Subway will shift focus from franchisees to multi-unit operators

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Diving Brief:

  • Subway is shifting its franchisee strategy from working primarily with 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 specific market needs and ensure restaurants are in the right locations and formats, such as drive-thru and non-traditional locations, to increase the convenience.
  • While the company’s single-operator concentration allowed it to become the largest restaurant chain by units, Subway oversaturated the market and began reporting poor sales from 2014. It closed thousands of locations and faces franchisee dissatisfaction during the last years.

Overview of the dive:

Subway’s change of franchisee is part of its ongoing brand transformation strategy, which began in July 2021 with Eat Fresh Refresh, Subway’s biggest 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 order flow and launched Subway Delivery, allowing customers to order on its app or website.

The Eat Fresh Refresh led to Subway’s highest August sales since 2013, with US sales up 4% in the month. It also achieved its highest average annual unit volume since 2014 in 2021, saw growth across its digital channels and “renewed passion for the brand among customers and franchisees,” the company said in the press release. hurry. More than 15,000 units of Subway, or 75% of its 21,000 units in the United States, saw an average comparable store sales increase of 8.2% in the first quarter of this year compared to 2019.

In addition to using the data to better evaluate site selection, Subway will continue to update its locations with renovations. To date, approximately 9,000 US units have committed to retrofits with the chain’s Fresh Forward design. Subway will also make format and layout enhancements to meet more delivery and digital demands with prep and pickup areas.

Subway also plans to discuss potential restaurant portfolio acquisitions with existing operators wishing to exit 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, Subway’s senior vice president of development, said the company will focus more on “the quality of our restaurants rather than the quantity”.

“To ensure we remain competitive for years to come, we are growing with high-calibre, multi-unit franchisees who bring operational expertise, development capabilities and capital,” Rafferty said.

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