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Principles of Management Research-Subways

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Principles of management APPLIED RESEARCH
SUBWAY Sandwich shop

Michael D. Robinson

Ottis Walizer
Park University Internet Campus

A course paper presented to the School for Arts and Sciences and Distance Learning in partial fulfillment of the requirements for the degree of

Principle of Management
Park University
May, 2008



International Business 4

Social, Legal and Ethical Responsibilities 5

General Planning & Strategic Planning 6

Operations Management and Plans 7

Organizing Work and Synergism 8

Organization Structure and Chart 8

Work Team Utilization 9

Staffing 10

Employee and Manager Development 10

Motivating Employees 12

Leadership and Management 13

Managing Conflict and Stress 13

Managing Change 14

Controlling 15

Appraising and Rewarding 16

Operations Control 16



SUBWAYS restaurants were developed by Fred La Duca and Dr. Peter Buck in Bridgeport, Connecticut, back in the summer of 1965. Fred was looking for a way to pay for college and one of his parents closes friends, Dr. Peter Buck, told him to open a sandwich shop. The suggestion came for a sub shop because they were very popular at the time and Dr. Buck even fronted Fred a $1,000 to help open his first sandwich shop. Fred’s first shop was called Pete’s Super Submarines, it wasn’t until 1974 when he reached a certain number of shops, that he officially changed the name to SUBWAY. Subways mission is “ To provide the tools and knowledge to allow entrepreneurs to successfully compete in the QSR industry worldwide by consistently offering value to consumers through providing great-tasting food that is good for them and made the way they like it."
This paper is guided to show the reader the everyday process and management that goes in to running a SUBWAY sandwich shop. The management of these types of stores is very unique due to the fact that all of 26,500 plus stores in operation are privately owned. Due to this private ownership, SUBWAY has been the number one franchise to own for the last 15 years (FORTUNE, 2008) This paper will include information on the following area; (a) international business, (b) legal, ethical and social responsibilities, (c) planning to include strategic, (d) general planning and strategic planning, (e) operations management and plans, (f) organizing work and synergism, (g) organization structure and chart, (h) work team utilization, (i) staffing, (j) employee and management development, (k) motivating employees, (m) leadership and management, (n) managing conflict and stress, (o) managing change, (p) controlling, (q) apprising and rewarding, (r) operations control (rue & byars 2007).

