comparative study of mc donalds and subway

CH-1 PLAN OF THE STUDY

1.1 INTRODUCTION

If the development capital is what establishes a business, sales & development management is

what keeps it going. One of the most common problem of every business is the selection of

wrong channels and wrong strategy. What is important is not just the size of operating costs, but

the management function of managing sales & distribution i.e., increasing sales volume & the

flow of regular customers by adopting the most effective strategy.

McDonalds was established in California during the 1940s by two brothers. McDonalds is a

leader in convenient foods and beverages, with revenues of about $23 billion and over i.6 million

employees serving the customer’s worldwide. On the contrary Subway is an American

restaurant franchise that primarily sells submarine sandwiches (subs) and salads. It is owned and

operated by Doctor's Associates, Inc. (DAI). Subway is one of the fastest growing franchises in

the world with 36,558 restaurants in 99 countries and territories as of April 7th, 2012.

The project is small attempt to study the current market scenario in the fast food industry

prevailing in India. Added to this fact the fast food industry in India is growing with a rate of 30

– 35 % currently.

OBJECTIVE OF THE REPORT

It is well known fact that we remember 20% of what we hear, we remember 40% of what we see

but we remember 75% of what we do.

Undergoing B.B.A is the first step to visualize the ever-dynamic business world and my main

objective while preparing the report is to explore the current management literature so as to

develop an individual style and sharpen my skills in the area of leadership communication,

decision making, motivation and conflict management. Preparing the report was to familiarize

myself with the current market trend in the fast food industry prevailing in India.

To present study in fast food industry mainly focus on the comparative study between

McDonald’s And Subway and between its other competitors with the help of primary data.

1.3 THEOROTICAL BACKGROUND

McDonald’s vs. Subway

McDonald’s and Subway are the first things that come to the mind whenever we are in a rush for

work, school or for any other urgent matter when we are hungry. They have these diverse variety

of ready-to-go foods that one can bring along in the bus or when one walk along the road. The

difference between McDonald’s and Subway is very obvious. They are totally different from

each other so people with different palette have to decide whether to go to McDonald’s with their

famous hamburgers or with Subway with their submarine sandwiches. Either one of them is

delicious enough to get confused about.

McDonald’s

McDonald’s has been in the market since 1940. The story of McDonald’s started in 1954, when

its founder Raymond Kroc saw a hamburger stand in San Bernardino, California and envisioned

a nationwide fast food chain. Kroc proved himself as a pioneer who revolutionized the American

restaurant industry. Today McDonald’s is the world’s largest fast food chain serving 47 million

customers daily. They have introduced their “Speedee Service System” that has become the

inspiration of modern day fast food chains. Their original McDonald’s mascot, a hamburger-

headed man with a chef’s hat, was replaced with the ever famous McDonald’s clown. Who could

have gone wrong with that consistently laughing face of their mascot? McDonald’s have

conquered 119 countries and is serving 58 million of consumers every single day. Some of their

restaurants are counter service alone, some are just drive thru like those locations on the

highways, some counter service restaurants of McDonald’s have playgrounds and others have

inner and outer seats which are usually of colour red and yellow. Their products are suitable for

any type of people, any time of the day and any mood of the season. Aside from their famous

hamburgers, they have chicken sandwiches, soft drinks, breakfast menu, French fries and

desserts. A lot of McDonald’s restaurants have something for vegetarian consumers also.

McDonald’s is also fond of adopting its products upon the countries food taboos. For instance,

McDonald’s in Portugal offer soup and the McRice in Indonesia.

Subway

Subway is labeled globally as the fastest growing fast food chain franchise. It started from Fred

De Luca’s youth. He was still 17 years back in the year 1965 and was struggling to pay for his

college fees. What he did is he borrowed money from his family friends and put up a restaurant

that sells sandwiches and was originally named as Pete’s Submarine. Subway is now serving

33,930 restaurants in 95 countries. Their consumable offers are submarine sandwiches, cookies,

Danishes and muffins that are of various flavours like chocolates and nuts. They also have

Veggie sandwiches for vegetarian consumers.

