Subway is not cheap because it is cheap

By orchioo May2,2023

Recently, Subway has been rumored again and again to sell its equity, with a valuation of $10 billion.Speaking of Subway, most people’s first impression is inseparable from “health”, “raw and cold”, and “poor living in the domestic market.”.
Currently speaking of Subway, the most mainstream view is that Subway’s success in the European and American markets is due to “health”;
The failure in the domestic market is due to insufficient “localization”.
But I don’t think it’s that complicated. Subway’s success worldwide and its poor performance in the domestic market are both very simple.
In one word, cheap.
The reason for success worldwide is because it is cheap.
Having a bad time in the domestic market is because it’s too cheap.
Perhaps you are surprised that Subway can still be cheaper in China?
After reading, you will understand.
Because it’s cheap, it’s not cheap.
Why is Subway so popular in Europe and the United States?
It’s related to health, but ultimately it’s cheaper to sell.
If you have been abroad, you will immediately know why Subway has lived well abroad.
Because in Europe and the United States, restaurant meals are very expensive, very expensive, and you can’t afford to eat much. For example, KFC McDonald’s Subway Starbucks are all cheap fast food at one price, and Subway beverages are still unlimited.
A large number of friends around me who have studied have directly stated that when I was abroad, I could only afford to eat Subway.
As for why not eat KFC McDonald’s?
Because the taste of KFC McDonald’s in China has been optimized, while those in Europe and the United States are not so delicious, and Subway seems to be somewhat healthier, although adding too much sauce is not healthy.
Selling cheaply is the core competitiveness of Subway.
Health is important, but cheap is the most important.
Of course, although Subway is indeed cheap abroad, others will not promote it, just like Coca Cola is also very cheap to sell, but all the publicity focuses on cool culture, youth, and personality.
“Raising the price tag from the brand perspective and lowering the price from the sales perspective are a common tactic.”.
Subway is also the same. Although it essentially sells cheap fast food, in 1999, a “weight loss story” appeared in front of the public.
Gerald Fogor, who weighed up to 200 kilograms, successfully lost nearly 100 kilograms by eating only Subway sandwiches for three consecutive months without any training or treatment.
This story is an advertisement for Subway, but in the United States, where the obesity rate is as high as 40%, it still stirs up.
Then another comparison showed that Subway was not expensive to sell, so Subway rapidly expanded and quickly became a global chain brand.
Once again, what is the core competitiveness of Subway?
Cheap, cheap, cheap.
“Two are cheap, one is indispensable.”.
It’s like walking on two legs.
First, the product price is cheap, and second, the franchise price is cheap.
If you have traveled to some European and American countries, you will find that Subway is the most friendly fast food for you.
But what is more crucial is the cheap joining fee.
Among many American fast foods such as McDonald’s, KFC, and Subway, Subway has the lowest joining cost.
This benefits from its consistent “low cost model”.
First of all, it is different from a group of American fast food mainly featuring fried chicken burgers.
Subway focuses on sandwiches, and simply combines prefabricated bread and various ingredients in an assembly line manner, saving a lot of kitchen equipment and store space.
What is this causing? The rental cost and equipment cost are very low.
At the same time, Subway does not require a complex kitchen system, nor does it require two groups of employees, one at the front desk and the other at the back.
Can save a lot of labor costs.
Secondly, the “selection+combination” self selection mode can greatly reduce raw material SKUs and supply chain management costs while meeting the diverse needs of customers.
When you think about it carefully, Subway actually just needs to prepare those raw materials well, and there is no additional cost for any finished product. This is wonderful.
Less manpower, smaller storefronts, and lower costs have resulted in lower entry barriers.
In the United States, the initial cost of joining a Subway company is only $15000, with a total cost of between $120000 and $270000, while the average franchise cost for McDonald’s is around $2.2 million.
The United States is a country of immigrants, with a large number of immigrants who lack professional skills and communication skills and need to make a living in small businesses.
They need Subway.
According to Fortune magazine:
About 30% to 50% of American Subway franchisees are immigrants, and about one-third of them cannot speak English or mathematics fluently.
Face is a healthier life.
On the inside, there is a lower joining threshold, which brings opportunities for rapid expansion for Subway.
By 2002, Subway surpassed its old rival McDonald’s and became the world’s largest fast-food chain brand with the largest number of stores.
In 2012, Subway reached the peak of its business career with a revenue of $18 billion.
In 2016, Subway reached its peak in the number of stores, reaching 44600 globally.
