Fast food franchises that specialise in nutritious, cost effective and flavoursome menu items including salads and sandwiches are snapping up their share of the market. 

According to the Key Insights into Franchising in Australia 2012 report by Griffith University’s Asia-Pacific Centre for Franchising Excellence, retail food accounts for 18 percent of the sector, second behind retail (non-food), which has a 27 percent market share. 

Traditionally there has been a strong link between food franchising and fast food brands including McDonald’s, KFC and Hungry Jacks, however a number of healthier brand names are coming to the fore, fuelled by consumers’ desire to lead healthier lifestyles.

IBISWorld’s Fast Food Services in Australia report states: “Traditional fast food has declined as a share of revenue, while revenue from premium and healthy categories has exhibited solid growth.”

The market research company’s specific sector report, Sandwich Shops in Australia states industry revenue is forecast to expand by an annualised 4.9 percent in the five years through 2013-14, to total $1.6 billion.

Furthermore, it is expected industry revenue will grow by an annualised 1.3 percent in the five years through 2018-19, to reach $1.7 billion.

Increased demand for healthy, convenient fast food options is expected to drive the industry’s growth over the next five years, however the sector is also expected to become increasingly more competitive as new players eager to cash in on the booming health wave enter the market. 

This means existing salad and sandwich bar chains will need to develop ways to differentiate themselves from their competitors amid a more saturated market. 

LIV-EAT SANDWICH BARS

Chris Button, the co-founder of Tasmanian-based Liv-eat Sandwich Bars cites the media as contributing to peoples’ changing eating habits. 

“I think the main thing that is driving growth is the health industry, it seems to have its own force behind it at the moment.

“There is a lot of media hype around getting fit, and I think the general awareness of eating healthily is only increasing every year,” he explains.

At the same time, he has also noticed a trend where people deviate from their healthy lifestyles every now and then and indulge a little. 

“They splurge out knowing that they can eat something like a burger or drink some alcohol on the weekend and then revert back to a healthy lifestyle Monday to Friday,” Button says.

He believes that essentially all salad and sandwich bar businesses offer the same product, so Liv-eat seeks to differentiate itself through product innovation, marketing and an inherent focus on the customer experience.

“If you stripped away every element of an individual store’s design, look and feel you would probably end up with similar products, so differentiation really is about presentation, packaging and marketing mixed with a more diverse offering,” Button explains.

“Customers don’t just come to us to get a sandwich or salad, we offer smoothies, juices and snacks,” he adds.

In saying that, salads and sandwiches comprise the bulk of Liv-eat’s business, and they are equally popular. “The core business is still salads and sandwiches and in winter its soups as well.”

Liv-eat has found a niche in catering, where Button explains business is booming.

“I’d say we are the biggest corporate caterers down in Tasmania now, and that is really just through our product and business model.”

Customers can place an order online via the Liv-eat website by simply selected their preferred products, as well as a delivery time.

“It is very convenient for office workers – they don’t have to ring around to place an order, which can be quite frustrating when they are trying to get their job done.

“We have grown our catering arm 500 fold within the last two years – we started off doing $30,000 a year in catering and I am hoping within the next year we will do $1 million or so. I think having a good, solid website has really helped us,” he says.

Button believes a brand such as Liv-eat offers a level of security that independent businesses cannot. “Obviously franchises are backed by research and the franchisor has put in a lot of hours into getting the business’s functions to work properly.

“An individual’s chances of being successful are largely increased by buying into a developed company or business,” he adds.

HEALTHY HABITS

Businesses’ ability to cater to the needs of the customer is driving growth within the salad and sandwich bar market, explains Mark Buckland, managing director at Healthy Habits.

“I don’t think that the factors driving the industry’s growth have changed much over the decades. When you reduce it down, quick service retail (QSR) has always existed to solve a problem for the customer.

“In a broad sense the customer’s problem has always been to access food that is convenient as well as innovative. All that has changed in recent years is the number of businesses that seek to solve the customer’s problem have grown,” Buckland adds.

Buckland speaks of ‘scope creep,’ within the sector, where large QSR brands are diversifying their menus to include salads and sandwiches – areas in which they do not traditionally play, bringing with it increased competition.

“Our key differentiation strategies have been around product and supply chain innovation. A relentless focus on our ‘real food, real fast’ mantra means that we are actually culling parts of our range to concentrate on core products.

“On the supply chain front we have made significant changes to the standard QSR supply models to bring the cost of goods down.”

Buckland says the brand’s sandwiches remain top sellers, however salads and juices are also taking off.

“Our key now is to develop complementarity between the offers so that we can provide customers with a true meal in the manner in which they have become accustomed through other outlets.”

He says Healthy Habits’ customer base has changed within the last 12 months to include younger Australians.

“A year ago I would have indicated that our product was most popular with the 24 – 44 year old age group, [however] in the past year we have discovered that age bracket has swelled to include people aged 17 to 24.

“This has been an unexpected effect of our investment in product pricing as well as social media. Both have really made our offer much more accessible to customers,” he adds.  

Buckland believes it pays to invest in a Healthy Habits franchise because independent salad and sandwich bars and being squeezed out of the market – namely due to their inability to compete on price and cater to consumers’ more discerning tastes. 

“A chain like ours gives operators a real fighting chance of avoiding these two trends and enables them to take advantage of supply chain and menu innovation as well as investment in technology.

“In a franchise the franchisor can assist the store owner to engage with their customer through a variety of touch points that the sole operator simply does not have the time for.” 

Stay tuned for part two of the sector snapshot, where we take a look at another two salad and sandwich bar brands.