In 1965, 17-year-old entrepreneur Fred DeLuca started his very own sandwich company in Connecticut, United States. Backed by investor Peter Buck, the pair started trading under the name ‘Pete’s Super Submarines’ before changing the name two years later to Subway.
Since its debut back in the sixties, Subway has grown to become one of the biggest names in the fast food industry and has the most locations out of any of its competitors, with close to 42,000 outlets worldwide compared to McDonald’s 39,000.
However, after half a century of success, Subway is starting to see a decline in popularity as more and more consumers choose to either cook at home or visit a rival restaurant. In 2019, Subway closed more than 1,000 stores in the U.S.A. alone, while McDonald’s closed just 68 during the same period.
So, what does the future hold for the sandwich giant, and what has it done to recover from these tough times?
How it all started
In the beginning, Subway’s new approach proved to be a hit with the American people. They advertised under the slogan, ‘The way a sandwich should be’ and people saw the store as a place where they could get quality food at a reasonable price.
DeLuca and Buck started another company called Doctor’s Associates Inc. which would focus on franchising their business and overseeing the operations of expansion. It proved to be a success and they began slowly opening more restaurants with the help of franchisees.
Over the next ten years, the pair set a goal to open 32 restaurants and, by 1981, there were over 200 locations in the U.S. After becoming experts in running their business, they set their sights further afield. In December, 1984, the first Subway store was opened outside of North America in Bahrain.
With this international recognition, Subway started to expand at a rapid rate and opened its first U.K. restaurant in Brighton in 1996. By now, the chain had moved on and were now using the slogan ‘Eat fresh’. They recognised that other fast food outlets didn’t get the best name when it came to being healthy, so DeLuca and Buck decided to capitalise on this and market their food as being good quality, and most importantly good for you.
Subway pioneered the idea of an open kitchen, where consumers could walk in and see the fresh ingredients laid out in front of them, before selecting what they wanted and watching the sandwich being made right before their own eyes.
It wasn't only customers who liked Subway’s business model but franchisees too. Subway is one of the cheapest fast food outlets to open which makes the prospect lucrative for many potential owners. To open a store, it typically costs between $120,000 and $270,000 — compare that to McDonald’s who have an average franchise cost of around $2.2 million.
Becoming the biggest in the world
With the company making it that easy to open a restaurant, location numbers skyrocketed and the brand became globally recognised. In the 1990s, in the space of just ten years, the number of Subway stores around the globe increased from 5,000 to over 13,000; an increase of over 260%.
Subway continued to market itself under the ‘Eat fresh’ slogan and, as obesity increased in the U.S.A. and the U.K., people began to see the sandwich company as a place to get really healthy food instead of the usual junk food of McDonald’s or KFC.
For around ten years, Subway ran advertisements showing a spokesman who had lost weight by eating their food and an image of him holding up his old, big jeans stuck in people’s minds.
Then came the recession, which caused devastating effects for many businesses around the world. Instead of healthy eating, people started looking for cheap places to eat where they could get a bargain. So, in response, Subway switched up its advertising campaign and, starting in March 2008, ran a new promotion — the $5 footlong.
By August of the next year, this campaign had earned Subway a massive $3.8 billion in sales, while its competitors like McDonald’s struggled to find a way through the recession.
Competitors entering the game
In the following years, as the economy slowly recovered, so too did Subway’s competitors. Many new sandwich businesses entered the market and began offering food which was equally as fresh, if not fresher than Subway’s.
Having previously adapted well to changes in the market, Subway started to become less motivated. Their business model remained relatively unchanged and they were offering the same products they had always sold. Its competitors were changing up their menus and bringing in new items on an almost monthly basis to attract new customers, but Subway remained the same and stuck to selling its tried and tested selection.
What’s more, chains such as McDonald’s had began to capitalise on the increased demand for healthy food and the 2010s saw them bring out their salad ranges, fruit bags, and other such healthier alternatives. Slowly, Subway began to lose their unique selling point and, with little to no change happening within the company, began to see their popularity decrease.
Closing down stores while its competitors thrived
Around 2015, Subway started to feel the effects of not changing its business model. By continuing to make their stores cheap to open, the chain started seeing stores popping up just around the corner from several others. Having so many stores in one small area resulted in each of them getting as much revenue as they did before.
Take Manhattan as an example, it’s difficult to walk anywhere in the city without seeing at least three Subway stores. If you look at a map and draw a mile-radius circle, it’s almost certain there will be at least five Subways inside of it.
Due to the decreased profits, Subway was forced to start shutting down stores around the world. In 2016, they closed 359 in the United States alone, making it the very first year the company closed more stores than it opened. This trend continued and in 2017 and 18, they closed over 800 and 1,000 stores respectively.
The future for Subway
With statistics like these, it’s hard to see how there’s any routes for the chain other than downfall. However, the owners haven’t given up yet and have made a couple of changes to their model to try and keep up with the ever-changing demands of customers.
They started by refurbishing a large number of their restaurants, creating a more modern, clean look with neon lights, brighter and more open atmospheres, and free WiFi and USB outlets. However, the company has been slow in implementing changes and hasn't rolled out the updates across all of their stores.
They’ve also experimented with bringing out new products, and in 2019, the chain released its new cheesy garlic bread, which proved to be one of their most best-selling items. They also invested over $80 million in developing new menu items and have partnered with viral food companies to create new recipes.
But is it too late?
Well, the market is becoming more and more competitive and eating out at fast food joints is as popular now as ever. Plus with rivals like McDonald’s thriving during the Covid-19 pandemic and also coming up with innovative new menu items, is it all too late for the late sandwich king?
It’s difficult to recover from the type of slump that Subway currently find themselves in. British sandwich and coffee chain Pret A Manger recently found themselves in a similar position and announced they would be closing over 100 stores of their own.
However, it seems the demand for Subway simply isn’t there any more. The public have so many options when it comes to food-on-the-go and, with cheaper, tastier options available, Subway really need to innovate drastically in order to bounce back.
Subway used to be the undisputed king of freshness and low prices, now though, it looks like they’ve lost the only two things that made them different.
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