Cheap, never bad.
In 1994, Fred, the co founder of Subway, visited China for an investigation.
Seeing McDonald’s crowded, Fred was confident that Subway would open at least 20000 stores in Chinese Mainland.
In 1995, Subway entered China.
Now, 28 years later, Subway, which once boasted of opening 20000 stores, has 661 stores.
By comparison, McDonald’s has 5700, while KFC has more than 9000.
The root cause is not “localization”, but “low cost”.
For example, market response.
General fast food brands expand the market by opening direct stores first and making profits before becoming franchise stores.
In the domestic market, Subway only operates franchise stores, which generally have a pyramid structure and hierarchical management.
This leads to lengthy management links.
Subway’s US headquarters is followed by the Asia Pacific headquarters (Singapore), the Asia Pacific headquarters is followed by the Chinese general agent, the Chinese general agent is followed by the city agent, and the city agent is followed by the specific franchisee.
Long management links lead to slow market response and inability to respond quickly.
In 2007, Mu Zehua, the general franchisee of Subway in China, suggested that Subway introduce localized new flavors to adapt to the tastes of Chinese consumers.
But when was the first local flavor sandwich introduced by Subway?
It’s the 2016 Sichuan Spicy Chicken Sandwich.
Grinding a sword in ten years is not such a grinding method.
This pursuit of low cost leads to uncontrollable drawbacks that permeate all aspects of Subway.
Why does Subway have almost no reputation in the Chinese market?
Because Subway uses an advertising fund model in China, marketing funds are extracted from store revenue.
This model ensures that the Subway brand does not need to invest too much in marketing costs and is directly profitable.
The more you earn, the more advertising, the more advertising, the more sales.
The American side of the abacus has heard it.
But the opposite is not true.
Due to the linkage between marketing budget and revenue, there is less publicity in areas with poor revenue, and the less publicity, the worse the revenue.
vicious spiral.
Moreover, due to regional division, Subway is also difficult to conduct network wide marketing like KFC and McDonald’s.
Then to specific products.
Everyone roast that Subway’s sandwich and order mode is not suitable for Chinese consumers.
But Subway didn’t have a choice either.
Its low-cost kitchen system is unlikely to provide a large amount of freshly fried hot food like McDonald’s KFC.
Poor staffing does not support a group of employees working at the front desk and a group of employees working in the back kitchen.
The open ordering model used to reduce supply chain costs is tantamount to on-site punishment for Chinese consumers who are not already familiar with sandwiches.
Regardless of marketing, product, or operational strategy, Subway is tied to a low-cost model.
And it cannot be changed.
Change requires money.
Major changes require more money.
But the franchisee won’t pay for this money, and the brand won’t come up with it.
So, after so many years, McDonald’s black silk little sister in the circle of friends crazy roll, KFC crazy Thursday played a network meme, even Hamburg King sold deep-fried dough sticks.
American fast food, Yusanjia, has been rolled into three auspicious treasures for Chinese breakfast.
And Subway is still the authentic American Subway.
Even more deadly is.
Subway is cheap in the European and American markets.
But in the Chinese market, Subway is not cheap.
From the consumer side, a Subway sandwich costs more than 30 yuan at a little bit, but a bowl of Lanzhou Lamian Noodles is less than 20 yuan, and it is still steaming hot with a large amount of food.
Not to mention the various packages offered by McDonald’s, not to mention Wallace and Tustin.
From the joining end, the joining cost of Subway is not low in China.
“Because Subway’s joining competitor in China is not actually McDonald’s KFC, nor even Wallace Tastings Honey Snow Ice City.”.
It’s Sha County.
In the United States, the main franchises of Subway are immigrants.
The only thing they can choose is Western fast food.
Subway’s cheap, winning takes for granted.
However, the Chinese market is different, and franchisees of fast food chains are either small merchants or large capital.
Big capital will inevitably choose KFC McDonald’s, which is a more mature model to ensure a profitable brand.
Small businesses have more options.
Cantonese can make rice noodles, Fujian can make Shaxian snacks, Northeast can make Spicy Hot Pot, Northwest can make Lanzhou Lamian Noodles.
“It doesn’t require a cost of 800000 yuan. Find a shop to hire a teacher or even buy a tutorial online, and start right away. 800000 yuan can be used to pay the landlord rent for several years. Why should I give it to Subway?”?
Then you will find that Subway has no advantage at all.
The key is, doesn’t Subway know all this?
Frontline employees and managers are very, very clear that everyone is not stupid.
At this point, it is necessary to review the extremely long decision links that have resulted in cost savings.
Because it’s cheap, it’s not cheap.
Ignorance and weakness are never obstacles to survival, arrogance is.

By orchioo

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