Subway has seen its traffic decline by 25% since 2012, a decline that has led to closed stores and angry franchisees and the return of the $5 footlong as the brand seeks to get those lost customers back.
The theory has long been that a stronger group of sub sandwich competitors, notably Jimmy John’s and Jersey Mike’s, has been taking that business.
But in the latest bit of evidence that competition in the restaurant industry isn’t all that it seems, the company that has benefited the most from Subway’s decline has been … Chick-fil-A?
According to Earnest Research, which tracks the transaction records of millions of anonymous customers, the Atlanta-based chicken concept had the largest growth in orders from former Subway customers from 2015 through 2017.
The next three most likely destinations for Subway customers are even more of a surprise: Third-party delivery services.
Grubhub, Postmates and DoorDash, in that order, received the most visits from former Subway customers in 2017.
Former Subway customers also turned to a selection of high-growth chains, including Sweetgreen, Raising Cane’s, Pret A Manger, Mod Pizza, Jersey Mike’s and Shake Shack. A sub sandwich rival, Jersey Mike’s, didn’t appear until No. 9.
The results speak to the complexities of consumer choices and reveal again that the competitive landscape isn’t as simple as we think.
Simply because a sandwich chain loses business doesn’t guarantee more business for its sandwich rivals, similar to the fact that Chipotle’s struggles in 2016 wasn’t quite the boon to Qdoba that many thought it would.
Customer choice can be tricky. How consumers choose a restaurant can often come down to opportunity or convenience, or whether people want to try something new, or whether there is an influential person in a particular party.
Many customers could be opting for one of the hot new fast-casual chains like Sweetgreen or Raising Cane’s or Mod Pizza rather than an old standby such as Subway. That speaks to the chain's need to make itself more relevant to today's customers to be more competitive with a new generation of concepts.
Subway and Chick-fil-A already have a lot of overlapping customers, according to Stephanie Vabre, senior restaurant analyst. So, Subway’s weakness has probably been to Chick-fil-A’s benefit. Or perhaps CFA’s strength has been a problem for Subway.
The loss to the delivery services could also demonstrate that Subway is losing one of its greatest strengths with the arrival of third-party delivery.
The sandwich chain has built its business around convenience, opting to paper the country with its sandwich shops. The fact that it’s likely to be close to any particular customer has made it an easy choice for many people.
But delivery is even easier. And it’s apparent that a certain percentage of Subway customers are willing to pay for that convenience. As such, they’ve opted to have a local restaurant delivered, rather than leave their home to get a sandwich.
“Sometimes the question is, ‘Do I want to get off the couch?’”
Ultimately, all restaurants compete with one another. It’s not just important for operators to watch the moves of their primary competitors. They need to pay attention to what the new restaurant down the street is doing. Because it could be taking their business.