Marketplace Scratch Pad

Eat Fresh, on every corner

Scott Jagow Sep 21, 2009

Subway is opening 40 new locations a week around the world. It’ll pass 31,800 this week, and within the next 9 months or so, it should overtake McDonald’s as the largest fast-food chain by number of stores. It’s hard to believe, but Subway has almost twice as many locations as Starbucks.

From Advertising Age:

Ron Paul, president of Technomic, said that outside of Asia, bread and some kind of topping “is an almost universal food.” And Subway, he added, is just starting to get aggressive in its international development.

And it will have to if it wants to surpass McDonald’s in every way. Dennis Lombardi, exec VP-food service at WD partners, said “you need about five or six Subways to equal one McDonald’s in terms of sales.” The average U.S. McDonald’s had about $2.3 million in sales last year; the average Subway made about $445,000, according to Technomic.

Still, Subway is probably more appealing to franchisees in this economy:

Subway restaurants have comparatively low start-up costs, and the all-sandwich menu is generally less intimidating to restaurant-industry neophytes. (Subway Development Director) Don Fertman noted that Subway always racks up franchisee applications in a down economy, when laid-off workers, disenchanted with the corporate world, decide to try their hands restaurant ownership…

the franchise ranks are packed with success stories. Hardy Grewal, who has about 1,000 Subway restaurants under his control, got his start in 1989. His wife was bored, so he bought her a Subway. He quit his job in 1991 because she was earning more.

Nice. Still, I’ve noticed Subways popping up way too close to each other, and franchisees don’t like that. Plus, I’ve read some rumblings that they’re also unhappy about being required to participate in the five dollar foot loooong promotion.

Subway says despite having almost 23,000 locations in the US, it hasn’t reach a saturation point. I’d say here’s a good barometer: If you can look out the window of one Subway and see another one, then you may be dangerously close to reaching the almost-impossible-to-satisfy American need for convenience.

And if you get to this point, where there are THREE restaurants at the same intersection, then, Houston, we have a problem (no, seriously, it’s in Houston):

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