Discussion Series

Impact of Subway's Re-positioning  


Sub Sandwiches aren't Cheap


  • The average check premium for the sub sandwich segment relative to the broader QSR sandwich segment (ex. subs) continues to ramp-up, pressuring the segment's value equation.
  • So the question becomes, are sub sandwich chains part of QSR or fast casual? It depends on the brand... 

Source: RR Menu Report (outline)


Checks = ↓ Sub Segment Share 


Source: RR Unit Sales & Growth Analysis Report (outline)

  • Consumers used to be willing to pay-up for burger alternatives in the form of sub sandwiches/hoagies which were generally perceived to be healthier while also offering plenty of customization not typical of QSR.
  • Today's consumers are perhaps less willing to wait in line for increasingly expensive sub sandwiches. Further, consumers can choose from an increasing number of retail channels (including convenience & grocery stores) offering prepared, grab-and-go sub sandwiches.  


Impact of Subway's Re-positioning


  • While there are many fast-growing sub sandwich chains like Jersey Mikes, Firehouse and Jimmy John's that have taken segment share, Subway remains the 800 lbs. gorilla in the room.
  • Subway's challenge is to find a value point acceptable to its franchisee base that sustains traffic among its less affluent consumer base. This requires Subway to process more transactions more quickly (think McDonald's) which means changes to its operational/convenience/digital access model. 
  • In essence, this requires a decision by Subway to firmly compete in the vast world of QSR with convenience & grocery stores on price rather than the smaller world of fast casual gourmet sandwiches.  
  • In any case, the potential near-term impact on QSR sandwich share from a Subway traffic & comp turn-around is likely to be muted by an associated closure of stores in the Subway system. Sustainable traffic growth is no easy task as stores that remain open will have to be remodeled or relocated, which requires that: unit level profitability must be improved organically from within the brand; and/or a willingness by the franchisor to jump-start this process with an investment in franchisee facilities.
  • Longer-term, a Subway system repositioned around value & convenience could become a force to reckon with.  


TraffiCast September 2018



"Sub Above" Positioning Drives Share Gains 

  • "Sub Above" brand positioning features signature Mike's Way sandwich topping option which includes a drizzling of "The Juice".
  • 1,338 units (79 company/1,259 franchised).
  • 163 new units projected FYE 2018 (8 company/155 franchised).


Get up to speed with a delivery leader

  • Core brand equity around "Freaky Fast" delivery as the only national sub chain offering in-house delivery.
  • 2,755 units (55 company/2,700 franchised).
  • 142 new units projected FYE 2018 (1 company/141 franchised.
  • New Factory Design new build image represents a 25% cost savings.


Brand Re-positioning Underway

  • Largest sub-sandwich chain is currently undergoing a brand re-positioning featuring new Fresh Forward design for new builds & remodels and Fresh Now platform (Signature Flavor & Fresh Pour Beverage stations).
  • 25,720 units (all franchised).
  • 480 new units projected FYE 2018 (all franchised).

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RR Resources


Thermometer Roundtable Briefs
Dashboard 2Q18 Investor Call Research Notes
Insights Franchisee Health Unit Level Trends
  Houlihan CFO Report Summaries
TraffiCast Summit Restaurant Menu Pics
September 2018 State of  Consumers Industry Events



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Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research’s analysis and opinions are not a guarantee of the future performance of any company or individual franchisee.  RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment. Copyright 2018.