The Decline of Subway: Key Insights

Introduction

• Subway was once a popular and health-conscious sandwich shop.
• Rapid decline since 2015, closing 1100 locations in 2018 alone.
• Presentation covers top 5 reasons for Subway's decline.

Brief History

• Founded over 50 years ago by Peter Buck and Fred DeLuca.
• First store opened in Bridgeport, Connecticut in 1965.
• Core principles: exceptional service, high-quality items, affordable prices, and low operating costs.
• Rapid early success, expanded by franchising, becoming the largest sandwich shop with over 40,000 locations worldwide.
• Fred DeLuca served as CEO until his death in 2015.

Reasons for Decline

1. Over-Expansion

• Over 20,000 locations in 2006; over 25,000 by 2011 (22% growth).
• Expansion occurred during the 2008 economic recession.
• New locations opened to prevent competitors, leading to internal competition and losses.
• Continued growth from 2012 to 2016 with 2,000 additional stores.
• Realization of over-expansion led to store closures starting in 2016.

2. Marketing Campaign Issues

• Jared Fogle, key marketing figure, arrested in 2015 for child predation offenses.
• Struggled to move away from the $5 footlong campaign.
• Difficulty in creating new, successful marketing campaigns.

3. Failed Breakfast Menu

• Major push for breakfast items in 2010, but failed to gain traction.
• Difficulty in changing customer's breakfast habits.
• Strong competition from established breakfast chains like Dunkin' Donuts, McDonald's, and Starbucks.

4. Increasing Competition

• Subway's 2016 domestic sales decreased by $200 million; competitors rose by $540 million combined.
• Competitors like Jimmy John's offer unique services (e.g., delivery).
• Rising strong competitors in the sandwich market.

5. Internal Struggles

• Internal issues and need for new leadership to guide the company.
• Calls for new CEO and more premium sandwiches.
• Death of co-founder and CEO Fred DeLuca led to instability.

Future Prospects

• Potential to survive with strategic decisions: closing unprofitable stores, strong leadership, clear marketing focus.
• Investment from shareholders ($25 million) aimed at reinvigorating the brand.

Conclusion

• Subway at the initial stage of decline with potential to recover.
• Importance of strategic investments and right leadership.

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