Mr. Subs' expansion to China
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Mr. Sub is a Canadian submarine sandwich chain founded in 1990 that has expanded to 335 locations across Canada. It offers a variety of subs, wraps, salads, and soups. The presentation recommends Mr. Sub expand into China, highlighting strengths such as a diversified menu and experience, but also weaknesses like limited brand recognition outside Canada. A SWOT analysis and market entry strategy are provided, targeting urban youth. Financial projections show increasing profits over two years in China. The conclusion is that Mr. Sub should proceed with expansion to China.
Mr. Subs' expansion to China
- 1. Presented By: Geeta Sakhuja, Moon Guo, Maninder Mangat and Zaman Ahmed
- 2. • Established in 1990 by Jack Levinson and Earl Linzon. • First opened in Toronto and has now developed into a chain of 335 submarine sandwich shops in Canada. • Mr. Sub’s menu includes a wide choice of subs such as the Panini grilles subs, wraps, salads and soups. • They also offer catering services for school and office parties along with delivery and take-out options. About Mr. Sub
- 3. Demographic characteristics • The official language is Mandarin. • 45% of Chinese report the ability to speak English. • In 2012, Unemployment Rate averaged 4.15 % Macro-economic factors • China is an export oriented market economy. • China's gross domestic product growth increased in the past 10 years • China’s labor force in 2012 was 795.5 million Target Country Assessment
- 5. Strengths: Weaknesses: • Well diversified menu list • Strong administration ties • Potential to grow among the competition in the new market • Great business experience • • • • Opportunities: Threats: • Placing products in grocery stores • Mr. Sub can gain more consumers using the adaptation approach • Positive feedback from Chinese consumers for fast food • Faces tough competition from global competitors such as: • Burger King, Subway and McDonald’s • Competition in Chinese market: • Yonghe King and Sun Ya Da Bao Not widely known Only Canada wide recognition Not enough marketing promotion No visible CSR practices SWOT ANALYSIS
- 6. • Mr. Sub should gain 10% of market share by the end of first fiscal year. • Enter the market with competitive pricing • Opening outlets in most populated provinces. • Target 72.1% population of male and female of age group 14-40. Marketing Objectives
- 7. • Existing Franchising model • Franchising has become a popular method of investment in China • As urban and rural disposable income rises, market potential also continues to rise rapidly. • The new regulations indicate that cross-border franchise operations are possible. • The new regulation also cancels previous additional filing requirements • Does not require the franchisor to be located in China. Market Entry Strategy
- 8. • Location: Urban area • Ages: 14~40. • Educated, professional, middle class & high disposable income. • Lifestyle: Active, Environmentally aware and have high level of health concern. Target Consumer
- 9. Product line offering: • Localize and diversify its menu to better fit the Chinese customers Packaging: • Mr. Sub’s original red packaging theme • Comparatively smaller package sizes • Recyclable and environment friendly Branding Strategy: • Healthy eating and balanced lifestyle • Shopping Bags and some products; • Fresh and healthy • Tasty good. Marketing Mix - PRODUCT
- 10. Services rendered: • Outstanding customer service • Knowledgeable employees • Mr. Sub will also cater school programs and parties Store layout: • Consistent with the layout that is displayed in Canada MARKETING MIX - PRODUCT
- 11. • Competitive Pricing: • High food quality standard • Set the price a bit lower. • Wholesale Pricing Program • Focuses on partnering with gyms, schools and companies that offer healthy food choice. • Factors/Impacts on Pricing Strategy: • • • • • Currency Fluctuations Inflation Government Controls Subsidies and Competitive Pricing Price
- 12. • Mr. Sub would set up franchises at some of the busiest and crowded areas of China where people are always on the go. • There are three location strategies an international restaurant franchisor can adopt when entering the Shanghai market: • (1) Locating in the Downtown Area • (2) Locating in the Special Economic Zones, and • (3) Locating near an upscale residential area. Place
- 13. Some of the advertising methods we wish to follow for Mr. Sub would include the following: 1. Creating a new video advertisement to be published in China • Theme: “SUMMER SUB” • Media used: Commercial published on the local TV channels, radio stations and on YouTube • Frequency: Advertise twice every week and keep customers regularly updated with Facebook updates, and tweets. • Timing: Mid-July to August end. Promotion
- 14. 2. Discount Special – MR. SUB sandwich with 2 cokes at 10% Off. • Theme: “MR. SUB FALL SPECIAL – 10% OFF” • Media used: For discount promotions publish flyers in frequently read newspapers and magazines. • Frequency: Advertise for every weekend until the winter approaches. • Timing: Mid-September to December end. Fall Promotion
- 15. Mr Sub. Profit & Loss Statement. 2013 Sales 2014 200,000 300,000 Cost of Goods sold 100,000 120,000 Gross Profit 100,000 180,000 Total Expenses 75,000 85,000 Net Income Before Depreciation 25,000 95,000 Deprecation (9,500) (10,500) Net Income Before Taxes 15,500 84,500 Income Taxes 2,290 2,519 Total Income 13,210 81,981 Financial Analysis
- 16. Based on our intensive research we believe that Mr. Sub should move further with its expansion to China. Decision
Editor's Notes
- #3: Mr Sub Established in 1990 by Jack Levinson and Earl Linzon. It was first opened in Toronto and has now developed into a chain of 335 submarine sandwich shops in Canada. Mr. Sub’s menu includes a wide choice of subs such as the Panini grilles subs, wraps, salads and soups. They also offer catering services for school and office parties along with delivery and take-out options. The key reasons for Mr. Sub’s success are as follows:Strong administration ties generated through original owners/ directorsGreat business experience, established since 1968Promotional packages that aimed at targeting varied demographicsAnd widely diversified Menu options
- #4: With 36.7% in agriculture 28.7% in industry, 34.6% in services.China spends about 40-50 % of its GDP on infrastructure.China has the second longest expressway network in the world and World's second largest rail network.
- #6: ; due to less number of outletsSeen as local company
- #8: Mr Sub will continue to use the franchising mode as it has done in the past within Canada, and does not wish to indulge in exporting its product. In China, franchising has become a popular method of investment as less capital is required on the side of the franchisor and there are easier government regulations for establishing one’s own entities all over the country. As urban and rural disposable income rises, market potential also continues to rise rapidly. The new regulations do not impose any further requirements for Foreign Invested Enterprises (FIEs), implying that FIEs are subject to the same franchising rules as Chinese franchisors. In the 2004 Measures, one of the pre-requisites was that before engaging in franchising in China, franchisors had to operate a minimum of two "directly-owned" stores for at least one year in China ("the 2-stores-1-year rule"). (China’s New Franchising Regulations, 2007)The new regulations indicate that cross-border franchise operations are possible, meaning that the two directly operated stores no longer need to be located in China. This may imply that foreign franchisors who meet those requirements but have no operations in China (i.e. have two qualified locations abroad) can also apply. (Michael & Erik, 2013) The new regulations do not specify any other information concerning cross border franchising. Although the new regulation cancels previous additional filing requirements and does not require the franchisor to be incorporated in China.