The accelerating demise of Subway, the world’s largest restaurant chain, will one day be just another case study of how to run a once-spectacular business empire into the ground, as Americans quickly abandon this iconic sandwich chain in droves, seeking healthier and fresher, or just simply “different” food alternatives.
For the first time in its 52-years of operation, the company contracted in 2016, shuttering 359 US locations, which was the most significant retrenchment in its history. In 2017, the company closed another 800+ US locations, as details emerged that some one-third of shops in the US could be unprofitable.
Subway’s crisis could be linked to many factors: demographic shift, healthy eating trends, a disgraced ex-spokesman charged as a pedophile, and or managerial shifts. As we explained in December, it is only the tip of the iceberg for Subway’s closures, as we stated it is the “beginning of a crisis.”
And according to a new report from Bloomberg, the sandwich chain continues to close US stores at a record pace (which is not saying much as it has only had 2 full years of net closures in its entire history). Not even one month into the second quarter, management already announced that as many as 500 stores are closing across the country. While it is evident that Americans did not spend their Trump tax cuts on Subway sandwiches, the company is shrinking its North American footprint for greater opportunities in the U.K., China, India and Latin America, Bloomberg said. Last year, the chain closed +800 stores, bringing its total U.S. count to around 25,908 — well off the highs of 27,103 in 2015.
“We want to be sure that we have the best location,” Chief Executive Officer Suzanne Greco, 60, said in a phone interview. “We focused in the past on restaurant count. We’re focused now on strengthening market share.”
“Store count isn’t everything,” she added. “It is about growing the business.”
Greco told Bloomberg that the company is struggling to increase sales in the U.S. as newer, more modern fast-food chains are crowding out the industry.
More from Greco:
“Subway had been hurt by fierce competition in the U.S., including from a resurgent McDonald’s Corp., whose domestic system sales rose 3.4 percent last year, according to data from researcher Technomic. Subway fell 4.4 percent. It’s also now faced with supermarkets and gas stations that are selling more grab-and-go fare, putting immense pressure on Subway to be faster and more convenient. Along with the closures, some locations are being relocated, and Subway is now using data from SiteZeus to choose better real estate.”
While the US segment clearly topped out in 2015, Greco told Bloomberg that her concentration today is on international expansion. She added the fast-food chain will add more than 1,000 locations outside North America and will primarily focus on the U.K., Germany, South Korea, India, China, and Mexico.
In summary, the compounding effect of store closures, eatery trends, waning restaurant industry, and poor advertisement choices, have ultimately dethroned the world’s largest restaurant chain, and now forced the company into a contraction phase for the third year in a row. And, as a last-ditch effort to preserve momentum and prevent further hemorrhaging of the sandwich empire, management has opted to shrink the North American segment for more, costlier opportunities abroad.
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