Subway enjoyed one of the best years in recent history in 2021. Despite the closure of about 1,000 of its restaurants, its sales rose by 13%. For a company that has historically struggled with low unit volumes, its ability to generate that much more business out of its restaurants was a big victory.
The problem, for Subway anyway, is that everybody else did well, too.
In fact, the company’s market share among sandwich chains has declined 10% since the start of the pandemic, according to Restaurant Business calculations of Technomic Top 500 Chain Restaurant Report data. While Subway had a good year, most of its direct and less-direct competitors performed better.
For this exercise, we looked at sales for both quick-service and fast-casual sandwich chains, because let’s face it: There is relatively little difference between those sectors. Subway is a direct competitor of Jersey Mike’s. Yet the latter is considered fast casual and the former is considered quick service. (Feel free to ask us for more examples on why the term “fast casual” makes no sense.)
We started looking at the broad sandwich category, which can include everything from sub sandwich chains to bakery-café concepts to hot dog restaurants—yes, a hot dog is a sandwich. Subway’s share of sales in that market has fallen from 31.6% in 2019 to 28.6% last year, a 300-basis point decline. Two-thirds of that decline came in 2020. But the company also lost share last year.
It’s easy to see why. While Subway’s system sales rose by 13% last year, the average growth among sandwich chains increased by 21.5%.
And, while Subway’s domestic system sales have declined by 8% over the past two years, sandwich chains on average are up over 4%.
To be sure, Subway isn’t exactly a natural competitor to chains like Arby’s or even Wienerschnitzel. Breaking it down further to narrow the competitive set demonstrates the chain’s market-share loss more acutely—and helps us understand just who is taking it.
Among this group, Subway’s market share has fallen from 58% to 53% over the past two years, including a nearly three percentage point decline last year.
Top 500 deli/sandwich market share
Source: Restaurant Business, Technomic Top 500 Chain Restaurant Report
Subway remains dominant among this group, though to be fair it is a relatively small number of brands. The chains in this competitive set together do not equal Starbucks’ annual system sales, for instance.
Subway’s biggest rival right now appears to be Jersey Mike’s. Jimmy John’s, owned by Inspire Brands, has grown by just over 9%. But Jersey Mike’s has been an absolute juggernaut. Its sales are up by 65% over the past two years, making it among the fastest-growing Top 100 chains over that timeframe.
That kind of growth has taken its share of the deli and sandwich market to 12.4% from 7.7%. That’s a substantial jump.
Firehouse Subs, just acquired by Restaurant Brands International for $1 billion, has grown by 25% over that period and has seen its share of that group jump by more than 100 basis points.
Subway’s biggest problem, frankly, has been unit closures. The chain’s unit count declined by 5% while the average deli and sandwich chain returned to unit growth last year.
None of this is to say that Subway can’t find the right strategy to generate sales growth and get back to developing new units. But it also highlights the challenges the brand has as it works to slow closures and recover its market share. It simply does not have the dominant position it once had, and its biggest competitors are gaining ground.