The US fast food market has seen a healthy increase in growth over the past three years, the outlook for which can be kept. The fast food market is forecast to maintain its current growth expectations, with an anticipated Compound Annual Growth Rate (CAGR) of 2.3% for the five-year period 2005-2010. This is expected to bring the market to a value of $ 57.6 billion by the end of 2010. Drivers of growth include an increasing number of Americans in the workplace, reducing the amount of time spent preparing meals in home. In 2010, the U.S. fast food market is forecast to be worth $ 57.6 billion, an increase of 12.1% from 2005.
In 2010, the US fast food market is forecast to have a volume of 37 billion transactions (Figure 1). This represents an increase of 5.3% from 2005. The CAGR of market volume in the period 2005-2010 is projected to be 1%.
Success factors for fast food franchisees will include product and marketing targeting healthier menu selections, brand consistency, low start-up costs, franchisee support, and consumer convenience. Subway ® represents a poignant example of a fast food franchisee poised for success in the future fast food market. Their strategies go beyond the fast food market and apply to many other markets and products.
Subway sandwich shops are well positioned to leverage their strengths and address reasonable threats, weaknesses and opportunities. The table below highlights these strengths, weaknesses, opportunities, and threats.
- Size and number of stores and channels.
- The menu reflects the demand for fresh, healthy and fast food.
- Use of non-traditional channels.
- Association with the American Heart Association.
- World brand recognition.
- Customizable menu offerings.
- Low start-up costs for the franchisee.
- Franchisee training is structured, brief, and designed to ensure quick start-up and success.
- The decor is out of date.
- Some franchisees are not happy.
- Service delivery is inconsistent from store to store.
- Employee turnover is high.
- There is no control over the saturation of franchises in certain market areas.
- Continue to grow the global business.
- Update the decor to encourage more dining business.
- Improve the customer service model.
- Continue to expand channel opportunities to include event cars.
- Improve relationships with franchisees.
- Experiment with the self-service business.
- Expand packaged dessert offerings.
- Please continue to review and update the menu offerings.
- Develop more partnerships with movie producers and toy manufacturers to promote new movie releases through children’s menu packaging and co-branding opportunities.
- Disturbances or litigation of the franchisee.
- Food contamination (spinach).
- Interest costs.
- Economic downturn.
Subway is not without competitive pressures. The main competitors include Yum! Brands, McDonalds, Wendy’s and Jack in the Box. Hmm! The brands are the largest in the world, with 33,000 restaurants in more than 100 countries. Four of the company’s most recognized brands, KFC, Pizza Hut, Long John Silver’s and Taco Bell, are world leaders in the Mexican seafood, chicken, pizza and quick service categories. Hmm! It has a workforce of 272,000 employees and is headquartered in Louisville, Kentucky.
McDonald’s Corporation (McDonald’s) is the world’s largest foodservice retail chain with 31,000 fast food restaurants in 119 countries. The company also operates restaurants under the brands ‘The Boston Market’ and ‘Chipotle Mexican Grill’. McDonalds operates primarily in the United States and the United Kingdom and is headquartered in Oak Brook, Illinois and employs 447,000 people.
Wendy’s International (Wendy’s) operates three fast food restaurant chains: Wendy’s (the third largest hamburger chain in the world), Tim Horton’s and Baja Fresh. Wendy’s operates more than 9,700 restaurants in 20 countries, has been listed in Fortune magazine’s Top 500 US Companies, is headquartered in Dublin, Ohio, and employs about 57,000 people.
Jack in the Box owns, operates and franchises Jack in the Box quick service hamburger restaurants and Qdoba Mexican Grill fast food restaurants and is based in San Diego, California.
The increase in sandwich sales has been the result of declining consumer interest in hamburgers and fries and increased demand for healthier options. Sandwich sales are growing 15 percent annually, outpacing the 3 percent sales growth rate for hamburgers and steaks.
Current marketing program
A new generation of restaurants is making big profits off the market’s saturated burger joints. Called “fast casuals,” these restaurants are dominated by Mexican chains and sandwich restaurants offering freshly baked breads and specialty sandwiches.
Respond to changing consumer expectations for health, fresh, custom-made sandwiches; Subway’s marketing program addresses these expectations through several approaches. Most notable were the television commercials with Jared. These commercials emphasize the health aspects of a Subway sandwich by highlighting the 245 pounds that Jared lost by eating a Subway sandwich diet. Subway also markets through national sponsorship at events such as the American Heart Association Heart Walks and local events such as triathlons and children’s sports teams.
The Subway example represents product and marketing strategies that are classic examples of focusing on market demand, consumer trends, product leverage, and innovation. Marketing strategies of creating clear brand recognition, product and brand association and market demands have strategically positioned Subway to advance market share in the near future. These marketing strategies are also repeatable fundamental marketing strategies that transcend the fast food market. Does your marketing strategy link brand recognition to products that support the future direction of your market?