On Tuesday, Subway released sales data for 2021. It was selected data, highlighting 7.5%, two-year same-store sales growth for the top 75% of the chain’s 21,000 locations. The company said it had its best average unit volumes since 2014, but it didn’t provide the actual number. It also said it generated $1.4 billion in sales “above expectations,” though we do not know what those expectations were.
At our request, the company said its full system same-store sales were flat last year compared with 2019.
As a private company, Subway is only obligated to release what it wants to the public and, as a brand eager to court larger and more sophisticated franchisees, it wants to put on as good an image as possible. That explains the data. But it’s worth taking a deeper look into what it all means. Here are three points to consider based on the company’s release.
Sales growth is a good thing
Subway generated two-year same-store sales of 7.5% at its top 16,000 locations. Some have suggested that it’s all price and not traffic. Indeed, fast-food prices are up 8% year over year and about 11% when compared with 2019. So on a price-adjusted basis, its best stores are still underwater.
But the same is true for much of the restaurant industry. A lot of the overall recovery in sales last year came from higher prices, and not from consumers dining out more often.
On balance, however, sales growth is a good thing. Subway as a brand has struggled to generate comparable-store sales growth for the better part of a decade. Improving those unit volumes is imperative for the brand to survive. This is especially true at a time when so many costs are on the upswing.
And we have spoken with operators who had good years in 2021, including one who said it was their best year in history.
But underperforming locations are still locations
At the same time, the brand can’t rightly ignore the 25% of locations—about 5,000 units total—that are not generating even price-based sales growth. Subway’s report suggests that these 5,000 stores remain 30% or more below where they were in 2019.
Many of these are likely in business centers, university campuses and retail areas that have yet to recover from the pandemic, and theoretically they will come back when the economy returns to some sense of normal.
But Subway is well known for having grown too large. And it has long had a sizable number of struggling locations. That’s why so many of its restaurants have closed in recent years.
Subway has closed about 6,000 locations since it peaked at 27,000 U.S. restaurants in 2015. That includes 1,000 closures last year. In 2020, it closed more restaurants than any other restaurant chain in history.
All the data suggests more closures are necessary.
It is underperforming other chains
There are two publicly traded sub sandwich chains. One of them is Firehouse Subs, whose same-store sales rose 20% last year on a two-year basis. Subway’s performance is more on par with that of Potbelly, whose same-store sales were down relative to 2019 in the first half of the year but rose 4.5% on a two-year basis in the third quarter. It has yet to report fourth quarter numbers.
But other major chains also performed much better. McDonald’s same-store sales rose 13.8% on a two-year basis. Taco Bell’s same-store sales rose 10% on a two-year basis. Starbucks’ two-year same-store sales were up nearly 10% last calendar year. Chipotle Mexican Grill’s two-year same-store sales were up more than 20%.
On the other hand, Subway’s performance is roughly in line with that of Burger King, whose same-store sales declined less than 1% on a two-year basis.
Still, the fast-food business as a rule had a strong 2021. The performance of Subway’s best 16,000 locations underperformed most of its contemporaries. Its overall performance was in line with a chain that just overhauled its management team and a much smaller, urban-centric brand in the midst of its own revitalization efforts.
Subway’s year was a good one considering where the brand had been. But its revitalization has miles to go yet. And it may necessitate many more closures. We leave you with a graphic of its U.S. unit count.
Subway’s U.S. locations
Source: Technomic