Apple has officially entered the arena of the Internet of Things. Coming out from the left corner, the company has decided to set their sights on a software-only entrance to complement their current CarPlay offering. The iOS8 announcement at the Worldwide Developers Conference 2014 introduced a whole new realm of digital pathways of information. One of the major features introduced is the Health App – a centralized hub to facilitate tracking personal fitness details from other apps, with metrics ranging from caloric expenditure levels to sleep patterns. However, the introduction of health functionality isn’t exactly new to the market. For example, Samsung’s “S Health” has been present since their last generation flagship device – the Galaxy S4 – and there are already multiple wearable devices with their own apps that cover extensive health metrics. Late to the game, Apple needs a substantial innovation if it wishes to see any real sales growth from to this additional health service.

Multi-Apple Pie

Increasingly so, Apple has found intense competition in a market it once ruled. Though potential solutions through new products such as iBeacons and wearable devices have been suggested, doubts still remain over the viability of Apple’s future growth. And while the Health app’s functionality is an innovation in the market, Apple will need more than a hub that simply compiles data from other applications to get consumers to bite. Through combining Apple’s rumoured wearable device, iBeacons, and the recently announced Health app functionality, the company can carve up a new market and strategically position itself for future growth and dominance.

Fitness tracking is no easy task and requires the careful coordination between software and hardware. Tracking food intake has consistently plagued digital fitness developers due to its complexity both in terms of ease of use and accuracy. Whereas a pedometer can passively track steps in the background, food tracking always requires manual input by the user. Whichever company can offer comprehensive fitness tracking by simplifying nutritional data tracking has much to gain, with the digital health industry expected to grow annually at 20% to over $5.7B in 2014. In this instance, Apple is the company to deliver.

Apples and… Sandwiches?

Subway, the multi-national sandwich franchise, may not leap into view when one envisions Apple partnerships. However, Apple’s best opportunity to leverage the combined offering of its rumoured wearable device, iBeacons, and Health app is a partnership with the global sandwich chain. Subway is the perfect partner for Apple to demonstrate the validity of its ecosystem in action: iBeacons could broadcast nutritional information directly to a user’s wearable device, whereupon the device can utilize its own internal applications to store the information on iOS8 Health. In terms of logistics, receipts could have unique identification codes users could scan for easy matching between orders and devices, followed by minimal customization on the customer device itself. The consumer experiences no-hassle nutritional tracking, and Subway benefits from not only the improved diner experience, but can also gather data on which offerings are most popular among health-conscious fitness trackers.

The concept of fitness tracking sits well with Subway’s brand image of freshness. The premise would naturally attract a crowd more inclined to track fitness information, potentially further boosting store sales. Subway has been the fastest growing restaurant franchise since 2013, but its per-store sales are less than half of that of McDonalds’, surely placing growing same-store sales on the mind of Subway executives. Based on a conservative estimation, if such an Apple iBeacon initiative improved store traffic by even 1%, same store sales would improve by nearly $5,000 per year, which equates to 10% top line growth for Subway as a whole.

Having said that, despite the clear advantages that an iBeacon initiative may have for Subway, Apple should finance this initiative independently to help guarantee Subway’s approval and participation. Since iBeacons are extremely low cost, even if Apple paid for all development and implementation costs, the approximate $12M investment for an American initiative would be recouped by capturing less than 4% of the global smart watch industry. Considering rumors that Apple plans to sell 50 M units within the first year on the market, beating industry-leader Samsung by a considerable margin, this break-even is likely within reach.

Moreover, much of the benefit to Apple would come from the establishment of a new standard for restaurant-patron technological interactions. This iBeacon initiative can then be rolled out to other food establishments that share Subway’s image of freshness and health, thus allowing Apple to dominate the electronic in-restaurant experience. If an American market pilot proves successful, this program can definitely be easily replicated overseas, due to the global standing of both companies.

Tallest Tree in the Orchard

This iBeacon initiative is not something competitors can easily copy either. No other competitor has the same degree of vertical integration as Apple to offer such a package to restaurant chains. Despite the fact that Android phones can also take advantage of the underlying technology in iBeacons, only iOS devices can passively communicate with iBeacons and receive advertisements and other offers. This will ultimately leave Samsung and the Android platform to play catch up, while Apple can aggressively form new partnerships and expand its ecosystem. This first mover’s advantage will allow Apple to form the partnerships necessary to make entering the market difficult for new entrants, since the chains with the most economies of scale would have already been taken. Going forward, this model can be applied to other types of food establishments, such as the rising fast casual restaurant segment, which focuses on fresh, healthy ingredients.

True that on their own iOS8 Health and an Apple wearable device may not offer a competitive advantage among a sea of similar products, Apple will be able to carve out a new playing field for itself by combining these offerings together. Additionally, Apple can help propel Subway into its next phase of sales growth. Together the two companies can bring about a revolution in the digital fitness industry regarding how nutritional information is logged, changing how consumers perceive digital fitness tracking, and once again, placing Apple at the helm of innovation.