International Business

Where did the SUBWAY chain open its first international location? It wasn’t in Canada, Mexico or somewhere close to the United States. It wasn’t in England, Australia or somewhere that English is the official language. It wasn’t in Germany, France or somewhere else where many different types of sandwiches are popular. The SUBWAY chain tested international waters when it opened its first unit in the small exotic Middle Eastern island nation of Bahrain in December of 1984. In a short time, the SUBWAY chain started to appear in such distant lands as Iceland, Poland, Nicaragua and China. The SUBWAY chain goes to tremendous lengths to bring great taste and fresh ingredients to consumers in the farthest reaches of the globe. With more than 2,400 locations outside the U.S. and Canada, the SUBWAY chain is a leader in fast-food international development. In upcoming months, the plans for SUBWAY restaurants in countries such as Belize, Luxembourg, Thailand Romania and Hungary are on the drawing board, despite the diversity of cultures. Wherever SUBWAY restaurants are located, the core menu stays relatively the same—with the exception of some cultural and religious variations. World travelers can expect the same high quality ingredients regardless of what nation they are visiting. According to Carlos Eduardo Avila, SUBWAY Development Agent in Venezuela, "Franchisees are attracted by the proven success of SUBWAY restaurants , and they consider brand recognition to be of the utmost importance. The ‘first-50’ restaurant phase is only the beginning of a great challenge for the SUBWAY chain to become Venezuela’s number one quick-serve restaurant." In a relatively short period of time, the SUBWAY restaurant concept developed into the largest submarine sandwich franchise in the world, with more than 22,000 locations in 77 countries (as of November 2004). Within 30 days of the Iraq War being started, there was a SUBWAY restaurant in Iraq for our American forces.
Social, Legal, Ethical Responsibilities Subways is a big time company with small town values. When Kennewick, Washington’s Playground of Dreams went up in smoke, Subways helped by donating 1,000 pounds of sandwiches to volunteer workers during the reconstruction of the park. Subway Regional Manager Lisa Moon said it was a horrible thing when the popular playground was torched in a Thanksgiving weekend arson, which damaged more than half the castlelike structure. She said Subway, like the community, felt it should help in anyway it could to rebuild the playground. She said the donation, which is enough to feed 2,160 people, is small compared to the time and labor others donate. Subway's contribution is one of many provided by community groups concerned about Kennewick's popular park. Safeway, Pepsi, Wal-Mart, Frito Lay and dozens of other businesses have also contributed to the community project. (June, 2004) On the other side, Subway Sandwich Shops has had more problems than any of its competitors and has distinguished itself as a business that must deal with conflict with its franchisees. Disputes disclosed in an annual report required by the Federal Trade Commission total 160-more than the combined total listed by Subways seven largest competitors. Many franchisees claim Subway has defrauded and damaged them by opening too many new franchises in their neighborhoods. After the U.S. House Committee on Small Business studied the franchise for six years, staff economist Dean Sagar concluded: A Subway sandwich shop is the biggest problem in franchising and emerges as one of the key examples of every abuse you can think of.@ (Behar, 1998) While the average customer who buys a sandwich may not be aware of the ethical dilemmas in the Subway organization, these issues can influence the quality of the product and customer satisfaction. Negative publicity about disputes could cause some consumers to avoid Subway. But the average customer just wants a good deal when it comes to purchasing food; most are unaware how one franchise threatens another. We, as Americans, just come accustom to thinking that everything that is here today will be there tomorrow. I believe the threat comes from Subways because it is a lot easier to set up a Subway that it is for a Mc Donald’s or a Burger King. Plus, the Subways menu is a lot simpler which in turn, makes it easier to get the store started.
General Planning and Strategic Planning Success in the sandwich segment requires operators to work a lot harder than they did just a few years ago. There was a noticeable slowdown in the open- ing of new submarine sandwich shops in 1992, although the growth rate still exceeds in most of the other restaurant segments. Competition has intensified, with hamburger chains experimenting with sub sandwiches as menu additions. Subs seem to be a category anyone can participate in. Subs offer easy entry into the foodservice business and a simple, low-cost route to menu expansion, plus health appeal. Market data indicates that the sandwich is firmly established as a nationwide food item and there is plenty of room for growth in all areas. Many operators also see opportunities for sub-like concepts. For example, one variety of sandwich shop that continues to expand specializes in Philadelphia-style cheese-steak subs. When it comes to sub shops, the Subway chain is the undisputed market leader, with 10 times more locations than any other competitor and more than 75 percent of all
United States sub chain outlets. As of mid-1993, Subway operated 7,825 units worldwide, with about 7,750 units in North America. When it reached 8,400 stores in 1993, Subway was the No. 2 fast-food chain in the United States. By opening its small sandwich shops at breakneck speed, Subway grew from $360 million in sales in 1987 to $2.2 billion in sales in 1992, while income increased substantially. The former No. 2 was Pizza Hut, which operated 7,929 units in North America and expected to have 8,355 by the end of 1992. However, in terms of sales, Subway ranks 12th among chains nationwide. Their sales are about 15 percent of McDonald's. Subway is also looking to expand its nontraditional sites. The chain has about
150 outlets in colleges, convenience stores, hospitals, bus terminals, railway stations, and convention centers. Other future areas of emphasis include improving business during the dinner hour and late night and more marketing to children.

