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Subway overtakes McDonald’s
as WORLD'S LARGEST FOOD FRANCHISE
by Simon Lord, last updated on 13th May 2011
A sandwich company founded to fund a 17 year-old through college has become the largest food franchise in the world.
In December 2010, a milestone was reached when Subway overtook McDonald’s as the world’s biggest food franchise. The Connecticut-based Subway had 33,749 restaurants, beating the McDonald’s figure of 32,737 for the first time. Such is the speed of opening that, three months later, the Subway website now claims more than 34,000 locations in 96 countries. While Subway may have more locations, McDonald’s generates global sales of some $24 billion in sales compared to Subway’s $15 billion.
'Originally, Subway was ‘just a way to pay my way through college,’ Fred De Luca, who started Subway at age 17, told the AFP news agency. ‘But we did have a goal.’ He and Peter Buck, a family friend who lent him $1,000 dollars to open his first store, aimed to open 36 Subways over the next 10 years. ‘To have 1,000 times as many is unbelievable.’ Today, according to Forbes magazine, De Luca is ranked the 692nd richest billionaire in the world with a net worth of US$1.8 billion.
There are now 229 Subway outlets in New Zealand while McDonald’s has around 150. The first McDonald’s here opened in Porirua in 1976, while Subway didn’t arrive until 1996 when it opened its doors in Parnell. Franchise New Zealand recalls Fred di Luca turning up 30 minutes late for his own store opening and instantly charming the waiting crowd by explaining that he had been out at Muriwai watching the gannets ‘and I just couldn’t tear myself away.’ A few days later, we interviewed him for a feature in the magazine (read the archived story here) that covered many aspects of franchising, including the company’s system of appointing development agents rather than master franchisees.
Among the most significant factors in Subway’s growth have been the fact that it requires lower investment levels than restaurants such as McDonald’s and the perception that the made-to-order sandwiches are intrinsically healthier than hamburgers. This is an area where McDonald’s has been playing catch-up in recent years, ditching the the infamous bun chute that kept cooked food warm and wilting for up to 20 minutes and launching a range of fresh products. (read Re-Inventing McDonald’s)
However, De Luca plays down the rivalry between the companies. ‘We've been big beneficiaries of McDonald's," he told AFP. 'I would say if McDonald's never existed, we would have had fewer stores than we have. They've gone to so many places and gotten people into the habit of going out to eat on a regular basis and that opens the door for us to grow.’
Another factor in Subway’s growth has been its relatively small footprint and simple equipment requirements, which have enabled it to open easily in non-traditional locations from automobile showrooms and appliance stores to high schools and churches. A partnership with Wal-Mart gave Subway access to thousands of high-traffic locations in the US, while the company brought a new meaning to the phrase ‘high-profile’ when it launched a store in a converted shopping container to service workers on the 105-storey skyscraper being built on the site of the World Trade Center in New York.
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