Rafferty feels Subway’s franchise offering is one of the more flexible deals in the quick-service segment. It’s a fairly simple operation since no fryers, grills, or broilers are involved, and that allows the chain to fit into all types of traditional and nontraditional venues, like airports, hospitals, gas stations, travel centers, and more. In terms of drive-thru—an order channel that skyrocketed in popularity during the pandemic—Rafferty says there’s ample opportunity to grow from the 2,000 currently in the system because of the food’s portability.
Recently, a growing number of quick-service concepts have ventured into off-premises-only restaurants in traditional locations. Some (i.e. Wingstop and Panera) have taken it a step further and debuted digital-only units in which there are no cashiers and customers must order via the website/app or through a third-party delivery platform.
Subway is aware of those trends and impressed by them, but the chain isn’t ready for that type of prototype just yet.
“We’ll be testing some of that, but it’s not something that we see as the largest opportunity in front of us,” Rafferty says. “It’s a big one, but we think we have an opportunity to get better and better at drive-thru in a traditional way perhaps first as we go see what we can learn by testing different formats, potentially, including the digital-only pickup model.”
In nontraditional spaces, Subway is in the early innings of testing unattended retail solutions. In 2021, it began piloting grab-and-go sandwiches inside different channels like casinos, gas stations, and convenience stores. That experiment has grown to 400 locations. Subway is also tinkering with contactless and cashless smart fridges filled with freshly made sandwiches, an idea prompted by franchisees.
“The partner says, ‘Hey, how can we maximize our sales even in the hours when we’re not open?’” Rafferty says. “We had some success with limited trial of this in international markets, in some Asian markets specifically. But closer to home, as I said, travel plaza partners have really latched on to this and it’s really meeting the needs of our customers who are our franchisees who in turn want to meet the needs of our consumers.”
Development is one of several ways leadership is trying to build a better Subway, Rafferty notes. In July 2021, the brand rolled out the largest menu launch in company history—a major first step in its multi-year transformational journey.
More than 20 upgrades—11 new and improved ingredients, six new or returning sandwiches, and four revamped signature sandwiches—hit outlets nationwide. The launch was supported with ad campaigns featuring some of the highest-profile sports stars, including Serena Williams, Steph Curry, Tom Brady, and Charles Barkley. Additionally, Subway upgraded its app to reduce friction and partnered with DoorDash to launch delivery through its app and website.
The menu helped Subway beat 2021 sales projections by almost $1.4 billion and reach its highest AUV since 2014. About 75 percent of the U.S. system—more than 15,000 locations—experienced a 7.5 percent increase in same-store sales versus 2019. In Q1 2022, the same number of restaurants witnessed comps grow 8.2 percent compared to 2019.