Operations Management and Plans

Running a franchise is a little different from running a conventional restaurant. There is a small level of interaction between the store manager and SUBWAY headquarters regarding how the store is run. There is two weeks of training for new owners, and they also have management training aimed specifically at store managers, and the owners are encouraged to send managers on this course. They have an operations manual that contains four years of business experience and hundreds and hundreds of pages, and it’s updated regularly with any new operational techniques we’ve come up with. That’s an evolutionary process, but the owners are expect to follow this operations manual to that point the area developers spend time on a regular basis going into a franchisee’s store and doing store evaluations. SUBWAY also perform regular store evaluations 12 times per year, with results being reported back to HQ so they can see how well the owners are running the business.
Organizing Work and Synergism Subway is the traditional or classical design, common in many medium- and large-size organization. It’s hard to pin-point the same type that all stores use, being that there are over 27,000. It’s kind of mechanistic organizations are somewhat rigid in that they consist of very clearly delineated jobs, have a well-defined hierarchical structure, and rely heavily on the formal chain of command for control. In Subways case it would be the store owner and the store manager, if the store had one. Subway stores are a form of organization characterized by a rational, goal-directed hierarchy, impersonal decision making, formal controls, and subdivision into managerial positions and specialization of labor. The store reigns are driven by a top-down or command and control approach in which managers provide considerable direction and have considerable control over others.
Organization Structure and Chart
The organizational chart for Subways is as follows:

[pic] The Organizational Chart of a Subway shop has simple management structure with a total of eleven employees. Our organizational structure is likely to change due to the fact that the owners plan to manage the store; however, as we grow and expand to other Subway stores, the management staff will have to be added. The eight Sandwich Artists that are on our staff are paid a salary of six dollars per hour, and overtime accrued after an employee has worked over forty hours in a week.

Work Team Utilization

All Subways have the same set of values called “Our Core Values and Philosophy” Which are as follows: 1. We are committed to customer satisfaction through offering high quality food with exceptional service and good value. 2. We take great pride in serving each other, our customers and our communities. 3. We seek continuous improvement in all that we do. 4. We value a sense of urgency and emphasize an innovative, entrepreneurial approach to business. 5. We expect fairness and mutual respect in all our activities. 6. We know our success depends upon the initiative we take individually and our ability to work as a team.


Maintaining a position of strength and expectation is crucial to the process and extends beyond merely passing on inappropriate candidates. Subways starts with the recruiting process, they convey their key information about benefits, and expectations about working with them. Doing so increases the likelihood of attracting sincerely interested applicants--applicants whose abilities and experience correspond to your needs. This process should continue in the interview stage. In addition to garnering the standard information about each candidate, use this time to continue to educate him or her about your vision and about what is expected of them. The interviewer will pose scenarios and questions to gauge the appropriateness of the potential match. This communication process must not fade out after the interview--it should, in fact, intensify once the hire has been made--serving as the foundation of individuals orientation and ongoing training. When working at Subways, you are not hiding behind a counter or a wall. Each customer watches your every move that you make when preparing their food, that takes some getting use to.