The difference between McDonald’s and Subway is crystal clear because the actual competitor

of Subway is Quiznos which sells sandwiches as well. However, because of their popularity and

their unquestionable delicious foods, we usually wonder as to where we really like to eat,

because we want both. Subway is truly generous with their products that they have been legally

questioned before for their oversized sandwiches; McDonald’s have fought well to protect their

‘Mc’ trademark with their foods because they, too, have faced several lawsuits about it. Which is

which never matters when they’re, both, are truly satisfying.

McDonald’s vs. Subway Menu Facts. The Calories & Nutrition War Begin Here!

The most controversial yet popular topic engulfing two major giant in the worldwide fast food chain

restaurant – McDonald’s and Subway. So which is better? Which one is healthier? Which one offer less

calories? Which one will help you to shed some pound? What is the calories and nutrition index of these

two franchises?

Subway’s Menu Nutrition Facts

Subway always offers meal with comparatively low calories from fats. However the nutrition

from Subway may vary depend on the person who prepares the meal. If you check out Subway’s

nutrition chart here – Subway Nutrition Value you can find that most of the sandwiches served

are less than 400 calories. And most of the item are low in fat, cholesterol and free from trans-fat

while Subway always serving fresh ingredient, not fried and adding lots of veggies in the menu.

But the calories and fat level will go up if you happen to add some cheese or mayo to these

sandwiches. Its price will be slightly more expensive compare to McDonald’s, however Subway

is still a preferable choice for most of the fast food lover out there due to its healthy menu

choices.

McDonald’s Menu Nutrition Facts

McDonald’s on the other hand seem to have suffered from a multiple of personality disorder.

McDonald’s is tirelessly campaigning about their healthiness in the meal they offer e.g. their

salads, and their healthy options – even persuading athletes to appear in ads. One thing good

about McDonald’s is that they serve it real fast, you can walk in there, order something, slap

money down, and be walking out with food within 60 seconds. While some claim that the menu

in McDonald’s is cheaper compare to Subway. But sorry if you thinking of having a fresh

vegetable there as most of the time the foods are served in deep fried or deep grilled in most

country. You can check out McDonald’s nutrition chart here McDonald’s Nutrition Value.

Simple Comparison Between McDonald’s and Subway

McDonalds Hamburger: Patty (100% pure USDA inspected beef; no additives, no fillers, no

extenders.), Bun, Ketchup, Mustard, Pickle Slices, Onions (Dehydrated), Seasoning – Salt,

pepper, partially hydrogenated vegetable oil (cottonseed and soybean).

Subway Sub Sandwich – Turkey Breast: Sliced Turkey Breast and Standard Vegetables (Can

be Altered – Iceberg Lettuce, Tomatoes, Red Onions, Green Peppers, Olives and Pickles).

The ingredients are DIFFERENT

Subway 6″ Inch Turkey Breast: 280 Calories, 5 FAT (Grams).

McDonald’s Big Mac: 560 Calories, 30 FAT (Grams).

A Subway Sandwich compared to a McDonalds Big Mac can save hundreds of calories and at

least 25 Grams of Fat.

It is clear that from the comparison above, Subway always associate themselves with the The

Biggest Loser while for most of the time, McDonald’s is on the other way round The Biggest

Gainer.

McDonald’s versus Subway – The Sandwich Hamburger battle

In March 2011, sandwich chain Subway surpassed the world’s largest hamburger chain,

McDonald’s in terms of the number of stores globally. In 2002, around nine years ago, Subway

had already surpassed McDonald’s in number of stores in the U.S. However, McDonald’s still

rules in terms of revenue with $24.1 billion, as compared with $15.2 billion for Subway last year.

Subway – Rapid growth strategy – opening outlets in non-traditional locations

Subway has opened around 8000 outlets in non-traditional and unusual locations. E.g. in

Automobile showrooms, Goodwill stores, high schools, zoos, appliance stores, ferry terminals,

riverboats, and even a church. In China it has around 200 stores and has plans to expand it to

around 500. Subway has competitive advantage over other chain restaurants as it costs less for it

to open and operate a smaller format store.

McDonalds Subway

Restaurants (end of 2010) 32,737 33,749

Number of Countries 117 95

Restaurants in U.S. 24000 24017

Franchised restaurants

around the world

More than 75% >32,800 franchises in 92

countries

Revenues in 2010 $24 billion $15.2 billion

Owned by McDonalds Doctor’s Associates Inc.

