If you are a K-drama fan, you must have seen a Subway ad once or twice. Or in every other show you binged. Yes, Subway sandwiches are that popular across the world.
When the healthy eating fad touched America, Subway sandwiches appeared to be every conscious eater’s favorite choice. Filled with fresh vegetables and assorted meats, combined with affordable deals, Subway was a no-brainer. Until it wasn’t.
In recent years, Subway has struggled to meet customer needs as high inflation and rising competition ate into its profits. Industry experts note that traffic growth for the multinational chain is much less compared to its competitors.
In 2021, in an attempt to recapture customers, the chain announced a major menu overhaul and promised fresher ingredients. While it worked as a temporary fad, newer chains that focus on salads and healthier options have gained ground in the last few years.
Subway Sandwiches and Changing Consumer Tastes
In 2021, Subway’s promotional campaign helped it drive systems wide sales up by 13%. A mean feat when you note that the chain closed almost 1,000 restaurants that year. Subway was once the largest restaurant chain in the business.
Research firm Technomic noted that Subway had the best year in 2013, when sales at its US locations hit $12.3 billion. Since then, its sales and franchisees have seen a sharp downfall as the chain failed to be innovative enough to adapt to a changing palette.
The Connecticut-based company has around 20,700 restaurants in the US as of December 2022.
But the growth paled in comparison to that achieved by competitors like Arby’s, Jimmy John’s, and Potbelly. In the first quarter of 2022, Potbelly reported year-over-year revenue increase of 25.8% to $98.2 million. Meanwhile, regular value deals and good meat options have customers flocking to Arby’s restaurants. It is also the second-largest sandwich chain in the world with over 3,500 outlets. Jimmy John’s has managed to hit the sweet spot with fresh vegetables, meats, and bread, along with quirky advertising that has endeared it to a younger customer base.
The year 2022 helped Subway redeem itself after years of near-failure and franchisee operators have been vocal about the effect of the remodel.
The first signs of a changing tide were revealed in October 2022, when the sandwich maker said it had “record-setting sales” across its roughly 20,000 US locations. This came after major menu changes and store remodels. Subway sandwiches were back on track and the positive feedback assuaged stakeholder worries after facing years of decline.
“As part of our journey to transform the brand, we are improving across every aspect of our business and, after two years of record sales results, we can confidently say that Subway is getting its swagger back,” said John Chidsey, CEO of Subway. “Across every region, the team’s efforts have set the stage for another year of strategic and profitable growth and exciting enhancements to our guest experience.”
The Subway Series launch, a new menu with sandwiches across four categories, was a game-changer, helping it climb to the top of the food chain.
Subway Sale
Fresh on the menu is the sandwich sale itself. The company made the surprise announcement on February 14, after global sales year-over-year jumped by 9%.
Early February, the company announced same-store sales were up 9.2%, a sign that its revamp has worked. The trend bucked years of declining sales and troubles.
So, it is surprising that Subway is exploring a sale at this point in time. The Wall Street Journal had reported in January that the restaurant had hired advisors to check out the possibilities of a Subway sale at over $10 billion.
JP Morgan is advising the chain in conducting the sale exploration process. The company has not set any timeline or made concrete announcements about any prospective clients.
In a press release, the chain noted, “The management team remains committed to the future and will continue to execute against its multi-year transformation journey, which includes a focus on menu innovation, modernization of restaurants and improvements to its overall guest experience.”
As it is privately owned, there is no detailed breakup of its finances. The company is not obligated to release quarterly reports. In a release earlier this month, Subway sandwiches showed eight consecutive quarters of sales growth making a viable buy.
In November 2021, Subway suffered a major blow after the death of its founder Peter Buck who left 50% of the company to charity, The Peter and Carmen Lucia Buck Foundation. It is unclear how this will affect a potential sale. But while economic uncertainty prevails, Subway has shown us that constant innovation is key to staying relevant and that it is never too late to make a fresh sandwich. We mean a fresh start.
