Eric Heinrich decided several years ago to abandon the bright lights of Toronto, where he was employed by a national hotel chain, and go into business for himself—ideally in a smaller community where he felt more comfortable and the cost of living was cheaper. He bought his first Subway franchise in 1994 in Hanover, Ont., a community of about 7,000. He has since added a dozen or so more of the popular submarine sandwich restaurants around the province, focusing on similarly small towns where there is little competition from rival fast-food chains. That now includes locations in Wiarton (with 2,300 residents, not including a famous winter-predicting groundhog named Willie), Kincardine, Wingham, Arthur, Port Elgin, Walkerton, Clinton, Exeter, Palmerston and three stores in his hometown of Owen Sound, a relative metropolis with a population of 22,000.
These days, he is in the midst of building his 15th Subway restaurant about halfway between the small towns of Orangeville and Shelburne, northwest of Toronto, in a location that doesn’t really have any permanent residents at all. “It’s basically a busy intersection that’s a good stopping area for travellers,” Heinrich says. “The only other options are greasy burger joints, so we thought it would be a good opportunity.”
His business credo—“in order for a store to be successful, you need either a high school or a highway”—has proven remarkably successful, even in a down economy. But he has also benefited immensely from Subway’s unique low-cost operating model, which stems from its straightforward menu of “foot-long” or “six-inch” sandwiches that don’t require much in the way of expensive kitchen equipment or staff to produce.
As a result, Subway franchisees like Heinrich are able to scratch out a living in towns and hamlets that would otherwise be considered too small to sustain a McDonald’s or Burger King, but are starved for the experience of a big chain restaurant. In some ways, it’s the perfect franchise recipe for a large and sparsely populated country like Canada, and is among the reasons Subway, which generated US$13.8 billion in global sales last year, is poised to overtake industry icon McDonald’s when it comes to global locations in the next few months (Subway already has more restaurants than McDonald’s in North America, although it still trails Tim Hortons in Canada).
Subway’s sprawling growth is also being driven by the soaring popularity of sandwiches in general. Despite having been a mainstay in lunch pails and brown bags for generations, sandwiches and wraps have suddenly become the hottest growth item in the fast-food industry—in part because sandwiches are perceived as healthy, but also because they are fast, convenient and, generally, made to order. As a result, everyone from burger and pizza joints to coffee shops are eager to get a piece of the action, creating a market brimming with BLTs, club sandwiches and permutations of the chicken wrap: Caesar, Southwest, Chipotle BBQ, Honey Mustard—the list goes on. Even suppliers like Maple Leaf Foods are keen on getting into the business by selling branded, prepacked sandwiches. In other words, get ready for a world where sandwiches are everywhere, from gas stations to corner stores. Fast-food nation? Not quite. Welcome to sandwich nation.
Along with their low-carb wrap counterparts, sandwiches were among the few fast-food menu items to experience growth—up two per cent—in the Canadian market last year, according to data compiled by market research firm NPD Group. In fact, NPD says they are also the single most popular lunch item at fast-food restaurants in Canada, accounting for one out of every three lunch meals.
The numbers support what many hungry Canadians have noticed on the menu boards of their favourite fast-food counters in recent years. After observing the meteoric growth of sub chains like Subway and Quiznos, several quick-service operators (industry-speak for fast-food outlets) have decided to try to take a bite out of the market themselves. Tim Hortons, the country’s largest franchise chain, moved away from selling only coffee and doughnuts in the mid-1990s and now offers a full lunch menu, including a variety of sub-style sandwiches. Meanwhile, McDonald’s (still the biggest chain by overall sales) overhauled its menu several years ago in a bid to shed its bad-for-your-health image and now offers a wide array of “toasted deli sandwiches” and wraps. That includes its new Mac Snack Wrap, which is basically a Big Mac stuffed inside a tortilla (and therefore not much healthier than the original, according to critics), and represents the first time in the company’s history that it has toyed with its iconic double-decker burger. Meanwhile, several pizza chains have also experimented with adding sandwiches or wraps to their menus. “It started with a number of quick-service operators three years ago and just this last year even more jumped on the bandwagon,” says Linda Strachan, an NPD food service analyst.
But in order to truly gauge Canadians’ appreciation for sandwiches, one needs to look no farther than Subway’s eye-popping expansion in this country. The first Canadian Subway restaurant opened its doors in 1986 in St. John’s, Nfld., after an eager entrepreneur approached the Connecticut-based Doctors Associates Inc., which owns the chain, and has nothing to do with medicine (one of Subway’s two founders had a doctoral degree). More than two decades later, the number of locations has ballooned to 2,495 restaurants, nearly twice the number run by McDonald’s in Canada. That translates into about one store for every 12,027 Canadians, compared with one for every 13,212 people in the United States, Subway’s home market, giving Canada the distinction of having the most Subway stores per person of any of the 90 countries that the company operates in, according to Don Fertman, Subway’s director of development.