WIXLIB

Saimaa University of Applied SciencesBusiness Administration LappeenrantaCorporate and Financial LawRiina LiutuSUBWAY MARKET RESEARCHBachelor‟s Thesis 2010

ABSTRACTRiina LiutuSubway Market Research, 114 pages, 7 appendicesSaimaa University of Applied Sciences, LappeenrantaDegree Programme in Business AdministrationCorporate and Financial LawBachelor‟s Thesis 2010Instructor: Sari Jokimies Manager of Degree ProgramThe main goal of this thesis is to find out whether Danish entrepreneurs can becomesuccessful in the Danish market as Subway franchisees. Three specific cities,namely Århus, Horsens and Vejle, are looked at in depth. In the thesis, these threecities will represent the Danish market. An evaluation of the most suitable location fora Subway restaurant is made. To reach the above objective, the Subway franchisingconcept, the market situation, the customers and the competitive situation will beanalyzed and evaluated.In order to understand the market in which the franchisee would operate, the size ofthe market, historic growth, potential growth, trends and macro environmental factorswill be analyzed. The analyses will show that the fast food market is mature, and thatit still holds some growth potential.To find out who the potential customers of the Subway franchisee might be, a surveywas made. A questionnaire was used as a main tool to analyze customerpreferences and the prospects of opening a Subway restaurant in Århus, Horsens orVejle. After evaluating the results of the questionnaire, Horsens was pointed out asthe most attractive and suitable city to open a new Subway restaurant.The competitive situation is also analyzed. In doing so, the overall competitivesituation within the fast food industry is assessed. Furthermore, three maincompetitors, namely McDonald‟s, Burger King and Sunset Boulevard, are analyzedin depth.The findings in the thesis show that the competition is fierce. There are many playerswithin the fast food industry, and Subway is not well represented since it currentlyhas only two restaurants in the Danish market. In addition, due to the expectedslowdown in market growth, the competition can be expected to increase.Keywords: Denmark, Subway, Market Research, Competition, Customers

TIIVISTELMÄRiina LiutuSubway Market Research, 114 sivua, 7 liitettäSaimaan ammattikorkeakoulu LappeenrantaLiiketalous, yritysten ja taloushallinnon juridiikkaOpinnäytetyö 2010Ohjaaja: Koulutuspäällikkö Sari JokimiesTämän opinnäytetyön tarkoitus on selvittää, voivatko tanskalaiset ksena on antaa lukijalle mahdollisimman hyvä kuva siitä, miten Subwayravintola perustetaan, miten sitä pyöritetään ja mitä hyötyjä ja mahdollisia haittojasiitä on tanskalaiselle Subway-yrittäjälle.Vuonna 2009 Tanskan markkinoilla oli vain kaksi Subway-ravintolaa, toinenAalborgissa ja toinen Sønderborgissa. 1990-luvulla markkinoilla oli kuitenkin yli 20Subway ravintolaa, mutta kaikki vedettiin pois markkinoilta lähes samaan aikaan.2000-luvulla Subway-ravintoloita alkoi kuitenkin taas ilmestyä Tanskan markkinoilleja tällä hetkellä ravintoloita on jo kahdeksan.Tässä opinnäytetyössä lukijalle annetaan kattava kuva Subway-konseptin historiastaja sen strategioista. Myös yksi tunnetuimpia johtamisen malleja, McKinseyn &Co:nmalli ”7S”, tulee esille. Seuraavaksi käydään läpi Tanskan markkinatilannetta jalähinnä sen kokoa ja tämänhetkisiä trendejä. Kuten Suomen markkinoilla, myösTanskan markkinoilla on paljon pikaruokaketjuja. Opinnäytetyössä käydään läpiTanskan markkinatilannetta ja arvioidaan Subwayn kolmea suurinta kilpailijaa,McDonaldsia, Burger Kingiä ja Sunset Boulevardia.Yksi suurimmista haasteista tässä opinnäytetyössä oli kysely, joka tehtiin kolmessaTanskan kaupungissa, Horsenssissa, Århusissa ja Vejlessa. Tämä oli hankalaa siksi,että kysely tehtiin katukyselynä ja se vei odotettua kauemmin aikaa. Kyselyn tuloksetosoittavat, että Tanskan markkinoilla olisi tilaa uudelle Subway-ravintolalle japarhaaksi paikaksi näistä kolmesta osoittautui Horsens.Asiasanat: Tanska, Subway, markkinointitutkimus, kilpailu, asiakkaat

CONTENTS1INTRODUCTION . 61.1Background of the research . 61.2Purpose. 71.3Research method . 81.3.11.42346Limitations and structure . 9THEORETICAL FRAMEWORK . 102.1PEST-Analysis . 102.27-S framework of McKinsey . 112.3AIDA . 112.4SWOT-analysis . 122.5Marketing mix. 122.6Porter‟s five forces . 13SUBWAY AND THE FRANCHISING CONCEPT . 143.1History of the Subway chain. 143.2Current product portfolio . 173.3Key competences . 183.4Subway‟s current strategies . 233.5Franchisee benefits from Subway . 243.6Advantages and disadvantages of the Subway franchise concept . 26THE FAST FOOD MARKET . 274.1Market size. 274.2Market growth . 284.3Trends . 304.4Macro environmental factors . 344.4.1Political Environment . 344.4.2Economical Environment . 344.4.3Socio-Cultural Environment . 354.4.4Demographical Environment . 364.55Quantitative and qualitative research . 9Attractiveness of the Danish fast food market . 37THE QUESTIONNAIRE . 375.1Test of the questionnaire . 385.2The final questionnaire . 39COMPETITIVE SITUATION . 416.1Main competitors. 41

