World of Franchising - SUBWAY & NAASF

A discussion of issues affecting franchisee operators in the Subway franchise system and how the system may be improved. If you have any comments and wish to contribute to this web page; feel free to email the author.

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Location: Canada

My background is in Research and Development (Science) as well as Economic Development (Business). Currently managing my own businesses. My degree; B.Comm, Finance Major.

Friday, July 30, 2004

Just back from holidays and decided to check and see how my emailed questions to NAASF and my rep were answered. I have to admit I got an email from my rep on the board. He was very excited about the Convention in Las Vegas. That is about all folks!

What is it about NAASF which is so secret that they can't even tell us what is going on? The last update I have is the NewsWire which said that they were getting nowhere in their negotiations with DAI. That is a few months old now. They still don't use their own web site for any useful information. I'm sure it must just be run by an administrative assistant. How may hits do they get on that site and how long do they spend reading it?

I got a voice mail from my HQ co-ordinator which said that they only got 20 franchisees signed up for the install of the 'Speed Oven' and that the installation was now in our hands as they would not send an installation team. Boy, it must be very difficult to run some electrical wired to an oven. Can it be much worse than our bread oven? My electrician was able to do that one with no difficulty. It appears we will be getting the oven some time this fall. I will wait to see the oven and then decide where it will be best to install it.

We are now over 2000 visitors to this site and it continues to viewed by people from across the world.

I was reading some Subway disclosure information the other day. In our market of just over 200 stores there has been over 80 transfers as of this summer! This seems a bit high to me. Also there had been four abandoned stores, including one owned by the DA. I guess more than one franchisee took Fred's advise on; this may your best time to sell and get out of the system if you don't like what I'm doing?

On this note; does anyone really like the direction Subway is going these days? I noticed that even though my stores are among the best run in our area that I'm still getting marked out of compliance. How do I know my stores are among the best run? I do visit other stores and also very carefully monitor my stores. My labor cost is high because we have extra staff to ensure good customer service and a clean store. I also have sales among the best in the area.

In my latest travels I came across a TV ad., in a different territory, where they were advertising a 6" sub at about 1/2 the regular price. I can't see this being something which the franchisees would be wanting to do. I read the DA's hand in this advertising promotion. It sure makes it easy for the DA to direct the policy of the local FAF board when he has friends and family members controlling the vote. Do you think DA's have 'friends' on the Board of NAASF? I do.

That is about all for today.

I have attached a link to my holiday video which you may enjoy.

Take care.



Thursday, July 08, 2004

It has been some time since my last post as I was waiting for some news from the NAASF Conference. Here is what I got from the News Section on NAASF's own web site:

"Stay tuned to this page for news and details of the NAASF election procedure.

Elections for the 2005 NAASF Board will begin in June, when nominations are open to all members.

Final results of this year's election will be announced this November

I am wondering if they even had a Conference in Las Vegas but I'm sure they did. Maybe nothing happened which was news worthy? I doubt that also. Probably it is just the bored Bored members and staff which have forgotten that they have a web page! Why else would they not use this excellent communication tool? Maybe it is because they have no one in NAASF who is responsible for communications! Come on guys and gals, use the tools which are there for you to communicate with the franchisee community!

I wonder why so many franchisees are apathetic about NAASF?

The other day I received an advertisement for a new POS. It was not one that IPC was working with, as far as I know. On this note, where is the DELL system for the Canadian franchise? It would be nice if either IPC or NAASF would comment on this new POS as promoted through DAI and the fact that Canada still has no special Subway deal with DELL.

We are currently being pressured to offer low price point sandwiches to attract new customers to our stores. A low price package is being promoted by the local FAF board. Possibly similar offers are being made nation wide? The object is to increase customer counts. This is admirable and also necessary as there has been very little growth in customer counts over the past several years. We have been increasing sales with higher priced products, bundling and miscellaneous sales. There is only so much one can extract from the same customer for a sandwich dinner.

Over the years the cost of making a sandwich has steadily increased. there is not one item which accounts for this but a series of events ranging from; labor laws, supply and demand of labor, utility costs driven by the oil industry and environmental concerns, stricter compliance guidelines which result in higher labor costs, repairs and maintenance, more expensive and frequent renovations and upgrades, additional equipment for new products and expanded service, new product mix and complexity of menu items, reduced capacity with four bread per bread form rather than five (20% reduction in capacity), increased vegetable load on sandwiches due to the perception of a bigger bun (food cost increased by about 2 to 3% points), now the new toaster ovens which will further reduce through-put and add to the operating and equipment costs.

Some of the increases are outside the control of Subway but many are not. The problem as I see it is that there is no over all plan as to where we want to go and what will wait us when we get there. No vision and no long term planning at DAI. Has anyone done any study to see what the effect of more expensive sandwiches will do to our bottom line in the longer term? Maybe DAI is going for an upscale, bistro, sandwich restaurant? Will we be serving beer and wine next? How about table cloths and waiter service? Why not, at the prices we are charging the customers will expect more than counter service with subs wrapped in paper.

Lets assume (I know it is dangerous to assume anything) that DAI does not have a plan for an upscale sandwich restaurant. In this case we really do need to start attracting new customers with a more affordable menu offering. We need to get back to basics with some low cost and low priced offerings. Why not have some sandwiches with lower food inputs, less meat, cheese and vegetables on a 'new' deli sub? Make the cost affordable to children and people who don't want to have an after dinner nap after eating our typical foot long sandwich. Set the cost at 50% of a six inch and price accordingly. Now stand back and watch the new customers flock in to your store.

Lastly, lets stop this automatic remodel at 7 years, whether the store needs it or not. With a very high volume store it may be necessary due to wear and tear. A low volume store should not need it any sooner then 10 years. This will substantially reduce the operating cost of the stores.

Take care.

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