The recession put the brakes on many franchise chains’ expansion — but not all. For instance, the top fast-food chain by number of locations, Subway, added close to 6,000 restaurants from 2008-2010, the Milford, Conn.-based company reports.
The sandwich juggernaut’s recession-era expansion was the largest of any chain by a long ways, industry research firm FranData reports. The second fastest-growing franchise during that time period — commercial-cleaning chain Jani-King of Addison, Texas — added just over 4,500 new locations during the same period.
How did these booming franchises pull it off? For popular concepts with access to capital for expansion, a recession can be a bonanza. Prime real-estate locations come back on the market, and tenant-hungry landlords are willing to pay more for tenant improvements and cut lower-cost lease deals.
Subway spokesman Les Winograd says the sandwich chain’s positioning as a healthier fast-food alternative helped it advance during the down years. What drove the growth — was it the cheaper real estate, more available prime locations, more agreeable landlords?
“Yes, yes, and yes,” Winograd replied.
Another factor in Subway’s favor is its relatively low startup cost for new franchisees, due in part to the fact that the concept requires no chefs, stoves or fryers. The franchise fee is just $15,000 and a traditional restaurant can be opened for around $250,000, where many fast-food chains require upwards of $750,000 or more.
When you’re already ubiquitous, where do you add more restaurants? A spreadsheet provided by the company shows growth was almost evenly split between domestic and overseas initiatives. The company is now in 100 countries, and top recession-era growth markets abroad were Brazil (more than 400 new stores), Germany, Australia, Mexico, France, China, Russia, and India, in that order.
The chain also looked for “white space” on the map — points lacking a big green-and-yellow Subway sign, that is — in markets where it’s already a major presence, says Winograd. People will only drive so far for a sub sandwich, so in-filling existing markets was big, too.
California may have been one of the hardest-hit states in the depression, but it was Subway’s top expansion market in 2008-2010 with 459 new stores, followed by Texas and New York. Hard times also mean people looking for more affordable dining options, a shift where Subway is well-placed to benefit.
Another edge Subway had in the tough times is a focus on “nontraditional” locations, many of which don’t take up much space. These alternative locales are now 20 percent of Subways new openings. There are Subways now on college campuses, inside a church, at car dealerships, and in several bowling alleys, Winograd notes.
Putting on some steam in a generally slow period can vault a franchise ahead of competitors. The spurt hasn’t stopped yet at Subway, either — Winograd says the chain added another 2,100 units in 2011 and now has over 36,000 eateries.
By contrast, archrival toasted-sub chain Quiznos added about that many new locations over three years, from 2008-2010, which still earned it a spot on FranData’s top 10 fastest-growing recession-era companies list. But the addition of many new units doesn’t always tell the whole story — overall unit count has fallen dramatically at Denver-based Quiznos in the past few years, with the chain reporting to the International Franchise Association in mid-2011 that it had just 2,772 locations in all.
© 2012 Forbes.com