Subway’s growth is on a roll

Marketplace Staff Sep 21, 2009

Subway’s growth is on a roll

Marketplace Staff Sep 21, 2009


Bob Moon: There is one particular fast-food chain that seems to be moving-in everywhere you turn. It’s sandwiching its way in, shall we say, right there between the neighborhood Starbucks and McDonald’s.

Subway has become a franchise powerhouse, and it’s now on track to overtake rival burger giants and become the world’s most ubiquitous restaurant. Soon, the number of Subway outlets will outnumber McDonald’s. We asked Marketplace’s Jeff Tyler to find out what’s behind the growth.

JEFF TYLER: Subway markets itself as a healthy fast-food alternative for diet-conscious diners, but the company itself is growing larger. Two thousand new locations are expected to open this year. One reason is the company’s flexibility.

DON Fertman: We have a store in a church. Car-wash locations. You name it, we can put a Subway there.

That’s Don Fertman, Subway’s director of development. He says the chain appeals to franchisees because it’s a simple business — no cooking or frying. The cost to open a franchise is as little as $80,000. And, Fertman says the economy is forcing more people to go for work for themselves.

DON Fertman: During economic depressions, where people are laid off, we get a lot of folks that come knocking at our door, and saying, ‘Hey, I’m interested in doing this kind of business.’

It’s a kind of business that appeals to other companies too.

JEREMY Cohen: Franchising seems to be the preferred method for development recently.

Jeremy Cohen is a stock analyst with Morningstar.

Cohen: It takes pressure off the parent company in this down economy. Limits the costs, since the franchisee pays for the key investments, in property, employees and such.

Some fast-food franchises are more lucrative than others. Subway may soon have more locations, but McDonald’s still dominates when it comes to sales.

I’m Jeff Tyler for Marketplace.

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