Once having the most stores globally, why has Subway, the 'King of Sandwiches', fallen behind?
Key Points
- Subway: The world's largest sandwich chain brand, which once surpassed McDonald's and KFC in terms of the number of stores.
- Franchise Model: Subway's unique expansion method, featuring a low entry - barrier but high commission rate, has led to tense relations with franchisees.
- Health - oriented Marketing: Subway once promoted itself with the selling points of "healthy and fresh", but now faces food - safety doubts and challenges from competitors.
- Globalization Strategy: Subway has adopted a relatively conservative strategy in the global market and failed to fully adapt to local needs.
- Digital Transformation: Subway started late in the digital field and failed to keep up with the development trend of the fast - food industry.
Abstract
The global sandwich giant Subway, which once led the global fast - food industry with over 45,000 stores, is now facing the predicament of being put up for sale at a price of $10 billion. In this episode of Vibrant Morning Coffee, the reasons for Subway's decline are deeply analyzed, including the alienation of franchisees leading to a wave of store closures, the loss of the two selling points of health and freshness, and the passive globalization strategy. Given the changes in the catering business environment and the cooling of industry financing, Subway's future development has attracted wide attention. Additionally, the program also covers other business and technology news, such as Amazon's new round of layoffs, the appointment of a new CEO at Starbucks, and the slowdown of Pinduoduo's revenue growth.
Insights
The content of this podcast deeply analyzes the reasons for Subway's decline and reveals the challenges faced by the fast - food industry in globalization and market competition. For other catering enterprises, Subway's case provides an important warning. While pursuing rapid expansion, they must attach importance to the cooperation relationship with franchisees, adhere to product quality and brand image, and actively adapt to local needs and digital transformation. Moreover, the analysis of companies like Amazon and Pinduoduo in the content also reflects the growth pressure and transformation challenges currently faced by the technology industry.
Opinions
01 "The Pros and Cons of the Franchise Model"
Subway's low - threshold franchise model achieved rapid expansion, but it also led to a decline in store quality and increased management pressure, ultimately triggering a wave of store closures.
02 "The Sustainability of Health - oriented Marketing"
Subway once succeeded through health - oriented marketing, but failed to maintain the fresh and healthy image of its products, resulting in the loss of its competitive edge.
03 "Localization of the Globalization Strategy"
Subway failed to fully consider local needs during the globalization process, making it difficult for its products and services to meet the needs of consumers in different markets.
In - depth Analysis
The Fall of the Sandwich Giant: Reflections Behind Subway's $10 - billion Sale
Subway, once a shining star in the global fast - food industry, has now reached the stage of being put up for sale. According to Bloomberg, this chain brand famous for its long - loaf sandwiches is seeking a sale at a price of $10 billion. From its peak of 45,000 stores to its current dismal situation, Subway's downfall has sparked profound reflections on its business model and development strategy.
Hidden Concerns Behind Rapid Expansion: The Predicament of Franchisees
Subway's rise was largely due to its unique franchise model. Compared with other fast - food giants, Subway had an extremely low franchise threshold, with the cost of opening a store being only about one - tenth of that of McDonald's. This low threshold attracted a large number of new immigrants and entrepreneurs, helping Subway expand rapidly.
However, behind the low threshold were strict requirements for franchisees. Subway's headquarters extracted a weekly commission of up to 12.5% from franchise stores, far higher than that of competitors like McDonald's. In addition, the headquarters had absolute control over store location selection, business management, etc., which restricted the autonomy of franchisees.
This high - pressure policy ultimately led to the dissatisfaction and resistance of franchisees. Due to the overly dense store locations, the stores cannibalized each other's business, and the single - store sales volume was far lower than that of competitors. At the same time, the headquarters provided insufficient training and support to franchisees, resulting in a decline in store service quality. All these factors combined ultimately led to a large - scale wave of store closures in the US market, shaking the foundation of Subway's franchise system.
The Collapse of the "Health" Myth: Food Safety and Brand Crisis
Subway once won the favor of consumers with its "healthy and fresh" brand image. However, in recent years, more and more research and news reports have revealed that Subway's "health" myth may be untrue.
In 2020, the Supreme Court of Ireland ruled that Subway's bread had too much sugar and did not even meet local food standards. In addition, Subway has also had multiple food - safety issues, especially the hygiene problems of raw vegetables in sandwiches, which have raised concerns among consumers.
Even more ironically, Jarred, the weight - loss star who once endorsed Subway, was sentenced for a child - pornography case, which dealt a heavy blow to Subway's brand image.
In the increasingly competitive fast - food market, health has become a common selling point for many brands. Facing competitors with more diverse offerings, lower prices, and stronger marketing, Subway, with its slow product updates, gradually lost its competitive edge.
Mistakes in the Globalization Strategy: Failure to Adapt to Local Markets
As one of the world's largest fast - food chain brands, Subway has stores in more than 100 countries around the world. However, unlike other Western fast - food brands that actively integrate into local markets, Subway's globalization strategy seems overly self - confident and arrogant.
Take the Chinese market as an example. Subway almost copied the US model without fully considering the tastes and habits of Chinese consumers. For instance, the 15 - centimeter or 30 - centimeter bread designed according to the appetite of American consumers left Chinese consumers either still hungry or unable to finish it. Moreover, the wide variety of sauces made it difficult for Chinese consumers to make a choice.
In terms of pricing, Subway also failed to fully consider the consumption level of the Chinese market, resulting in relatively high product prices, which discouraged a group of potential consumers.
Meanwhile, competitors like McDonald's and KFC actively carried out localization and digital transformation, continuously launching new products that met the tastes of Chinese consumers and vigorously developing online business. In contrast, Subway started late in the digital field and failed to keep up with the market's development trend.
Forward - looking Thinking: The Future Path of the Fast - Food Industry
Subway's downfall is an epitome of the development of the fast - food industry. In the context of increasing globalization and market competition, fast - food enterprises must continuously innovate and transform to maintain their competitiveness.
First, fast - food enterprises should attach importance to the cooperation relationship with franchisees and establish a mutually beneficial and win - win community of interests. The headquarters should provide more support and training to franchisees to help them improve their business management level and jointly face market challenges.
Second, fast - food enterprises should adhere to product quality and brand image, continuously innovate products and services, and meet the increasingly diverse needs of consumers. At the same time, enterprises should strengthen food - safety management to ensure that consumers can eat with confidence.
Finally, fast - food enterprises should actively embrace digital transformation, use technologies such as the Internet and big data to improve operational efficiency and service levels. In addition, enterprises should also strengthen interaction with consumers, understand their needs and feedback, and continuously improve products and services.
Subway's sale may just be the beginning. In the future fast - food market, only those enterprises that can continuously adapt to changes and actively embrace innovation can win the favor of consumers and achieve sustainable development.