Commercial Real Estate lists 125 Australian Subway stores for sale with prices ranging from $ 98,000 to $ 495,000”.
Many franchisees have spoken up about the situation and discouraged other potential store owners from taking Subway’s offer. Taylor and Luna (2021b, pp. 22) state that “franchisees could have to pay three years’ worth of royalties and advertising fees if they leave the system prematurely.” Some sources speculate that the new contract is an attempt to make Subway a more appealing buying target. The rumors claim that the business’s current owners, Elizabeth DeLuca, and Peter Buck, want to sell the company due to its inner structure continuously crumbling. A constant stream of scandals and complaints associated with Subways proves to affect the business negatively.
Subway’s Opportunities
Subway’s current opportunities remain ambiguous. Recently, the company has performed a brand refreshing Eat Fresh Refresh campaign to boost sales. According to Subway’s press release (2021, p. 1), “the top-performing quartile, representing over 5,000 restaurants, experienced a 33% increase in sales and the top three combined quartiles, about 16,000 restaurants, averaged an increase of nearly 14% ”. Thus, it is safe to say that the company still has potential for further market expansion: for example, with more vegan options and overall portfolio expansion (Figure 1).
Carayannis, Samara, and Bakouros (2015, p. 1) also add that “the capacity to introduce new products in the market anticipating their competitors, earning in this way significant shares of sales, constitutes a big competitive advantage for companies.” Additionally, the COVID-19 pandemic have shown the population’s need worldwide for food delivery; therefore, establishing a continuous delivery service is another opportunity.
The company’s capabilities lie primarily in the diversification and diversity of the existing base, which is experiencing a crisis after its rapid growth. First, modern offerings and menu changes must suit the tastes of the Australian population. In order to preserve the core flavors that have made the brand famous, such changes should not be made drastically but in addition to existing flavors. The company’s franchise opportunities have already been exploited to their full potential, and therefore management should focus on customers. Secondly, Subway could introduce loyalty programs for customers that are not yet popular in similar fast-food restaurants.
Subway’s Threats
The innovations of Suzanne Greco, who became the CEO of Subway after the death of her brother Fred DeLuca, did not provide much in terms of the company’s development. In 56 years of its existence, its menu rarely changed, and many consumers became tired of the same food over time. The constant closing of shops and decline in sales Subway experiences nowadays are a result of many factors, mainly the business’s aggressive expansion and Fred DeLuca’s authoritarian method of leading the company (Figure 1). Today, the main competitors of Subway Australia are Hungry Jack’s and Grill’d, each of which have proven to respond better to the changing needs of the population.
It is safe to say that the company needs a new strong strategy for further development, as it is clear that today’s Subway way of operating franchise does not reflect the actual market situation. Currently, Subway lacks significant advantages to make its products more desirable to customers than the competitors’. Moreover, the company’s flawed politics concerning treating their franchisees also does not work in Subway’s favor.
Active Strategy
An active change strategy is now necessary for Subway. According to Taylor (2021, p. 7), “corporate employees and Subway franchisees state that a lack of long-term vision has persisted and that Chidsey’s – Subway’s current CEO hired in 2019 – clearest priority is cutting costs”. The changes should begin within the company – new products and offers should be introduced, seeing as the recent brand refreshing campaign was pretty successful.
A well-designed marketing communication strategy established within the company could gently introduce the renewed menu to provide a competitive advantage to the company. According to Williams et al. (2018, p. 43), “the true benefit for a firm appears to lie not in any one particular action but in a conglomeration of strategic thinking approaches.” Additionally, the regulations related to the franchise operation should be reassessed; currently, they harm the franchisees and repel new potential store owners.
Brand Strategy to Achieve New Position
Currently, Subway still has a strong position on the market, maintaining its place among the fast-food industry leaders. Long (2021, p. 2) states that “there are 1232 stores in Australia, even more than McDonald’s restaurants”. However, this leadership is majorly based on the achievements and strategies from the past. The essential element of strategic management and planning in the company is the analysis of the external environment and the monitoring of the industry market. Wadhwani et al. (2020) claim that historical assumptions play one of the crucial roles in entrepreneurship research. The local Australian market is currently experiencing a steady uprise, and the number of competitors is growing exponentially.
IBISWorld’s (2019) insights add that, with the $20 billion fast-food markets in Australia and a 3.3% of annual growth rate, there is much competition, both local and international, for Subway. Thus, a new strategy should be implemented to increase the brand’s influence and anchor Subway’s position in the market, steering the company away from further decline and sales loss. In order to evaluate the brand within competitors, there is a positioning map in Figure 2.
