Why Subway’s ‘fresh’ appeal has suddenly gone stale.
Once a top-selling food chain, the sub sandwich empire is now fast losing its appeal with consumers
With 43,945 sandwich shops in 110 countries, Subway has become the world’s most ubiquitous restaurant chain, posting armies of “sandwich artists” in more American outposts than McDonald’s and Starbucks combined.
Yet at the dawn of its 50th birthday, all is not well in the land of Jared and jingles about $5 footlongs. Subway’s U.S. sales last year declined three per cent, or US$400 million, falling faster than any other of America’s top 25 food chains. The mega-deli was also knocked back to America’s third bestselling food chain for the first time in seven years.
Subway ascended over the last several decades on the back of broad American tastes, offering a healthy alternative for eaters leery of fast food, and at prices that made it unstoppable during the Great Recession. Even U.S. first lady Michelle Obama praised Subway during a visit last year for “working to get kids excited about eating their vegetables.”
But the chain’s fast-rising rivals, like Chipotle Mexican Grill and Firehouse Subs, are beating Subway at the game it helped create, offering seemingly fresher, healthier, build-your-own meals.
Diners increasingly say they want to know their meat has been cut fresh, not peeled off wax paper; their meal heated by steamer, not microwave.
That’s led to what analysts say is one of the sub empire’s biggest threats yet: What Americans see as healthy has evolved. Subway hasn’t.
“The ‘Subway fresh’ has lost its appeal with consumers, because to them fresh has evolved to mean something very different,” said Darren Tristano, executive vice-president of industry researcher Technomic. “More people have money to spend, and they’re choosing to spend a little bit more on better concepts where they get a better product. ... Subway’s strategy has only been to open more stores, and ultimately those stores just cannibalize each other.”
Milford, Conn.-based Subway’s problems run close to those of fellow food king McDonald’s, the sagging-sales chain now launching a turnaround because of “challenging industry dynamics” and changing tastes.
But in some ways, Subway’s money-making challenges look even sharper than those of the Golden Arches. The average Subway sold US$437,000 worth of subs, sodas and cookies last year, the smallest haul in half a decade, and about a fifth as much as the typical McDonald’s, which pulls in US$2.4 million per store.
Tricia Hetherington, the company’s director of research and development, said in a statement, “We’ ll continue to evolve our reasonably priced, fresh, customizable sandwiches and salads to better meet our customers tastes and needs.” Subway, which is privately run and closely held, would not comment further.
Subway debuted as Pete’s Super Submarines in Bridgeport, Conn., in the summer of 1965, when a Brooklyn, N.Y.-born 17-year-old named Fred DeLuca borrowed US$1,000 from a family friend, a doctor named Peter Buck. DeLuca, an aspiring doctor who is now worth US$2.6 billion, hoped slinging sandwiches would help him pay his way through medical school.
The duo slogged through several slow years of sandwich-making until, in 1974, they started selling franchises under a new name, Subway.
In the decades that followed those first shops, Subway franchises have expanded, yeast-like, onto what seemed like every street and strip mall in America. By 2013, Subway was opening 50 new shops a week. Today, Subways serves nearly 2,800 sandwiches every minute, data from industry researcher IBIS-World shows.
Still owned by Doctor’s Associates Inc., the found- ers’ holding company, Subway has opened inside hundreds of U.S. colleges, malls, military bases and other, less-predictable locations: a car showroom in California, a Goodwill thrift store in South Carolina, a church in Buffalo.
DeLuca, the chief executive, said last year that the chain wanted to add 8,000 new U.S. franchises to their existing 27,000, an explosion on par with adding the combined store count of Taco Bell and Chipotle.
“We’re continually looking at just about any opportunity for someone to buy a sandwich, wherever that might be,” Don Fertman, the chief development officer, told the Wall Street Journal last year. “The closer we can get to the customer, the better.”
The chain got one of its biggest early boosts in Washington in 1977, when Larry Feldman, then an assistant minority counsel to the House Banking Committee, opened one of the earliest franchises near a House office building.
Feldman’s Subway Development Corp. has grown to 1,500 locations across the District and the mid-Atlantic states, and Feldman, the “secretary of sandwich,” has been called Subway’s most successful “development agent.”
The chain has excelled at sometimes-egregious uses of product placement: In a 2012 episode of CBS’s Hawaii Five-0, an actor called Subway “serious culinary fusion” and said its food would help him lose weight, adding, “It worked for Jared, and that dude was large.” But the all-franchise chain has expanded largely through winning over new franchisees, who run (and fund) their stores.
Subway’s reputation as a healthier lunch spot has helped it torpedo fast-food rivals, even 15 years after first tapping Jared Fogle, with his tale of sub-aided weight loss, as its spokesman and “the Subway Guy.”
But even with its vegetarian-friendly menu, Subway has struggled to maintain its healthful image.
Consumer surveys by Technomic found Subway’s food taste, flavour and visual appeal sagged among U.S. respondents over the past year.
Subway’s strategy has only been to open more stores