Knowing Subway's market cap now, would you invest in them as an angel investor? You'd be a billionaire right now.
They didn't become big by differentiating product. Their sandwiches aren't that special. They became big by coming into existence where people wanted sandwiches.
They absolutely did become big by differentiating product. There's a Jersey Mike's and an Arby's near my home, as well as a Subway about a mile away. The former two chains came into existence right around the same time (and slightly before) Subway did. They struggle for business, both nationwide and locally. It wouldn't surprise me if most readers of this comment haven't heard of them, while most everyone has heard of Subway. That's despite having a similar product (sandwiches) and similar locations to Subway.
What they're missing is the brand. Subway pushed heavily on being a healthy, quick-service chain with good selection in the late 90s, right as America was waking up to the virtues of healthy food and wanting something different from burgers. (They'd actually been around since the 60s, but I never heard about them until the early 2000s.) Nobody buys a Subway for the sandwich; they buy a subway because they want something quick & easy, from a known source, and don't feel like getting a burger. There are plenty of other sandwich shops that sell sandwiches cheaper, oftentimes with better ingredients (i.e. not 49% soy protein in their chicken), but you'll never have heard of them, and most close up in a few years. Invest in them and you go broke.
I have to believe you're wrong, given how awful Subway is compared to every other sub place, particularly Jersey Mikes, Jimmy Johns, Potbelly, DiBellas, even Firehouse Subs. Without doing in depth research, the differentiator has to be their franchising model.
No, Subway's biggest differentiator was and continues to be the low cost of building one, compared to a McDonalds. You can build out a Subway for $200,000 in some cases compared to $1-2 million for a McDonalds. That's why they're the most popular franchise restaurant.
That’s from the sellers point of view and doesn’t translate into consumer demand to keep the ventures profitable and have a competitive ROI.
A 100 cheese and tomato sandwich shops are even cheaper and would probably go broke or a paper airplane franchise ...etc
I suppose there is a relationship between profits and the establishment cost however customer demand is king
It could be related - a low franchise cost means a Subway on every corner (there're 3 within a 5 minute driving radius of my home), which increases the chain's brand recognition. Same strategy that Starbucks uses, opening a store on every corner, even to the point where they cannibalize each others' sales. Familiarity has an advertising benefit all on its own.
They didn't become big by differentiating product. Their sandwiches aren't that special. They became big by coming into existence where people wanted sandwiches.