"Starbucks created a huge market for that type of product," Alan Warmund, president of mid-Atlantic development at McLean, Va.-based Subway Development Corp. of Washington, which has more than 1,000 Subway locations, told AdAge. "If [image-nocss] the store is open for breakfast, you have to have a great coffee product."
Warmund's company has approval to build up to five Subway Caf as. The caf as will be larger locations with Wi-Fi and more-comfortable seating. It will ass espresso drinks, gelatos and paninis to Subway's standard menu. The new items are expected to be incremental to sales, but sandwiches are expected to account for 90% of volume, the report said.
"We're not looking to get into the coffeehouse business," Warmund said.
The caf as are going into office buildings in high-density areas. Warmund said his company developed the concept in response to requests from landlords in those spaces. The concept, he said, probably wouldn't work in a rural area. "There just wouldn't be a need for it."
According to Ron Paul, president of Chicago-based food consultancy Technomic, Milford, Conn.-based Subway could quickly become a player in the coffee wars based on the convenience factor alone. The chain has nearly 22,000 U.S. locationsfar more than any other fast-food chain. "Trial would be pretty high," he told the publication. "They're going to be a value player, and it's surely going to have an impact."
Subway spokesperson Les Winograd said that even though the franchisee is building caf as with the parent company's blessing, the push is purely the franchisee's. It's also true, however, that the closely held chain has a history of letting its franchisees try out the big ideas first. "Many of our franchisees are very entrepreneurially minded," Winograd told AdAge. "After all, it was a franchisee that first suggested we serve turkey. It was another franchisee that explored...opening locations inside convenience stores."
So franchisees will be watching the D.C.-area tests closely. "We will be very interested in our area to develop this new Subway Caf a," Hardy Grewal, who owns the franchise rights to Subway restaurants in Southern California, told the publication.
The coffee market is becoming increasingly crowded. McDonald's is in the midst of its McCaf a rollout, and Dunkin' Donuts is on an expansion binge. Other chains have conceded testing various coffee drinks: Wendy's is testing iced coffee in some areas, spokesperson Bob Bertini said. Burger King also boosted its efforts on the coffee front. The chain relaunched its coffee as BK Joe and added a mocha flavor. It is testing other flavors, along with some espresso-based drinks, spokesperson Heather Krasnow told AdAge.
The industrywide coffee frenzy appears to run counter to the problems at Starbucks, which recently said it would close 600 stores and later launched a value promotion, said the report.
"Starbucks has expanded very rapidly over the last several years and they may have put some stores too close together and it cannibalized existing stores," Warmund added. "I don't think it's a systemic problem with people getting away from coffee."Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.