Subway PESTLE Analysis

Subway Overview

As the largest quick service restaurant chain in the world by store count, Subway has built its empire on fast, made-to-order sandwiches at affordable prices. Subway generated $10.4 billion in revenue in 2022 across its network of over 37,000 stores.

Founded in: August 28, 1965
Headquarters: Shelton, Connecticut, United States
Industry: Fast-Food Restaurant Chain
Current CEO: John Chidsey
Employee Count: ~410,000

Key financial strategies have been expanding franchising as well as co-branding with other chains to drive growth. Subway aims to differentiate itself through its wide array of customized ingredients and healthier options compared to traditional fast food.

Within the United States, Subway has approximately 24,000 locations. The company has seen a resurgence in its performance, with same-store sales growing by 5.9% in North America and 6.4% globally during 2023.

Subway also continues opening locations rapidly on a global scale, especially in Latin America, Europe, and Asia Pacific. Leveraging its size and scale while adapting to compete against rising fast casual chains will be imperatives going forward if Subway wants to maintain its leadership position.

Subway’s Main Products and Services
Sandwiches, Breads, Wraps, Salads, Catering, Beverages, Health Conscious Options, Online Ordering and Delivery
Brand Portfolio of Subway
Spicy Italian, Turkey Breast, Sweet Onion Chicken Teriyaki, Meatball Marinara, Black Forest Ham, Roasted Chicken & Bacon Ranch Melt, Tuna, Oven Roasted Chicken, Steak & Cheese, Veggie Delite, Cold Cut Combo, Club, Italian BMT, Five Dollar Footlong, Deli Heroes Series
Competitiors of Subway
Tim Horton’s, Papa John’s, Chipotle Mexican Grill, Au Bon Pain, KFC, McDonald’s, Mr Goodcents Franchise Systems Inc, Smokin Joes Pizza, Shake Shack, Taco Bell, Domino’s, Panera Bread, Burger King, Pizza Hut, Starbucks

By conducting a detailed Subway PESTLE Analysis, we can identify key opportunities and threats facing Subway across these macroenvironmental factors. This provides strategic insights into how Subway can adapt its business strategy based on the circumstances revealed through an in-depth Subway PESTLE Analysis.

Political Factors Affecting Subway

Food Safety Regulations

As a major fast-food chain, Subway must comply with a complex web of local, state and federal food safety regulations. These cover food handling, preparation, and storage. Meeting these varied requirements increases Subway’s operational costs. For example, California has strict glove-wearing rules for food preparers. Subway has adjusted its nationwide procedures to meet California’s standards.

Minimum Wage Laws

Rising minimum wage laws at the city, state and federal levels directly impact Subway’s labor costs. As a franchise heavily dependent on entry-level workers, Subway feels pressured by minimum wage hikes. To address this, Subway is exploring automation technology to potentially reduce reliance on human labor. However, too much automation could degrade the “freshness” of Subway’s made-to-order offerings.

Health Care Laws

Laws like the Affordable Care Act have increased Subway’s costs by requiring health insurance for more employees. Subway has responded by reducing some staff hours and increasing focus on technology-enabled self-service options to control labor costs.

Tax Policies

Subway must comply with constantly changing federal, state and local tax codes and rates. The Trump tax cuts briefly benefited Subway’s profits. However, progressive locality-specific taxes aimed at large corporations counteract this. Subway is also impacted by payroll taxes for its employees. Overall, increased tax obligations directly reduce Subway’s bottom line.

Trade Policies

Subway relies on imported foods like Brazilian sugar, Indian spices and European cheeses. Changes to US trade policies can impact Subway’s supply chain costs. For example, Trump era tariffs on Chinese goods raised prices on some equipment. Subway manages such volatility by diversifying suppliers globally. But ultimately import taxes get passed to consumers via higher menu prices.

Food Industry Regulations

As a major restaurant player, Subway must follow various federal and state food industry regulations. These cover nutritional disclosures, hygiene and sanitation procedures, ADA compliance and more. While important for public health, meeting these varied requirements increases Subway’s operational expenses. Subway has overhauled its menus, facilities and staff training to ensure compliance.

Licensing Requirements

Local health departments require food service licenses and permits for each Subway location. Renewing these annually is mandatory for continued operations. Delays or problems with licensing immediately halts Subway’s ability to serve guests. Store managers are trained to properly display up-to-date permits and proactively submit renewals to avoid disruptions. Subway’s licensing department also assists with compliance.

