Some people are loyal to the glorious, golden arches of McDonald’s; others prefer the tasty buns of Burger King. For myself and the millions of other sandwich enthusiasts out there? It’s got to be Subway.
In 2021, economists valued the global fast food market size at $647.7 billion, expecting it to surpass an astounding $998 billion by 2028. Until recently, Subway’s position as one of the top franchise restaurants was uncontested; its slice of the pie was sizable and secure.
In this Subway competitors analysis, I’ll explore how one submarine selling sensation of a franchise secured its position at the top of the food chain, alongside other giants like McDonald’s.
However, with every rise comes a fall. Subway’s dominance in the industry has started to slip, and as much as I am a devoted customer of the franchise, it’s beginning to look like the company might not make a full recovery.
While Subway’s “eat fresh” slogan initially positioned the company as a middle ground between ultra-healthy restaurants and the ultra-unhealthy burgers of its rivals, today, health-conscious consumers are increasingly opting to cook at home instead.
Even more significantly, the industry-wide trend towards ordering food online and delivering it to your door is damaging Subway’s business.
By 2025, experts anticipate online food delivery will grow to a 21% share of the restaurant market. Depressing though it is, with thousands of delicious cuisines right at our fingertips, it’s hard to see why anyone would opt for a sandwich.
Bottom Line Up Front
Subway competes in the fast food industry against some of the world’s biggest corporations, including McDonald’s. I’ve always rooted for Subway because I think it offers something different, and like many others, I view it as a convenient and healthy alternative to burgers and pizza.
However, Subway’s success might be waning. It still has the largest number of restaurants globally, but sales are declining as more and more people turn away from fast food, opting to cook at home or order online.
List of Subway’s Main Competitors
- Burger King
- Yum Brands (Taco Bell, KFC, Pizza Hut)
Subway Business Strategy
Subway is a multinational fast food restaurant franchise headquartered in Milford, Connecticut. It was founded in 1965 in Bridgeport, Connecticut, and sells the best submarine sandwiches money can buy (I am a big fan, as you can see). As well as sandwiches, Subway sells wraps, salads, nachos, hash browns, and a range of beverages.
I was surprised to discover that Subway has more restaurants than McDonald’s, but maybe that’s because McDonald’s has created a more substantial brand presence than its sandwich-serving rival. If you do some research, there are two excellent reasons why Subway has a more extensive franchise network.
The first reason is that its restaurants require considerably less square footage, so building them is more straightforward and economical. The second reason, which I discussed briefly earlier, is that Subway’s food is perceived to be healthier than McDonald’s and is also highly customizable, meaning it appeals to a broader audience.
You can buy a Subway sandwich in over 100 countries; it’s no surprise that over 8 million are purchased daily.
Franchising is a great business model because the franchisee who runs each restaurant does all the hard work; they’re in charge of hiring staff, making orders, and paying salaries. If they do these things well, high margins are guaranteed.
Quality control can be an issue in this business model, but Subway takes several steps to ensure each franchisee operates their restaurant according to a set of criteria. It also motivates people with a “franchisee of the year” award.
One fascinating part of the Subway story, which charts the company’s rise and (supposed) fall, involves a marketing campaign that eventually led to the company becoming embroiled in controversy.
In 1998, an overweight student called Jared Fogle started eating Subway meals regularly because they were convenient, cheap, and healthier than alternatives. Fast forward a year, and he had lost more than half his body weight.
Subway naturally saw this as an excellent opportunity for a marketing campaign and jumped on it. The company went hard on advertising campaigns, and at first, they saw so much success that when they paused a campaign quickly in 2005, sales dropped 10%.
Unfortunately, in the early 2000s, Jared began to gain weight. Then, in 2014, reports surfaced that Jared was in possession of child pornography. The FBI raided his house, and Jared went to court; no matter how much Subway denied all knowledge, the company couldn’t escape the controversy since Jared had solicited underage sex from one of Subway’s employees.
These events marked a downward turn for the company. Sales dropped 3% in 2014 and declined to 13% in 2020.
Enough time has passed since the Jared Fogle controversy that Subway executives are feeling hopeful they could hit 100,000 restaurants by 2030. In 2022, the company announced a new development strategy focusing on scaling up multi-unit franchises and signing deals for international growth.
Right now, Subway has a 28% share of the limited service sandwich market, generating $10.2 billion in revenue in 2020. A year later, Subway’s domestic sales exceeded projections by more than $1.4 billion, with over $1.3 billion in digital sales alone.
