Subway is in the habit of conducting listening tours, spending about a day and a half in different markets every two to three weeks. Leadership visits restaurants, sees what’s happening, and then has an afternoon meeting with 15-20 franchisees, from small single-unit operators to larger multi-store restaurateurs. There’s a reception afterward, which draws upwards of 50 visitors. Trevor Haynes, president of the chain’s North America segment, estimates that Subway has reached 1,000-plus stakeholders this way in the past two years.
Two years being the operative words. That’s when the brand officially kicked off its multi-year turnaround strategy, beginning with the most ambitious menu launch in company history. Since 2021, franchisee sentiment has moved from “I’m not sure,” to “I’m feeling more optimistic,” to “Just bring it on. We’re so excited about where it’s at,” Haynes recalls.
In late August, the brand announced that it will sell itself to private equity firm Roark Capital, the same company that owns Inspire Brands (Buffalo Wild Wings, Jimmy John’s, Sonic, Dunkin’, Baskin-Robbins, and Arby’s), Focus Brands (Auntie Anne’s, McAlister’s, Schlotzsky’s, Cinnabon, Moe’s, Jamba, and Carvel), and CKE Restaurants (Carl’s Jr. and Hardee’s). The deal is reportedly worth $9.6 billion, according to the Wall Street Journal.
The executive admits that if Subway is doing 10 things, operators may not agree with two of them. But at the same time, they’re encouraging the corporate team to keep going and carry forth innovation. “When we’ve got 10,000 franchises in the system, we’ll never get everyone to agree,” Haynes says. “But they do agree on the things that matter.”
Food Remains at the Core
With a potential sale and $10 billion valuation in the background for the past few months, Haynes describes Subway’s recent journey as nothing short of transformational. The brand has looked at all touch points around the guest experience, and at the center of it all has been food. Year one, taking place in July 2021, was about improving ingredients, bread, proteins, cheese sauce, and more. The release, called “Eat Fresh Refresh,” involved 20-plus upgrades—11 new and enhanced ingredients, six new or returning sandwiches, and four reimagined signature sandwiches. The bread alone took 18-24 months of work, with the assistance of a panel that included Nancy Silverton, a James Beard Award winner.
The next year, Subway sought to outdo itself with the rollout of Subway Series, a lineup of 12 signature sandwiches that can be ordered by name or number—a way to streamline the ordering experience for guests, as opposed to going ingredient by ingredient. It expanded to 18 products in May with the addition of Sweet Onion Teriyaki, Italian B.M.T., Chicken & Bacon Ranch, Spicy Italian, Pickleball Club, and Teriyaki Blitz.
“Summer is where you can have a lot more fun I think in regards to a launch or just being active,” says Haynes, describing why Subway chose July for its big reveals. “No one wants to go and line up at a restaurant in the Northeast in February. Whereas in summer you’ll get people out and about doing things a lot more. So I think the first year was when everything came together. Everything came together and we were able to hit the summer target. And that said, every year, we’ve got to hit this because you got to roll over what you’ve done the year before.”
This July was no different, with the launch of Deli Heroes as an extension of the Subway Series menu. The product features freshly sliced meats, something “a sub shop should be all about,” Haynes says. The lineup has four highlights—Titan Turkey, Grand Slam Ham, Garlic Roast Beef, and The Beast. The first two comprise 33 percent more meat and The Beast, true to its name, has a half-pound of meat (pepperoni, salami, turkey, ham, and roast beef). They all have double cheese and are served on artisan Italian bread.
“You can just taste it and you can see the difference,” says Paul Fabre, senior vice president of culinary and innovation. “And for us, it was really about building these sandwiches the way that a great deli sandwich should. There was a lot of science actually [around] the right ratio of the amount of turkey with cheese and bread.”