Employee and Manager Development

There are three levels of management, Shift Leader, Restaurant Manager, and General Manager. Being a Shift Leader, requires a special type of person. Selfless dedication to training your crew and an unrelenting desire to succeed in all aspects of your daily work routine are just some of the skills we are looking for. Previous management experience is preferred, but other quick-service restaurant (QSR) management experience is certainly a real plus when we consider management candidates. Other skills that will enhance your hiring potential for each of our management positions include but are not limited to: 1. Work within the guidelines of our Mission Statement. Provide outstanding customer service, which includes knowing the product we sell, understanding our menu, and operating the cash register properly. 2. Is well-versed in the duties of the sandwich artist and is an example for others to emulate. 3. Communicates effectively with others while positively motivating them to meet store goals. 4. Assertively supervises additional employees in support of the Mission Statement.
Maintains accountability of cash throughout their shift and accepts responsibility for cash mishandling. 5. Must enjoy their work - serving the customer is the #1 objective.
Demonstrates the capability and willingness to perform Store Manager duties in their absence. Being a Restaurant Manager basically follows the same guide lines with more responsibility. Earning your way to the top, while learning and using management tools that can help you run your own business, can make this job both exciting and challenging. Store Managers learn and develop skills to manage their store. Interviewing, new hire training, scheduling, inventory control, food cost analysis, ordering, and performance counseling are some of the many management responsibilities undertaken everyday. Compensation is salary based. Your three general areas of concern are: 1. You have the ability to work within the guidelines of our Mission Statement. 2. You can maximize the profitability of the store by increasing sales and decreasing or maintaining costs. 3. You possess excellent communication, management and organizational skills. Flexible, Dependable and Self-starting are words that describe the work efforts of our General Managers (GM). Flexible and self-starting in the sense that the corporate office does not dictate your daily routine as long as you perform all the duties expected of you. Dependable because you report to the corporate staff and your store managers look to you for guidance in running their restaurants. You are responsible for the sales growth, costs controls, and the hiring and development of your management team for your group of stores. Your salary is supplemented with a monthly profitability bonus that is determined by the profitability of each of your stores. Most GMs move on to owning their own stores, some move on to owning 3-5 within a 7-10 year time span.
Motivating Employees It gets very stressful preparing some ones food right in front of them; most mangers have realized this is the reason for a high turnover. So Subway made some changes. Knowing that half of the turnover occurred in the first 30 days of employment, the managers first set out to keep new hires' stress levels down. To put new employees more at ease, the managers or designated trainers spend 20 hours with workers during their first two weeks on the job. Quicker feedback was found out to also be a motivating tool. Managers now evaluate employees at the end of the first 30 days--rather than wait until the end of the first quarter. With each review, workers have the chance to earn more money. In addition, most managers began placing special significance on employees' one-year anniversaries, a service pin, a Subway sweat shirt, and a different-colored uniform. Employees' longevity with the company is denoted by one of three colors, and it has become a matter of pride among employees to move up a color. The final color is given after a worker's third year. Store managers also know the importance of creating realistic job expectations during the interview process. If workers leave because the job differed from their preconceptions, it means the manager didn't make clear what the workers should expect. With these plans in place, most stores have reduced turnover by 100%.
Leadership and Management There are many avenues of management and leadership, Subways keeps their end sight close and easily understood. They take risks; you can’t be successful if you are afraid to take risks. Why are people reluctant to take risks? They’re afraid of making mistakes. The successful clients I know chalk up mistakes as learning events and move on. They have great integrity and are always striving to do what they promise, even in the smallest things. They are scrupulously fair in all their dealings with others. You have to love your work; the sense of purpose is one of their most attractive characteristics. The disciplined decisiveness displayed in this process is amazing. It’s what drives the organization and is especially effective when the process includes people from all levels of the organization. You have to be positive and confident. The doubts you express have more to do with tactical matters, not about their purpose, strategy or goals. Although confident, they don’t take achievement for granted; they celebrate it and spread the credit where it was earned. You have to be high energy and care about their health and life balance. Most importantly you have to communicate openly and directly. Managers don’t assume that the burden of problem-solving is theirs alone. They get input from many sources before making a decision.

Managing Conflict and Stress

Many people attempt to reduce their job-induced stress without resolving the workplace conflict that causes it. Consider taking a proactive, rather than reactive, approach. Learn simple, practical communication tools that enable you to manage conflict, rather than let conflict manage you. Benefits include reduced emotional and physiological stress, and the physical illnesses that often result from chronic stress. Don’t be aggressive and unforgiving. Be compassionate and kind during conflict. When you tear down someone’s ego, you have torn down your own and there can be no peaceful resolution. If you are in tact, there is no reason to humiliate another person. Subways have some rules that are enforced for dealing with stress: 1. Remember that everyone wants to be right – so let them. Gender, culture, custom, and childhood experiences all color perception of the truth. 2. Limit communicating your position to 2 minutes; otherwise you risk being off the topic, repetitive or venting. 3. When possible, ask the other person when it is a good time to discuss a problem. Choose your words carefully; make sure the other person will hear them the way that you intended. 4. Adapt as arguments unfold and be ready to change your mind. 5. When you respect others, they will respect you. Aggressive behavior and rude language is alienating and be a compassionate listener.

Managing Change

When dealing with the food franchising, the economy and what popular changes on a every day basic. When dealing with these changes, a heads-up is always given to the store owners. A current amount of time is always needed when dealing in the food market because there are many things to consider; updating the cash register, updating the menu, hanging promotion posters, and training the employees on how to prepare the new food ideas. So as you can see, it can get very stressful real quick. The GMs are responsible for the downward training of all personnel on all changes. In the end, all shifts will be responsible for training the on- coming shifts.


