Why do all the world’s best athletes do Subway commercials?

🌈 Abstract

The article discusses the challenges and transformation journey of the Subway fast-food chain, including its aggressive expansion, marketing strategies, and efforts to revamp its brand and image.

🙋 Q&A

[01] Subway's Marketing Strategies

1. What are the key points about Subway's marketing strategies?

• Subway has used high-profile athlete endorsements, such as Tom Brady, Steph Curry, and Serena Williams, to promote its brand as a healthier fast-food option
• The athlete endorsements are seen as "corporate" and less authentic, as the athletes likely adhere to strict meal plans that may not align with Subway's offerings
• Subway's marketing campaigns and ads have not always aligned with the actual experience and perception of its restaurants, which are described as dated and not fully modernized

2. How much are Subway paying for these athlete endorsements?

• Subway has not disclosed the exact amount spent on its star-studded ad campaign, but estimates suggest the athletes are likely earning seven-figure deals, with Patrick Mahomes potentially earning $2-5 million
• The cost of these endorsements is largely borne by Subway's franchisees, who pay a 4.5% advertising fee as part of their weekly 12.5% franchise fee

[02] Subway's Expansion and Franchise Model

1. What are the key issues with Subway's rapid expansion and franchise model?

• Subway aggressively expanded to over 27,000 locations in the US, leading to oversaturation and cannibalization of its own stores
• Subway's franchise model is relatively cheap to enter, but the company charges a high 12.5% franchise fee, much higher than competitors like McDonald's
• The high franchise fees and disputes over promotional deals have created tension between Subway and its franchisees

2. How has Subway's financial performance been affected by these issues?

• Subway's sales have declined from $12 billion annually in 2013 to $9.4 billion in 2021
• The average unit volume (sales per store) for Subway is around $500,000, significantly lower than competitors like McDonald's ($4 million) and Chick-fil-A ($9 million)

[03] Subway's Transformation Efforts

1. What are the key elements of Subway's transformation efforts?

• Subway has introduced a "Eat Fresh Refresh" initiative, which includes a new menu, new ingredients, and new bread options
• The company has also been working to modernize its store design and experience, but only about half of its 20,000 locations have been renovated
• Subway has invested in new meat slicers, but some franchisees have complained that these investments are not driving sales

2. How have Subway's transformation efforts been received?

• Subway's brand perception has taken a hit in recent years, with only about a third of consumers saying they would consider eating at Subway post-pandemic
• However, the recent sale of Subway to private equity firm Roark Capital has been seen as a positive step, with franchisees supportive of the move