It took the chain more than two years to prepare for this change, including reorganization of the supply chain and installation of deli meat slicers in roughly 20,000 restaurants nationwide. The equipment—added to one store every five minutes in nine months—was completely free for U.S. franchisees. Subway spent over $80 million to cover the costs. The slicer came from Germany-based Bizerba, which added another line in its factory dedicated to Subway.
The launch required effort from several groups, including franchisees who assisted with testing, the chain’s independent purchasing co-op, and vendors.
“It was all around the fresh-sliced product in restaurants. We’ve had a history of doing things from a fresh perspective— fresh bread, baked bread, fresh sliced veg, and now freshly sliced meat,” Haynes says. “ … The implementation of it was certainly like an orchestra. There were many minds and many hands working on that for many, many months to source the slicers, test everything out, actually bring the slicers into the system.”
The plan was initially met with skepticism as franchisees thought this meant sliced to order. But the corporate team was quick to correct this and let operators know it would be batch slicing throughout the day. Sliced to order was tested, but it was too slow and labor intensive, Haynes says. Once franchisees understood how the slicer would be used and the fact that they wouldn’t have to pay for the equipment, they were sold. All employees have to do is press a button and the slicing begins. Other than that, it’s changing the dial for various proteins.
Prior to the official unveiling of Deli Heroes, Subway held a training session in Dallas. Attendees took what they learned back to their respective markets and held training rallies. One in Los Angeles brought in 500 people.
“The franchisees understood how this was going to work,” Haynes says. “They understood the supply chain, how that was going to be delivered, and how the proteins were coming to life in the testing. There’s no additional labor needed. We’re already fresh, sliced vegetables every day. There are times throughout the day when staff are not as productive. They’re around to complete this task. So it didn’t add that level of complexity or expense to their business.”
Haynes recalls visiting Ohio where he met with a franchisee that had around 19 restaurants. He placed the slicer in about eight or nine of his stores to see how managers would react. One week went by and nobody commented. When he finally asked how they felt, the response was “Yeah, it’s great. It’s fine. We like it, it’s really easy.” The managers in the other locations began to ask when they were going to get their hands on the equipment.
Among all three menu launches in the past three years, Fabre says the first introduction was the most difficult, just because of the time it took to sort through all the ingredients and moving parts. Once that was established, the Subway Series was a matter of putting together the right pieces. The Deli Heroes are a continuation of that exploratory process.
“I think this one, we already had a lot of the components, like the meat,” Fabre says. “It was really about finding the right combinations and then really about implementation of the slicers and diversification of the supply chain.”
Development Takes a New Turn
Subway’s comeback plan also hinges on renewed growth, which hasn’t been the chain’s strong suit in the past half-decade.
Between the start of 2020 and 2023, the sandwich chain lost a net of 3,200 U.S. restaurants. Although the damage does seem to be softening. Subway closed a net of 1,609 stores in 2020, and that improved to a loss of 1,043 in 2021 and then 571 in 2022.
Haynes attributes the downsizing to shifts in trade areas, like nonviable strip centers or malls. The strategy now is to remove Subway from those situations and relocate them with the right format. Endcap drive-thru and freestanding drive-thru were prototypes that came to Haynes’ mind.
“We’re very much looking at that type of real estate and [drive-thru] format for the future,” Haynes says. “Because it just allows a franchisee to trade 24/7. You can close the lobby and just keep the drive-thru going. In some areas, you find it’s dangerous to keep the restaurants open, whereas, drive-thru, you can trade 24/7.”
Another significant difference is a focus on multi-unit operators as opposed to ones with one or two stores. In February, Subway held a multi-store development seminar in Hollywood, Florida, where it recalibrated how franchisees should think about growing in terms of timing, human capital, and financing. The company is finding that a majority of restaurants that sell internally are moving from retirees to new owners. In April, the brand announced five multi-store agreements across Texas, Florida, Arizona, and the Mid-Atlantic that led to the transfer of more than 230 stores. The transactions included two new operators and one existing franchisee that acquired 100-plus locations to expand their footprint to over 140 outlets.