To increase its market share and increase the flow of customers, Subway should take steps to develop a strong promotion campaign, similar to Eat Fresh Refresh. It is necessary to stand out against the plethora of competitors. Thus, the company needs to create new offers which would attract customers. The advertising should focus on the company’s strengths and develop them intensively to ensure a stable financial and material position of the restaurant.
Within the framework of modern marketing, the relationship between the fast-food restaurant and the client is changing. Earlier, restaurants and cafes offered customers a standard set of services. Now they are forced to constantly develop new products that are addressed to specific groups of customers – mainly to certain categories of individuals.
After 56 years of successful development, Subway’s concept and brand have a strong position in the fast-food business. The company positions itself as a chain of restaurants promoting a healthy lifestyle and offering an alternative to traditional fast food. Subway’s concept promotes healthy, low-calorie nutrition based on fresh vegetables, quality meat products, and freshly baked pieces of bread. The target audience perceives Subway as a fast-food chain where they can order a more individualized and healthy meal instead of more or less similar offers from McDonald’s, Burger King, and Wendy’s.
Pricing Plan
A sales strategy is a plan for developing sales in a company, which contains a set of activities and checkpoints to control their effectiveness. The company must take short-term losses to reverse the current course, which has completely outlived its usefulness and does not bode well for the future. First, Subway can test product line extensions relatively painlessly through research and customer engagement. New products must be sold at low enough prices for many to try and appreciate them. Secondly, long-term strategies require the constant practice of introducing new products into the line. One of the most successful examples is McDonald’s, where the best products of the seasonal lines are added to the main menu.
Marketing Communication Plan
When drawing up a marketing communications plan, its tasks should coincide with the tasks of the marketing plan, the main goals of which, in turn, are based on the tasks specified in the strategic plan. Hole, Pawar, and Bhaskar (2018) add that more impactful promotion programs are accessible through service marketing due to their distinctive approach. Because of this, it is crucial to understand the relationship between these three plans, which can best be demonstrated by comparing their objectives and strategies.
Kanten and Darma (2017, p. 1) conclude that “in order to gain better business performance, the marketing department has to combine consumer behavior, marketing strategy, and customer satisfaction rather than just focusing their efforts only on Marketing Strategy.” Advertising is one of the main components of any marketing strategy (Horst and Murschetz, 2019). With a properly planned advertising campaign and a well-chosen advertising idea, sales can grow exponentially.
The key objectives for the launch of the new Indian vegan wrap are attracting more vegan customers who already present a reasonably big market part by influencing their decision. Many vegan consumers struggle with the blandness of vegan food – the Indian vegan wrap offers a more tasteful food experience. Its offers draw directly on the consumers’ fears. Thus it would greatly influence their interest in Subway and its other offers.
The most popular digital channels for attracting customers today are search engine optimization (SEO), social media marketing (SMM), e-mail marketing, and content marketing. Sorescu (2017, p. 695) also supplies that “big data offers many opportunities to update business models and create new ones.” In order to develop the best promotion strategy for every product, Subway would need to analyze the data flow from their different channels and find out which works best for which offer.
Soegoto and Utomo (2019) support the claim, stating that social media currently become influential in increasing sales and promotion. Thus, among the primary placements would remain Instagram, Facebook, TikTok, Google search engine, YouTube channels, and context advertising in mobile apps and websites.
Full integration is necessary for a successful launch of the product. For example, it could be the TikTok campaign for a new vegan wrap offer that would ask followers to create and upload their videos on TikTok, Facebook, and Instagram for a chance to win valuable prizes. Another way to integrate different channels in collaboration with opinion leaders on different platforms such as YouTube, Twitch, and Instagram is to promote the new offer creatively.
The integrative communication strategy influences both current and future consumer behavior, as it creates a desirable public image of the brand. Moreover, it also forms a public opinion on the brand, which serves as the main drive for customer behavior. The Gantt diagram for this project is presented below, in Figure 3.
Conclusion
Strategic marketing should come first in advancing the brand because it provides the necessary data to make crucial decisions regarding the future direction of the business and its activities in the market. After designing a proper marketing strategy, the brand can start drawing up marketing theses, promoting, and selling goods and services. A working marketing strategy covers many aspects and allows the brand to develop valuable insights into the business process.
Subway is a strong brand that has maintained its leading position on the fast-food market for decades. However, nowadays, the business experiences significant losses due to ineffective managing strategies and marketing failures. It is safe to conclude that Subway needs to adjust its marketing strategy to the current trends in the food industry and reevaluate its regulation choices. Changes should be made in the product offers that would provide the business with the needed competitive advantages it currently lacks.
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