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Subway may not have created the sub sandwich. But it largely created the sub sandwich chain. Its rise in the 1970s and 1980s through franchising established the market for long sandwiches, and dozens of chains have come along hoping to mimic its success.
Its incredible growth through the 1990s and into the Great Recession put it on a level enjoyed by few other chains. By 2013 it had 41% of the market for limited-service sandwich chains in the Technomic Top 500—putting it on par with concepts like McDonald’s.
Even that understates its dominance, given that limited-service sandwich chains include concepts like Panera Bread and Arby’s that are different. Narrow it down to other sub chains, in other words, and Subway dominated like few other concepts.
That is no longer the case. Subway’s share of the limited-service sandwich market has taken a hit over the past eight years. Sales challenges and closing restaurants have cut its market share of the Top 500 sandwich chains to 28%.
Subway’s share of the Top 500 sandwich market
It’s worth pointing out that 2020 was a different year, and likely understated Subway’s overall market presence. It could well rebound this year as the consumers have grown more comfortable eating inside restaurants. Several operators tell us their sales have been higher the past six months than they were in 2019—though numerous other chains have seen similar results.
Subway remains the market leader. It generated $3 billion more in system sales than Panera and $4 billion more than Arby’s. For all of its problems, it remains a behemoth.
The typical sandwich chain saw system sales decline 13% last year. That, plus Subway’s general decline over the years, has had a real impact on the overall market. Top 500 sandwich chains generated about the same system sales last year that they did in 2013.
Had Subway simply held serve over those eight years, the market for Top 500 sandwiches would have increased 12% over that time period. Its $4 billion system sales decline in that period swung the entire market by 25%.
Subway’s 28% share of the limited-service sandwich market is considerably smaller than other sectors. By comparison, McDonald’s owns 47% of the burger market that itself has attracted a bunch of new competitors in recent years. Chick-fil-A, meanwhile, has 41% of the chicken market. Subway’s decline over that time has basically democratized the sandwich market, making it far more competitive.
Subway’s decline has helped democratize the sandwich sector. There are now 53 limited-service sandwich chains in the Top 500. By comparison, there are 38 burger chains and 21 chicken concepts. While the sandwich category is broader, consumers are spreading their money around a lot more now than they did a decade ago.
Subway’s U.S. system sales
Subway’s challenges are well documented. The company overexpanded, often forcing franchisees to build stores near existing locations. The sheer number of restaurants—nearly 27,000 at its peak in the U.S.—meant that each individual store generated less revenue per unit. It should have focused more on unit volumes than on store growth and continues paying the price for that decision.
Many of Subway’s franchisees are smaller operators who only run a few stores at a time. That put the company on a relatively weak foundation, and when sales began to weaken in 2013—and worsened in 2015—operators began closing units. They’ve closed 5,000 since 2015, and thousands more are believed ready to walk away.
But declining market share also takes other chains to improve. And that has happened, too. Since 2013, Jimmy John’s has seen its U.S. system sales rise 31%. Firehouse Subs’ sales have nearly doubled over that time. Jersey Mike’s system sales have tripled.
To be sure, Subway remains far bigger than its sub sandwich rivals. Those three chains above generated $4.3 billion in combined system sales last year, or about half of what Subway did. But 15 years ago Chick-fil-A was less than half the size of the largest chicken chain, KFC, and now it holds the dominant position. Consumer tastes change and preferences can move quickly.
Subway’s decline in market share over the past eight years shows just how much work the company’s executives have ahead of them. It also places a unique importance on its upcoming marketing campaign and menu overhaul—which executives call one of the biggest in its history.
It may not be the biggest, but it’s arguably the most important.