Subway passes McDonald’s, becomes largest fast food chain

March 7, 2011

While both are often seen on the same block, Subway passed McDonald's in its total number of locations worldwide in 2010. Image: CC dmuth/Flickr

There are now more Subway locations than McDonald’s locations worldwide. Fueled by foreign growth, Subway had passed McDonald’s in its sheer number of international locations by the end of 2010. With U.S. restaurant sales flat, many major U.S. fast food franchises are focused on foreign markets as the best prospect for growth in the coming decade.

How Subway stacks up against McDonald’s

As 2010 drew to a close, Subway edged McDonald’s in locations operating worldwide 33,749 to 32,737, according to Securities and Exchange Commission filings in February. Subway, which passed McDonald’s in U.S. locations about nine years ago, has been aggressively seeking growth overseas. Subway opened its first international location in Bahrain in 1984 and expects its number of international restaurants to outnumber its domestic locations by 2020. McDonald’s, which had about a 50-year head start, still leads Subway in international presence, if not locations, with 117 countries versus Subway’s 95. McDonald’s also outpaced Subway in worldwide revenue $24 billion to $15.2 billion. Both companies are dwarfed in international presence by Yum! Brands, which has 38,000 international locations. Yum! Brands comprises multiple popular franchises such as KFC, Pizza Hut and Taco Bell.

Owning a Subway franchise

Subway has achieved world domination by adopting the same franchise model that made Mcdonald’s an international brand. Entrepreneurs can own a Subway franchise with a relatively low investment. Subway franchisees buy into an instantly recognized brand and a proven business model. Subway franchises come with flexible options regarding size and location, and the company offers financing, equipment leasing and hands-on training. Subway spends about $290 million a year to promote the brand, and its menu of fresh food is more widely acceptable than McDonald’s, enabling Subway franchises to locate where McDonald’s can’t, such as hospitals and schools. Plus, sandwiches are a flexible product that can change with the times, as was the case with the $5 footlong, which kept Subway thriving during the economic downturn when other fast food franchises struggled.

Fast food chains seek an international future

Subway expects international locations to exceed its 24,000 U.S. locations by 2020. It currently has 199 locations in China and projects to have more than 500 by 2015. Subway has already opened 1,000 restaurants in Asia. For U.S. restaurant chains in general, saturated markets, high unemployment and an uncertain economic future in the U.S. are compelling them to follow in the footsteps of Subway. Another ubiquitous franchise, Starbucks, plans to triple its number of locations in China, for example. Dunkin’ Brands Inc., which owns Dunkin’ Donuts and Baskin-Robbins, is also planning thousands of new locations in China.

Sources

Wall Street Journal: http://online.wsj.com/article/SB10001424052748703386704576186432177464052.html

MSNBC: http://money.msn.com/stock-broker-guided/article.aspx?post=54c8daba-4967-4140-9026-675d1595c289&GT1=33009

TIME: http://newsfeed.time.com/2011/03/07/super-size-no-longer-subway-surpasses-mcdonalds-as-worlds-largest-restaurant-chain/

Food and Drink Digital: http://www.foodanddrinkdigital.com/sectors/hotels-and-restaurants/joining-subway-franchise-team

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