The Subway sandwich and salad chain has had its business and competitive challenges over the last couple of years, and that’s started to take a toll on franchisees of U.S. locations.
During 2017, the chain lost 909 U.S. locations. That was only a small dent in the more than 25,000 Subway locations nationwide, but the chain had already experienced a net loss of 359 locations in 2016.
It’s not just franchisees exiting the market, either. Subway has had a reported loss of about 25 percent of its customer base over the last five years.
Here are some of the leading reasons for the sales plummet and friction with the brand’s franchisees.
The return of $5 footlongs early next year is proving to be even less popular with franchise owners than it is with customers. More than 400 franchisees signed a petition to try to kill the promotion. One owner operator sent a letter to corporate headquarters stating that the footlong deal and other recent promotions have proven unprofitable and have even pushed some Subway location owners out of business.
Which national chain of any kind has selected what turned out to be a worse company spokesperson than Jared Fogle? When the face and voice of your brand gets convicted of having sexual relations with minors and possessing child pornography and gets sentenced to nearly 16 years in federal prison, you have a P.R. nightmare on your hands.
The first problem was that Subway became too closely identified with one person. Jared was in most of the Subway commercials and was virtually interchangeable with the brand. That looked like a smart move right up until the day the authorities started moving in.
Subway disconnected from the Jared association in 2015, but they’ve been slow to come up with more effective advertising — or workable promotions.
The fast-casual restaurant category has seen a bunch of higher-end competitors in the last several years. As Subway finds itself forced to compete with brands like Panera and Sweetgreen, the brand is looking a bit tired by comparison.
Are you sure? The Subway menu isn’t known for its healthful menu selections. Diners today are looking for more than price benefit. When the subject turns to nutrition and food sourcing, Subway again suffers by comparison to some other dining options.
The food chain has responded to franchise owner complaints and slumping sales in a number of ways. It’s working on what the company refers to as a “massive transformation.”
Planned changes that customers will eventually see include store location remodeling and redesign efforts to quickly modernize. The hope is to update their image and placate franchise owners.
Analysts might also remember that, globally, Subway only suffered a net loss of 471 shops, with 44,014 still operating. So things aren’t all doom and gloom at the sandwich shop that — unfortunately — Jared built.