The Rise And Fall Of Subway

Summary

Subway, once a fast-food giant with over 42,000 locations, has experienced a significant decline with thousands of store closures and a 25% drop in business from 2012 to 2017. Originally successful with its customizable sandwiches and 'eat fresh' image, Subway faced challenges from emerging competitors offering fresher options and from internal issues like overcrowding of franchises. Despite setbacks, including the scandal involving former spokesperson Jared Fogle, Subway is attempting a turnaround with the Fresh Forward program, store remodeling, and an $80 million investment in new menu items.

Takeaways

• 🌐 Subway once boasted the most locations of any fast-food chain globally, with over 42,000 restaurants across more than 100 countries.
• 📉 Despite its extensive reach, Subway has seen a significant decline, closing thousands of stores and experiencing a 25% drop in business from 2012 to 2017.
• 🍔 The brand's origin dates back to 1965 as Pete's Super Submarines, rebranding to Subway in 1968, and was known for its open-kitchen format and customizable sandwiches.
• 📈 Subway's growth was rapid, with a low franchise cost compared to competitors, leading to a surge in store numbers and sales, especially after going international.
• 🥗 The brand's health-focused marketing, including the influential Jared Fogle success story, positioned Subway as a healthier fast-food option, boosting its popularity.
• 💸 The introduction of the $5 footlong promotion in 2008 was a significant sales driver, generating substantial revenue during the economic downturn.
• 📉 However, by 2014, sales began to decline as competitors offered fresher and healthier options, and Subway's innovation in menu and marketing lagged.
• 🏪 The ease of opening new Subway franchises led to oversaturation in some markets, with stores cannibalizing each other's sales due to a lack of protected territory.
• 💔 The Jared Fogle scandal in 2015 severely damaged the brand's image, turning a key marketing asset into a liability.
• 🔄 In response to challenges, Subway launched the Fresh Forward program, remodeling stores and investing $80 million in new menu items to revitalize the brand.

Q & A

How many restaurants does Subway have worldwide?

Subway has more than 42,000 restaurants in over 100 countries.

What was the original name of Subway when it was first established in 1965?

The original name of Subway was Pete's Super Submarines.

What was the significant feature of Subway that set it apart from other fast-food chains at the time?

Subway's significant feature was its open-kitchen format and the ability to customize sandwiches, which made it feel healthier compared to other fast-food chains.

How did Subway's expansion strategy contribute to its rapid growth?

Subway's expansion strategy involved franchising, which was one of the cheapest options to start a fast-food business, costing between $116,000 and $263,000, compared to other chains like McDonald's, which could cost up to $2.2 million.

What was the impact of the Jared Fogle story on Subway's brand and sales?

The Jared Fogle story was a significant success for Subway, associating the brand with weight loss and health, and it contributed to a significant increase in sales and brand recognition.

What was the '$5 footlong' promotion, and how did it affect Subway's sales during the Great Recession?

The '$5 footlong' promotion was a pricing strategy introduced in 2008 that offered a foot-long sandwich for $5. It helped Subway generate $3.8 billion in sales and achieve a 17% jump in US sales from the previous year.

What factors contributed to the decline in Subway's sales starting in 2014?

The decline in sales was due to increased competition from other sub chains and fast-casual chains offering fresher and healthier options, as well as a lack of innovation in Subway's menu and marketing.

How did the proximity of Subway franchises to each other affect the business?

The close proximity of Subway franchises led to cannibalization of sales, where stores competed against each other for the same customer base, which negatively impacted individual store revenues.

What was the financial impact on Subway franchisees as sales began to decline?

The average annual revenue for a Subway franchise dropped from $482,000 in 2012 to $422,000 in 2016, significantly affecting franchisees' income.

How did Subway respond to the challenges it faced, and what steps did it take to revitalize the brand?

Subway launched the Fresh Forward program, which included remodeling stores, updating menu items, and investing $80 million in new food offerings. They also partnered with Tastemade to develop new menu ideas and introduced successful promotions like cheesy garlic bread and ciabatta sandwiches.

What was the role of the media company Tastemade in Subway's efforts to innovate its menu?

Tastemade partnered with Subway to develop hundreds of new menu ideas, contributing to Subway's efforts to innovate and diversify its food offerings to attract customers.