Image Credit: Mike Mozart
I’m pretty sure that even if you didn’t know it, there are more Subway sandwich restaurants out there than there are McDonald’s restaurants. With the chain being that large, you would expect that they must be doing quite well. In the past that has been the story. Much of what the Subway product managers have been spending their time doing has been looking for ways that they can power the chain’s expansion. However, lately things have changed. The Subway product mangers now have a new challenge on their hands.
The Problem At Subway
Subway has the most locations of any restaurant chain in the U.S. the product managers are pursuing a new way to try to boost domestic sales: better bread, not new shops. Subway’s food operations started to slip during the company’s relentless U.S. expansion drive. So what was the result of those stumbles? Sales hit a peak of $18 billion back in 2012 and then they fell for years afterward. Following the chain’s expansion push, the domestic restaurant count has decreased by about 20% in the past five years, and the number of franchisees has shrunk by about 15% during the same time period. Just to make things a bit tougher for the product managers sandwich-chain rivals have also proliferated.
One of the problems that the Subway product managers were facing was that the company was acting more like a mom-and-pop organization than one doing billions of dollars in sales. What it lacked was strong central management and oversight. To deal with this the product managers have had to make changes. They have renegotiated contracts, and centralized functions such as advertising and culinary standards. They have even overhauled their menu. The product managers are also changing Subway’s longstanding development system to focus more on improving established sites rather than building new U.S. stores. The good news is that sales are up globally nearly 20% from last year. Meanwhile, closing domestic stores and other brand changes have helped boost Subway’s average sales per store in the U.S. last year to the highest level in eight years.
When the Subway product managers realized that they were having problems they also realized that there were too many things that they could go after. They had to prioritize, because if they chased 20 things simultaneously, they obviously would not have done them all well. There were things that needed to be done in order to turn the brand around. The product managers heard loud and clear from their customers that they need to create more desirable food. They also had to improve their product quality. Part of making that happen was getting franchisees really re-engaged and improving their overall operations.
Turning Things Around At Subway
In order to fix things at Subway, the product managers had to make sure that they understood what had gone wrong at the chain. In the U.S., Subway had had a total focus on development. They had gotten lucky because for the longest time, Subway had no real competition. That all changed when the new competitors showed up: Jersey Mike’s, Firehouse Subs, etc. Once this happened, Subway was faced with these new guys that had beautiful new restaurants, new equipment and new food. The end result of all of this is that those things snuck up on Subway.
One of the ways that the product managers went about making things better at Subway was to close low performing stores. They are currently down 3,000 to 3,500 stores over the last three or four years in the U.S. This leaves them with about 20,000 stores and almost 11,000 franchisees total. Subway currently has more than 37,500 stores around the world. The thinking is that they have bottomed out for now. This year will be the first year where the brand will start adding units again because the international growth is so great. This will happen even if they end up closing a couple hundred more in the U.S. The product managers believe that some shrinkage is good if you’re ending up with a better portfolio.
The pandemic caused a lot of changes to happen in the restaurant industry. One change is that a lot of restaurants added drive-throughs. However, Subway has very few drive-throughs. 7% to 10% of their restaurants in the U.S. have drive-through. Due to the pandemic Subway added a curbside program so takeout grew tremendously during the lock-down. Subway also makes use of third-party delivery services like DoorDash. During the pandemic these types of sales really took off. Subway also does direct delivery, so customers can go through Subway as opposed to through a third party. Overall, digital sales have tripled. The product managers believe that those are avenues that will continue to grow and they need to continue to invest in them.
What All Of This Means For You
Subway restaurants seem to be just about everywhere. However, in the past few years the Subway product managers have been dealing with declining sales. They needed to take a look at how their brand was operating, look at the competition, and decide what types of changes needed to be made. It was time to reinvent what it meant to be a Subway sandwich store.
In the last five years, the amount of revenue generated by Subway stores has been declining. At the same time, new competition has been showing up. One of the problems that Subway had was that they were being run like a mom-and-pop organization. Significant changes have been made and now profits are once again increasing. In order to improve things, the Subway product managers had to prioritize what changes they were going to make. They chose to focus on their food and find ways to make it more desirable for their customers. The problems at Subway happened because the competition snuck up on them. Subway had to close a number of their domestic stores that were underperforming. The pandemic caused Subway to invest in a number of new ways for getting their sandwiches to their customers.
The good news for the Subway product managers is that their customers seem to really like their product. The product managers need to understand that they are now existing in a world that has a lot of competition for the types of products that they are offering. They need to take steps to make their product stand out from the competition. Taking steps to make it easier for customers to get their product will also help to boost sales. Change can a good thing for the Subway product managers.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: How can the Subway product managers make their products different from the competition?
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What We’ll Be Talking About Next Time
So just exactly how much time do you spend each day thinking about shaving? If you are like the majority of people, probably very little. What’s even worse, from a shaving product manager’s point-of-view is that we probably spend even less time thinking about the equipment that we use to shave with. Over at Schick their product managers want us to start spending some more time thinking about how we are going about this whole shaving thing. They think that they might have come up with a winning idea.