Subway Competitors Analysis
Subway competes with other fast food restaurants, including Burger King and McDonald’s.
McDonald’s Corporation hardly needs an introduction; this multinational fast food chain has one of the most recognizable brands in the world, serving over 70 million customers daily. It started as a restaurant in California in 1940 until, in 1953, the company’s founders introduced the golden arches logo and turned their business into a franchise.
Fast forward to 2022, and McDonald’s is the largest company by revenue; it generated $23.22 billion in 2021. How did it achieve this level of success? Let’s take a closer look.
McDonald’s business strategy is all about selling food to customers at a highly competitive price. Its products can be made and eaten quickly; there’s no need to sit in a restaurant, so people who lead busy lives can eat on the go.
Ultimately, McDonald’s success is all about speed and convenience. Even the franchise business model aligns with these two fundamental values; individuals pay the company to use its brand, and they are in charge of running the restaurant, so it’s a convenient and fast way for the company to make money with minimum effort.
McDonald’s also owns all the land its restaurants are built on (estimated at around $18 billion), so it generates revenue from franchisees paying rent. Franchise restaurants brought in more than 56% of McDonald’s revenue in 2021.
McDonald’s uses cost leadership and international market expansion strategies to achieve its global ambitions.
In 2017, the company launched its Velocity Growth Plan, which opts for a customer-centric approach to move people through each conversion funnel stage. Then, in 2020, it updated this strategy with a new Accelerating the Arches initiative.
Accelerating the Arches consists of three pillars: investing in new methods of communicating value, capitalizing on the demand for familiarity, and focusing on delivery, drive-thru, and digital.
Yum! Brands Inc. is a multinational fast food corporation headquartered in Louisville, Kentucky. It was founded in 1997 and owns several well-known brands, including:
- Pizza Hut
- The Habit Burger Grill
Despite owning some of the most widely recognized fast food brands, Yum! ‘s market share is less than McDonald’s, just 7.86%. The company’s business strategy uses a franchise model; it develops, operates, franchises, and licenses different fast food restaurants.
Yum! made $6.58 billion in revenue in 2021. It has more than 43,000 restaurant units in over 135 countries, 95% of which are franchised.
2015 was, in some respects, a troubling year for Yum!. Following slow business in China for KFC, compounded by the threat from Avian flu, it announced plans to split into two companies.
By contrast, Taco Bell has seen impressive growth over the past decade, allowing it to pull ahead of Yum! ‘s other brands.
In 2016, Yum! announced a digital transformation strategy to drive growth by focusing on a leaner cost structure and increasing franchisee ownership.
So far, the strategy appears to be going well, and the company has proved its dedication to digital through acquisitions. For example, Yum! acquired an Australian technology corporation called Dragontail Systems in 2021 that focuses on managing and optimizing food preparation.
It’s no surprise that 2021 was the company’s best year yet. It opened over 4,000 restaurants worldwide, and digital sales soared 25% year on year to an impressive $22 billion.
Burger King is a multinational chain of burger restaurants with headquarters in Miami, Florida. It was founded in 1954 – a decade and a half after McDonald’s – and today, it is the second largest fast food hamburger chain behind McDonald’s.
We’re all familiar with the Burger King brand – it’s hard not to be, given that there are over 18,700 Burger King restaurants in more than 100 countries – but what you might not know is that the company started life with the name Insta-Burger King.
Two Miami-based franchisees bought the company in 1954, despite it experiencing financial difficulties, and renamed it. The rest is history – almost.
If you ask me, one of the greatest business rivalries of all time is between McDonald’s and Burger King. Most people have a favorite fighter in this battle, and many will go to great lengths to defend it.
I’m not quite that burger crazy, but I am interested in the marketing strategies these companies have used to create such strong brand loyalty. Burger King, for example, uses advertising to highlight that its restaurants use “flame-broilers,” which is a USP.
Burger King’s business strategy focuses on franchising, just like McDonald’s. Setting up a restaurant could involve an investment as low as $300,000, with a flat fee of $50,000. These are comparatively low numbers; another one of Burger King’s advantages is that it’s relatively affordable to set up a franchise.
A Brazilian investment firm called 3G Capital bought Burger King in 2020 for $3.3 billion. However, the firm took Burger King public again in 2012.
Unfortunately for Burger King fans, McDonald’s has been the industry leader for several years. Burger King is working on a new strategy to close the gap between its main rival, which will focus on higher ROIs, but I suspect the gap has already become a chasm. McDonald’s is, by all accounts, a business behemoth.