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Economic Factors Affecting Subway

Consumer Income Levels

Subway relies heavily on middle and lower income consumers for sales volume. During strong economic times when unemployment is low and wages are rising, customers have more disposable income to spend on Subway sandwiches. However, recessions marked by job losses and wage cuts drastically reduce Subway’s customer base and sales, as happened during 2008’s housing crisis. Subway responds by strategically offering discounts and affordable combo meals to entice budget-conscious diners.


As a major purchaser of common grocery items like meat, cheese and vegetables, Subway is vulnerable to food inflation shrinking profit margins. When wholesale costs rise faster than menu prices, Subway’s margins get squeezed. Runaway inflation in 2022 has put pressure on Subway’s costs. To counter this, Subway has selectively raised menu prices and tweaked recipes to adjust portion sizes. It also promotes higher-margin beverages and snacks to customers to boost revenue.

Commodity Prices

Global commodity price swings directly impact Subway’s expenses as wheat, vegetable, dairy and meat costs fluctuate. For instance, spikes in beef prices due to shortages have repeatedly forced Subway to pay more for meat inputs. To manage this volatility, Subway uses long-term contracted pricing for key commodities. They also source from diverse suppliers globally to mitigate regional price swings. Menu optimization models adjust offerings and portions as costs shift.

Real Estate Costs

Subway seeks prominent main street and shopping center locations with high foot traffic. But soaring commercial real estate prices in desirable retail areas have driven up franchise occupancy costs. This squeezes profit margins for franchisees on expensive leases. Subway corporate assists by negotiating master leases with national developers. But ultimately local franchisees must balance prime positioning with affordable rent.

Fuel Prices

With over 20,000 locations in the US alone, Subway is exposed to fluctuations in gasoline and diesel fuel prices. Fuel surcharges from distribution partners get passed onto Subway during times of high oil prices. Subway also incurs substantial fuel costs for refrigerated supply trucks and food deliveries to individual restaurants. To counter this, Subway seeks logistics efficiencies like backhauling and optimized routing to reduce mileage.

Interest Rates

Most new Subway locations are opened by franchisees who finance part of the startup costs through small business loans. When interest rates rise, it becomes more expensive for prospective franchisees to borrow expansion capital. In turn this can slow Subway’s overall pace of new store openings. Subway mitigates this by offering select financing incentives and discounts to new franchisees to boost growth during periods of tight credit.

Competitor Pricing

Although a market leader, Subway relies on value priced subs to stay competitive. Consumer perception of menu pricing relative to direct rivals like Quiznos and Jimmy John’s heavily influences Subway’s sales. If Subway raises prices far above prevailing fast food lunch norms, traffic will likely shift to cheaper competitors. As such, Subway uses data analytics to benchmark pricing within a competitive sweet spot.

Subway Shop
Photo by Sasha Prasastika

Social Factors Affecting Subway

Health Trends

With rising obesity, Subway has capitalized on health trends by positioning itself as a fresh, made-to-order alternative to greasy fast food burgers. Subway highlights nutritious choices like wheat bread, lean meats, low-fat sauces, and veggie-packed sandwiches. Marketing reinforces healthy eating, dieting and losing weight. Subway faces ongoing pressure from customers to add nutrient-dense menu options as health concerns grow.

Ethical Sourcing

Subway has set corporate social responsibility policies to address ethical concerns. Their sustainable seafood program follows guidelines on responsible fishing. Their animal welfare policy establishes standards for humane livestock treatment by suppliers. However, activists pressure Subway to strengthen standards further. Subway must balance cost efficiencies with efforts to improve supply chain ethics. More consumers consider such issues in dining choices.

Changing Lifestyles

Subway benefits from the trend of Americans increasingly eating meals outside the home for convenience. Subway’s made-to-order model appeals to busy professionals and families eating on the go. They cater to this with quick service formats like online ordering for takeout and delivery. Customizing subs also suits customers seeking convenience along with some personalization. Adapting to changing household and work dynamics is key for Subway.

Demographic Shifts

Population data shows two key trends Subway monitors: the aging of the baby boomers and the rise of single-person households. To appeal to older diners, Subway has added more senior-friendly offerings like soups, oatmeal and toasted sandwiches. For singles, they market meal deals, drive-thru and delivery for easy individual meals. Adapting food and promotions to demographic shifts is critical.

Food Allergies/Intolerances

Subway aims to accommodate growing customer concerns about food allergies and intolerances like gluten or lactose. Subway recently introduced gluten-free bread and wraps systemwide to attract gluten-avoiding diners. They train staff on allergen protocols and offer vegan protein options for vegetarian guests. However, operational complexities of avoiding cross-contamination makes fully allergen-free customized prep difficult.

