Unlocking the Secret to Success: Why Unit Economics Matter for Restaurant Growth
Restaurants like Subway and Noodles struggle with weak unit economies affecting growth and profit. Discover why unit economics are crucial for sustainable expansion.
In the bustling world of dining and gastronomy, two prominent brands, Subway and Noodles & Company, have recently faced financial challenges that underscore the importance of unit economics in sustaining business growth. Simply put, unit economics encompasses the profit and expenses attributed to an individual unit or location. For these chains, the struggle reveals an essential lesson for all restaurateurs: the vitality of ensuring each unit stands strong on its own.
The Rise and Struggles of Subway
Subway, once a giant in the quick-service restaurant sector, experienced a rapid expansion that eventually led to the closure of over 7,600 locations. This reflected a critical oversight in ensuring each store’s viability before opening another. Despite this, Subway remains a major player in the industry, but its generous new loyalty program has sparked concern among franchisees worried about profit margins.
Noodles & Company’s Hurdles
Noodles & Company has dealt with similar issues, facing pressure from investors to sell locations to offset debts. This need stems from a decade of inconsistent sales growth, illustrating the impact of weak unit volumes on both financial health and strategic flexibility.
Learning from Past Lessons
It’s a common pitfall for chains to prioritize rapid unit growth over strengthening individual store performance. For Subway, focusing on improving unit-level results might have tempered the consequences of aggressive expansion. Similarly, Noodles could have avoided its current predicament if individual locations performed better over the years.
Industry Insight: Strategic Adjustments
The challenges faced by these brands highlight the necessity for strategic adjustments. Restructuring efforts and reinventing business models, as observed in other successful chains, can serve as a guiding light. Chick-fil-A’s introduction of the owner-operator model to college campuses, for instance, exemplifies adapting strategies that bolster unit economics.
Final Thoughts
The lessons learned from Subway and Noodles remind the industry that sustainable expansion hinges on the strength of individual units. According to Restaurant Business Magazine, thriving unit economics not only drive profitability but also empower franchises to withstand market pressures and adapt to evolving demands.
By fostering a deep understanding of unit economics, restaurant chains can ensure that each location contributes positively to their narrative of growth and success.