There is some good news, in any case. This strategy has been highly successful in the UK, where Burger King plans to open 200 new restaurants, thanks to a revenue increase of over 65% between 2020 and 2021.
Starbucks Corporation is the world’s largest coffeehouse chain, recognized the world over thanks to its iconic siren logo. It was founded in 1971 and has headquarters in Seattle, Washington.
I’d attribute Starbucks’ success to its ability to bring coffee lovers together; the corporation is responsible for instigating the second wave of coffee culture, which focuses on the experience of drinking coffee as much as the coffee itself.
With 33,000 stores in 80 countries, few companies have achieved such a high brand awareness. 15,444 of Starbucks’ coffee houses are in the US. Of the rest, just under 9,000 are company operated; the rest are licensed.
Unlike Subway, Starbucks operates using a chain business model. While this typically results in slower growth, it does mean that all Starbucks coffee houses are owned by the company, giving it more control.
Starbucks earned $29.06 billion in revenue in 2021, opening 538 stores in the fourth quarter. Though Subway is still bigger based on its number of restaurants, Starbucks has a broader appeal because its products aren’t associated with being unhealthy.
Domino’s Pizza, Inc. is an American multinational pizza chain founded in 1960 with headquarters in Ann Arbor, Michigan. CEO Russell Weiner leads the corporation.
Domino’s mission is to be the number one pizza company in the world; if you ask me, that’s a goal it has already achieved. I don’t crave pizza often, but when I do, it’s got to be Domino’s.
With over 18,848 stores worldwide as of 2021 (an increase of over 1,000 year on year), Domino’s is taking the world by storm, not least because it has invested significantly in digital technology for online orders and home delivery.
Domino’s operates using a franchise business model. Typically, the corporation has master franchise agreements with one company per country, although a few companies have acquired multiple master franchise agreements.
After 44 years of trading as a private company, Domino’s began trading common stock on the New York Stock Exchange in 2004. Two years later, a Domino’s restaurant in Dublin, Ireland, became the first to hit a turnover of $3 million yearly.
Marketing campaigns have been instrumental in ensuring the success of Domino’s, especially when it was a relatively new – and much smaller – business. In 1986, for example, Domino’s was well known for its successful commercials featuring a character called Noid, which the company revived in 2021.
Domino’s generated $4.36 billion in revenue in 2021, a 5.83% increase from the previous year.
Subway SWOT Analysis
This SWOT analysis demonstrates Subway’s strengths, weaknesses, opportunities, and threats.
- Customer loyalty – the brand and its values make people want to return
- Franchise model is easy to implement and guarantees rapid success
- Customizable products
- Healthier option compared to McDonald’s
- Large number of stores globally
- Low operation costs
- Product variety
- Customer service varies between stores
- High employee turnover rate
- Jared Fogle scandal permanently damaged the company’s reputation
- Lower brand value than competitors
- Small online presence
- Subway could expand its range of products to better meet the needs of the health conscious market
- It could also expand its home delivery network, which is currently only available in certain areas
- Competitors have successfully implemented drive-thrus; Subway could do the same
- Vegetarianism and veganism are gaining popularity; the company could expand its product range to better cater to these dietary requirements
- Oversaturated market, which is difficult to compete in; rival firms have the same business proposition
- Negative reputation from bad press coverage and lawsuits
- Changing trends could make customers look for food elsewhere
Subway Competitors Analysis FAQs
Question: Is Subway considered healthy?
Answer: The answer to this question is a matter of perspective. Compared to its competitors like McDonald’s and Burger King, yes, Subway is relatively healthy. Ultimately it depends on the sandwich you choose; there are healthy options, and there are unhealthy options.
Question: Who is Subway’s biggest competitor?
Answer: McDonald’s is Subway’s biggest competitor based on revenue; it generated $23.22 billion in 2021.
Question: What is Subway’s competitive advantage?
Answer: I think Subway has two key advantages: first, its products are highly customizable, meaning it can appeal to a broader demographic, and second, its products are healthy compared to most other fast food restaurants.
Question: Who is the target market for Subway?
Answer: The 18-55 age group takes up 90% of Subway target markets. Working professionals are also highly targeted.
Despite declining sales, I strongly believe Subway could turn things around with the right approach. By diversifying its product range with a focus on healthy foods and investing significantly in targeted marketing campaigns to reach the right demographic, the company could reverse the negative reputation it earned during its Jared Fogle era.
Rival companies have embraced the rise of new technology, offering services like drive-thrus and apps where you can order food online and have it delivered to your door. If Subway follows suit – and quickly – it should be able to reverse the damage of the past few years.
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