76.2Strength of the competition . 446.3Competitor analysis . 466.4Conclusion of the competitive situation . 51THE CUSTOMERS. 527.1Buying behavior . 527.2Target group . 577.3Data analysis . 617.3.1Horsens . 617.3.2Vejle. 667.3.3Århus . 707.48Marketing-Mix . 74CONCLUSION AND RECOMMONDATIONS . 808.1Conclusion . 808.2Recommendations . 81REFERENCES . 83APPENDICESAppendix 1 The old questionnaireAppendix 2 The final questionnaireAppendix 3 Forecast Sales in Fast Food by Subsector: sales in DKr millionAppendix 4 Forecast Sales in Fast Food by Subsector: in terms of value growthAppendix 5 Fast Food by Subsector, sales in DKr millionAppendix 6 Fast Food by Subsector, in terms of value growthAppendix 7 Fast Food Denmark, Euromonitor international

1 INTRODUCTIONSubway chain is the third largest fast food chain in the world after McDonald‟s andKFC. The first Subway was founded in 1965. The founder of the Subway chain, FredDe Luca, started running his restaurant business when he was only 17 years old.The first Subway restaurant was opened nine years after its foundation inConnecticut where the headquarter is now situated. (Subway Denmark)Now there are more than 30,000 Subway restaurants in 88 countries worldwide andit is the world‟s fastest growing franchise chain. New Subway restaurants areopening all the time. The franchise chain has employed more than 150,000 people.(Subway 2009)Subway offers customers many different kinds of fresh submarine sandwiches alsocalled “subs”. Customers always decide how they want their sandwiches to beserved. Subway‟s advertising is based on freshness. Slogan “Eat Fresh” tells thatSubway chain uses only freshly baked bread and fresh ingredients. Subway has a lotof competitors for example McDonald‟s, Burger King and Sunset Boulevard.There were more than 20 Subways in Denmark in the 1990s but 10 years ago theywithdrew from the Danish market. In 2009 Subway tried to strive for the Danishmarket again. At the beginning of February they reopened Subway in 2 cities, inAalborg and Sønderborg. The Subway chain has also a lot of competitors in Danishmarket. One of the main competitors is the Danish chain Sunset Boulevard. Whenthe Subway chain was withdrawing their restaurants from the Danish market, SunsetBoulevard bought 3 of their branches. (Subway Denmark)1.1Background of the researchThis thesis will give background information about the Subway chain, its customersand Subway as a franchise concept. The fast food market in Denmark and thecompetition between Subway and its three biggest competitors, McDonald‟s, BurgerKing and Sunset Boulevard, are also included.6

1.2PurposeThe purpose of this thesis is to find out how attractive the Danish market is forentrepreneurs to take up the Subway franchise concept. This means that the focusof the thesis will be to analyze the Danish market and the opportunities that Subwayoffers the entrepreneurs. The objective of the thesis is to find out which is the mostattractive location for a Subway restaurant. Three different cities are analyzednamely Århus, Horsens and Vejle. The topic was chosen because it is interestingthat Subway is not well-represented in Denmark.This thesis is made to find an answer for the following main question: Canentrepreneurs take up the Subway franchise concept and become successful in theDanish market?The franchising concept of Subway:A company needs to know which strings it can play on, meaning that it has to knowwhat its key competences and its overall capabilities are. By having this knowledge,the company can decide on doing business within areas where it is most capable. Tofind out the benefits of doing business with Subway, the following main questioncould be asked:What are the pros and cons of cooperating with Subway?External analyses:The marketFor a company it is important to know the market it is operating in. Knowing thepossibilities for entering the market and the potential customers are vital.Furthermore it is a good idea to look at the macro environmental factors that areinfluencing the market. To get a better knowledge about a market, the following mainquestion is asked:How attractive is the market for fast food?7

CustomersA company needs to know who its customers are. To know the target group and itspreferences can be a huge advantage. Knowing this would make it easier to makedecisions concerning products, service and promotion. To get to know the customersand their buying behavior, there is one main question namely:What is the target group?Competition:It is important to know something about the competition within a given market, as itserves as an indicator as to how difficult (or easy) it is to operate within that market.Fierce competition will undoubtedly affect for example marketing expenses, thus it isuseful to know what kind of co

Subway offers customers many different kinds of fresh submarine sandwiches also called “subs”. Customers always decide how they want their sandwiches to be served. Subway‟s advertising is based on freshness. Slogan “Eat Fresh” tells that Subway chain uses only freshly baked bread and fresh ingredients. Subway has a lot