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Subway finds a tougher sandwich market

Competitors are nipping at the heels of the once-unstoppable giant.
Restaurant Business

Top 500


In the sandwich market, Subway has always been the 50-foot-tall giant, swatting away competitors like flies. Past rivals such as Blimpie and Quiznos still haven’t recovered from the damage the Milford, Conn.-based chain inflicted.

But lately, those flies have been getting the upper hand—to the point where Subway simply isn’t quite the giant it once was.

The sub sandwich chain’s system sales fell by $500 million last year, according to Technomic’s Top 500. That’s a decline of 4.4%. Unit count, meanwhile, declined by 800 locations, or 3.1%.

By comparison, the next eight sandwich chains in the limited-service category averaged 7.1% system sales growth and 6.5% unit count growth.

That includes Jimmy John’s, now a sizable chain in its own right with $2.4 billion in system sales and more than 2,800 locations. Its system sales grew by 6.2% last year, while unit count increased by 6.5%.

Jersey Mike’s, meanwhile, saw its system sales grow by 18.2%, and it is now on the verge of $1 billion in system sales, with $975 million. Unit count grew by 13.1%, to 1,343. Not far behind is Firehouse Subs, whose system sales grew 4.7% to $716 million, while unit count grew 4.9% to 1,088.

It’s not just other sub sandwich chains doing the damage. Arby’s has generated sales growth in recent years. Last year its system sales grew by 1.3% to $3.6 billion, while unit count grew by 1.4% to 3,283.

And then there’s Chick-fil-A.

The Atlanta-based chicken sandwich chain is the fastest-growing large chain in the U.S., with system sales having grown by 14.2% last year to just more than $9 billion, while unit count grew 7.6% to 2,261.

In fact, Chick-fil-A grew system sales by more than $1 billion, or twice Subway’s decline. It picked up many lapsed Subway users: According to Earnest Research, it was the most likely destination for consumers who stopped going to Subway.

The sandwich chain’s problems are stark, given its past growth. Subway added locations in the U.S. at a breakneck pace for more than 30 years, and even now, it is the world’s biggest restaurant chain by location count, with 44,000 units globally and nearly 26,000 domestically.

Same-store traffic has fallen since 2012, following the end of the popular $5 Footlong promotion. And then in 2015, the chain lost its healthy-eating spokesman, Jared Fogle, when he was arrested on child sex charges.

Many analysts believe Subway simply grew too fast. “They need to bleed at least 5,000 units in the United States to get the overdevelopment done,” says John Gordon, a restaurant analyst out of San Diego.

All of which could be a boon to the numerous chains looking to take a bigger piece of the market. The growth of the smaller chains, coupled with Subway’s continued challenges, promises to continue the sandwich realignment in the coming years.

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