Subway Franchise - Essay Example

? Subway Franchise Subway Franchise The franchise concept has several advantages for both the franchisor and the franchisee. For the franchisor, offering a franchise arrangement means an easy access to capital formation brought about by the investments of franchisees (Om Sai Ram Center for Financial Management Research, 2006). Furthermore, it provides incremental income for the franchisor through royalty payments. Another advantage of the franchise concept is that it makes possible a faster expansion program for the franchisor supported by motivated distributors in the person of the franchisees (Om Sai Ram Center for Financial Management Research, 2006). The franchisees stand to benefit too from a franchise agreement. The franchisee gets to experience entrepreneurial autonomy using a proven concept, often with extensive recognition of the brand name (Om Sai Ram Center for Financial Management Research, 2006). The franchisee also benefits from the training programs provided by the franchisor, coupled with continuing supervision of the store. Although there are advantages to owning a franchise, franchisees are faced with disadvantages too. Decision-making is quite limited since the franchisee should follow the guidelines set by the franchisor (Om Sai Ram Center for Financial Management Research, 2006). In terms of purchasing, the franchisee is forced to purchase supplies and equipment from the franchisor even if they are more expensive compared to other sources. They cannot carry other products and they must adhere to the quality standards of the franchisor. Moreover, most franchise agreements are skewed towards the franchisor. Profits are shared with the franchisor but not the losses. In case a bad image is experienced by one franchisee, all the other franchisees are affected. The franchise that one chose is Subway. Subway has been consistently in the top 10 franchise favorites. It is the world’s largest submarine sandwich chain. It has more than 37,204 stores in 100 countries (Subway, n.d.). It is known for its quick, nutritious and delicious sandwiches. Subway sells foot-long and other sandwiches, salads and other food items. The start-up cost for the franchise is not too huge unlike the other restaurants. The three (3) resources that helped one decide which franchise to operate are: A. “View From the Top” by Nichole L. Torres (2005). This article delves into the reasons why Subway has been consistently in the top franchise list. It talks about how Subway values their franchisees, always making sure that they grow their market share. The article also points out that the entrepreneurial spirit of Subway’s franchises is a major strength of the company. B. “Subway Hits the Spot” by Dennis Romero (2009). The article discusses the attractiveness of owning a Subway franchise. It tells about how Subway has survived the economic downturn and how this downturn has helped boost its sales. The article points out that one strength of Subway is the upward flow of ideas from its franchisees. C. “Top 100 Global Franchises Ranking” by Franchise Direct (2012). This site was helpful in helping one decide which franchise to choose. It presented a list of the top 100 global franchises. It gave information about the initial investment needed to obtain the Subway franchise. It also showed that Subway occupies the number one spot in the Top 100 Global Franchises. It presented the support services that one can expect from a Subway franchise. These three resources have influenced one from choosing the Subway franchise. They have given an overview of how the Subway company operates. The articles discuss the strengths of the company and the reasons why it has survived despite the economic slowdown. The reports have extensive information about Subway’s success formula. Choosing a Subway franchise has several advantages. Foremost among this is that Subway is one of the world’s largest restaurant chains. Subway is a very popular brand all over the world; thus, it would not be difficult to market the restaurant. Subway holds the number one position in the Top 100 Global Franchises Ranking (Franchise Direct, 2012). The second benefit of getting a Subway franchise is the support that it gives to its franchisees. Their franchise support system includes training, product development, advertising, purchasing cooperative and field support, among others (Subway, n.d.). The third advantage of owning a Subway franchise is that it is the undisputed leader in fast, healthy food (Subway, n.d.). More people nowadays are becoming health conscious; therefore, one foresees that there will be an increase in the demand of Subway products. Subway sandwiches boast of freshly-baked breads with can be paired with a variety of toppings and sauces (Subway, n.d.). Like any other franchise, owning a Subway franchise also has its disadvantages. First, the Subway franchise may not be affordable to small investors. The total initial investment may reach approximately $260,000, which includes a franchise fee of $15,000. This is however expected because of the high success rate of its franchisees. The second disadvantage of the Subway franchise is that one has to pay a royalty of eight percent on the gross sales of the restaurant. But royalty fees are not unique to Subway. All franchisees pay a royalty fee to the franchisor. The third disadvantage is that it has a very limited growth potential. One cannot just expand the business without the permission of the franchisor. The way to expand is to put up another franchise store. Furthermore, there are plenty of Subway outlets in many communities so the competition is something that has to be contended with, not to mention the presence of other popular fast food restaurants such as McDonald’s and Burger King. The strategy of the franchise is to emphasize the high-quality and healthy food offered, banking on the reputation that Subway has been known for. The target market will be students, office workers and mothers who want a fast healthy meal for her family. The organizational structure will follow the guidelines set by the franchisor. The store will be headed by a Store Manager who oversees the overall operations of the outlet. The manager will be assisted by four full-time employees and six (6) part-time employees. The part-time employees may be working students. Depending on how large the market in the area, the number of sandwich artists may be increased. The Store Manager will see to it that all the procedures and systems specified in the Operations Manual are strictly followed. The training program that one will implement once one becomes a franchisee will focus mainly on the person who will make the sandwich, known as the sandwich artist. The training program will include the following topics: A. Background information on Subway – This will include the history of the company, its mission, goals, values, products and services offered. B. Operations manual - This manual will contain among others step-by-step procedures on how to prepare the food, how the supplies are obtained, guidelines on customer relations and day to day operations C. Onsite training – After having familiarized the employees with the Operations Manual, they will be trained in the workplace. Hands-on training is very important because one will be taught how to handle the food properly to maintain cleanliness and quality of the sandwich D. Evaluation of the trainees – After the training program, the trainees will be evaluated if they are ready to work for Subway. Those who do not pass the training conducted will either be re-trained or will not be employed. E. Continuous training - Like in any organization, it is important that the training program for the employees be an ongoing program to keep the workers updated on any changes within the organization. Training assures an organization that the employees remain efficient and effective. References Franchise Direct. (2012). Top 100 global franchises ranking. Retrieved August 7, 2012, from franchisedirect.com: http://www.franchisedirect.com/top100globalfranchises/rankings/ Om Sai Ram Center for Financial Management Research. (2006). Franchising: Marketing strategy to prevent "Investment cycle tyre from puncturing". Journal of Financial Management and Analysis , 19 (1), 91-97. Romero, D. (2009). Subway hits the spot. Entrepreneur , 37 (1), 125-133. Subway. (n.d.). Why choose SUBWAY? Retrieved August 7, 2012, from subway.com: http://www.subway.com/subwayroot/own_a_franchise/whychoosesubway.aspx Torres, N. L. (2005). View from the top . Entrepreneur , 33 (1), 128-131. Read More