The Real Reason More Than 900 of These Restaurants Closed Last Year
We should’ve seen the warning signs. First, it turns out that the footlongs aren’t even a foot long. Then, the company’s spokesman turns out to be a diddler — in the immortal words of Frank Reynolds. And now? We’re seeing one of America’s largest and greatest restaurant chains take it on the chin (or bottom line). That chain? Subway — the restaurant that grew from a small yet robust company into an absolute behemoth.
It’s so big, in fact, that it has more worldwide locations than any other restaurant chain on Earth. Or, at least it did for a time. But the chain has lost its step in recent years. It’s failing to attract customers and win over new converts. Subway is facing stiff competition on almost all fronts from old foes and new enemies alike. And the core tenents that helped the company win so many hearts and stomachs in the United States over the past couple decades? They’ve fallen by the wayside.
In short, the food has gotten worse. The price has gone up. And a lot of negative press has put Subway in a tight spot. That’s not to say that the company still commands an incredible amount of market share, but it does appear to be waning.
The recent numbers show that something is up. Hundreds of Subway locations closed in 2017 alone. And in April 2018, the chain announced it would shutter 500 more U.S. locations.
First up: What’s happening to America’s most widespread sandwich chain?
Eat Fresh, boys
- More than 900 Subway restaurants closed in 2017.
Subway gave Business Insider a look at its internal struggles, and it isn’t pretty: 909 store locations in 2017, representing more than 3% of the chain’s total. This is the end result of lower-than-expected foot traffic. Sales fell almost 2% in 2016, resulting in the chain (or franchisees) shuttering restaurants in 2016, too. These numbers paint a picture, but what’s really going on under the hood?
Next: What once was fresh is no longer.
What’s the problem with Subway?
- Two groups have grown sick of the chain: Customers and franchisees.
From a consumer’s perspective, Subway had two things going for it: It was cheap and healthy. You remember the days of $5 footlongs, and the marketing surrounding the fresh meats and veggies available for consumption. It was different than the greasy burgers and fries everybody else was selling. But if you take a trip to Subway now, you’ll find the prices inflated and the food….lacking.
As for franchisees, it’s been a struggle to maintain margins. Customers want bargains, corporate wants a bigger, more expensive menu, and local governments want higher minimum wages. Needless to say, it’s been tough.
Next: Feeling the heat
Competition is picking up
- Rivals like McDonald’s have stolen some plays from Subway’s playbook.
One other big thorn in the company’s side is that its rivals are catching up. Restaurants like McDonald’s have managed to reinvent themselves, to some degree, to offer fresher, better options. And they’re typically cheaper than a sub — in many cases, anyway. On top of that, Subway is fighting off all of those new “fast-casual” chains that have sprouted up in recent years, like Panera Bread.
Some of those fast-casual chains are actively trying to kneecap Subway by stealing its franchisees.
Next: How can company leadership turn things around?
Turning things around?
- How can the chain right the ship?
Unfortunately for franchisees and company leadership, there isn’t an easy fix. One obvious way, at least from a consumer’s standpoint, is to return to what made the restaurant at hit in the first place — quality choices and good value. But it isn’t as simple these days as it was in the ’90s and early 2000s. In fact, some analysts say that the chain’s retraction may be the best thing for it. Subway may have simply bit off more than it could chew.
Also, getting rid of that Jared Fogle dude couldn’t have happened sooner.
Next: This is far from the only story concerning struggling chains.
Subway: One of several struggling restaurants
- The company is far from alone in its recent struggles.
This is far from a unique story. Subway is struggling, but it’s only one of many chain restaurants that are trying to keep up with the times. There are scores of others that have run into similar ruts, and while some have managed to reinvent themselves and remain profitable (McDonald’s, Olive Garden), others are still fighting. Still, Subway may be able to survive based on the fact that America still loves it — and name recognition alone may help it for years to come.
Next: It was a tough year, but Subway is still a monstrous company.
…But let’s not lose perspective
- With nearly 27,000 U.S. locations, don’t expect the company to disappear anytime soon.
It isn’t easy to take down Goliath, and when it comes to the restaurant industry, Subway most certainly fits that bill. Despite a tough year last year and in 2016, the store still has 26,744 U.S. stores, and there are more than 40,000 worldwide. And the chain has said it plans to add more than 1,000 additional locations around the world in 2018. A few hundred closures isn’t something to completely write-off, but taking a look at the big picture shows that the chain still has a huge foothold and isn’t going to die off overnight.
Finally: Is the chain really doomed?
Seriously, though, is Subway doomed?
- With 40,000 stores, probably not.
Sure, Subway could go down. But it would be a very long, painful death. The company’s experiencing a turbulent time like every company does, but a total implosion is an incredibly remote possibility. Even with a sex scandal involving its most famous spokesperson, the revelation of gross ingredients in its bread, and flat-out oversaturation of the market, you can probably expect to see green and yellow signs in just about every community you visit well into the future.
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