(DAI)

First Restaurant 1948 1965

First franchised restaurant 1955 1974

First international restaurant 1967 in Canada & Puerto

Rico

1984 in Bahrain

Became billion dollar

corporation in

1972

10,000th Restaurant 1988 1995

Number of worldwide

employees

1.7 million 3,00,000

Founders/Owners Ray Kroc (Dick and Mac

McDonald)

Fred DeLuca and Dr. Peter

Buck

BCG Matrix :

According to BCG Matrix McDonald’s is a star. The reason for this is its high market growth

and high market share in the Indian market. On the other hand KFC and Pizza Hut are the cash

cows because of their low growth rate and high market share. During past some years KFC and

Pizza Hut have lost their market growth because of the fact that they lost their standard war to

their competitor i.e. McDonald’s.

Another direct competitor of McDonald’s is Subway. According to BCG Matrix it is a dog.

Some of the reasons that are responsible for its low market share and low market growth are the

less expansion strategies being followed by the company. Secondly they are not focusing at all

on all the major cities.

COMPETITOR ANALYSIS

PIZZA HUT:

Pizza Hut is a global fast food chain, a subsidiary of Yum! Brands Inc., the world’s largest

restaurant company. It was founded in Wichita, Kansas, USA in 1958 and is running its

operations in about 91 countries worldwide. It is one of the major competitor of McDonald’s.

Pizza Hut serves a large variety of starters, soups, salads,

sandwiches, Pastas and deserts.

Strategic Objectives:

When we talk about strategic objectives, Pizza hut says: We

want to satisfy our customers by offering them “The best”.

Diversification of the products that they offer has always

been a focal point of strategies at Pizza Hut. The strategies at

Pizza hut are guided by principles like Cleanliness, Hospitality, Accuracy, Maintenance, Product

quality and Speed (CHAMPS). Since it’s a global chain, the strategies are based upon

customizing the services, advertising and marketing activities according to the countries that they

are operating in. Customer service and satisfaction have of course always been a vital aspect of

the strategies. Another important feature of the Pizza Hut’s strategies is the 3 F’s (Fun, Friendly

and Familiar).

Problems and Weaknesses:

At one time, the biggest marketing problem Pizza Hut faced was lunch. As compared to

McDonald’s, its restaurants had virtually no lunch time sales, and neither did any of its pizza

competitors. The reason, of course, is that it takes 20 minutes to cook a pizza from scratch in a

traditional pizza oven, and most people won’t spend that long at lunch time waiting to be served.

By using a new, continuous-broiling technology adapted from burger business, Pizza Hut

developed a personal pan pizza that could be served in less than 5 minutes. It was quick, tasty

and moderately priced. And Pizza hut rolled it out to all 4500 stores worldwide and locked up the

pizza-lunch business almost everywhere, almost overnight.

One of the weaknesses of Pizza hut that it hasn’t overcome yet is it’s price. Local chains are

constantly springing up, offering lower prices and similar recipes. Most people don’t mind

giving a lower price for slightly different taste because of which the sales at pizza hut at are

suffering.

Growing awareness about eco-friendliness has forced a lot of the food chains to maintain

practices that conform to international environmental standards. For example McDonald’s is

introducing coffee beans grown in environmental friendly conditions in order to appeal to the

people who are conscious about environmental friendliness. In the Pizza selling restaurants,

organic pizzas are the new concepts that are appealing to the masses to these days. It’s a

phenomenon that highlights the health conscious attitude as well as environmental friendliness.

Pizza Hut on the other hand has not come up with any strategy in this area and if it doesn’t even

in the future, it is going to lag behind the chains that offer healthier food.

Competitive Advantages:

Pizza Hut has the first mover advantage in the pizza chains because of which it has developed a

strong customer base which is one of its strengths.

The delivery service of Pizza hut is clearly a competitive advantage that it enjoys. Pizza hut’s

delivery service is one of quickest and the pizzas delivered are oven hot in the real sense of the

world.