Under these purchase agreements, franchisees—new and existing—are signing on to build new restaurants over the next few years.
“There was a lot of interest in our system, we just had closed it off,” says Haynes, regarding Subway’s new plan to attract multi-unit operators. “We felt that it was the right time to do this because franchisees coming in from other brands will have access to capital, they have sophisticated operating systems. It’s going to help to evolve the system.”
That’s not to say Subway will do away completely with mom and-pop franchisees.
“We will always have restaurant owners that have one or two restaurants,” Haynes says. “The U.S. is too big. There are so many little towns that we operate in with like 1,000 people and [a franchisee] has been there for 20 years and she’s got her one restaurant. She does a great job and we love and we want her to be there and she will do a better job than someone from 100 miles away.”
Haynes says there’s no hard and fast rule around the size of these multi-location agreements. It’s more of a common-sense approach. If an operator is in Kansas, the most they could scale within a reasonable driving time might be 10 restaurants. In Atlanta, there could be 200 stores because of the population density. In any case, Subways wants to ensure the operator can properly service these locations. It doesn’t want a franchisee owning units in Maine and San Diego, for example.
There are exceptions, however. Nontraditional partners like Pilot Flying J or Love’s Travel Shop have hundreds of locations scattered in the U.S., but they come with the infrastructure to handle it. Toward the end of last year, Subway had roughly 5,900 nontraditional shops in the U.S. and Canada, which is about 25 percent of the company’s North American footprint. The brand is not only opening stores in airports, college campuses, and hospitals, but it’s also offering extensions for franchisees, like its fully unattended smart fridges.
The first iteration debuted at the University of CaliforniaSan Diego in September 2022. Now there are 25 fridges, all stocked daily by the franchisee’s nearby restaurant. AI allows customers to talk directly to the smart fridge and ask about any products inside, and guests are charged via weight sensor shelves. UV-C light sanitizes the fridge after every purchase.
“The experience is completely contactless and cashless,” Haynes says. “Guest feedback has been overwhelmingly positive, which has also generated strong interest among Subway franchisees who are eager to expand their portfolios and generate incremental revenue. As we continue to expand our flexible nontraditional concepts, our guests can expect to find smart fridges in more convenient places like airports, college campuses, and hospitals.”
Amid this change in growth strategy is a years-long remodel program featuring Subway’s “Fresh Forward” design, which includes LED lighting, new floor coverings, containers, tables, colors, and chairs. Around 10,000 restaurants in North America have undergone the reimage—that’s a larger footprint than Jersey Mike’s, Firehouse Subs, and Jimmy John’s combined.
“Franchisees will say, once they remodel their restaurant, they know their staff feels like that’s where I want to work,” Haynes says. “The staff feels proud of where they’re working. The franchisee goes, ‘Why didn’t I do this five years ago?’ Some of them will push, but once they start doing it, they feel very positive about it.”
Worldwide, Subway has nearly 37,000 restaurants in more than 100 countries, making it the second-largest restaurant chain in the world behind McDonald’s. Internationally, the chain has signed 15 master franchise agreements in the past two years—good for more than 9,000 restaurant commitments across Europe, the Middle East, Africa, Asia Pacific, Latin America, and the Caribbean. In June, the brand announced an almost 4,000-unit deal in China, which would grow the chain’s footprint in the country by 7x.
Subway’s goal is to increase new openings in North America by 35 percent compared to 2022. The chain debuted almost 750 restaurants globally last year and added 145 stores in Q1.
Despite Subway’s recent transformational journey, Haynes says the pitch to prospective franchisees remains the same as it’s always been.
“We’re a low-cost model,” Haynes says. “We’re easy to set up and operate. We don’t have fries or grease traps. And it’s easy to staff and get a Subway set up so you can get up and open. Whereas if you think about a burger concept, it’s multiple levels of staffing and it’s much harder production. The elements of Subway that have been core DNA type—low cost, easy to operate—that’s certainly true today.”