Most people know, or have heard of, the legendary Chicago-based sandwich shop, Speedway. The “Burger King of the Midwest” if you will. But, what is the future of this American institution? Are they going to continue to reinvent themselves, or is this the end? Let’s examine the facts and figures surrounding this issue.
Total Units Sold
You’ll often hear restaurant industry analysts talk about the importance of unit sales when predicting future performance. Total units sold gives you the total number of sandwiches sold across all locations. You can use this figure to get a general idea of how well a restaurant is doing. A fast food franchise that sells only 100 units per week would be considered moderately successful. Whereas, a restaurant that sold 500 units last week would be considered very successful. This is because there are around 400 units per week that are sold as part of a package, including side and drink orders. So, even though the restaurant itself may be operating at capacity, their business still needs to make money from the side to make a profit.
Same Store Sales
The concept of “Same Store Sales” or “SSS” was first used by Starbucks back in the 1980s to show the growth of their coffee company. This type of measurement takes into account the performance of a particular restaurant or coffee shop over a specific period of time. It is usually calculated by comparing the sales of a single location with the previous year. For example, if a coffee shop saw a 20% increase in sales compared to the previous year, then it would be considered “same store sales positive.” In simpler terms, this would mean that the coffee shop grew their sales at that location by 20%. If we look at the SSS metric for just Starbucks stores within the US, then it is currently positive.
A Different Kind Of Unit
The restaurant industry is quickly changing and evolving as more and more consumers are looking for healthier options. One way that Subway is staying fresh and innovative is by offering unique and creative sandwiches that you just can’t find anywhere else. Do you remember the Reuben sandwich? Or how about the Meatball Marinara Pocket Sandwich? Both of these sandwiches are completely vegan and available only at certain locations.
The income of a business is what they generate after expenses. Normally, businesses will generate profits from selling goods or providing services to customers. However, if they are not generating sufficient profit, then they would need to seek outside investors or lenders to fund their projects.
Based on the income statement, we can get a general idea of how well a business is doing financially. If sales were to decline and the costs of doing business remain the same, then the only logical conclusion is that the business is in dire financial need. This is often the case with smaller businesses that do not have the financial resources to weather a rough patch. Usually, these businesses will either have to shut down or seek outside investment before they can turnaround. But, before they make any rash financial decisions, they would be wise to seek advice from an experienced business lawyer. Without further ado, here is an overview of the future of the popular fast-food franchise, Speedway.
Increasingly Dependent On Franchisees
Based on the income statement, it is apparent that the greater part of the income of a business like Speedway comes from the franchisees. This is because most of their revenue comes from the sale of food at restaurants that they own or franchise. With most major cities having multiple locations, it is important to note that none of these restaurants are independently owned and operated. Instead, each location is either owned or franchised by another business.
If we compare the income of a franchisee-owned restaurant with that of an independently owned and operated restaurant, then it is clear that the income of the former is much greater. Essentially, this is because franchisees are required to pay royalties and fees to the parent company based on certain metrics, such as the number of stores and total unit sales. However, it is also important to note that franchisees may incur additional expenses, such as franchise fees and legal fees. When looking at the income of an independently owned and operated restaurant, these expenses will largely disappear.
More Opportunities To Grow
With more companies moving away from the traditional nine-to-five workweek, more and more workers are looking for flexible work arrangements. This presents a new set of opportunities for businesses, like Speedway. Since each location is either independently owned or part of a franchise, owners can negotiate more favorable lease terms with flexible work arrangements in mind.
For example, if a business has 10 restaurants located in different parts of the country, then they could potentially benefit from some variation in hours, as long as they meet the requirements of the law. A location that finds itself in a more rural area might require more hours due to the lack of other restaurants in the area. Or, maybe the location is further away from a major airport and needs to operate during more hours to accommodate the decreased amount of traffic. These are all possibilities that a business, like Speedway, could exploit to their advantage. Plus, with more restaurants in different places, there is always the opportunity for someone to enjoy a unique regional flavor.
Consumers Preferring More Organic Choices
Consumers are driving the demand for healthier options and brands are responding by providing more nutritious food. This trend is certainly apparent in the case of Starbucks, whose sales of vegan food have doubled in the last three years. According to the market research firm, Research and Markets, nearly half of all Starbucks’ customers are now choosing to avoid dairy, eggs, and gluten, preferring to have food brands offer more plant-based options.
This trend is also apparent in the burrito bowls and sushi rolls that are becoming popular at fast food restaurants. Consumers are seeking healthier alternatives and companies are responding by providing more vegan, vegetarian, and organic options.
Overall, Is Speedway Going Out Of Business?
Based on the information presented so far, it seems that the greater part of the income of a business like Speedway comes from franchisees and not directly from consumers. This is a fairly common scenario and something that most business owners in the industry have come to expect. If we compare this to the income of a franchisee-owned restaurant, then it is very apparent that the former is considerably more lucrative. However, you must remember that just because a business is dependent on franchisees and not consumers, this does not mean that they are doomed to failure. Instead, it simply means that their revenue streams are somewhat different. Plus, as we have established, these streams provide ample opportunity for the business to grow and prosper.
So, although it is always somewhat unpleasant to see a business struggle, just because a business is dependent on franchisees does not mean that it is not a viable option. Plus, if you are a fan of the iconic brand, then it would be a missed opportunity not to at least consider purchasing shares in one of its restaurants.