Pizza Hut is often referred to as ‘Pizza Innovation Leader’ because it is constantly coming up

with new varieties of pizzas to appeal the different audiences and at the same time, people at the

pizza hut have a really good idea about which varieties are appealing to the customers and they

are thus retained in the menus

The first mover advantage is an advantage that Pizza hut was born with but time, Pizza hut has

been successfully creating competitive advantages like a

traditionally strong brand name for itself and the quality

service that it provides.

KENTUCKY FRIED CHICKEN (KFC):

KFC, founded and also known as Kentucky Fried Chicken, is a

chain of fast food restaurants based in Louisville, Kentucky. KFC is a brand and operating

segment, called a "concept", of Yum! Brands since 1997, when that company was spun off from

PepsiCo as Tricon Global Restaurants Inc.. KFC has more than 11,000 restaurants in more than

80 countries

Strategic Objectives:

KFC has the strategic objectives of expansion along with profits and sales growth. KFC has also

been applying its strategies at improving services and making them more and more customer

friendly. It has not only been customizing it's menu according to the countries that it has been

operating in, it has also been trying to cater to different ethnic groups like African Americans

and Hispanics. Such types of strategies are focused on increasing the customer base by better

customization of products. Other than the traditional eat-in restaurants, KFC has also been

expanding into non-traditional facilities like shopping malls, hospitals, universities, stadiums;

office buildings etc and a number of strategies have been formulated to aid this kind of

expansion.

Problems and Weaknesses:

The advertising campaign of KFC does not specifically appeal to any segment. It does

not appear to have a consistent long-term approach. The U.S. has enormous changes in its

demographics. Only in US, single-person households increased from 12% in 1970 to 25%

in 1995. With this kind of dramatic change, KFC does not have a proper approach to its

target market.

The increased health concerns of the masses has put KFC at a great disadvantage because

of the word 'fried' attached to its brand name which gives an instant idea that the food

would be oily and unhealthy.

Another weakness of KFC is that of the lack of a corporate direction because it has been

a part of four different parent companies till now namely, Heublein Inc., R.J Reynolds,

Pepsi Co. and Yumm! Brands Inc. The corporate functioning of these companies has

been pretty different from each other because of which a strong culture could not be

established at KFC and it had long been struggling with it.

Because of the nature of the chicken segment of the fast food industry, innovation was

never a primary strategy for KFC. However, during the late 1980's, other fast food

chains, such as McDonald's, began to offer chicken as a menu option. During this time,

McDonald's had already introduced the McChicken while KFC was still testing its own

chicken sandwich. This delay significantly increased the cost of developing consumer

awareness for the KFC sandwich.

Competitive Advantage:

A very strong financial background is one of KFC’s competitive advantages.

KFC has been functioning as a multinational corporation for several decades. As a result,

the company is familiar with the logistical and quality problems which accompany

operating an international food operation, and has demonstrated that it can work with host

countries and businesses within the host country to develop a strategy which works in the

most cost effective way. With the passage of time, KFC has developed another very important competitive

advantage for itself- Environmental Friendliness. In March 2009, the first eco-friendly

green KFC was opened in Northampton USA. The restaurant is designed according to

environmental goals that include cutting energy and water consumption by 30 percent

and reducing CO2 emissions. Operations at the new site are also expected to reduce

waste and the amount of rubbish sent to landfills; the restaurant composts and recycles

other waste, grease and used cooking oil. Other than this, in an effort to reduce its

packaging by 1,400 tons, KFC is now switching from cardboard to recyclable and

biodegradable paper wrapping for some of its products.

Subway:

Subway is a restaurant franchise that primarily sells submarine sandwiches and salads. It is

owned and operated by Doctor's Associates, Inc. (DAI). Subway is one of the fastest growing

franchises in the world with approximately 30,052 restaurants in 90 countries as of April 2009. It

is the second largest restaurant operator globally after Yum! Brands (35,000 locations).

Subway restaurants are known for their sub sandwiches and salads. The Subway restaurant chain

is the fastest growing restaurant chain in the world surpassing even McDonald's. Subway has the

second most stores of any chain restaurant system in the world after McDonald's, and the most

locations in North America of any chain. Subway was founded in 1965, however the franchising

started in 1974.

