America's Largest Sandwich Chain Is Losing Customers, and This Is Its Biggest, Fastest-Growing Rival
Last year, in an attempt to recapture some of its former popularity with customers, America's largest sandwich chain Subway announced a major menu overhaul. Ingredients were swapped for better quality versions, new signature subs were introduced to the menu, and a million of them were offered up to customers for free.
According to Subway's subsequent sales figures, the move appears to have worked. Its August sales, which were directly boosted by the new menu, grew by 4% compared to 2019. On an annual basis, despite the fact that the chain closed nearly 1,000 restaurants in 2021, its systemwide sales rose by 13%.
While this is undeniably a move in the right direction for a chain that has been struggling to stay relevant, the recovery may not be as significant as it first appears.
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According to Restaurant Business, that growth pales in comparison to the average growth among other similar sandwich chains, which was about 21.5%. What's more, the company's market share has declined 10% since the start of the pandemic, according to data from Technomic's Top 500 Chain Restaurant Report. More specifically, Subway's market share fell from 58% to 53% over the past two years. In other words, it's doing okay, but losing customers to its competitors.
And currently, its biggest rival seems to be Jersey Mike's Subs. What started as a small shop called Mike's Subs in Point Pleasant, N.J., has grown to become a powerhouse sandwich chain known for quality ingredients. The chain counts more than 2,000 locations around the country—with those stores reaching an average of about 20% EBITA margins across the business, according to Franchise 500. In fact, its sales are up by 65% over the past two years.
So what does Jersey Mike's have going for it? A lot, including a fan base so loyal that one fan even became a franchise owner.
Restaurant Business also notes that Jersey Mike's performance was in part due to its "early use of technology, a quick decision to jump enthusiastically on the third-party delivery bandwagon, and [the CEO's] eager willingness to go against franchisor convention by doing something so bold as to pay for franchisee remodels."
Then there's its commitment to giving back. For example, on March 30, all Jersey Mike's restaurants donated 100% of their sales—a record-breaking $20 million—to the 2022 Special Olympics USA Games.
"It created our biggest day of sales ever. Thank you to our customers, franchise owners, team members and Special Olympics family for making a difference!" said Caroline Jones, senior vice president of Jersey Mike's Franchise Systems. In 2021, the chain raised $3 million for Feeding America.
CEO Peter Cancro estimates the franchise will amount to 3,000 units within three years. "We're riding a wave," Cancro told Franchise 500. "No one ever knew about us. And the last two years, they do."
For Subway, Mike's is one to watch in the coming years.