Subway says its sales grew again last year

Average unit volumes are higher than they’ve been in a decade and the sandwich chain says the number of closures has slowed, too. And more changes are coming.
Subway sales
Subway hopes remodeling more locations will generate more sales in the coming years. / Photo courtesy of Subway

Subway’s latest menu revitalization and an improved focus on digital channels drove sales at the sandwich giant last quarter, leading to its best average unit volumes in a decade and a slowdown in store closures, the company said on Thursday.  

The Milford, Conn.-based sandwich chain said that its global same-store sales rose 9.2% in 2022, including 7.8% in the U.S.

The company is privately held and thus not obligated to report financials. But the results represent the second consecutive year of positive sales results from a brand that had been struggling for the better part of a decade with weak volumes and store closures.

“We’ve had eight straight quarters of same-store sales increases,” Subway CEO John Chidsey said in an interview. “We continue to move in the right direction.”

Chidsey said that average unit volumes were the best the company had since 2012, which would put them between $473,000 and $481,000, based on data from Restaurant Business sister company Technomic. AUVs in 2021 were $434,000, which was a seven-year high.

He also said that the brand closed 272 locations in the U.S. and opened another 90, meaning it finished 2022 with 182 fewer locations than it operated in 2021. That would put the company at just under 21,000 domestic restaurants.

But that’s also the lowest net closure rate for the company since it began shedding locations in 2015, based on data from Technomic.

“I feel the U.S. has gotten toward an inflection point,” Chidsey said, noting that new locations will mostly offset closed locations and get to the point “where we basically tread water.”

Still, Subway is encouraging franchisees to build new units this year. Operators who open a restaurant between now and Dec. 15, 2023 will receive a rebate on the franchise fee for that location.

Still, Chidsey said, unit growth in the U.S. will not be Subway’s primary revenue growth vehicle. Instead, it needs to build sales at existing locations, which improves franchisee profitability and health. Most of its new locations will likely be in places like airports, hospitals and convenience stores. It is also opening grab-and-go locations and smart fridges.

“It’s really an AUV story,” he said. “If we do grow from a unit standpoint, it will be mostly nontraditional where our footprint is so much smaller and it’s so much less expensive.”

The comments come as Subway is apparently on the market. Chidsey would not comment on any potential sale, but reports have indicated the company has hired advisers to put the brand on the market more than three years after he took over as CEO. The company could be worth up to $10 billion. Peter Buck, the brand’s cofounder, left his 50% interest in the chain to his foundation.

Chidsey’s comments also come as Subway has worked furiously on major changes from everything to the quality of its bread to who is responsible for inspecting stores and terminating franchisees.

Subway in 2021 started the first of what has become a series of menu changes, starting with improvements to its ingredients. Last year, the company created 12 foundational sandwiches, called the “Subway Series,” that’s designed to shift its dependence away from customized sandwiches that can be complex to make and can often detract from the brand’s quality.

Those 12 subs accounted for 19% to 20% of the chain’s sales last year, Chidsey said. That equaled the company’s expectations. But Subway hopes to move more sales toward those subs, which simplify the ordering process, come at a higher price point and are more friendly for digital orders.

“We would like to drive it closer to 40% to 45% in the coming years,” he said. “We never want to walk away from customization where the brand is born and created. But given where we want to go from digital and from a third-party standpoint … it helps with labor, order accuracy and ease of ordering.”

The brand has more changes in its menu coming, notably with the addition of slicers in its restaurants. For the company, the decision could help it improve the perception of its quality while lowering costs. It costs more to have suppliers slice meat, after all.

Subway has rolled out 7,000 slicers so far. “We already have the highest quality proteins, but the consumer did not see that,” Chidsey said. “We’re not getting credit for what we have. By having a slicer, it shows up in front of the consumer and drives huge perception differences. It drives the message and it takes the cost out.”

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