Food Safety Concerns

After outbreaks at chains like Chipotle, consumers have heightened concerns about food safety at quick-service restaurants. Subway implements strict food handling protocols and staff training to reassure customers and avoid foodborne illnesses, which could devastate the brand. Their supply chain standards also aim to control contamination risks. Senior leadership makes food safety a top priority.

Nutritional Issues

With rising public health issues like obesity, Subway works to position itself as a nutritious fast-food choice. It offers low fat, reduced calorie and high protein options. Detailed nutritional information empowers calorie-conscious diners. Marketing touts Subway as an alternative to high-fat burgers and pizzas. Operational efforts like eliminating artificial preservatives also aim to improve Subway’s nutritional profile compared to quick-service competitors.

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Technological Factors Affecting Subway

Online Ordering

As online and mobile ordering booms, Subway has invested heavily in digital platforms to keep up with shifting consumer preferences. Their website, app and partnerships with third-party delivery services like Uber Eats allow remote ordering for takeout or delivery. This provides revenue growth opportunities and improved customer convenience. However, operational complexities like fulfillment workflows and packaging for off-premise eating remain challenges.

Social Media

Subway uses social media for low-cost marketing outreach to millions of potential customers. However, Subway’s massive social media presence also provides a pulpit for any customer complaint to gain traction. Negative reviews and incidents like the famous footlong lawsuit can quickly spiral on social channels. Subway aims to monitor this by responding swiftly to controversies and promoting positive brand stories. Overall, the company sees social’s marketing value outweighing reputation risks.

Self-Service Kiosks

To optimize operations and potentially reduce labor expenses, Subway is piloting self-order kiosks. Customers can personalize sandwiches on a touchscreen. However, kiosks could undermine Subway’s made-to-order positioning if poorly implemented. And they may not yield much labor savings within existing restaurant footprints. Careful testing is still underway to find the right kiosk approach for Subway’s needs.

Loyalty Programs

Subway’s app features customized promotions and a loyalty program to incentivize repeat purchases. This allows Subway to gather data on individual customer behavior for targeted marketing. The Subway MyWay Rewards program offers free subs, snacks and other deals to engaged loyal buyers. Data analytics helps optimize offers while providing a customized guest experience.

Food Safety Technology

Subway is piloting sensors, RFID tags, and other technologies to improve food safety. Smart thermometers with data analytics help monitor refrigeration temps. Handwashing sensors track employee hygiene compliance. Blockchain-type tech traces ingredients through the supply chain. While costly to implement, this tech provides data-driven insight into safety vulnerabilities across Subway’s vast system.

Supply Chain Technology

Route optimization, automated inventory management, GPS and other logistics technologies boost efficiency in Subway’s complex supply chain. Reducing miles driven cuts costs and environmental impact. Predictive ordering shrinks food waste by aligning inventory to demand data. Overall, supply chain tech provides valuable data analytics to streamline workflows, cut waste and enhance transparency.

Automated Production

Subway is looking into automation, like robotic vegetable choppers, automated bread baking ovens, dishwashers and sandwich assemblers. This could potentially boost productivity and output, while saving on rising labor costs. However, too much reliance on automation risks undermining Subway’s customized, human-made offerings. For now, Subway is cautious about major production automation investments. But future labor trends may necessitate a rethink.

Legal Factors Affecting Subway

Food Safety Regulations

As a large restaurant company, Subway is subject to a complex array of national, state and local food safety regulations. These cover food prep, handling, storage, labeling and more. Failure to comply risks substantial fines or even restaurant closures. High profile cases like Chipotle’s health scares demonstrate the massive legal and PR damage potential. Subway mitigates this through extensive staff training, kitchen protocols, supplier oversight and legal/regulatory monitoring.

Labor Laws

Employment laws governing wages, breaks, harassment, discrimination and more apply to Subway’s thousands of frontline staff. Violations open Subway up to employee lawsuits, regulatory actions and reputation damage. Cases may affect individual franchises or the overall brand. Subway aims for full legal compliance, though some franchisees have faced lawsuits over issues like overtime wages. The corporate office offers guidance and training to help franchise owners navigate labor regulations.

Health Regulations

As public health concerns like obesity and food allergies grow, government policy responds with stricter nutrition labeling, marketing limitations, allergen statements and similar rules specifically targeting the food industry. Subway expends resources to ensure compliance on details like calorie counts, health claims and allergy disclosures. The regulatory environment pressures Subway to make its offerings and marketing ever-more health-conscious.

