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More chains start leapfrogging Subway

The sandwich giant, once the second-largest chain in the U.S., is expected to fall out of the top five in the Technomic Top 500 for the first time since 2001.
Photograph courtesy of Subway

Subway, once the second-largest chain in the U.S. and growing at a seemingly unstoppable pace, is now watching more chains pass it by.

The sandwich giant is on pace to fall out of the top five in the Technomic Top 500 Chain Restaurant Reportthis year, according to an updated forecast released this week—which pegs the Milford, Conn.-based chain at sixth.

Subway is projected to see its U.S. system sales decline by 4% this year, to less than $10 billion. That would be the first time since 2001 that the chain had sales below that figure. It would also be the lowest sales number since 2009.

The decline on the ranking means Subway is not only falling behind fast-growing Chick-fil-A and Taco Bell, but also Burger King, where U.S. system sales are projected to grow 2% this year, to $10.1 billion.

“Their rate of closures will really put a dent in their sales,” said Kevin Schimpf, manager of industry research for Technomic, a sister company of Restaurant Business.

Subway had grown for decades based on a model that emphasized large numbers of low-volume sandwich shops, giving it a strong advantage when it came to convenience. But growth by other sandwich chains and the company’s shift away from $5 footlong subs years ago, among other things, have conspired to hurt Subway’s sales.

Operators have been closing units as its sales and traffic have fallen and the chain stopped expanding. Unit count, which peaked at more than 27,000 locations in 2015, has declined by nearly 10% since then, to fewer than 25,000 in 2018.

At the same time, other chains are simply growing quickly. Chick-fil-A, the fastest-growing large chain in the U.S., is expected to grow by 15% this year—continuing a long string of double-digit system sales growth numbers. It is expected to finish the year as the third-largest chain, up from No. 5 last year, according to Technomic.

Taco Bell, meanwhile, has also grown quickly in recent years, if not quite at the rate of the Atlanta-based chicken chain. Its sales are expected to grow by 5.5% this year.

Technomic expects that Wendy’s will be No. 7, with $9.6 billion in system sales—just $400 million less than Subway. Wendy’s projects to grow by 2%. Subway’s tumble down the ranking of the largest U.S. chains could continue in the next year or two, absent a reversal of unit closures and same-store sales declines, or struggles at chains nipping at its heels.

No. 8 is Dunkin', where sales are expected to grow 4.5%, to $9.2 billion.

To be sure, Subway is working feverishly to get customers back in the door. It is offering a plant-based Beyond Meatball Marinara sub. It has tested Halo Top milkshakes as well as sandwiches made with King’s Hawaiian Bread.

Subway has also instituted a “barbell” strategy, with a menu ranging from low-priced Sliders that start at $1.89 to a new Pit-Smoked Brisket Sandwich that can run well over $10 for a footlong.

Here’s how Technomic expects the top 10 to look by the end of this year:

  1. McDonald’s ($40 billion in U.S. system sales)
  2. Starbucks ($21.3 billion)
  3. Chick-fil-A ($11.5 billion)
  4. Taco Bell ($10.9 billion)
  5. Burger King ($10.1 billion)
  6. Subway ($10 billion)
  7. Wendy’s ($9.6 billion)
  8. Dunkin’ ($9.2 billion)
  9. Domino’s Pizza ($7.3 billion)
  10. Panera Bread ($5.9 billion)

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