Subway vs. McDonald's: Fast Food Face-Off

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The Golden Arches may be tumbling soon. Subway recently declared they will have more locations than McDonald’s (Stock Quote: MCD) by the end of this year. Subway currently has 31,771 shops worldwide, but plans to open up several hundred more and surpass McDonald’s record of 32,158 restaurants.

Subway already owns the record at home, beating out McDonald's for most U.S. locations since 2002. They now have more than 22,000 locations in America. There are 1,500 stores in Wal-Mart locations (Stock Quote: WMT) alone, according to Subway’s public relations office.

Meanwhile, McDonald’s still dominates abroad. The burger chain has locations in 118 countries, compared to Subway which is in just 91 countries.

In some ways, the total number of locations, like all records, can be read as just a symbol. But it does point to a distinct business method. McDonald’s has entered into more world markets, but in recent years, the burger giant has focused on making its existing locations more profitable rather than opening new ones. And it seems to be working: The average McDonald’s store rakes in five times as much money as the average Subway.

“We're focused on our long-term business strategy, the Plan to Win,” said Heidi Barker, Director of Media Relations at McDonald’s. “Part of that plan is ‘being better, not just bigger.’”

Subway, on the other hand, tends to apply the Starbucks (Stock Quote: SBUX) method, saturating particular areas by opening multiple stores in close proximity to one another. “If you’re in a city, you might not always want to cross the street,” said Les Winograd, public relations representative for Subway. Yet, if Starbucks is any indication, this model is not always sustainable. The coffee giant has closed hundreds of stores in the last year.

Winograd said the company is not too worried about that. Their goal is to get into environments with "captive audiences" such as churches, laundromats and malls, regardless of whether those locations are near other existing ones.


Obviously, Subway is doing something right. According to a recent interview in "Entrepreneur" with Subway CEO Fred DeLuca, much of the company's success is due to two things: the franchise’s popular $5 deal on foot-long subs, and consumer’s desire for healthful foods.

“We’re providing healthy alternatives to traditionally fatty fast foods and we’re seeing that consumers are interested in the healthy options we provide,” Winograd added. Plus, Subway’s mascot is a svelt man who attributes his weight loss to their healthful brand, while McDonald’s mascot is a clown doling out cheeseburgers to children.

But is Subway’s success really an indication of a deeper shift in consumer tastes toward healthful, cheap food? Some nutrition experts think the effect is minimal. “Since when did Americans choose fast food for health?” said Marion Nestle, author of "Food Politics and What To Eat." “I'm guessing Subway looks like a bargain and people like what they get.”

The real reason for their increased presence may just be because it’s easy to open new stores. According to Winograd, it’s possible to open a Subway for less than $100,000 and unlike McDonald’s, many are embedded in other bigger businesses, like Wal-Mart or in shopping malls, which generally means lower overhead.

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