Strategic Objectives:

The strategic objectives of Subway focus on creating a global strategic plan to enable Subway

Restaurants to succeed internationally. Other than this subway is intent upon introducing the

concept of ‘healthy fast food’. Sandwiches of Subway have been included in diet plans by

experts. Jared Fogle, an obese college student who weighed 425 pounds introduced a weight loss

plan called the subway diet and lost 245 pounds in 11 months. Subway’s stand regarding obesity

in children is not new to its customers. Strategies at Subway are not only about a really ambitious

increase in franchises all over the world but they are also about making the food more and more

appealing to the health conscious customers because health conscious attitudes, according to the

experts, are here to stay now.

Problems and Weaknesses:

One of the major problems that can be identified with Subway right now is related to the

franchises. Although Subway has long been named as the number one franchise

opportunity by The Entrepreneur magazine but it seems that Subway has developed a

myopic focus regarding the franchises. Subway has regional managers who have the

opening of new franchises as their sole aim and their bonuses and incentives are tied to

the opening of new franchises. These managers at Subway even don't care if the new

franchises are detrimental for the existing ones and because of this; many of the

franchises are becoming a victim of internal competition or cannibalization. For example,

in Lahore alone, Subway has 20 outlets. Instead of this, Subway could have targeted

Cities like Faisalabad and explored a new market. Franchise owners believe that Subway

has been irresponsible with allocating the franchises and uses bloated store sales

projections as part of their sales pitch for encouraging new franchises.

The opening up of a lot of new stores in close proximities are also resulting in decline in

sales per store because of which the franchisees are not very satisfies with Subway.

The environment at the Subway stores cannot be compared with that of McDonald's,

KFC or Pizza Hut. The Stores are small and suffocating and do not even provide the

necessary privacy to the people eating there. Subway has no standard size for any of its

store because of which the sales oriented Franchisees try to fix them at as smaller a place

as possible. This is tarnishing the image of Subway as an international brand.

The quality of the sandwiches and standards of cleanliness at Subway are going down

day by day due to the greater and greater autonomy that franchisees enjoy. The Subway

at Rawalpindi was recently closed down due to quality issues as well.

There is a dire need of a system to integrate the large number of Subway franchises and

to ensure that the original Subway practices are being followed there. The management of

the franchises is one part of their operations that Subway has not handled well.

Competitive Advantage:

One of the greatest competitive advantage that Subway was born with is it's healthy Menu. The

salads and sandwiches appeal much more to the people as compared to fried chicken, burgers,

fries and pizzas. With its advertising and promotion, Subway has long been highlighting its

healthy food in advertising and promotions and with the passage of time, it has established itself

as a healthy brand.

Another competitive advantage that subway enjoys is the fact

that along with traditional locations, Subway restaurants can

be found in more than 4,000 non-traditional locations such as

food courts, health clubs, hospitals, universities, amusement

parks or just about anywhere. In fact, Subway restaurants can

even be found in automobile showrooms and Laundromats!

This global presence is indeed a sustainable advantage for Subway and needs to be

managed properly.

Subway's fresh food is also a competitive advantage because unlike its competitors like

McDonald's it allows its franchisees to choose their own food suppliers, to ensure they can

access the freshest ingredients.

McDonald’s

Strengths:

McDonalds has been able to maintain its market share in Indian market very early and this is

actually the major strength of McDonalds that has made it so popular. Other major strengths are

listed below:

Products:

The reputation of the various products each season has made it possible for the company to

attract customers having different tastes and to try out the season specialties. A major strength is

the various deals that McDonalds offers so that it could be made affordable. Recently

McDonalds offered a deal for Rs.85 only, containing a beef burger along with a drink.

McDonald’s offers many flavors of Mcflurry ice cream from a mix of M&Ms to Oreo cookies.

The M&Ms flavor was introduced about a year back and is still popular among the M&Ms

lovers. McDonald’s has also customized its meal according to the tastes of India. People in India

do not eat beef so McDonalds does not offer such sort of meals in the country.

Social Responsibility:

The social responsibility acts of McDonald’s are commendable. It has been able to maintain a

reputation as a socially responsible and aware enterprise all over the world. Its practice of going

green and serving in an environment friendly way has made it possible for McDonald’s to gain

fame.

