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.

Thursday, January 20, 2005

Here we are in 2005 and Subway continues to do exceptionally well. We can expect better sales and more stores in the coming months. More Subway millionaires will be created and the existing ones will continue their growth in sales and stores. I wish all continued success.

How will NAASF do in the coming year? Will we see some real inroads in our relations with DAI or just more of the same inactivity? That is, promises of action and change but in the end no real progress.

We may have IPS collecting fees for NAASF. This should alleviate some of the revenue pressures on the organization. It will require almost all the franchisees signing up for this and I don’t know if this will be possible give that we still have about 30% of the franchisees not signed as members with a free membership.

I went to a DA Regional Conference this week. It was a one and a half day event. It was well attended but I was quite surprised at how many of the franchisees were new to the system. Given that we have not seen such a large growth of stores in or market it was remarkable how many were new faces. I guess we have a high turn over in more than staff at Subway.

In talking with some of the new franchisees I learned that some were disappointed with their profits and the amount of time that was required to operate a Subway. Some were knowledgeable of their real food and paper cost while others were not. For example; one franchisee told me his food cost was 31%. I was surprised as I’m having a hard time getting anywhere near 35%. I also learned that his prices were at the ‘recommended’ prices which are quite a bit lower than mine and many of the more seasoned franchisees. In further questioning I learned he had been in the system 8 weeks and his costs were generated from the SubShop 2000 program in our POS. Boy will he be in for a surprise at the end of the year when his accountant adds up his costs. I recommended that he invest in an accounting program and take off monthly statements.

The Convention was quite well run. The best part was the presentation by Raghu Marwaha and Bob Grewal of LA. The IPC presentation was disappointing and seemed to only go to support the DA’s statement that we should not be in a rush to raise prices as food and paper costs are generally coming back down. No mention of the long term trend of raising costs over the past few years. Only focus was on the past few months. Then there was the Balanced Scorecard presentation by Suzane Ebelher. I have no idea as to the relevance of this to our business. ‘Local Restaurant Marketing’ was explained by Carolyn Martin, a past field rep. I guess some of the ideas are useful to the new franchisees but I did not see anything which I had not done or was not doing in my market.

Our NAASF board member was present at the meeting but no mention was made of NAASF to the participants! Not an introduction, no recognition and no mingling during the convention that I saw. There were no membership hand outs – NAASF was absolutely invisible! I was very disappointed.

The only FAF presentation was by our Advertising Agency, Scott Richards. It was again to support the DA’s views. It was in support of continuing the Sub-Card. No mention of the successful trials which support elimination of the Card and Stamps.

If I have any complaint it was that the convention was DA-centric and not for the benefit of the franchisee. There were no round table type of exchange process and there were no question and answer sessions. A work group to set recommended prices could have been useful and would have more belief than the current one set by the DA.

Here is a good link to some useful information on our SubShop 2000 POS and other related material. Check out the training for your managers for the POS.

Take care.

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