Last week a report was published on money.cnn.com stating that Subway had surpassed McDonald’s to become the world’s largest restaurant chain in terms of units. At the time of this post, Subway listed on their website (subway.com) that they have 34,127 restaurants in 96 countries. McDonald’s only had 32,737 at year’s end. The most significant reason for these numbers is that a Subway can pop up almost anywhere. Without a need for grills or fryers, locations such as airports, convenience stores, hospitals, car dealerships, truck stops and riverboats can all offer Subway sandwiches.
While this is all very interesting, the truth of the matter is that Subway isn’t bigger or better in terms of profit. McDonald’s continues to be the industry champion, reporting $24 billion in revenue for its last fiscal year. Subway generated roughly $15.2 billion. The reason for this financial disparity could be that people only spend the familiar $5 at Subway for a foot-long sub, whereas for the same amount of food at McDonald’s, you can easily find yourself spending closer to $7 or $8.
Could McDonald’s road to fame be paved with money from the land and buildings that it owns? By charging roughly eight percent for their franchise fee, McDonald’s generates revenue not only from the franchisees’ rent, but from using the McDonald’s name as well.
In addition, McDonald’s appears to be focusing on increasing sales at existing restaurants. With newly remodeled restaurants, longer store hours, new menu options and the introduction of McCafe, it’s enough for anyone at their corporate office to say “I’m lovin’ it.®”