Subway to shift franchisee focus to multi-unit operators

Dive Brief:

Subway is shifting its franchisee strategy from working with mainly single-unit operators to targeting well-resourced, multi-unit franchisees, the company said Thursday.
The sandwich chain will also use a data-driven approach to better understand market-specific needs and ensure restaurants are in the right locations and formats, such as drive-thrus and nontraditional sites, to increase convenience.
While the company’s single-operator focus allowed it to become the largest restaurant chain by units, Subway oversaturated the market and began reporting lackluster sales starting in 2014. It has closed thousands of locations and faced discontent among franchisees in recent years.

Dive Insight:

Subway's franchisee move is part of its ongoing brand transformation strategy, which began in July 2021 with Eat Fresh Refresh, Subway’s largest menu update in its history. The new menu included an extensive marketing campaign with various celebrities. Subway also bolstered its digital ordering experience with a new dashboard to improve ordering flow, and launched Subway Delivery, allowing guests to order on its app or website.

The Eat Fresh Refresh led to Subway's highest August sales since 2013, with U.S. sales up 4% during the month. It also reached its highest-annual system average unit volume since 2014 in 2021, reported growth across its digital channels and “renewed passion for the brand among guests and franchisees,” the company said in the press release. Over 15,000 of Subway's units, or 75% of its 21,000 units in the U.S., reported an average same-store sales increase of 8.2% in the first quarter of this year compared to 2019.

In addition to using data to better assess site selection, Subway will continue to update its locations with remodels. To date, about 9,000 U.S. units have committed to remodels with the chain's Fresh Forward design. Subway will also make improvements to format and layout to accommodate more delivery and digital requests with areas for prep and pickup.

Subway is also planning to discuss potential acquisitions of restaurant portfolios with existing operators wishing to retire or sell, the company said in the press release.

While the company will continue to work with single-unit franchisees, many of whom are first-time business owners, Steve Rafferty, SVP of development for Subway, said the company will be more focused on ”the quality of our restaurants versus quantity.”

“To ensure we remain competitive for years to come, we’re scaling up with high-caliber multi-unit franchisees, who bring operating expertise, development capabilities and capital,” Rafferty said.