On 27th March’ 2008, McDonald's announced that it is giving further backing to Rainforest

Alliance certification by offering a cup of tea with a conscience in all of its 1,200 restaurants in

the UK.

Like KFC, McDonald’s is also involving itself in educational and social activities so that people

should know that McDonald’s isn’t yet another business oriented corporation aimed at just

making money but it actually cares.

Employment Opportunities:

The equal employment opportunities regardless of race, color, sex, national region, age,

disability etc are offered to people. People looking for jobs can also upload their CVs online.

Brand Recognition:

McDonalds has gained recognition worldwide. The chain is present all over the world in more

than 122 countries. In India a large number of franchises are present, majority of them in

Mumbai and Delhi and McDonald’s is regarded as a symbol of value and quality for your

money.

Good communication and friendly environment:

McDonalds has always ensured a friendly environment to offer to its customers. Children love

going there, having a happy meal and the toys that they get as a gift. Play places also serve as a

significant attraction where children can go and make friends and play. Employees are also very

polite and they are always ready to serve you in every best possible way that they can.

Party celebrations:

McDonald’s offers its clients, especially children to celebrate their birthdays there. One can

invite friends, they decorate the party area, various party games are organized along with face

painting activity etc. Children are provided with an opportunity to celebrate their day in the way

that they want.

Partnership with Coca Cola:

McDonalds and Coca Cola are official global partners. Coca cola is a big brand name serving

people all over the world with beverages.

Partnership with telecom companies:

McDonalds offered special deals to its clients with up size meals who are the users of a particular

company such as Warid and Ufone.

Weaknesses:

More advertising:

In India, McDonald’s rarely advertises at TV, however billboards often show off juicy

McDonald’s burgers but this could affect its popularity in future. It definitely needs to advertise

more to reach the target and the potential customers.

Drive-ins:

The service at McDonald’s drive-ins has been subject to criticism all over the world and a lot of

people complaint that the orders are either missing some of the items or are entirely wrong. The

service time at the drive ins is also subject to great variations and needs to be improved.

Opportunities:

Reasonable Prices:

McDonalds can broaden its market by offering meals at more competitive prices in comparison

to other local QSRs such as AFC, Al Maida etc. This way it could get hold of the potential

customers too.

Opportunity to be innovative:

McDonalds could make itself more innovative by offering deals that appeal more to Indian

consumer’s e-g it can introduce desi flavors in the present products such as Barbeque, Tandoori,

Masala and other spicy tastes which are staple of the country.

Breakfast and special noon meals:

Now in India most the trend of women going to work and opting for profession is increasing as a

result of which they are running short of time to carry out all the home chores along with their

work. McDonalds can offer deals to such market by catering them in the morning for breakfast.

During the office hours people mostly go out for their lunch to restaurants. McDonalds can avail

this potential market too.

Growing dinning out Market:

In India the dining out trend is increasing especially in youngsters and upper middle class.

McDonalds has the opportunity to grasp this market quite well. It is already doing well by

serving them but it could arrange various activities for the people of this age.

Dine in Cafes:

McDonalds can open up with small-sized cafes for the teenagers in their universities and

colleges.

McCafe’s:

McDonalds has opened coffee shops by the name of McCafe’s in UK. India can serve as a new

potential market for these cafes.

Threats:

More health conscious customers:

With increasing awareness about food and the importance of a balanced diet, people are opting

for low calorie food e-g salads and food with high fiber content. To remain in the scope,

McDonalds needs to serve this market as well as the present customers, this could be posed as a

threat to McDonalds. Subway is offering its low fat veggie and chicken sandwiches at prices

almost the same as McDonalds. For McDonalds diet meals could be a way out of this situation.

Foreign as well as local competitors:

In the growing market of India McDonalds competitors are entering not only from other

countries but from within the country too. Their competitive prices could be a reason due to

which McDonalds can lose its share in the Indian market.

Changing customer styles:

Indian culture has been changing for years now with new technologies and trends. People who

are not brand loyal move with the changing times. Some competitor can easily enter into the

market and make better offers to its consumers by focusing on their needs and the satisfaction

that they want. To remain competitive, McDonalds needs to be innovative and should change

along with the Indian consumer styles.