QSR September 2022

GROWTH

Rafferty feels Subway’s franchise offering is one of the more f lexible 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 non traditional 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 loca tions. 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 bet ter and better at drive-thru in a traditional way perhaps first as we go see what we can learn by testing different formats, poten tially, 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 specif ically. 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 deliv ery 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.

The rollout and subsequent TV ads placed Subway back into the consideration set of some multi-unit candidates because it showcased how committed the brand is to becoming a better version of itself. For existing franchisees who were hesitant to make further investments coming out of the pandemic, sales results encouraged more to pursue remodels. This July, Subway unveiled another slate of menu changes, called “Subway Series.” It’s a lineup of 12 new signature sand wiches, ordered by food category and number, i.e. (Cheesesteaks: No. 1 The Philly, No. 2 The Outlaw; Chicken: No. 7 The Mex iCali, No. 8 The Great Garlic ). Instead of picking ingredients and toppings, customers are able to say a sandwich number or name and whether they want a half-foot or foot-long sand wich. Subway said the latest release was the result of six decades worth of culinary expertise and experimentation of more than 100 recipes. “It reminds people about Subway and it brings guests back,” Rafferty says. “Maybe they haven’t visited us for a while and it reminds them of what they love about Subway. And it creates some repeat business that our franchisees are thrilled to see.” About 9,000 stores have committed to Subway’s “Fresh Forward” design, which includes LED lighting, new f loor cov erings, containers, tables, colors, and chairs. That’s thanks in part to a grant program in which the chain promises to con tribute and invest alongside franchisees. As of June, 4,500 of those restaurants completed the remodel. The remaining loca tions have ordered and paid for equipment and are just waiting to receive everything. “We had one sandwich artist, when she walked into a remod eled Subway, she said, ‘Wow, it looks like an Apple store,’” Rafferty says. “That’s a bit of an overstatement from my per spective, but I sort of get what she’s talking about, right? It is a very different look than what our guests might remember us as having been in their experience. It’s very bright. It’s very appealing. It’s very clean. It just looks modern, and we think a great expression of what the Subway brand really can be.” Every week, members of the leadership teammeet with fran chisees to learn about what’s working and what needs to be done differently, whether that’s operational setup behind the coun ter or how certain products impact sandwich artists. Rafferty and his team look into the future knowing the best ideas will come from the field. On a broader scale, Subway distributed a global franchisee satisfaction survey in 2020—the first one it had done in a long time, if not ever, Rafferty says. The information established a baseline for the brand. The chain received results from its sec ond survey in April, and found franchisees rated it higher in all key measures compared to two years ago, including leadership, support, core values, and having a clear vision for the brand. “We know that we’ve got a long way to go to continue meet ing the needs of our franchisees and in turn our guests, but we’re pleased with the sort of interim checkpoint that says, you know what, we’re headed in the right direction and our franchisees are telling us that. That’s really important to us,” Rafferty says. q

Ben Coley is Food News Media’s content editor. He can be reached at Ben@QSRmagazine.com .

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SEPTEMBER 2022 | QSR | www.qsrmagazine.com