Franchise Regulations

Laws like the FTC Franchise Rule regulate the franchise business model, protecting franchisee rights when dealing with corporate franchisors like Subway. This covers termination procedures, renewal terms, financial disclosures, and more. Subway’s franchise agreements must comply, ensuring fairness in the franchisor-franchisee relationship. Lawsuits occasionally arise from franchisees disputing Subway’s enforcement of system standards and termination decisions.

Zoning Restrictions

Subway must comply with varied zoning codes and land use restrictions when opening new locations. Some municipalities limit or outright ban certain types of establishments. Others have specific permitting processes for restaurants. Complex zoning variance applications may be needed for approval in certain districts. This occasionally delays or halts Subway’s expansion plans. Proactive engagement with local governments is key to smooth openings.


Proper licensing from health departments and food service permits from local authorities are mandatory for each Subway location to legally operate. The company must also obtain liquor licenses to serve beer and wine where applicable. License renewals are annual requirements. Subway corporate assists franchisees with license applications and compliance to prevent business disruptions.

Food Sourcing Laws

Subway and its vendors must adhere to regulations on food imports, inspection regimes, traceability systems and other supply chain oversight measures. These laws aim to ensure food safety and prevent adulteration. Subway’s corporate social responsibility program also sets voluntary standards on issues like animal welfare and sustainable sourcing. Oversight of a complex global supply chain is essential to manage legal compliance from farm to restaurant.

Environmental Factors Affecting Subway

Sustainability Regulations

With growing concerns about environmental issues like plastic pollution and climate change, Subway faces pressures from consumers and regulators alike to operate more sustainably. This includes reducing plastic waste from packaging, food waste from unsold ingredients, and carbon emissions from its far-flung supply chain. Subway has set corporate responsibility goals around waste, packaging and energy use and aims to promote its efforts publicly.

Packaging Restrictions

An increasing number of jurisdictions are enacting restrictions on single-use plastics and polystyrene foam containers. For example, Subway must comply with plastic straw bans in Seattle and foam container bans in San Francisco. This patchwork of local laws means Subway must develop customizable packaging protocols and materials regionally. They aim to gradually phase out problematic packaging in favor of recyclable or compostable alternatives nationally.

Energy Efficiency Standards

Subway aims to reduce energy usage and costs in its thousands of stores worldwide. Initiatives include installing LED lighting, ENERGY STAR certified appliances, programmable HVAC systems, and more. New locations are built to LEED sustainability standards. These efforts cut costs while also improving Subway’s carbon footprint. However, retrofitting older stores remains an obstacle to achieving systemwide efficiency gains.

Waste Management Laws

Subway must comply with a mosaic of local waste management regulations that vary across its thousands of locations. Some municipalities mandate recycling certain materials or banning food waste from landfills. Staying compliant with complex and evolving requirements around trash, recycling streams and composting adds to Subway’s operational expenses.

Water Usage Restrictions

In markets prone to droughts like California, laws aimed at cutting water usage force adjustments by Subway restaurants. Restrictions on landscaping irrigation as well as mandates to install low-flow faucets, toilets and other equipment to curtail water intensity impact site design and facilities. Subway aims to proactively manage water risks and stresses conservation across all restaurants.

Ingredient Supply

As climate change spurs more extreme weather events, Subway’s supply chain faces increased risks of disruption. Droughts, floods or harsh winters can damage crop yields for ingredients like produce, wheat and dairy. This leads to shortages and price spikes. Subway manages this by diversifying sourcing and contingency planning, but ultimately major climate events beyond their control can impact operations.

Food Transportation Emissions

With rising focus on emissions reductions, Subway aims to minimize transportation-related environmental impacts. Optimizing logistics and haul routes reduces mileage and cuts carbon footprint. Investments in fuel-efficient fleets, anti-idling technology, aerodynamics and weight reduction help improve fuel economy in distribution. But as a ubiquitous chain, Subway will always have substantial transportation emissions to manage.


This Subway PESTLE analysis highlights the many external factors impacting the iconic sandwich chain. Subway must navigate a complex regulatory environment, rapidly evolving consumer preferences, and a competitive quick-service segment. Looking ahead, Subway can focus growth efforts on menu innovation to align with health trends.

Targeted expansion in markets like India, Latin America and China provides growth potential. Implementing cutting-edge digital experiences and loyalty programs can help deepen customer relationships. Overall, by leveraging its brand equity while adapting nimbly to external shifts, Subway can maintain its leadership position at the forefront of the “better-for-you” fast food category worldwide.

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