Fast Food and Subway

News that Subway has passed McDonalds as the worlds biggest fast-food chain is scarcely a surprise to Australians, given the sandwich chain has 1,254 injects in Australia, comp ared to just over 780 McDonalds stores. But the rapid and unrelenting growth of Subway in Australia and overseas does raise an important question for the license sector Are franchisees now favouring smaller and cheaper franchise options? Franchising expert and SmartCompany blogger Jason Gherke, of consultancy Franchise Advice, says Subway and McDonalds have pursued in truth different growth strategies.Where Subway uses relatively low entry prices and smaller store formats (which mean pass up rents) to attract franchises, McDonalds has a strategy of owning the land that a franchisee can build a store on, with the exception, of course, of stores in shopping centres or other retail precincts. There is a much more significant great investment required from both the franchisor and the franchisee under the Mc Donalds model, Gherke says.The rate at which both chains grow is at once related to that. Whereas McDonalds would need up to five years of lead time to scout store locations, seduce planning approvals and build a store, it could take only months to get a Subway store planned, found and up and running. The trend towards smaller store formats is one Gherke says is also evident in the pizza sector, where pizza Hut has moved away from a dine-in concept to a pure take-away concept.Rivals such as Eagle Boys have also modified their franchise offering to include express outlets which can be opened in small spaces within petrol stations and airports, for example. However, McDonalds is unlikely to be too worry about being in second place to Subway Gherke says its slower growth means that McDonalds franchises corpse much sort after, and very expensive. I wouldnt hazard a guess at what a franchise would sell for these days, if you could actually get your hands on one. And while other fast food operators are reducing the size of their stores, McDonalds has concentrated on changing its computer menu (particularly to include healthier options) and changing its store formats (with the inclusion of McCafe outlets in most stores). I cant say that Ive noticed a down-sizing of their outlets. McDonalds have modified their menu and their offer rather than their footprint. And of course, store numbers arent the only thing that counts in the battle for the stomachs of consumers. According to IBISWorld, McDonalds has a 19. 5% share of Australias fast-food market, compared with Subways share of just 2%.