Subways management accountability is the expectation that managers are responsible for the quality and timeliness of their programs performance, increasing productivity, costs and assuring that programs are managed with integrity and in compliance with applicable law. Management controls are the organization, policies, and procedures used to reasonably ensure that policies achieve their intended results and resources are used consistent with agency mission. To include the programs and resources are protected from waste, fraud, and mismanagement; laws and regulations are followed; and reliable and timely information is obtained, maintained, reported and used for decision making. Actions required are for Subway shops and agencies and individual Federal managers must take systematic and proactive measures to develop and implement appropriate, cost-effective management controls for results-oriented management; assess the adequacy of management controls to Subways rules and regulations, plus, identify needed improvements; take corresponding corrective action; and report annually on management controls.

Appraising and Rewarding

A good appraisal system could be enough to motivate your employees. Subway realizes that motivated staffs are more likely to work harder and more effectively. Appraisals and rewards systems are invariably very closely linked, but consider carrying them out as separate interviews. Here are some benefits when working with Subways: Based on a combination of a percentage of sandwiches are sold over a given time; a small bonus will be given. It will be based off the last month’s sales; the amount will be based on positions that the employees hold in the store. Consistently good performance and a willingness to take on more responsibility might make you consider an employee for promotion. The Subway store owner I worked for, would give a member of his team $500 for college is they were an exceptional worker. Reward reviews can be an excellent way to motivate employees, but be careful, you need to monitor the rewards program carefully to make sure they are having the impact you hoped for. Most importantly, they must be fair, and all employees should be treated equally. Take particular care that the rewards do not discriminate against particular employees. Some companies find that the use of job evaluations helps to give a clearer pay structure by ranking each job in a league table and setting salary brackets accordingly.

Operations Control

The SUBWAY group main Regional Offices and World Headquarters are located in Milford, Connecticut. From there you will find many of the area of operation to include: corporate communication, executive office, assist buyer, international projects manager, legal sections, and the operations and technology department. The Operations Control section is primarily responsible for supporting franchisees, Development Agents, Field Consultants and internal departments with accurate and current operational information; oversee and implement operation programs, changes and enhancements. The position is also responsible for develop of tools, modules and training programs, write articles for publication to the field, conduct industry relevant research. The Operations Control section has under it: Leasing Representative which is responsible for the negotiation and renegotiation of existing leases to increase franchisee profitability. Other position responsibilities include, ensuring lease renewals are completed in a timely manner, analyzing and authorizing various lease documentation, and assisting franchise owners and field personnel throughout the renewal process; Store Designer/CAD Operator designs floor plans to be used in the construction of Subway restaurants. Responsible for assigned territories to complete drawings and work with franchisees regarding floor plans and construction requirements.


As you can see, managing a SUBWAY restaurant has its ups and downs like any other franchise. I believe the reason why it is the number one franchise for the last 15 years is that everything is designed for a private owner and can be ran off minimum manning. With a limited down payment of $12,000 (depends on the area) you could be a happy business owner. Most of the stories that you read about ownership have one thing in common, most of the current owners started out working part time at a SUBWAYS. Plus, 80% of all current owners were already owners of a SUBWAY store. That right there shows how much of an opportunity this is for young entrepreneurs to start a business. When attending others restaurants, there is always a mystery about the preparation of the food. Did the cook wash his/her hands? Was my food dropped on the floor prior to being cook? While visiting a SUBWAY, you realize that there is no mystery on the food preparation. They add excitement back to food preparation, watching your sandwich being prepared layer by layer. I felt this paper cover all aspects of the ownership of this franchise and answered all questions about what managing a SUBWWAY restaurant would be like.


Behar, Richard (1998) A Why Subway is the biggest problem in Franchising, @ Fortune, March 16, p. 97 Burns, Tom and G. M. Stalker, Management of Innovation, London: Tavistock Publications, 1961, p. 19.) Caminiti, Susan. "Look Who Likes Franchising Now." Fortune (September 23,
1991): 3 May 2008 Ferrell, Linda The Role of Ethical Leadership in Organizational Performance
3 May 2008 Mandel, Debbie, Stress Management Site, Bella Online-The Voice of Women
1 May 2008 Maynard, Roberta (May, 1997), How to motivate low-wage workers - includes bibliography and tips on determining whether workers are unmotivated, 1 May 2008

Subway History [Online] retrieved on 2 May 2008 from the World Wide Web

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