Subway-the World's Largest Fast Food Chain on a Downward Spiral

Subway-the World's Largest Fast Food Chain on a Downward Spiral
Case Code: BSTR597
Case Length: 15 Pages
Period: 2009-2018
Pub Date: 2020
Teaching Note: Available
 Price: Rs.500
Organization: Subway
Industry: Restaurants
Countries: United States
Themes: Competitive Strategy, Corporate Strategy, Waste Management
Subway-the World's Largest Fast Food Chain on a Downward Spiral
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The US-based Subway, the world's largest restaurant chain by number of locations, found itself in deep trouble in 2019 in its home country. After being popular for more than 50 years for its healthy subs with unlimited options to customize, Subway was falling behind competitors, who had come up with products that were similar to or better than Subway's. Subway was unable to cater to the changing demands of the customers, who wanted healthier food and food that was fresh, organic, and procured locally. Also, there were changes in the way the food was consumed. While some customers preferred plush interiors and restaurants, others wanted to grab food on the move through drive-ins. More and more customers wanted food delivered to them. Subway, which expanded rapidly over the years, was facing a huge backlash from the franchisees in the US. Rapid expansion over the years had resulted in oversaturation, with the franchisees, especially those in the US, self-cannibalizing sales due to operating in close proximity to the Subway restaurants. Several outlets were closed due to consistently declining sales and traffic. To attract customers and face the competition, Subway started lowering prices. This angered the franchisees as their margins were impacted. Amidst these problems, the founder of Subway, Fred DeLuca, died in 2015, and his sister took over. The franchisees were not happy with her leadership, and complained of a leadership vacuum. As the chain continued to face challenges, the operations were handed over in mid-2018 to Trevor Haynes (Haynes), who became its interim CEO. It remained to be seen how Haynes would bring the beleaguered chain back to glory.

Issues

The case is structured to achieve the following teaching objectives:

  • Understand the US Quick Service Restaurant Business and its main players
  • Examine the future of the Quick Service Restaurant, considering the changing trends and preferences of the people
  • Analyze the reasons for the problems at Subway
  • Discuss how Subway can be steered out of the crisis

Contents

Keywords

Fast food Industry, Submarine Sandwich, Business Model, Franchisees, Competition, Quick Service Restaurants, Rise and Fall, Strategy, Competitive position, Subway, fresh food

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