Subway struggles through two-year losing streak

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Subway, for the first time in its 52-year operation, took a massive hit in 2016, by being forced to close 359 U.S. locations.

Bloomberg described the situation as the “biggest retrenchment in the history of the restaurant chain,” whose total store count dropped 1.3%, from 27,103 in 2015 to 26,744. Even worse for the sandwich eatery, a Subway representative confirmed that another 909 locations had been shut down in 2017, representing more than 3% of the chain’s 2016 U.S. stores.

It appears Subway may have peaked in its five-decades-long business cycle, with the fast food company failing to keep up with the latest fast-food trends. Many consider Subway to be subpar to other fast-casual competitors, including Panera, Starbucks, and Sweetgreen.

The company is currently operating 25,835 shops in the United States, compared with 26,744 at the end of 2016. Sales also declined 1.70% after 359 locations were dropped, creating a domestic sales slowdown that made its way into 2017 and will likely continue through 2018.

“Subway is in the midst of a massive transformation, and change of this size takes time,” a representative for the company told Business Insider. “Our goal is to strengthen the Subway brand in every market around the world to give Subway franchisees the greatest opportunity to successfully grow their businesses.”

However, the company’s international business has also stalled, with the closing of 471 international shops. The chain operated 44,014 shops worldwide in 2017, down from 44,485 in 2016.

Subway also lost public trust as a healthier food option. Bloomberg notes the chain has been working to restore its healthier food status by eliminating antibiotics from its chicken and switching to cage-free eggs.

“Today, people are evermore educated on nutrition, food sourcing, and ethical holistic business models,” Sara Bamossy, the chief strategy officer at ad agency Pitch, told Business Insider. “To create (or to rekindle) loyalty and sales, it is not enough to label something as ‘natural’ and it’s not enough to be affordably priced.”

“The national promotional focus over the past five years … has decimated [us] and left many franchisees unprofitable and even insolvent,” said Mitesh Raval, a Virginia franchise owner. More than 400 franchise owners have signed a petition that “protests [the] chain’s plans to roll out its famous $5 footlong deal in January.”

Moreover, there is the company’s huge PR problem surrounding former Subway spokesman Jared Fogle, who was charged with having sex with minors and possessing child pornography.

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