Not all that long ago, Subway had a stranglehold on the sandwich market. In the early 2000s, its decision to sell $5 Footlong subs and add toasters to its shops helped hammer Quiznos.
That chain went from the second-largest sandwich brand, with nearly 5,000 locations, to one that is on the verge of falling off the Technomic Top 500 altogether.
These days, Subway is the one losing ground to competitors. Its unit closures and largely stagnant volumes, coupled with strength from brands like Jersey Mike’s and Firehouse Subs have diminished the Miami-based chain’s market share in a big way.
To figure this out, we looked at Technomic Top 500 data over the past five years. We also used a narrower group of both quick-service and fast-casual sandwich chains that compete more directly with Subway, removing brands like Panera Bread or Arby’s.
Subway had long dominated this market and for years boasted a share of well over 60% at one point, a share rivaling the one enjoyed by Taco Bell in the fast-food Mexican market. Even in 2019, when its decline was in full swing, the company held 56% of this market.
It’s a lot smaller now. Subway’s share of the sub sandwich market has declined by 21% in the past five years, to 44%.
And it’s not just store closures, though the company has closed 2,600 restaurants over that period, about 10% of its total. Subway’s share of the sub sandwich unit count has fallen by just 10%.
In other words: Rival sandwich brands are not just winning by opening more locations while Subway closes them. They’re winning by gaining more organic sales at existing restaurants.
Subway’s challenges cannot simply be dismissed as rooted in changing consumer tastes. Despite the chain’s sales issues—Subway’s own domestic system sales have fallen by about 7.5% over the past five years—total sales by the sub sandwich group are up 19%.
Typically, when the dominant chain in any market falls like that, it brings down the entire group. Instead, customers Subway would have are simply taking their business to one of these other chains and they’re thriving.
Subway has faced an enormous number of challenges, both in and out of its control. Its founder died in 2015 without an effective succession plan. Its longtime spokesman Jared Fogle went to prison.
Yet its fundamental flaw has always been too many locations and a too-long focus on low prices, which has made its prices these days seem too expensive. Franchisees are closing stores. Others have cut back on staff or taken other steps in a bid for survival, such as refuse to accept discounts. That just makes matters worse.
For years, many brands mimicked Subway’s business model, using franchising to aggressively sell stores to small operators. Brands like the aforementioned Quiznos and Blimpie tried using that format. But they’ve declined precipitously. Blimpie at one point had nearly 2,000 locations. Today it is off the Top 500 altogether with about 100 restaurants, according to Technomic.
That business model was based on a flawed premise, that the presence of locations would fuel enough demand to enable franchisees to make money. But any of the brands that used this business model have declined from their original peaks. Quiznos is the largest collapse in history. And no brand has closed more locations than Subway.
Many of these other rivals are winning with different models and larger unit volumes that enable operators to make more money and remain open. Jersey Mike’s has a griddle and slices meat in front of customers. Jimmy John’s has delivery. All use larger operators and don’t build stores right next to one another like Subway did.
All of this will test Subway and its new CEO Jonathan Fitzpatrick. As we’ve said repeatedly, it’s not an easy fix.